No quick fixes for the econ­omy

The Compass - - OPINION -

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 bur­

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