Notes on the Realignment of the Cape Breton Economy

by Michael MacDonald

Thank you Mr. Chairman, and welcome to Baddeck. I live in suburban Baddeck, Big Harbour. The population of Baddeck, in winter, is about 850; Big Harbour boasts 48 people. Last year my wife and I moved to Big Harbour, and from Big Harbour I work in New York, Washington, Ottawa, Halifax, and London, and by email just about anywhere else. Yes, you can get there from here, and when we return home, we have found life to be very special here on the edge of the Great Bras d’Or.

The Conference organizers have asked me to talk about the investment climate in Cape Breton. This is a very difficult task, because I just can’t be a hired consultant. This is my home and has been my family home for seven generations. But there is no doubt that Cape Breton is at a turning point and that great progress has been made. Great progress with the good services of people like Rick Beaton, his staff at ECBC and a number of community business leaders who have put their money where their mouths are. If local people are willing to invest, things are looking up, and that goes for anywhere in the world.

So let’s pretend you’ve hired me to do an unbiased investment analysis for you. Here we are this afternoon in this beautiful place, which is in the heart of Cape Breton, where two hundred years ago Europeans joined the Mi’kmaq on the shores of the Great Bras d’Or.

Cape Breton has a great history of producing talent, much of which has out migrated to the cities of North America. And for a century as the farms dwindled, coal and steel supported an economy which frankly went bust in the 1960’s. Until recently propped up by government subsidies the old steel coal industrial centres maintained an artificial economy long out of step with what was happening elsewhere in the country and in the world.

But the coal and steel monkeys are finally off Cape Breton’s back, and these communities are ready and hungry to join Cape Bretoners elsewhere on the Island in what looks like a genuine renaissance. And the timing seems perfect.

I am not going to talk about oil and gas, and the inevitable arrival of Laurentian gas into Cape Breton. This will happen and probably sooner than later. But let’s not get our investment analysis too far ahead of reality.

For five years as President of the Greater Halifax Partnership, I worked with site selectors from all over North America. And we were very successful. Site Selectors always focussed on three factors before recommending a development site:

availability of trained labour
a sophisticated telecommunications infrastructure, and
access to a good airport, preferably an international airport.
Yes, there were other factors but they were far down on the scale from these three; and of these three, trained labour outranked everything else by a wide margin.

Three years ago, when the federal HRDC department did an inventory of available trained labour in Cape Breton, everyone was surprised that there were about 4000 people who were immediately available for call-centre jobs. Everyone was surprised, especially in other parts of Canada, that they hadn’t already left for Thunder Bay, Moose Jaw, and Fort McMurray.

The regional MTT/Aliant was here and had been here for generations, and it was quickly joined by other telecommunications service-providers. There was a vibrant modern university where the arts and humanities actually dirtied their hands with technology and trades. Several community-college campuses picked up the slack in training. The airport had survived the Air Canada cutbacks, and it has been successfully privatized.

Several smaller towns and communities had been amalgamated without too much pain into the Cape Breton Regional Municipality. The Crime Rate was low. Despite the headline grabbing Tar Ponds, access to a pristine natural environment was relatively easy and inexpensive. And this community of 140,000 souls had produced a unique musical culture whose artists make money, whose festivals have become internationally known, and a tradition of humour, comedy and satire which people pay to see. Busted? You’ve got to be joking.

But let’s not belittle the phenomenal and painful transition these people are making from nineteenth-century unionized coal and steel to small business and a knowledge economy. The challenges here are not economic, my friends, they are cultural and they are profound.

In the case of Greater Halifax, for example, which had also experienced the political trauma of amalgamation, the Greater Halifax Partnership came face to face with the weaknesses in our own community before we could take on the world. In Halifax we discovered through a series of independent surveys that the confidence rate within the community was at 7 out of a possible 100, the lowest in Canada. With confidence so low economic growth was impossible and new investment was unlikely.

In this crisis, we had an analysis done by a group of American site selectors on our economic future and we tried to identify the best sectors for investment and growth. The results of that study convinced us that at least 80% of the new jobs in this decade would come from within, from growing small businesses, from new investment by local people and others, and by taking care of what we already had. And what we mainly had was a superbly trained labour force and the universities and colleges that would produce more for generations to come.

As a result we branded the city and focussed 80% of our marketing on our own community, the only city in Canada to have ever done that. The results were staggering. Within eight months confidence levels had risen from 7 to 46%; and today, four years later despite September 11and the collapse Greater Halifax has a confidence rate among the highest in Canada.

Now what lessons did we learn from that experience which in hind sight looks like such common sense? And what can Cape Breton learn from that experience? Yes, it is ironic: Cape Breton’s people are its greatest asset and its greatest challenge. If Cape Breton is to grow and prosper, and attract new investment, the community will have to build confidence among its people, create an entrepreneurial culture, and encourage a new type of leader to chart the community’s destiny.

This is no small task. It is much harder than creating jobs. It is about tomorrow and a new generation. And one’s rose-coloured glasses have to grounded firmly to a solid economy and the hard economic facts of competitiveness, excellence and productivity.

Is this possible? I think so. I can smell it in the air: the young people who work in our stores and shopping centres, the young carpenters who are building my barn, the young bank clerks, the woman in the corner convenience store, the young boy teaching sailing, the young people running a small technology company in Sydney, the produce manager in the supermarket, the young doctor and the nursing assistant, and young women working in the garden centre. They will invest their lives here. They all feel something new in the air, and there in a cautious optimism and an entrepreneurial spirit which has not been here in decades. Yes, my business friends, this is anecdotal data, but it is real.

It’s in the air because Cape Breton has the people and the talent to confront change and make it work for them. That’s what Sweden did at the beginning of the last century in the face of a national epidemic of alcoholism and unemployment. That’s what Ireland did with the highest out-migration rates in all of Europe and a civil war to the north. That’s what’s happening today in Scotland, Portugal, Poland and the Czech Republic.

In all of these communities an economic re-alignment is taking place. No, it’s not just grants and subsidies from the EU. Young, educated, local people are making the difference. A new economic re-alignment is taking place and communities once at the margins are enjoying unparalleled attention and growth..

So too for Cape Breton and the Maritimes. Oil and gas, yes. But people, educated people first. That is the greatest asset of this region, educated people emerging from a dynamic culture and cataclysmic economic change. And there is further economic re-alignment to come.

Since 2001 I have been leading the Atlantica Project with a group of Canadian and American colleagues. Atlantica is a project begun by Americans who eventually found us. Briefly, the Free Trade Agreements which have profoundly changed our economies, have continentalized markets and economic zones. One of the last to enjoy the benefits of these expanded markets has been the north-east trade zone– Maine, New Hampshire, Vermont, northeastern New York, south-eastern Quebec and the Maritimes.

Yes, this is one economic zone, focussed on the Atlantic seaboard and stretching all the way from Plattsburg, New York to Sydney, Nova Scotia.

If you have ever travelled though the north east, you will realize that moving north-south is no problem, along the Interstates that lead to the Canadian border. But have you ever tried to travel east-west? You meander along two-lane roads, through towns and villages with breathtaking scenery, and you finally get to New York State or to Maine. There is no east-west interstate route, and so, no direct modern access to the Atlantic.

Throughout the 1990’s the Americans developed a series of multi-modal transportation studies which were linked to NAFTA and national security. But the northeast analysis was never started because in effect it had to involve Canada, because Maine reaches up into Canada and forms a wall between Quebec and the Maritimes.

Recently the four northeastern states led by Senators Hilary Clinton and Charles Schumer of New York and Senators Susan Collins and Olympia Snow of Maine have begun to demand this intermodal analysis based on the premise that for economic reasons their regions need a new economic realignment with an east-west highway joining the 90 series of interstates. This highway will link these states to the Canadian Atlantic coast, to our ports and our cities, and it will allow our businesses easier access to a market of 20 million people. This American re-alignment is directly linked to us.

It has finally dawned on our American cousins that the communities hugging the international border on both sides are communities in economic distress. These communities lack transportation access to NAFTA markets and a modern multi modal transportation link to the rest of the continent. And simply put, you are in the rest of the Continent this morning.

In a recent speech to the Empire Club in Toronto Derek Oland the Chairman and CEO of Moosehead Breweries in Saint John argued that the cure for out-migration throughout Canada was access to the rich American markets. He challenged the federal government to re-focus from its obsession with congestion on the Windsor-Detroit border to helping Canadian communities and Canadian businesses to have easier access to American markets. His dramatic conclusion was that this realignment of economic relationships could stabilize Canadian communities and prevent an out-migration meltdown into Canada’s four largest urban centres.

The tragic events of September 11, 2001, have intensified the Atlantica study. An east-west highway is now a matter of continental security as the land border separating the Maritimes from New England begins to disappear. The new continental border is out here on the Atlantic seaboard and our ports, airports and highways and are an essential part of the new continental security.

This does re-align the Maritimes and its economies; and it will have a profound effect on the economy of Cape Breton as Atlantica and the north east trade zone become the context for growth and development. Our economy is finally, as the old people used to say, “going back to Boston.” Security and its allied industries will be important to us and we will benefit finally from the congestion, high costs and lack of security in ports like New York, New Jersey and Baltimore. At the least the Atlantica project, generously supported by private foundations, will put these options on the table clearly and dramatically. This re-alignment will have a dramatic effect on New England’s access to the Maritimes, especially in tourism and transportation.

Finally, as the margins start to change with economic opportunities and the demands of continental security, communities like Cape Breton will have big choices to make. Not everything will be positive, and there will be trade-offs. But the investment opportunities are immense and federal partnerships at this stage are mitigating the investment risk. For the first time in a century these choices will be in the hands of local people and their leaders. That will be a new experience and that will make all the difference.

Thank you for your patience.