No quick fixes for the economy
Earlier this month, it was announced the operations of Terra Nova Shoes would be relocated from Harbour Grace to Ontario. For decades, it was seen as a model of how a small manufacturer could help diversify a local economy. Today, not so much.
An $8 million, interest-free loan did very little to keep valuable jobs in the Conception Bay North area. However, it should be no surprise. In our history, economic development has meant governments bending over backwards to attract or keep large corporations. It is an “if we build it, they will come” mentality. But when it did not work out, it was taxpayer dollars that were lost and very little gained in return.
However, Canadian Federation of Independent Business (CFIB) members are clear that the practice of focusing on large firms is not the best way to develop the local economy. In a recent survey, 22 per cent of CFIB members said governments should attract large firms as a way to encourage economic development in the province.
Lending, or worse, giving millions of dollars of taxpayer money to multi-mil- lion dollar companies is not sound economic development; at the very least, it is not long-term, sustainable economic development. We must get away from the apparent view of governments that we need to bribe large corporations for economic development and diversification. They help, but it should not be the “be all and end all.”
According to 2013 Statistics Canada data, 45 per cent of the workforce in the province is employed by small- and medium-sized businesses (those with less than 500 employees). Compare this to 29 per cent by the public sector and 26 per cent by large business (those with greater than 500 employees). It’s obvious who the main job creators are in the province.
But businesses come and businesses go all the time. It is well-known that the survival rate of a new business is quite low. If a business reaches its second anniversary, it is considered to be successful, and even then there is no guarantee that it will reach its fifth anniversary.
However, this does not deter anyone in this province who has an idea and the entrepreneurial spirit to be successful. Just go to a local farmers’ market this sum- mer for evidence. The challenge, however, is creating the right environment so people like vendors at the farmers’ markets can grow how they choose. After all, they’re the ones taking the risk and working hard to ensure they are successful.
Ultimately, it is the individual decisions of entrepreneurs to start or close a business that drives an economy. Governments may use taxpayers’ dollars to influence those decisions, but even then it may not be enough, as Terra Nova Shoes shows.
If governments are to have a role in economic development, it is to create the right environment. One that facilitates entrepreneurship and recognizes the risk and effort that is required to start and grow a business. This means adopting initiatives that are not targeted to one company or sector, but rather for the business community in general.
The best environment for business growth and economic development is a competitive tax system, an appropriate amount of rules and regulations, and the necessary infrastructure.
For example, the provincial government has made significant strides in recent years in making our tax system more competitive, but much more can be done, particularly by implementing meaningful reductions in workers’ compensation premiums. Further, almost a decade ago, the government committed to reduce the red tape associated with doing business in the province. There is now a growing need for a renewed commitment to red tape reduction. As well, small business owners are supportive of investments in infrastructure because they know that these will help them take advantage of business opportunities as they arise.
There are no quick fixes for an economy. Businesses need to be able succeed and fail on their own merit. However, this requires patience. Something our political leaders don’t seem to have when jobs are on the line.
Vaughn Hammond is the director of provinicial affairs (Newfoundland and Labrador) for the Canadian
Federation of Independent Business
Burton K. Janes lives in Bay Roberts. His column appears in The Compass every week. He can be reached at email@example.com