Tinderbox Issues Ahead for Government

Published in the Telegraph-Journal 24th February 2012

In coming months, the David Alward government will face its first real test when its position on two critical issues are made public. Its decisions on forestry policy and shale gas regulations will provide a tense backdrop to the remainder of its mandate. Because both issues have polarized interest groups and citizens across New Brunswick, public support for the government’s positions is at risk, regardless of what the decisions will be. The fact that these issues will receive the full glare of media attention at roughly the same time that the provincial budget will be released adds pressure to a government that is walking a tightrope of public support.

While forestry may not be a sunset industry, it is in the doldrums.  The industry has been pressing government to make supply concessions that will not please environmentalists. Industry would be happy to increase clear-cutting practices because clear-cutting is the most productive method to harvest lumber. Environmental groups want clear-cutting to be dramatically reduced or banned altogether as well as decreasing the amount of cutting in stream-side buffers, deer habitat and old spruce-fir habitat. Forestry industry detractors argue that an increase in investment in New Brunswick’s forestry industry will pay no dividends in revenues or jobs; they point out that over the last ten years product output from New Brunswick’s forestry industry has more than doubled, but without a corresponding increase in employment.  This productivity increase is largely the consequence of process improvements and technology substitution and has kept mills alive in this province that otherwise would have been closed years ago. Industry’s response has been that, without supportive government policies, what remains of New Brunswick’s forestry industry is in jeopardy, including the thousands of jobs spread across some of the province’s most economically challenged geography.

Both sides have adopted positions that are unyielding if not intractable. The government is faced with a political minefield over solutions to the challenge of balancing environmental concerns with economic factors. The likelihood that disagreements about forest management in New Brunswick will be settled any time soon is remote.

The issues associated with shale gas drilling regulations are complex. The New Brunswick government has ambitiously committed to establishing tough standards on drilling practices; Premier Alward has promised that he wants New Brunswick to have “the strongest shale gas exploration regulations on the continent.” The implications of this commitment potentially are profound. Environmentalists and landowners will want to know what acids, hydroxides and other materials are being pumped into specific wells. Regulations may need to involve the mandatory disclosure of the volume of water needed to drill each well since many experts view this as critical information to evaluate how fracking affects water supplies. Some of the most critical aspects of shale gas regulation will revolve around how the regulations will be monitored and how enforcement will be administered. Regulation, monitoring and enforcement will represent a substantial challenge to government.

Fracking has become a flash point between environmentalists and those who think stopping shale gas development at a time when New Brunswick needs jobs and revenues reflect poorly ranked priorities.

These two tinderbox issues are not the government’s only risk problems. The New Brunswick government’s projected deficit is forecast to be approximately $471 million for 2011-2012, higher than the $448 million that Finance Minister Blaine Higgs estimated in his budget last March. There’s not much good news on the growth side of the ledger, either. Private-sector job growth has slowed dramatically and has come to a halt in industries that are exposed to global competition. Government fiscal austerity measures will mean reductions in public-sector jobs as well.  And the specter of federal government budget cuts looms large on the horizon. The provincial government is faced with what may be the most profound challenges of its mandate.

Is Transformation in New Brunswick’s DNA?

Published in the Telegraph-Journal 21st February 2012

Canadians are adverse to change and risk. At least, that is the prevailing wisdom. In the face of growing deficits and a burgeoning debt, the recently-released Drummond Report featured almost 400 recommendations for the massive overhaul of Ontario’s public services. The torches and pitchforks are already out over the potential impact of these recommendations, wielded by public service unions, academics, business interests and the public at large. One can fully imagine that, in perhaps six months or so, there will be not one single recommendation contained in the report that will not have attracted its share of detractors.

In New Brunswick, government is under pressure to resolve growing social and economic challenges including health care, education and infrastructure. As the demands on public services have been expanding, so has the burden on taxpayers. In response to this service delivery expansion, the New Brunswick government has been forced to run larger budget deficits leading to increasingly higher levels of public debt. This is a consequence not only of running its operations but dealing with an unprecedented array of calamities that include the financial crisis, demographic shifts and energy prices. Additional complications associated with government’s soon-to-be released forestry plan and shale gas regulations have environmental and social implications which will make government’s decision-making more difficult.

So, although its problems differ in scope, scale and origin, New Brunswick is faced with challenges similar to Ontario’s. The key question in this province is whether there is any appetite for real change in the face of these challenges?

It’s easy to think of New Brunswick as historically and culturally predisposed to resisting change. Upper Canadians have developed a cartoon stereotype of Maritime culture more backward than forward looking. Because the Maritime Provinces are small, it is difficult for them to compete directly with their much larger cousins. But New Brunswick can lay claim to energizing an unlikely transformation under the leadership of Premier Louis Robichaud in the 1960s.

Against substantial opposition—some of which still resonates today—Robichaud introduced the Equal Opportunity Plan. Under the Plan, the jurisdiction for education, rural road maintenance and health care was transferred to the provincial government which was adamant that equal coverage would be provided across the province. County councils and rural areas now fell under direct provincial jurisdiction. In 1969, New Brunswick’s Official Languages Act made French an official language. New Brunswick remains the only constitutionally bilingual province. The consequence of these monumental changes was to dramatically reduce the geographic and linguistic isolation of northern New Brunswickers, many of whom were Acadians.

This feat of government reform matches any other in Canada’s history. That this transformation involved no inherent boost to economic growth or rise in revenue makes it even more remarkable that the necessary public support to underpin it was found. And Robichaud’s actions involved enormous political risk to himself, his government and political party.

Was that set of transformations an isolated moment in the history of this province or is it embedded in the DNA of its citizens? Are we more risk-averse today than fifty years ago?

Some of the answers to these questions involve technologies that have democratized information and knowledge to an extent that government officials are only beginning to understand. The Internet generally and social media specifically have made it much easier for citizens to get involved and to create coherent interest groups. Overnight, thousands can convey intense opposition to a proposed plan or policy. This is occurring at the same time that the need for accountability and reliability in the modern economy has resulted in selection against radical transformation.  It is a paradox that the most comprehensive proposals for reforms are being promoted when the resistance to them is greatest.

The Challenge of Transforming Government

Published in the Telegraph-Journal 24th February 2010

The pressures on government to resolve monumental social and economic issues including health care, education and infrastructure are growing. As the demands on public services have been expanding, so has the burden on taxpayers. In response, governments are being forced to run larger budget deficits leading to increasingly higher levels of public debt. This is a consequence not only of governments running its operations but dealing with an unprecedented array of calamities that include the financial crisis, demographic shifts and energy prices.

In the face of this complexity, we have created a simpler problem that is easier to manage – that government is inefficient, ineffective and too costly. This simplification lends itself to the evident solution; that government operations need to be reduced in scope and scale, its budgets chopped, its head count dramatically decreased.

This solution misses the real challenge. To make the transition to the next economy, the role of government will be critical. The emerging multi-polar global economy has created dramatic shifts in trading alignments and capital flows. Major changes in the nature of employment and consumer confidence may be irreversible in the short term. These combined effects have destabilized the authority of governments at precisely the moment when they need to be a powerful ally for political, social and economic change. In order that governments assume this role, it is important that they are efficient and effective. Yet, governments are ill-equipped to meet this challenge. After years of operating at cross purposes, confidence and a tolerance for risk are not as high as needed to undertake systemic reform. The prevalence of orthodox practices and too little emphasis on performance excellence means a public sector culture lacking focus on quality, cost or transparency. Increasingly, those that are concerned by the profound challenges facing society are calling for a transformation in the way government works.

Ironically, falling short is the biggest danger when taking on an integrated approach to transformation. Even when previous reform programs were undertaken, they were too slow, took too long to achieve results and ultimately achieved too little. In addition, the complexity of government means that very few managers have the necessary experience or expertise to bring complicated reform to a productive conclusion. The challenge associated with the need to operate under media and public scrutiny further complicates reform goals. The failure of previous approaches to achieve the objectives of broad reform frequently is seen as evidence that it cannot be done. For other detractors, the objective of raising productivity in government means primarily reduced spending and accepting lower quality outcomes from government activities. Their assumption is that government reorganization will produce winners and losers. The corollary of this assumption is that the adoption and implementation of efficiency targets is a project that is intrinsically undemocratic. In fact, the transformation change in government is critical to ensure that it is best equipped to play the significant role in managing many problems where the private sector has little authority, credibility or motivation. Government is a critical partner in the development of an equitable society.

There are other obstacles to transformative change. Transformational change must incorporate the soaring ambition needed to challenge powerful existing orthodoxies associated with government’s organizational structures, capabilities and processes. This means that the reform must be aggressive and even radical. Simultaneously, to succeed, transformative change will require sustained and systematic engagement with public service employees and the general public. To ensure support for major change, its proponents will need to engage with those who will be affected to ensure its legitimacy. For leadership, this responsibility entails real risk but it cannot be delegated away.

Is Ontario’s Drummond Report a Model for New Brunswick?

Published in the Telegraph-Journal 18th February 2012

Released yesterday amid media fanfare more commonly associated with the announcements of NHL draft picks, the Drummond Report is a weighty document. At five hundred and sixty-two pages stretched tightly across twenty chapters and with almost four hundred recommendations, the report may not quite rival Tolstoy’s War and Peace in scope and scale, but Path to Sustainability and Excellence will probably be read the same way. Few will read it in its entirety while many more will begin with good intentions before settling for the executive summary.

Ontario established the Commission on the Reform of Ontario’s Public Services in 2011 to advise the government on how to return to a balanced budget no later than 2017-18. Its other mandate was to determine how government could get more value for taxpayers’ money in every area of its expenditures, from health care and education to back-office management to intergovernmental relations. The Commission concluded early in its mandate that the deficit was on track to rise to more than $30-billion by 2017-18 from $14-billion in 2010-11.

The report recommends a degree of spending restraint that is “almost certainly unprecedented in Canadian post-war history.” Annual growth in program spending would be held to only 0.8 per cent over a seven-year period. The report additionally recommends limiting health care to increases of 2.5 per cent a year, post-secondary education to 1.5 per cent, education to 1 per cent and social services to 0.5 per cent; everything else would be reduced by 2.4 per cent a year.

Two assumptions underpin the report. First, in Ontario, economic growth cannot provide the usual revenue leverage this time, either in the next few years or further down the road. The report concluded that, while everything needed to be done to boost the economy, Ontario could not depend on the type of growth to which it had become accustomed. Second, the government needed to focus on reforming and transforming programs, rather than relying on simple cost-cutting measures.

The report adamantly opposes the indiscriminate slashing of the public service. Don Drummond, the Commission’s chair sets a reformist tone in the report when stating that, “affordability and excellence of public services are not incompatible; they can be reconciled by delivering all programs more efficiently. The silos of the health system can be better integrated to save money and ensure people don’t fall between the cracks. Universities and colleges could deliver better value for the money through greater differentiation and reducing their high, internal rates of cost escalation. Impressive results have been achieved in recent years in Ontario’s education system, but non-core costs have risen sharply and must be reined in.”

Perhaps surprisingly, the Commission does not examine some remedies to the fiscal challenge to the same extent. While the question of tax increases is quickly dismissed, the potential for revenue generation and government transformation through key asset sales is underplayed.

If the Drummond Report has accurately framed one important problem of government, can it be used as a model for other provinces that are similarly being squeezed between fiscal realities and flagging growth?  As in Ontario, New Brunswick cannot simply adjust its fiscal parameters in the short term to eliminate a deficit caused by the recession and a growth shortfall. Although restraint measures that have already been undertaken represent a beginning, New Brunswick’s provincial deficit will continue to rise in an environment of modest economic growth. Although in New Brunswick the fiscal challenges exist on a smaller scale than in Ontario, its economic growth problems arguably are even more severe. The Drummond Report’s conclusion is that Ontario’s fiscal response must not only be strong and sustained over a much longer period, ultimately it must reform the way government delivers virtually every service. Surely this conclusion could be applied in equal measure in this province.

Innovation Networks Are Crucial To Business Development

Published in the Telegraph-Journal 14th February 2012

Clusters are among the most popular of economic development policies. A host of magazines, journals and online sites are dedicated to focusing on the cluster phenomenon. Every day there is news of a new initiative trumpeting a new cluster strategy. It would be difficult today to find a country, region, or city that is not actively attempting to develop a network of complementary and competitive firms. Not all economic activity centers are actually clusters but the term has become a synonym for creative innovation networks. The political appeal is immediately obvious, particularly now that the global financial crisis has put a laser focus on innovation to support growth and job creation. However, the challenge lies in turning a newly created science park or knowledge corridor into a genuinely competitive center for innovation.

But what were key business attraction features only a few years ago are bog standard today. This has made it more difficult for smaller centers to add advantages to compensate. But many of the practices and ideas being used by innovation networks around the world have common features. Virtually all successful innovation networks have government playing a crucial role and it is clear that many innovation networks have succeeded by dint of government involvement. What is challenging to get right is the scope and scale of support; while hyperactive intervention can stifle progress, too little can lead to a lack of vital support.

Innovation networks have collaboration at their foundation, so success involves more than just locating firms in the same region. Although innovation networks are increasingly globalized, almost all experts agree that ideas, innovation and commercialization flow fastest in a local community. A critical element of innovation network development is fostering this collaboration, especially where this has not been an integral part of the local business culture.

Talent management has become the single most important factor in developing successful innovation networks. The overarching objective of government in the most advanced innovation networks is developing a continuous supply of talent with world-class skills. Ottawa’s tech cluster success is in no small measure owing to its long-term efforts to develop the quality of its workforce where its two universities play a significant role. Since not all world-class talent can be grown at home, a related focus should be on encouraging the inward migration of specialized personnel from around the world.

Governments need to work to promote a culture of innovation and entrepreneurship. This is especially critical where government organizations are seen as the primary pathways to success. This means government must act as a model user for promising innovative products and services, a role that governments are not intrinsically comfortable playing.

Innovation networks work best when they are focused and can compete. The Ontario Technology Triangle region accelerated its growth to support the development of RIM’s rapidly expanding physical and intellectual campus. Ottawa’s tech community evolved around Nortel, Corel, Mitel and Newbridge. Universities were supportive sponsors in both locations and integral to their success.

Governments can do much to create an attractive business environment. This not only involves easing planning rules, making the tax code transparent, removing penalties for failure and smoothing immigration processes but focuses on the critical importance of ensuring a good quality of life for prospective employees and support efforts to attract and retain talent.

These factors frame the New Brunswick challenge to support innovation networks to supercharge growth and job creation. Since government is at the center of the success of innovation networks, a key strategy will be to ensure that its near-term restructuring does not overlook the importance of innovation support in its quest to stabilize budgets.

The Challenges of Health Care

Published in the Telegraph-Journal 10th February 2012

A heated discussion is emerging on what the future of healthcare will look like. In Canada, healthcare systems, which were created during a period of prosperity, are now facing severe economic challenges. Even though we are faced with a global financial crisis that jeopardizes our financial stability, the early 21^st century is a marvel of achievement in scientific advancement and technological progress. However, the financial foundations of healthcare are crumbling and could weaken further unless policies are quickly revised. The fundamental problem of healthcare is its spiraling cost, and there is no end in sight. Governments are beginning to review how to slow this upward spiral, but there is little agreement on how best to achieve this.

Perhaps the most critical question is how healthcare systems can be redesigned without damaging the foundation upon which they were originally developed. Founded on the principle of universality, Canada’s healthcare system is paid for by the public, with the risks of medical expenditures essentially shared. There is substantial evidence that most Canadians agree with this shared-risk principle even if they are uncertain about how rising costs are to be met. Most would resist any efforts to change the current system. Many think radical change would jeopardize the principle of universal healthcare coverage. However, the financial contributions required for healthcare have risen steadily, to the point where people are beginning to realize that further increases may no longer be possible. Governments, for their part, are beginning to recognize that continually rising costs will not be politically acceptable. Even so, the increase in the cost of healthcare continues to outdistance economic growth and shows no sign of slowing down.

In fact, healthcare costs are rising far more quickly than levels of available funding. These rising costs cannot be met with current levels of public funding and these costs cannot be met by raising taxes either, in part because the costs have become far greater than conventional taxes could generate. In New Brunswick, the main drivers of rising healthcare costs point squarely to the impact of aging populations and the related rise in chronic disease, as well as costly technological and pharmaceutical advances. And in today’s Internet culture, patient demand increasingly is being driven by a greater knowledge of options. Underlying all of this is the effect of less healthy lifestyles that has led to increasing incidence of obesity-related conditions such as heart disease and diabetes.

In the face of these challenges, governments and healthcare agencies are encumbered by legacy priorities and financing structures that are ill-suited to today’s requirements. But a consensus is beginning to emerge that the future of healthcare will be shaped by a number of separate, but interconnected, trends. A key trend is that healthcare spending will continue to rise, not only because of inflationary drivers, but because of a growing recognition by policymakers that improved health is strongly linked with greater national wealth. It is a paradox that without financial constraint, maintaining the universal healthcare model may require the rationing of services and consolidation of healthcare facilities, as public resources no longer are able to meet demand.

These trends have significant implications for governments and the public? Ultimately, patients may need to take more responsibility for their own health, treatment and care. More effective preventive measures and fundamental lifestyle changes should be promoted to encourage healthy behavior. Governments will need to wrestle with bureaucracy and liberalize rules that restrict the roles of healthcare professionals and that artificially increase the cost of healthcare research.  In the future debate about the details of healthcare reform in New Brunswick, what will be needed most is adaptability to focus on the best ways to maximize the health and well-being of New Brunswick’s population.

Asset Sales Need To Be On Deficit Agenda

Published in the Telegraph-Journal 7rd February 2012

With the New Brunswick government reviewing all options to reduce its debt and get annual budget deficits under control, it’s useful to review what the limits of those options might be. Beginning in the second half of the twentieth century, governments around the world have sold off state-owned assets to private investors, not only as a way to generate revenue but in response to charges that government should not be directly involved as owners in some business activities. The privatization revolution has included such assets as airports, railroads and energy utilities. This phenomenon has overthrown the widely held belief that governments should own some of the most important industries in the economy. The consequences of privatization have included reduced costs, higher-quality services and increased innovation in formerly unproductive or moribund government industries. But privatization is not without its controversy and detractors.

In 2003, the U.S. Office of Management and Budget calculated that about 50 per cent of all federal employees have responsibilities that are not inherently governmental. Some attempts have been made to outsource some of those activities to outside suppliers, but competitive sourcing is not privatization. And governments have taken a page from the business sector to consolidate some processes under the rubric of shared services. Outsourcing and shared services have their own merits and drawbacks, but privatization involves making an activity entirely private and removing it completely from the government’s financial ledger.

How far could privatization be extended in New Brunswick? Many provincial assets could be privatized, including infrastructure such as airports and highways. The government also possesses millions of dollars of real estate for which there may be no requirement that they be publicly owned and which could be sold. The benefits to the provincial budget of privatization may be modest, but the benefits to the economy would be more expansive as private sector businesses would innovate and improve their performance.

In principle, privatization promotes greater innovation and dramatically reduces cronyism, a serious hazard of government contracting. But there are other arguments in favor of the privatization of government assets. First, sales of provincial assets would reduce the budget deficit. Second, privatization would reduce government responsibilities so that policymakers could better focus on their core responsibilities, such as health care and education. Third, privatization would encourage economic growth by opening new markets to entrepreneurs.

Some policymakers think that certain activities are too important to leave to the private sector. But the reality is just the opposite. Government has not always shown itself to be capable of providing efficient and effective service delivery. Another criticism of privatization is that, because the business sector is motivated by profit, it is unable or unwilling to serve the public good, but service level agreements and carefully worded contracts would dramatically reduce this risk.

A key advantage of privatized assets is that private companies can readily access debt and equity markets for capital expansion to meet increasing demand. However, the modernization of government infrastructure is subject to the uncertainties associated with government budgeting. The result of this is that government infrastructure is often obsolete and poorly maintained.

Privatization has its drawbacks and it will not find support everywhere. But budget pressures will increase in the foreseeable future in New Brunswick. Provincial asset sales would help reduce the provincial deficit and create budget room for better maintenance of critical assets while economic efficiency and growth would increase as underused assets were put into more productive private hands. The public is faced with choices about what government will be able to support and it is becoming clear that some sacrifices will need to be made. Even if it is soundly resisted, privatization needs to be on the agenda.

Running Government as a Business

Published in the Telegraph-Journal 3rd February 2012

In the drive to find efficiencies and cost savings in government, there has been an increasing call for government to operate like a business. On the face of it, there is a visceral appeal associated with circumventing the convoluted organization design and decision-making of government bureaucracy and substituting this with a flat organizational structure and simplified decision making approach that typifies corporations. Presumably, government would be subject to the same methods to enhance productivity, such as business process engineering, outsourcing and lean six sigma. These approaches have not been universally successful, but winning corporations have used management and organization efficiency programs to boost profitability, market share and competitiveness in an increasingly tough global marketplace. University departments of public policy have borrowed liberally from the private sector to show how downsized government operations are the way of the future. The federal government’s own Treasury Board Secretariat houses a library of publications that document these new approaches. So, are there advantages to running government like a business?

Well, yes and no.

It’s true that the line between public and private sector operations has blurred significantly in planning, organizing, controlling and in the provision of leadership. The rationalization of services across federal government departments is a project that is now more than twenty years old in Canada and there are still additional efficiencies to be found. Andy MacDonald, the federal government’s first CIO, was responsible for initiating the fundamental reorganization of the government’s many IT shops into a more coherent and cost effective group, and the savings have been in the billions of dollars. Private sector methods, processes, practices and procedures were in many cases seamlessly integrated into public sector operations. Internal service provision, not only in IT but in real property management, procurement and many other services, has been radically overhauled over that twenty year period. And business process engineering, outsourcing and lean six sigma have been part of that overhaul all along.

Integrating business principles and methods would be a welcome approach to many of New Brunswick’s challenges. The management, design and direction of utilities and service provision agencies would respond to greater entrepreneurship and independence.

But there are limits. Perhaps the best example of where we need the business and public sectors working together is health care. We are becoming more fully aware of the impending crisis in health care funding, especially in the wake of the federal government’s unilateral funding formula that provides hard limits to the provinces.   It is clear we need a plan to work with this new funding model at precisely the time that spending is facing the greatest stress.

In response, we need to find ways we can improve not only the predictability but also the potential success for health care innovation in order to enhance the overall delivery of health care over the next decade. We will also need to make critical decisions based on key demographic statistics, the role of prevention and treatment in health care systems, and on important industry trends in emerging markets for the health care sector. New, expensive pharmaceuticals will come onto the market that will strain health care budgets and require decisions over what will be paid for as a public good.

All of this will complicate health care policy in the face of rapidly transforming approaches that technologies will deliver. Once esoteric, some treatments that today are at the leading edge of innovation will become standard approaches, but critically not for everyone everywhere. Under this pressure of judgements about what will constitute the public good rather than determinations of efficiencies, health care cannot be run like a business. The mutual benefits and responsibilities that are embodied most visibly in public institutions are not merely predicated on efficiency and cost. Citizens will expect elected politicians and departmental officials to be accountable for those decisions.

Parliament Prepares to Rewrite the Rules on Governance

Published in the Telegraph-Journal 31st January 2012

Members of Parliament have descended on Ottawa to begin a session that promises to create a new play book on relations between the federal and provincial governments. A federal action blueprint that is emerging is one of the most activist and aggressive in recent years. A number of issues will define this relationship for the foreseeable future.

Not all federal government objectives will be achieved. Finance Minister Jim Flaherty recently praised the federal government’s response to the global financial crisis, highlighting the resilience of Canada’s financial system.

“The actions taken by our Government have strengthened this system and prepared it to better face the challenges of an evolving financial world,” said Flaherty. But his ambitious plan to bring securities regulation under national control was turned back by the Supreme Court. The provinces continue to have authority over a regulatory framework that Flaherty characterized as unwieldy and inefficient.

But a distinct agenda is beginning to emerge in almost every other area of federal responsibility.

In health care, Prime Minister Harper has drawn a line in the sand, claiming that the federal government will not enter into discussions with the provinces over how to reform the health care system. Rather than draw up a new accord, the Prime Minister has frustrated the provinces through an announcement for future federal health care funding that simply articulated the federal government’s position regardless of provincial objections. The provinces will simply have to adapt.

President Obama’s decision to postpone the proposed Keystone XL pipeline has highlighted ideological divisions both in the U.S. and Canada. Harper has said that his government’s priority is to find other markets, such as China. But it is far more likely that another proposal – Keystone II – will be filed in the U.S. A post-election proposal is far more likely to achieve needed American support, especially if a slightly different route is put forward bypassing the environmentally sensitive Nebraska Sandhills.

Of course, there is no guarantee that any Keystone proposal will be approved after the elections. The pipeline still stands to be fiercely opposed by a range of environmental groups, who will continue to treat the pipeline project – in any form – as a symbolic test of Obama’s commitment to clean energy.

But what is more significant than the pipeline itself revolves around statements issued by the Prime Minister and Natural Resources Minister Joe Oliver that the federal government was seeking ways to avoid foreign-backed outsiders from obstructing the environmental hearings. This signals a deliberate process to decouple environmental reviews from the economic objectives of proposals and makes it far more likely that the federal government will simply impose timelines on any discussions involving environmental risks. There now has appeared two columns in the economic development ledger –economic benefits and the environmental costs that will endanger growth.

The Harper government may have demand on its side in the near term. Although there has been much criticism of how tar sands oil is environmentally incorrect, global demand for energy is predicted to rise at an accelerating pace over the next 20 years. Even though there is a recognition that the focus needs to shift to eventually boosting energy productivity, Canada possesses the energy needed to help power the American economy immediately. This reality places the Conservative government firmly in the driver’s seat and makes it more likely that energy strength will support the Harper agenda in the near term.

In its upcoming budget, the federal government has promised to present a fiscal blueprint containing major cuts to federal programs. Treasury Board President Tony Clement has committed to slashing annual spending by as much as $8 billion. Many elements of this budget will have an impact on provincial capability. And more than ever, the provinces will need to ensure that they are not on the outside looking in.

Three Scenarios for the Economy in New Brunswick

Published in the Telegraph-Journal 27th January 2012

Many New Brunswickers get the same feeling when listening to Finance Minister Blaine Higgs explain that they must want less from the provincial government as it wrestles with record debt and deficits. They want to know what he is going to do about it and why it hasn’t happened yet. The minister appears increasingly more frustrated that not everyone subscribes to his sense of urgency over the province’s fiscal challenges, even though there appears to be a widespread recognition that the situation is untenable. Some groups, especially the health care sector and teachers’ unions, are expecting deep reductions in services which will have a significant impact on their members.

For over a year since the election, the government has been working on an economic plan without revealing very much about what the implications of this plan might be. Some have commented that the government has very little latitude over its decisions because of the gravity of the challenge, but there are three scenarios that roughly approximate the options facing New Brunswick. Each scenario leads to very different outcomes not only in the short term but for the future of the province in the long run.

The first scenario represents the least deviation from the present course. This stay-the-course option largely maintains the status quo and reflects the view that only relatively minor measures are necessary to address the economic challenges facing the province today. Supporters of this analysis claim that major alterations to institutional relationships or historic economic bargains would be destabilizing and counter-productive and favour incremental changes that maintain current benefits. Proponents of the status quo tend to be hopeful that the future trajectory of the economy will favour New Brunswick. Views of the supporters of this scenario typically include health care costs responding to technological solutions, and support consolidating for projects such as shale gas drilling because they would provide relief in the form of jobs and revenue to government.

The second scenario is a managed strategic reduction of government operations and investments providing a much more narrow range of services to the public. Conceivably this could mean less support to industry as well but the hallmark of this scenario is that it represents the recognition that New Brunswick’s future is one of inevitable decline. There are many examples in the U.S. where state governments have made decisions to manage a strategic retrenching in the face of declining industries. Pennsylvania hasn’t fully recovered from the dramatic restructuring of its steel industry and northern Maine is a shadow of its former self. In both states, governments deliberately engineered a strategic retreat of services and entitlements in areas where traditional industries had declined and where population decreases followed. This scenario is perhaps the most radical of options and even more so in locations that currently rely most on government support.

The third scenario is really the obverse of the second where government transformation, investment and direct involvement become the infrastructural foundation for the growth and revitalization of the province. One of the cardinal assumptions of the arguably most risky option is that an ambitious remaking of the province and its relationships and institutions are not restricted to economic questions but include political and social ones as well. Questions that would figure prominently in this scenario would be whether we have a vision larger than ourselves and if we can find the balance between self-interest and sacrifice required to advance an agenda that promotes and supports that vision while remembering the profound challenges involved in actual transformation.

Each of these scenarios assumes a far more widespread conversation and even heated arguments about what we want New Brunswick to be, not only today but in twenty and fifty years. One of the key success elements of this conversation will be ensuring that it involves everyone in the province.