- srbp -
In another great service to Newfoundland and Labrador, the country’s leading shit-disturber has translated poll results by Abacus Data into a nice table.
It shows the results for each province across a range of topics.
CBC’s Rob Antle has updated work done over the past couple of years on government give-aways to private sector businesses in the name of economic development:
The Newfoundland and Labrador government has funnelled more than $20 million into grants, loans and the direct costs of business-attraction initiatives that have provided a net benefit of fewer than 100 new jobs — a quarter of them seasonal.
Faithful readers will notice some familiar names in the story and the associated documents posted with the online version of it.
Kodiak got $8 million to expand its operations at Harbour Grace. They laid off workers instead.That isn’t the only example of that sort of thing happening.
Then, there’s Dynamic Air Shelters,which has more government cash in it than many Crown corporations
None of this is surprising since Newfoundland and Labrador is the only province in Canada where the private sector prefers to be publicly funded.
It’s another way in which the provincial economy has grown increasingly fragile over the past eight years.
- srbp -
Environmental concerns are causing problems for a proposed electricity transmission line that could help carry Labrador electricity into the United States.
The Northern Pass project will carry electricity from Quebec into New Hampshire and on to the rest of New England.
Some local residents in New Hampshire are concerned that the proposed route will damage the state’s tourism industry.
John Harrington is a retired newspaper publisher. He told North Country Public Radio:
“What’s being threatened is the only thing we really have left, which is tourism. All for the convenience of people far to the south. And we’re going to wind up with this huge scar right down through the narrowest and most fragile part of New Hampshire.”
Then there’s the question of whether or not big hydro is actually green. Only Vermont currently accepts hydroelectricity from large dams as renewable and green and therefore eligible to count in state-mandated energy calculations. Most New England states require that a percentage of electricity in the state come from renewable, green energy sources. Both the American federal and some state governments also give cash incentives to renewable energy projects.
In some states, debate is already raging about the implications of renewable energy policies. In last fall’s gubernatorial campaign, incumbent Deval Patrick’s Republican challenger included support for big hydro as part of his campaign platform.
In Connecticut, Northeast utilities senior vice-president James Robb told a conference last November that without big hydro, “ it will be very challenging to meet those goals” of increasing the use of renewable energy sources to 25% of generation by 2025. Robb said that there are projects but many are uneconomical.
Still, the big hydro projects don’t meet existing guidelines.
The main concern regarding hydro is that the flooding resulting from dams causes leaves and other foliage to decompose, emitting methane, one of the worst greenhouse gases. The Canadian officials [at the November conference] argued that the water in their provinces is so cold that the leaves don’t decompose.
“I’m struggling here in New England with how New England is going to meet its renewable requirements. Without Quebec and Newfoundland & Labrador, you will struggle to hit that,” said Ed Martin, president and CEO of Nalcor Energy, which is based in the hydro- and wind-rich Newfoundland & Labrador. “Hydro is part of the mix that has to happen if you are going to meet the goals in New England.”
- srbp -
Politicians spent a few hours this week harrumphing about the impact falling oil prices might have on the provincial budget this year.
The problem for the provincial government is not whether they got the price of oil right in their budget. They’ve been underestimating for years. This year might be an over-estimate. In the short-term, they’ve still got lots of budget smoke and mirrors to cover off most of the likely outcomes. There’s no cause for panic, yet.
The problem for the provincial government is bigger than the current price of oil. Most of this will be familiar to regular readers, but at times like this it is worth pulling it all together in one spot so that people can see the big picture.
An analyst with the Atlantic Provinces Economic Council told a conference in St. John’s that the provincial government “has to get its fiscal house in order” before it makes an investment in any version of the Lower Churchill energy megaproject.
Fred Bergman said the province’s net debt to gross domestic product ratio remains among the highest in Canada at 41%.
Bergman is quoted by the Telegram [page four story, Wednesday November 3, not on line] as saying:
“Get your fiscal house in order, get your debt-to-GDP ratio down, get your budget balanced and then you can afford to tackle something like that.”
The Williams administration ran a half billion cash deficit in 2009 and budgeted for a $900 million cash shortfall in 2010. Budget projections released in spring 2010 do not include any forecast for balanced budgets.
Finance minister Tom Marshall has previously consistently rejected balanced budget legislation.
In its various configurations, the Lower Churchill project could cost anywhere from $6.0 billion to $14 billion.
The following charts show the provincial government’s liabilities and net debt. The vertical axis is in millions of Canadian dollars.
- srbp -
Related: “The Fragile Economy: staying the course”
While an official with Corner Brook’s municipal government understandably has to say wonderful things about the economy in the west coast city, a look at some numbers shows the city is feeling the effects of a larger problem in the province.
SRBP took a look at newsprint production levels and the value of newsprint exports from 2003 to 2012. The numbers are all from the annual editions of the budget document called The Economy.
The picture is not pretty.
The top 10 Bond posts for April [with links fixed] as determined by the statporn machines at feedburner.com:
-srbp-
Our economic vision for Newfoundland and Labrador is that of an enterprising, educated, distinctive and prosperous people working together to create a competitive economy based on innovation, creativity, productivity and quality.
Strategic Economic Plan, 1992
Our social vision for Newfoundland and Labrador is of a sharing society which balances its economic and social interests, cares for its disadvantaged, nurtures its human and physical environment, celebrates its quality of life and traditional values of individual respect and community responsibility and provides opportunities for personal and collective achievement.
Strategic Social Plan Consultation Paper, 1995
Within a mere two decades, Newfoundland and Labrador transformed almost two centuries of economic backwardness into unprecedented growth.
And yet, as we enter the second decade of the 21st century, a number of factors, some identified in the early 1990s, threaten to rob Newfoundlanders and Labradorians of the bright future they worked to achieve through careful planning, steady work, and a steely determination to endure.
Public sector debt remains at record levels. Rather than reduce debt, the current Conservative administration plans to increase the debt burden still further by building an economically unsound megaproject. What’s more, the most recent economic forecast predicts that the current administration’s policies could triple the debt within a decade. That is on top of the burden from the Muskrat Falls megaproject.
Changes in the province’s population, forecast in the early 1990s, have started to create pressure for new government spending and more government spending. Just paying the interest on the growing debt will rob money that could be helping to pay for those new services.
The highly competitive global economy that has emerged in the past 20 years, coupled with fall-out from the recent recession, will demand even greater inventiveness if businesses in Newfoundland and Labrador will meet the challenges these changes present.
Yet, over the past decade government policy has fostered greater social and business dependence on government hand-outs. The result is a fragile economy that will grow less robust and more susceptible to set-backs.
The answer to these challenges can be found in the principles that lay at the heart of the 1992 Strategic Economic Plan:
The ideas that will follow in posts over the coming days and weeks are nothing more than the starting point for discussion.
Only through vigorous, free-wheeling public debate can we build a mutual understanding among all the people of the province on both the necessity of change and of the specific changes themselves.
Change is not a luxury.
Change is not merely possible.
Change is essential.
- srbp -
Next: Building the Fishery of the Future
If the truth may be found in the smallest of things, then the shifts and changes in Kathy Dunderdale’s second cabinet reveal a great deal.
“It is very important to me that our government operates as efficiently as possible, while providing quality programs and services that meet the needs of the people of our province,” said Premier Dunderdale. “Re-aligning departments and adjusting ministries to ensure they are best positioned to take on the challenges and opportunities before us is very important.”
Here’s how the official news release laid out the re-aligning and adjusting:
This release puts the big information at the back end. Eliminating the business department ends an eight year fiasco. In effect, the Conservatives created the “business” department in 2003 by breaking off some sections of the industry, trade and rural development department. Now they’ve just put it all back the way it was, complete with the Beaton Tulk-era Rural Secretariat
After eight years of accomplishing nothing, the Conservatives have just put the economic development resources of government back to where they were in 2003. Danny Williams created the department to give a vehicle for his personal business acumen to create thousands of jobs and single-handedly produce a economic miracle in the province. Williams did nothing while he was minister of his own department, often going weeks without meeting his deputy minister. He handed it off to a succession of second and third tier ministers like Fairity O’Brien or Paul Oram. Even someone like Ross Wiseman couldn’t do anything except make speeches and hand out gobs of free cash to private companies.
The result of those eight years is a very fragile economy is is more heavily dependent than ever on government spending. The new minister – Keith Hutchings – has exactly zilch in the experience department when it comes to economic development:
Mr. Hutchings graduated from Memorial University with a Bachelor of Arts, Majoring in Political Science and obtained a Certificate in Public Administration from Memorial, as well as an Occupational Health and Safety Program from Ryerson University in Toronto.
Mr. Hutchings’ professional career has included 11 years with the Workplace Health, Safety and Compensation Commission. He also served as Chief of Staff and Executive Assistant to then Leader of the Official Opposition in the Provincial House of Assembly (1996 -1998) and successfully ran his own consulting business.
The Intergovernmental and Aboriginal Affairs department basically recreates what used to exist 20 years and more ago as the Intergovernmental Affairs secretariat, and adds Labrador Affairs and the non-profit and voluntary secretariat for good measure. The first two are relatively small, functionally oriented sections that could easily be rolled inside the Executive Council where they once lived. The latter two sections are meaningless political sops that serve only to increase bureaucracy without enhancing service delivery. Dunderdale could have eliminated them entirely while likely improving the overall efficiency of government.
The ministry went to newbie Keith McGrath in order to make sure there was a cabinet minister from Labrador. This reorganization is a minor administrative change.
The new Advanced Education department actually combines the pre-2003 post-secondary education ministry with the department that handled job training programs. That’s it.
The organization makes sense if it was aimed solely at ensuring that the provincial job-training resources lined up to meet – belatedly – the labour crunch in the province.
Adding Memorial University to the mix could severely hinder the university’s development by burying it inside a department aimed at something other than what it does. Memorial doesn’t exist in order to be a glorified trade school.
This is Joan Burke’s big reward for backing Dunderdale, nothing more, nothing less.
What’s more interesting about the labour market focus of the department is that it won’t include any of the labour relations elements. They are all part of the provincial government’s traditional function of regulating industry and ensuring a healthy and productive labour relations climate.
But under the most recent re-organization, the Workplace Health, Safety and Compensation Commission reports to the government services department and the labour relations agency reports to the environment department. Such a re-alignment ensures that the “silos” the new minister claims the re-organization would cure remain in place.
In every other respect and distinct from these three adjustments, the departmental organization stays the same.
When it comes to who got a new job and who didn’t, those seemingly small points also tell a larger story.
Besides Joan Burke, Susan Sullivan got a big reward for her political loyalty to the Premier. She takes over the health portfolio. Sullivan may not feel quite so lucky in a few weeks or months – health is a difficult portfolio – but it is the largest department and the one that typically goes to those the Premier holds in high regard. If she does well, Sullivan could become a contender to replace Dunderdale when the Premier leaves before 2015.
Jerome Kennedy’s new gig at natural resources gives him a well-deserved respite from the health minister’s job. Kennedy took over that job at a hard time and navigated the department though some tough times. he got out of it with both his health and his reputation intact. That’s a rare achievement.
At natural resources, Kennedy faces the challenge of mounting problems with the Muskrat Falls project. Kennedy can be a forceful proponent for an argument like Muskrat Falls. He can also be a diligent house-cleaner when problems occur. if Dunderdale had to kill off Muskrat, Kennedy could handle that effectively too.
In the next four years, Kennedy will also have to deal with the border issue in the Gulf of St. Lawrence and the future of a string of law suits related to the Lower Churchill.
Danny Williams appointed Kathy Dunderdale to natural resources safe in the knowledge that he was really looking after things. He didn’t need a minister who understood much and Dunderdale fit the bill. With Kennedy, Dunderdale has a minister who will – in all likelihood – lead this crucial department in more than name only and take the heightened public profile along with it. Kennedy could be well set when Dunderdale leaves.
Kennedy’s appointment as Government House Leader is a clear sign the Conservatives are going to approach the legislature with a strong arm and an iron fist.
Darin King took the poisoned chalice of fisheries in the recent cabinet shuffle. The provincial Conservatives haven’t been able to find a policy they can all agree on. As a result, the fishery remains a festering political pustule that breaks from time to time, splattering the minister of the moment. King can kiss his leadership aspirations good-bye.
Derrick Dalley got the Conservatives’ community pork portfolio as minister of tourism, culture and recreation. He succeeds Terry French who got a quiet and relatively easy portfolio in what is usually the home of ministers on the way into cabinet or those on the way out.
- srbp -
- srbp -
The SIDI simulation of government spending that we’ve run this past week might not be everyone’s cup of tea, but these sort of thought exercises are always useful.
The most striking thing is the amount of money from oil and mining that the provincial government has spent in the past seven years: $15.6 billion. That’s enough to wipe out the entire public debt plus the unfunded pension liability and have a couple of billion left over for an unprecedented capital works program.
It’s a staggering amount of money and the only thing more amazing than how much money there was is how easy it was to do something far more productive than just spending all the money, as the current provincial government has done.
The SIDI simulation included:
The only thing needed to make the simulation a reality was a political desire to do it. Had the provincial government done any one of the elements of the SIDI approach, then the provincial government could have either avoided the current crisis altogether or significantly altered the profile of the crisis and the prospects for coping with it.
Almost two years after your humble e-scribbler pointed out the blatant stupidity of the provincial government’s decision to boycott free trade talks, the provincial government is now sorting itself out.
The provincial government trade gang will switch from observers to participants at the upcoming trade talks between Canada and the European Union in April.
The old policy - supported unquestioningly by the same people who have now turned 180 degrees – was stupid because it jeopardized the existing and future economic interests of the province and left local industry to being left out of a new lucrative market.
What’s worse, the old, stupid policy threatened to increase the dependence of the local economy on on the American market. As a result, the provincial economy would become even more fragile than it had already grown as a result of seven years of backward economic policy by the provincial government.
It may have taken two years but the current crowd have finally figured it out.
- srbp -
For the year-end post, you’ll have to wait until Friday to find out what the readers picked as their favourite stories of 2010.
For today, here’s another view. Your humble e-scribbler has picked one Bond Papers post or topic from each month as a reminder of the year’s events. I f you take the time to wander back through the archives, you’ll find all sorts of things from the UFO story that ran among last winter to a couple of posts on education. There are also posts on the fishery that got some public attention – h/t to CBC’s Fisheries Broadcast.
So much more happened in the province than people seem to remember and the stuff they do remember is often not the most important things.
In any event, here’s the Year in Review:
January: Spending scandal: when “facts” aren’t true
February: Three on one topic: Deep Throat, Deep T’roat and Deep Throats
March: The Fragile Economy: staying the course
April: Jon Lien: mensch
May: The search for meaning challenge – yet more unfounded news media claims.
June: Roger Fitzgerald’s bias – the House of Assembly is at the point where partisan bias openly displayed by the Speaker is now commonplace.
July: Calamity Kathy’s story doesn’t add up. The local media are already praising her political genius. Here’s another example of how short their memories are or how low are their standards.
August: Good to the last fish
September: The politicisation of public emergencies
October: Breasts: they’re not just for gawking at
November: Reversing the entrepreneurial drive
December: How to win without news media – Part 2
- srbp -
In September 2008, four cabinet ministers went to Harbour Grace to announce that the provincial government was giving the company $8.0 million in public money, interest free.
It’s an interesting picture because within 12 months of the announcement, the two on the right – Taylor and Oram – would be gone from politics. Williams left in 2010, the year the provincial government started a “review” of the loan after the company cut the work force to 100. They never did add any jobs. Kennedy hung on the longest of the lot, but five years after his trip to the boot factory, Jerome was gone from politics as well.
The business world in a free market runs so extensively on psychology it's amazing that business schools around the world spend so much time on balance sheets, marketing and business plans.
Psychology is pretty much the reason why western government's responded to the American financial crisis with assurances that "the fundamentals" of the economy are sound.
However, in some instances, the efforts to describe the Canadian economy as somehow able to avoid any consequences of the move toward a recession south of the border became somewhat bizarre.
Take, for example, comments by Premier Danny Williams in an interview with the National Post:
"The fortunate thing about Newfoundland and Labrador and Saskatchewan in today's fragile economy is that our provinces are very, very well-positioned. We have strong economies, a lot of it based on natural resources, but we're going to weather this storm and weather it very well."
Finance minister Tom Marshall told reporters on several occasions that he doesn't see a problem find cash to build the Lower Churchill project. In other news stories, Marshall said he was concerned that lower oil prices would lower government revenues.
The Premier told VOCM listeners on Sunday night that the provincial "economy is growing very well." That isn't accurate. All economic forecasts - including the provincial government's own forecasts - show the province having incredibly modest growth. Some project the growth this year and next year will be scarcely above 1% and some have forecast growth at one half of one percent. That is as perilously close to a decline as it can get.
At the same time, European countries are taking action to bail out where necessary and take other actions to avoid repercussions from the American downturn. Odd is that, given that European countries are not as dependent as Canada generally or Newfoundland and Labrador specifically on the healthy American economy.
Iceland, once touted by some nationalists as a model for Newfoundland and Labrador to emulate, is in serious economic difficulty:
But in the financial world Iceland is now a hot topic of discussion for a different reason: many people suggest that it could become the “first national casualty” of the ongoing credit crunch. Until last year, Iceland’s economic track record in this decade had been phenomenal—its annual growth rate averaged close to four per cent over the past decade, and its per-capita gross national income is now higher than that of the U.S. This year, though, the country’s currency, the króna, has fallen twenty-two per cent against the euro; the economy has stagnated; and a global rating agency has put the nation’s three major banks on a credit watch. Now analysts are wondering whether the new Nordic Tiger will end up, instead, as “the Bear Stearns of the North Atlantic.”
Take, as but one example, an article from the weekend Globe and Mail. It included this comment one one manufacturer from Newfoundland and Labrador:
Mr. [Lorne] Janes, president of Newfoundland-based Continental Marble of Canada, is already getting the cold shoulder from his customers in Florida, Maryland and California. “The reply I'm getting now is, ‘Lorne, save the phone call, don't call any more until this sorts out,'” said Mr. Janes, whose 12-employee company manufactures equipment to produce moulded stone countertops.
Janes wouldn't be alone. A Bond Papers post from last July highlighted the extent to which the provincial economy is dependent on exports - especially energy exports - the majority of which heads to the United States. In 2005, the last year for which information is posted online at the provincial government website, 52% of international exports from Newfoundland and Labrador headed to the United States.
As the United States economy slows, the effects on Newfoundland and Labrador will be felt directly and in some instances very strongly:
The Newfoundland and Labrador economy is not immune from the effects of a serious downturn in the American economy. As much as politicians are tempted to say something different from that for political reasons, it would be far better to provide people with an accurate picture of the provincial economy and the interrelationship between international events and local economic well being.
The shock of finding out the truth if serious consequences follow will be far greater than if politicians didn't try to whistle a happy tune as they walk towards what - for some economic projects - might well be a graveyard of ambition. That shock will have far greater consequences than what would occur from telling it like it is right now.
-srbp-
Not only did the provincial government explicitly refuse to participate in talks that would diversify the provincial economic trade base, its members are proud of it:
PREMIER WILLIAMS: Mr. Speaker, what this government is very, very proud of is we are the only jurisdiction of thirteen jurisdictions in all of Canada who has not gone along with the European Free Trade Agreement which Canada is trying to enter into. We are the only ones who have stood our ground and said we are not prepared to agree unless there are certain conditions. The seal industry, of course, is obviously one; the shrimp tariff is another one. …
But if that wasn’t bad enough, the Premier justified the position by claiming that it had worked in one important respect:
We have been very successful in having the shrimp tariff reduced and, in fact, removed over time. It has made a huge difference to the shrimp industry. [Emphasis added]
The first problem is that “we” – the Premier and his ministers – didn’t have very much to do with lowering the shrimp tariff in the first place.
And the second problem is that “we” did not accomplish this by boycotting important trade talks.
Sure the Premier and his fisheries minister took a much publicised junket to Europe, but there isn’t much sign they did much else except try to take credit for lowering the shrimp tariff back in 2007 before the trade talks were on. Someone else did the work.
By the way, if you take a look at that last link you’ll see this line:
Fishery Products International said about half of its shrimp is exported to the United Kingdom alone.
That would be the same Fishery Products International that had a European trade division “we” helped sell off in the break-up of FPI.
But anyway, not only are “we” no longer one step back, “we” are now not even a mere two steps back.
Provincial trade policy is effectively three steps backward: headed in the wrong direction, proud of it and then justifying the gross strategic mistake by claiming credit for things the backward-assed policy didn’t do in the first place.
If the first step toward any solution is admitting there’s a problem, “we” are a long way from solving very much when it comes to provincial trade policy.
-srbp-
The provincial government is reviewing an $8.0 million interest-free loan made two years ago to Kodiak, according to the Telegram.
The cash was supposed to cover the cost of consolidating the company’s Canadian operations at Harbour Grace. As a result, and according to the official government news release, the work force of 170 at the boot plant in Newfoundland was supposed to increase by another 75.
Last week, the company slashed the Harbour Grace operation to 100, blaming a depressed marketplace.
The loan to Kodiak represents more than half the cash the Williams administration has managed to hand out to business since it announced its cash give-away programs in 2007.
Out of $75 million in total budgeted for the business attraction fund since 2007, only $14 million has actually been announced. In the first year, the government spent not so much as a penny of the $30 million initially budgeted. As the Telegram’s Rob Antle noted:
Other pots of cash set aside by the department to generate economic activity in the province have had similarly little take-up.
A "special initiatives" fund has doled out just $4 million of a budgeted $19.5 million over the past three years.
The department has budgeted an additional $7.75 million for special initiatives this year.
-srbp-
Related – The Fragile Economy series:
The provincial government’s business department issued a news release today crowing about an estimated increase of the province’s population by a mere 96 people.
To see the business department’s stunning record of success to date, check out the list of news releases for 2010 or read about the fragile economy.
What will they say when the recovery sets in and outmigration resumes once more?
-srbp-
