Sweeping away the coal curtain
by Fred McMahon


National Post

The coal curtain is being swept away in Cape Breton, and maybe soon the steel wall – Cape Breton’s subsidized steel industry – will come tumbling down. This should be a time of jubilee in Cape Breton, an occasion to pop champagne corks, not cry over split milk.

Last week, natural resources minister Ralph Goodale announced the Cape Breton Development Corporation (Devco), which runs the mines, will close. The largest mine, Phalen, will be shut. Ottawa will try to privatize the smaller Prince mine, but prospects are dim. Cape Breton produces the dirtiest coal in North America save for one smaller subsidized mine in New Brunswick.

The loss of these Soviet-era-like relics opens Cape Breton to new opportunities. The dangerous, money-losing, health-destroying, pollution-creating, out-moded coal industry was a barrier to new investment throughout Nova Scotia.

Nova Scotia Power was forced to buy Cape Breton coal at outrageous prices. That led to absurdly high energy costs and suppressed economic activity. Every time a business turns on a light, it transforms potential profits into Devco subsidies.

The damage is worse in industrial Cape Breton. Dangerous levels of local pollution form a barrier to new investment. A degraded environment is as deadly for economic growth as it is for human health. Industrial Cape Bretoners suffer disproportionately from any number of medical conditions and live shorter, unhealthier lives partly because of this. Who would want to build a new business here?

Even more deadly to job growth is the labour situation, the us-against-them, labour-against-the-fat-cat-bosses attitude engendered by old-time industrial unions. A mix of perverse federal programs – not just the subsidized industrial structure – creates a volatile, dangerous labour situation.

Many Canadians remember startling pictures of Cape Breton workers burning down an apartment building constructed by non-union workers. Fire-fighters were pushed, threatened and barred from the site until only smoldering embers remained. A more revealing incident happened a couple months later. A local bank branch needed roof repairs. The manager, to protect his building, sought out unionized contractors.

He couldn’t get the work done at any price and had to hire a Halifax firm. The bank paid Halifax workers to travel to Sydney, paid them while they were in transit, paid their way back to Halifax, and incidentally paid them to repair the roof. Halifax’s unemployment rate was below the national average. One in four in Sydney were unemployed. Halifax contractors jumped at the work; Sydney contractors shunned it.

Why? Folks are reluctant to talk about it, but the best explanation is that employment isn’t worthwhile for many workers unless it lasts long enough to provide a new round of employment insurance in a regionally enriched program which allows people to collect EI most of the year, year after year. Why give up the EI money you’re already taking home for short-term work that won’t qualify you for another round of EI?

The analogy between industrial Cape Breton and the Soviet economy is far from frivolous. Industrial CB runs on government money and planning. Market signals are crushed. Alongside the federal coal industry sits the equally out-moded, provincially-owned, money-losing steel industry. Nova Scotia says it wants out, but privatization attempts have failed. You would have a hard time distinguishing a picture of grimy industrial Cape Breton from Valdivostok.

This politicized economy discourages initiative, education and training. Political contacts – often political threats – are more important than any of these. Because this suppresses real economic growth, it engenders a false view of the economy, the negative sum economy. A job lost is a job lost forever. Coal jobs can never be replaced.

You don’t have to look outside Atlantic Canada to see how wrong this is. Federal budget cuts hit Halifax proportionately harder than any city in Canada, including Ottawa. Halifax lost 7,600 jobs and $1 billion in investment. Today, Halifax is brightest spot in the Atlantic economy. Our unemployment rate is set to fall below 7 per cent for the first time since the war. Government cutbacks help, not hurt.

Fifteen years ago, Moncton was devastated by the loss of its CN yards and the Eaton’s catalogue centre. Now Moncton rivals Halifax in dynamism.

This optimistic future can be Cape Breton’s. But people are already demanding some government plan to revive the economy. This will kill future prospects as surely as government’s plan of a vibrant coal industry maimed Cape Breton’s past. Government planners simply don’t have the infinite wisdom to decide which industries, producing what, are best where. The economy is organic, not mechanical.

People in Cape Breton can have a bright future if they shrug off the distortions, dependency and sense of entitlement of the past, and take their fate into own hands, as did people in Halifax and Moncton. Despite all the perversities of Cape Breton’s politicized economy, younger Cape Bretoners and a new class of entrepreneurs have created a thriving, though small, technology sector, with some real gems particularly in multi-media.

Ottawa has a role. After generations of subsidies and the implicit promise of lifetime employment, government should be generous with those too old or set in their ways to take up new challenges. Other workers should have training and education options they choose, not ones decided by government.

The closing of Devco and the winding down of Cape Breton’s old economy opens a new world of opportunities. Dangerous, unhealthy, life-shortening jobs are being shed. That’s to the good. The local environment may have a chance to heal, and Cape Bretoners a chance to determine their own future.