After Nova Scotia’s Economic Development Shakeup
David Campbell is a Moncton-based economic development consultant and co-host of the Huddle podcast, Insights. The following piece was originally published on his blog, It’s the Economy, Stupid!, on Substack.
As you probably heard, there was a significant restructuring of provincial economic development in Nova Scotia last week. This included the sacking of the heads of provincial agencies. Premier Tim Houston indicated this might be coming when Don Darling and I interviewed him on the Huddle Insights podcast.
Podcast: Tim Houston On Nova Scotia’s Plan To Reach A Population Of Two Million
I have some sympathy for these agencies but it is important to determine if they are fit for purpose in the 2020s. In the 1990s, when NSBI was set up as one example, the overwhelming priority was to create jobs that would mop up all the slack in the labour market. Now, the available workforce has dropped to near zero and is in negative territory in some sectors (if you bring in new jobs, they will just raid workers in other companies).
Economic development agencies shouldn’t learn the wrong lesson from this. Economic growth is still about job creation, it’s just that you need to bring in both the investment and the workers. Easy peasy.
The wrong lesson is to say “we can’t find the workers so we don’t want the industries and their investment.” As I before, trucking, administrative services, agriculture, and food manufacturing all have expanding workforces in Ontario. Please don’t tell me we are living in a world where it is easier to find workers in Ontario than in Nova Scotia. If so, that is the root of the problem.
What should the new CEOs of economic development in Nova Scotia do? Well, the premier is pumping hundreds of millions of dollars more a year into healthcare, so it might be a good idea to figure out how to get private-sector GDP growing. Between 1997 and 2010, real GDP from the private sector in Nova Scotia rose by an average of 2.5 percent per year. Since then, it has grown by 1.4 percent per year.
How do we get back to 2.5 percent per year? We need to break it down by sector.
Nova Scotia’s ICT sector’s real GDP rose by nearly eight percent per year between 1997-2010 and dropped to 3.4 percent per year since.
The province’s animal production (including aquaculture) GDP increased by nearly 12 percent per year between 1997-2010 and dropped to 1.1 percent per year since. Even crop production, excluding cannabis, has seen weak GDP growth of only 1.6 percent per year since 2010 (although this is an improvement over previous years).
Manufacturing GDP growth went from a modest 1.7 percent per year to only 0.7 percent per year. Wood and paper manufacturing went from solid real GDP growth before 2010 to both facing GDP decline since (paper fairly steeply).
Pharma products and rubber products (thank the good lord for Michelin) have seen solid real GDP growth since 2010.
Shipbuilding is doing very well (real annual GDP growth of 16 percent since 2010) but the rest of the transportation equipment manufacturing sector is struggling mightily. The aerospace parts and products sector went from 12 percent real GDP growth per year to a 2.3 percent decline since.
Office administration services (aka call centres) went from robust GDP growth through 2010 to a cumulative drop of 20 percent since.
Using accommodation and food services as a proxy for tourism, real GDP went from growth of 1.4 percent per year (modest to say the least) between 1997 and 2010 to a decline of 0.6 percent since. Sure, there is a pandemic thing going on there, but the weakness started well before.
If Nova Scotia is going to get back to private sector GDP growth of 2.5 percent per year on average, it’s going to need significant investment in export-focused sectors.
I suspect there is potential to see the ICT sector get back to above-average growth, particularly with the new focus on talent development. There is some potential in the mining sector. Forest products? Who knows – right now I don’t expect much growth there (no pun intended). Even in forestry and logging real GDP has declined by 40 percent since 2010.
Tourism? I would love the economic development folks to chart a path to robust growth in the sector. What tourism investment is required and where will it come from? What new tourism assets need to be developed? What markets can be exploited? Where will the hundreds of new tourism entrepreneurs come from? It’s clear to me that more funky social media marketing will not be enough for a step change in tourism output.
I think agriculture could be part of the growth agenda. The share of land used for farming continues to decline every Census period. The average age of a farmer is, well, old, but many tend to work until the grave. Still, we need more succession planning.
Administrative services? As I have pointed out in the context of New Brunswick, this sector is now growing in Ontario while declining in the Maritimes. Why? Mostly because of a lack of workers here. Good luck finding 300 workers at $19/hour to work in an airline reservations centre, or something similar.
Nova Scotia has considerable legal, engineering, and other professional services capacity, mostly in Halifax. That could be a source of more export revenue but I think there would need to be a strategy built around how to develop such an opportunity. I know there are examples of firms doing work in Halifax for clients around the world. Could that be a serious opportunity or on the fringes?
I’d love to see the post-secondary education sector get its GDP contribution back to pre-2010 levels (see the chart below). I would be interested to see how this could be done. Again, it would likely require a focus on export markets.
In the end, if the new CEOs focus on “programs,” cash grants, and marketing brochures they will end up on the firing line in a few years. If they work with partners to develop serious and robust strategies to grow export-focused industries (agriculture/food, ICT, PSE, mining, new energy, professional services) and it results in strong private sector growth, they will be heralded for their success.
The last point is around municipal economic development. I didn’t read anything about the RENs or municipal economic development. Nova Scotia municipalities generate about $2 billion in revenue each year. They should be spending about 1.5 percent of that, about $33 million, on economic development.
There are a few great examples of municipal/REN economic development but much more work must be done. You can have all the ACOA or provincial economic development you want, but without an engaged municipal partner the system is deeply handicapped.
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