Commentary

The Region’s ‘Fake’ Startups Are Helping Grow the Economy

Image: iStock.

Diane Francis loves to stir the pot. Her column – “Grants to ‘fake startups’ won’t build Silicon Valley North. They will only spawn Bombardier-like boondoggles” –  got people’s blood boiling especially in Atlantic Canada for whom she lobbed some particular verbal grenades.

All I can say is that in the past few years, the Maritime region has done particularly well when it comes to the contribution of the IT sector to GDP growth. New Brunswick and Nova Scotia had a few years in the valley but between 2014 and 2016 the two provinces led the country for IT GDP growth.

I excluded telecommunications (the “C” in ICT) because most of that GDP is from your spending on Netflix and cellphones. I also exclude IT manufacturing (computers, et cetera) because like just about all other non-natural resources-based manufacturing it is mostly done in Quebec and Ontario.

With these caveats, something seems to be working right now in the Maritimes – fake companies or not. Maybe it is fake GDP?

It is important to put things in perspective. The entire IT sector in New Brunswick (as defined above) contributed $370 million in real GDP to the province in 2016 – or 1.4 per cent of total GDP.

To put that in context, if the IT industry doubled its GDP contribution in a single year it would only boost provincial GDP by 1.4 per cent. We need, in my opinion, to get back to 2-3 per cent GDP growth per year in this province so don’t expect the IT industry to do the heavy lifting.

David Campbell writes a blog about economic development in Atlantic Canada called It’s The Economy, Stupid. This post was republished with permission. Campbell also operates Jupia Consultants, a consulting company that conducts demographic and economic analysis.

Huddle publishes commentaries from groups and individuals on important business issues facing the Maritimes. These commentaries do not necessarily reflect the opinion of Huddle.