skyscraper_1
February 27th, 2007, 05:35 PM
Pulling Against Gravity: Economic Development in New Brunswick During the McKenna Years
Institute for Research on Public Policy, 2001
David Murrell [ * ]
New Brunswick during the 1990s gave Canada two important men of national stature: premier Frank McKenna and academic Donald Savoie. “The McKenna Miracle” as it was known transformed the province’s economy and economic governance. Donald Savoie, an economic development professor at the University of Moncton, reached a national following with his two books on federal government: The Politics of Government Spending (1990) and Governing from the Centre: The Concentration of Power in Canadian Politics (1999). Consequently we should welcome his new book on Frank McKenna, Pulling Against Gravity: Economic Development During the McKenna Years (2001). Although better known for his research on federal government, Donald Savoie has written widely on regional economic development,[ 1 ] particularly from an Atlantic Canada and New Brunswick perspective. He brings this expertise into this book, and integrates this with in-depth knowledge of federal public administration.
Savoie frames his core thesis about New Brunswick under Frank McKenna using hard economic data, comparing the province’s economy in 1987 (when the McKenna Liberals took over from the Richard Hatfield Tories) to that in 1997 (when McKenna resigned his premiership). But Savoie also weaves into dry statistics a description of federal and New Brunswick provincial governance, before and during the McKenna years. In sum, Savoie’s solid knowledge of regional development and public administration allows him to craft a very thorough story of New Brunswick’s economic development.
Savoie’s story of New Brunswick and Frank McKenna’s miracle involves two distinct, but interrelated threads: the creation of New Brunswick (and Atlantic Canada’s) dependency on federal government largesse; and Frank McKenna’s revolution given such dependency. Savoie’s central thesis is that federal government policy against Atlantic Canada (including New Brunswick) hurt McKenna’s effort to modernize New Brunswick. Thus the title of the book. Frank McKenna’s dynamic policies worked to lift the province up off of the ground. But continued pro-central Canada federal policies have limited how high New Brunswick could go. I discuss each major theme in turn.
The creation of New Brunswick’s dependency: The province as a “supplicant”
Savoie argues that New Brunswick (and Atlantic Canada) are economic dependent regions. The economic dependency springs from Canada’s history. From Confederation onward, a highly-centralized federal government undertook economic policy to favour the interests of central Canadians. John A. Macdonald’s National Policy, favouring manufacturing in central Canada and east-west trading links, lead to corporate headquarters relocating away from the Maritimes. During the two world wars the federal government concentrated nearly all war making manufacturing Quebec and Ontario. Crown corporations, after playing a major role in the war effort, remained headquartered in central Canada (pp. 20-21). Particularly after World War I and onward, New Brunswickers and Maritimers took on the role of that of “supplicants”—people and governments continually and asking federal government for economic help (chapter 3). The Duncan Commission was established; the Maritime Rights Movement took hold; the Rowell-Sirois Report was tabled; various legislation and regional development efforts were undertaken after World War II onward. All of these efforts, according to Savoie, established Atlantic Canada in the public’s mind as a singularly have-not, backwards region — chronically underdeveloped and always asking the federal government for more help.
The crux of Savoie’s argument is that federal government boasts loudly about helping New Brunswick and Atlantic Canada through aggressive “regional development” efforts, but delivers little in actual industry development. Be it Diefenbaker’s Atlantic Manifesto, Trudeau’s new Department of Economic Expansion (DREE), Mulroney’s Atlantic Canada Economic Opportunity Agency (ACOA) or Chretien’s $700-million Atlantic Investment Partnership Program (just announced last year), these programs have been dwarfed by much larger “national” industry building initiatives—the St. Lawrence Seaway, the Auto Pact, Industry Canada subsidies and tax breaks, and federal R&D efforts like the Technology Partnership Program and “Networks of Centres of Excellence.” Indeed, Savoie makes the case, in this book and elsewhere,[ 2 ] that after the initial DREE years, regional economic development money has been steadily diluted away from Atlantic Canada to Montreal and to richer provinces points west. Throughout Pulling Against Gravity Savoie criticizes successive federal governments for addressing Ontario and Quebec concerns as “national” problems, while at the same time perceiving Atlantic Canada concerns as “regional” ones.
Why is this so? Savoie points to the over-concentration of power in central Canada. For example our Senate is a mere patronage tool for powerful prime ministers, all of whom since World War II have come from central Canada. Since senators are appointed, they speak for the prime ministers who appoints them, not for their respective regions. Being appointed, senators lack democratic legitimacy, and are rightly ignored by mainstream journalists and ordinary Canadians. The United States, by contrast, has a powerful Senate, whose constituent senators speak for diverse state interests. Consider the current lumber dispute. Certain powerful U.S. senators support anti-dumping measures. In Canada our senators remain silent. Moreover, having a powerful legislative body in the United States that speaks for the diverse regions has meant that the U.S. government has spread federal expenditures more evenly throughout that country. It has allowed for disparate federally supported growth poles (e.g., the space centres in Texas and Florida) to develop. In Canada, by contrast, our government has purposely favoured high-tech growth solely along the Montreal-Ottawa-Toronto axis (e.g., Canada’s space centre in Montreal).
Consequently New Brunswick (and Atlantic Canada in general) have become economically dependent in the sense that, to this day, the regions have failed to industrialize in step with modern economic development. Just as the federal government, from the National Policy onward, purposely nurtured central Canada’s traditional manufacturing (at the expense of Atlantic and western Canada), so too today our federal government favours an over-concentration of high-technology development within the southern Quebec/Ontario region. In fact Savoie makes the case that our federal government supports no meaningful industry building strategy for Atlantic Canada. Much of federal efforts are directed to funding after-the-fact compensatory programs (employment insurance, equalization payments). Savoie notes that, in the run-up to the 2000 federal election, Prime Minister Chretien stated: “we will win more seats in Atlantic Canada in the next federal election. Apparently, I will have to fix the problem with U.I. there” (p. 188).
For Chretien, liberalizing an already lenient employment insurance program made good vote-buying sense. But re-liberalizing employment insurance makes poor regional development policy. Given a lax EI insurance scheme, workers stay in old, sunset industries and occupations. Particularly in rural areas, the minimum number of hours to qualify for EI is very lenient, where workers spent unusually long periods idle. For Savoie, the federal government has always been quick to design lavish economic relief packages for Atlantic Canada, while at the same time ignoring industry-building programs. The result is that Atlantic Canada (and New Brunswick) remain dependent on federal largesse.
Frank McKenna’s Miracle
Frank McKenna, upon becoming premier in 1987, inherited from then-premier Richard Hatfield a sleepy provincial government comfortable with economic dependency. Under Hatfield, the province had no meaningful provincial economic development policy, nor a sound fiscal policy (the province had racked up steady ordinary-account deficits and tax increases, even during the prosperous years following the 1981-82 recession). McKenna—assisted by the equally energetic Francis McGuire, the province’s new deputy minister of economic development—began a top-down revolution to transform the province’s policies and public service to support New Brunswick province building.[ 3 ] McKenna saw that a new provincial logo was developed, to be put on all provincial advertising and publications. He began an upbeat sales promotion for the province. His government advertised in business trade publications and in The Globe and Mail. He personally met with leading corporate business executives professing any interest in the province. His raw energy caught the eye of the national and international media (including the New York Times Magazine).
McKenna’s call centre policy was particularly successful (pp. 102-104). He sold New Brunswick as a province with a true comparative advantage: cheap costs as to call centre service delivery. In particular, property sites for call centre were cheap; so too were labour costs. New Brunswick, as the only official bilingual province, offered a capable work force. McKenna abolished the province’s sales tax on 1-800 numbers, as a key incentive for attracting call centre operations. True, McKenna did personally meet with corporate leaders, but he brought with him government bureaucrats armed with cost data showing that New Brunswick offered the lowest costs to do business. By 1997, when McKenna stepped down as premier, he had created 9,000 new call centre jobs.
As well, in his last years in office, the premier pushed the Fredericton-Moncton New Brunswick highway, an as-yet-unfinished highway which will connect the two cities as a complete four-lane highway. Under McKenna the province undertook meaningful fiscal reform, bringing in balanced budget legislation to begin reducing the province’s high debt. McKenna started N.B. Works, a voluntary “workfare” system designed to integrate income assistance recipients into meaningful jobs. He reformed the province’s workers compensation program; he reformed secondary schools by adding mandatory testing and stressing science and computer literacy. Savoie also outlines in considerable detail how McKenna brought pro-business advocacy into the public service, from top to bottom.
Was McKenna successful? During the period he was in office, he was. Donald Savoie—and this is a strong part of his study— assembles a large set of economic data showing how New Brunswick, during the McKenna years between 1987 and 1997, gained relative to other small-to-medium-sized provinces (the author uses Nova Scotia, Newfoundland and Labrador, and Manitoba as comparative benchmarks). The author concludes that most overall economic data (real GDP, employment growth, personal incomes) show New Brunswick out-performing other provinces. And Savoie’s basic conclusions have been corroborated by other writers.[ 4 ] Savoie thus rebuts some media commentary suggesting that McKenna’s miracle was illusionary media hype.
But New Brunswick grew more slowly once McKenna left. Using Nova Scotia’s economy as a benchmark, by 1996 New Brunswick surpassed Nova Scotia in per-capita real GDP, by $17 (1992) per person. But by the year 2000, Nova Scotia was back ahead, producing $285 (1992) more per individual. In 1996 New Brunswick had a comparatively lower unemployment rate, 11.6 percent to Nova Scotia’S 12.3 percent. But by the year 2000 Nova Scotia’s rate was about a percentage point lower. One has to be cautious about generalizing from such overall indicators, but they may be suggestive that the “McKenna miracle” might have dissipated with the man. New Brunswick’s economy may be reverting back to its traditional status.
Savoie as an Atlantic Canada rights advocate
Pulling Against Gravity rolls two themes into one book. It first tells the story of Frank McKenna’s modestly successful “miracle.” But secondly it makes a passionate plea for New Brunswick and Atlantic Canadian rights in Canadian federation. Savoie calls for an elected Senate to bring meaningful power to periphery provinces. Failing that, the writer calls for a decentralization of power from federal government to the provinces. He writes:
“But a strong central government has never been in the economic interest of New Brunswick or Atlantic Canada. To be sure, federal transfer payments of one kind or another have enabled them to provide a high level of public service, but this came with a price—economic dependency (p. 190).
Pulling Against Gravity thus goes far beyond a competent description of the successful Frank McKenna administration. It marks a first step toward meaningful Atlantic Canada rights advocacy. Western Canada has its Canada West Foundation, along with many regional-rights academics. By contrast Atlantic Canada has never really developed any analogous rights-based academic tradition. But consider Savoie’s rise in stature following the publication of Governing from the Centre in 1999. With the publication of Pulling Against Gravity, this new book heralds the first pro-Atlantic Canadian advocacy from a nationally known writer. I hope readers from across the country read this book, if only for this reason. And I hope Donald Savoie continues his Atlantic Canada rights advocacy. If he does, it would represent something new and exciting.
http://www.isuma.net/v02n04/murrell/murrell_e.shtml
Institute for Research on Public Policy, 2001
David Murrell [ * ]
New Brunswick during the 1990s gave Canada two important men of national stature: premier Frank McKenna and academic Donald Savoie. “The McKenna Miracle” as it was known transformed the province’s economy and economic governance. Donald Savoie, an economic development professor at the University of Moncton, reached a national following with his two books on federal government: The Politics of Government Spending (1990) and Governing from the Centre: The Concentration of Power in Canadian Politics (1999). Consequently we should welcome his new book on Frank McKenna, Pulling Against Gravity: Economic Development During the McKenna Years (2001). Although better known for his research on federal government, Donald Savoie has written widely on regional economic development,[ 1 ] particularly from an Atlantic Canada and New Brunswick perspective. He brings this expertise into this book, and integrates this with in-depth knowledge of federal public administration.
Savoie frames his core thesis about New Brunswick under Frank McKenna using hard economic data, comparing the province’s economy in 1987 (when the McKenna Liberals took over from the Richard Hatfield Tories) to that in 1997 (when McKenna resigned his premiership). But Savoie also weaves into dry statistics a description of federal and New Brunswick provincial governance, before and during the McKenna years. In sum, Savoie’s solid knowledge of regional development and public administration allows him to craft a very thorough story of New Brunswick’s economic development.
Savoie’s story of New Brunswick and Frank McKenna’s miracle involves two distinct, but interrelated threads: the creation of New Brunswick (and Atlantic Canada’s) dependency on federal government largesse; and Frank McKenna’s revolution given such dependency. Savoie’s central thesis is that federal government policy against Atlantic Canada (including New Brunswick) hurt McKenna’s effort to modernize New Brunswick. Thus the title of the book. Frank McKenna’s dynamic policies worked to lift the province up off of the ground. But continued pro-central Canada federal policies have limited how high New Brunswick could go. I discuss each major theme in turn.
The creation of New Brunswick’s dependency: The province as a “supplicant”
Savoie argues that New Brunswick (and Atlantic Canada) are economic dependent regions. The economic dependency springs from Canada’s history. From Confederation onward, a highly-centralized federal government undertook economic policy to favour the interests of central Canadians. John A. Macdonald’s National Policy, favouring manufacturing in central Canada and east-west trading links, lead to corporate headquarters relocating away from the Maritimes. During the two world wars the federal government concentrated nearly all war making manufacturing Quebec and Ontario. Crown corporations, after playing a major role in the war effort, remained headquartered in central Canada (pp. 20-21). Particularly after World War I and onward, New Brunswickers and Maritimers took on the role of that of “supplicants”—people and governments continually and asking federal government for economic help (chapter 3). The Duncan Commission was established; the Maritime Rights Movement took hold; the Rowell-Sirois Report was tabled; various legislation and regional development efforts were undertaken after World War II onward. All of these efforts, according to Savoie, established Atlantic Canada in the public’s mind as a singularly have-not, backwards region — chronically underdeveloped and always asking the federal government for more help.
The crux of Savoie’s argument is that federal government boasts loudly about helping New Brunswick and Atlantic Canada through aggressive “regional development” efforts, but delivers little in actual industry development. Be it Diefenbaker’s Atlantic Manifesto, Trudeau’s new Department of Economic Expansion (DREE), Mulroney’s Atlantic Canada Economic Opportunity Agency (ACOA) or Chretien’s $700-million Atlantic Investment Partnership Program (just announced last year), these programs have been dwarfed by much larger “national” industry building initiatives—the St. Lawrence Seaway, the Auto Pact, Industry Canada subsidies and tax breaks, and federal R&D efforts like the Technology Partnership Program and “Networks of Centres of Excellence.” Indeed, Savoie makes the case, in this book and elsewhere,[ 2 ] that after the initial DREE years, regional economic development money has been steadily diluted away from Atlantic Canada to Montreal and to richer provinces points west. Throughout Pulling Against Gravity Savoie criticizes successive federal governments for addressing Ontario and Quebec concerns as “national” problems, while at the same time perceiving Atlantic Canada concerns as “regional” ones.
Why is this so? Savoie points to the over-concentration of power in central Canada. For example our Senate is a mere patronage tool for powerful prime ministers, all of whom since World War II have come from central Canada. Since senators are appointed, they speak for the prime ministers who appoints them, not for their respective regions. Being appointed, senators lack democratic legitimacy, and are rightly ignored by mainstream journalists and ordinary Canadians. The United States, by contrast, has a powerful Senate, whose constituent senators speak for diverse state interests. Consider the current lumber dispute. Certain powerful U.S. senators support anti-dumping measures. In Canada our senators remain silent. Moreover, having a powerful legislative body in the United States that speaks for the diverse regions has meant that the U.S. government has spread federal expenditures more evenly throughout that country. It has allowed for disparate federally supported growth poles (e.g., the space centres in Texas and Florida) to develop. In Canada, by contrast, our government has purposely favoured high-tech growth solely along the Montreal-Ottawa-Toronto axis (e.g., Canada’s space centre in Montreal).
Consequently New Brunswick (and Atlantic Canada in general) have become economically dependent in the sense that, to this day, the regions have failed to industrialize in step with modern economic development. Just as the federal government, from the National Policy onward, purposely nurtured central Canada’s traditional manufacturing (at the expense of Atlantic and western Canada), so too today our federal government favours an over-concentration of high-technology development within the southern Quebec/Ontario region. In fact Savoie makes the case that our federal government supports no meaningful industry building strategy for Atlantic Canada. Much of federal efforts are directed to funding after-the-fact compensatory programs (employment insurance, equalization payments). Savoie notes that, in the run-up to the 2000 federal election, Prime Minister Chretien stated: “we will win more seats in Atlantic Canada in the next federal election. Apparently, I will have to fix the problem with U.I. there” (p. 188).
For Chretien, liberalizing an already lenient employment insurance program made good vote-buying sense. But re-liberalizing employment insurance makes poor regional development policy. Given a lax EI insurance scheme, workers stay in old, sunset industries and occupations. Particularly in rural areas, the minimum number of hours to qualify for EI is very lenient, where workers spent unusually long periods idle. For Savoie, the federal government has always been quick to design lavish economic relief packages for Atlantic Canada, while at the same time ignoring industry-building programs. The result is that Atlantic Canada (and New Brunswick) remain dependent on federal largesse.
Frank McKenna’s Miracle
Frank McKenna, upon becoming premier in 1987, inherited from then-premier Richard Hatfield a sleepy provincial government comfortable with economic dependency. Under Hatfield, the province had no meaningful provincial economic development policy, nor a sound fiscal policy (the province had racked up steady ordinary-account deficits and tax increases, even during the prosperous years following the 1981-82 recession). McKenna—assisted by the equally energetic Francis McGuire, the province’s new deputy minister of economic development—began a top-down revolution to transform the province’s policies and public service to support New Brunswick province building.[ 3 ] McKenna saw that a new provincial logo was developed, to be put on all provincial advertising and publications. He began an upbeat sales promotion for the province. His government advertised in business trade publications and in The Globe and Mail. He personally met with leading corporate business executives professing any interest in the province. His raw energy caught the eye of the national and international media (including the New York Times Magazine).
McKenna’s call centre policy was particularly successful (pp. 102-104). He sold New Brunswick as a province with a true comparative advantage: cheap costs as to call centre service delivery. In particular, property sites for call centre were cheap; so too were labour costs. New Brunswick, as the only official bilingual province, offered a capable work force. McKenna abolished the province’s sales tax on 1-800 numbers, as a key incentive for attracting call centre operations. True, McKenna did personally meet with corporate leaders, but he brought with him government bureaucrats armed with cost data showing that New Brunswick offered the lowest costs to do business. By 1997, when McKenna stepped down as premier, he had created 9,000 new call centre jobs.
As well, in his last years in office, the premier pushed the Fredericton-Moncton New Brunswick highway, an as-yet-unfinished highway which will connect the two cities as a complete four-lane highway. Under McKenna the province undertook meaningful fiscal reform, bringing in balanced budget legislation to begin reducing the province’s high debt. McKenna started N.B. Works, a voluntary “workfare” system designed to integrate income assistance recipients into meaningful jobs. He reformed the province’s workers compensation program; he reformed secondary schools by adding mandatory testing and stressing science and computer literacy. Savoie also outlines in considerable detail how McKenna brought pro-business advocacy into the public service, from top to bottom.
Was McKenna successful? During the period he was in office, he was. Donald Savoie—and this is a strong part of his study— assembles a large set of economic data showing how New Brunswick, during the McKenna years between 1987 and 1997, gained relative to other small-to-medium-sized provinces (the author uses Nova Scotia, Newfoundland and Labrador, and Manitoba as comparative benchmarks). The author concludes that most overall economic data (real GDP, employment growth, personal incomes) show New Brunswick out-performing other provinces. And Savoie’s basic conclusions have been corroborated by other writers.[ 4 ] Savoie thus rebuts some media commentary suggesting that McKenna’s miracle was illusionary media hype.
But New Brunswick grew more slowly once McKenna left. Using Nova Scotia’s economy as a benchmark, by 1996 New Brunswick surpassed Nova Scotia in per-capita real GDP, by $17 (1992) per person. But by the year 2000, Nova Scotia was back ahead, producing $285 (1992) more per individual. In 1996 New Brunswick had a comparatively lower unemployment rate, 11.6 percent to Nova Scotia’S 12.3 percent. But by the year 2000 Nova Scotia’s rate was about a percentage point lower. One has to be cautious about generalizing from such overall indicators, but they may be suggestive that the “McKenna miracle” might have dissipated with the man. New Brunswick’s economy may be reverting back to its traditional status.
Savoie as an Atlantic Canada rights advocate
Pulling Against Gravity rolls two themes into one book. It first tells the story of Frank McKenna’s modestly successful “miracle.” But secondly it makes a passionate plea for New Brunswick and Atlantic Canadian rights in Canadian federation. Savoie calls for an elected Senate to bring meaningful power to periphery provinces. Failing that, the writer calls for a decentralization of power from federal government to the provinces. He writes:
“But a strong central government has never been in the economic interest of New Brunswick or Atlantic Canada. To be sure, federal transfer payments of one kind or another have enabled them to provide a high level of public service, but this came with a price—economic dependency (p. 190).
Pulling Against Gravity thus goes far beyond a competent description of the successful Frank McKenna administration. It marks a first step toward meaningful Atlantic Canada rights advocacy. Western Canada has its Canada West Foundation, along with many regional-rights academics. By contrast Atlantic Canada has never really developed any analogous rights-based academic tradition. But consider Savoie’s rise in stature following the publication of Governing from the Centre in 1999. With the publication of Pulling Against Gravity, this new book heralds the first pro-Atlantic Canadian advocacy from a nationally known writer. I hope readers from across the country read this book, if only for this reason. And I hope Donald Savoie continues his Atlantic Canada rights advocacy. If he does, it would represent something new and exciting.
http://www.isuma.net/v02n04/murrell/murrell_e.shtml