New economic plan: false hope, false assumptions

Opinion

False hope is always based on false assumptions. Welcome to the Manitoba government’s new economic development strategy. False hope that this strategy will make Manitoba a “have” province within 15 years, by 2040. And false assumptions this conventional, bigger-government approach is enough to break the province’s enduring financial dependence on equalization transfers.

As written, the document is a ramshackle affair. It confuses strategies with objectives, pillars with outcomes. Replete with earnest phrasing, it contains zero actual analysis of the economic and financial conditions challenging the province. That comes later, it says.

No measurement indicators of progress are offered. No specific economic goals are set to guide actions. It speaks of the importance of “benchmarking against the best-in-class” economies and sectors, yet offers no specifics of where Manitoba is doing this.

The current Trump tariff crisis and economic uncertainty are noted only in passing, a gobsmacking omission. Removing interprovincial trade barriers is referenced once and only in relation to agriculture. It’s as if the past eight months never happened in Manitoba.

It didn’t have to be so. The strategy starts out promisingly enough identifying the need for greater business productivity, approvingly quoting a speech by the Deputy Governor of the Bank of Canada on its importance. But it then fails to follow her advice on how to become more productive: “But if I had to pick the biggest concern in this area, I’d say it’s competition. Simply put, businesses become more productive when they’re exposed to competition.” The word “competitiveness” appears just twice in the strategy’s almost 40 pages.

What governments say shows how important things are to them. So too does what they don’t say. It’s a tell. There are plenty of tells in this strategy document. For one, there is no mention of general tax relief for businesses to help them grow, underlining the fact this will not be a priority. Missing in action is any reference to the importance of eliminating the provincial deficit or directing new spending to economic growth priorities, as business leaders are demanding of the federal government.

Equally telling is the walk back on clean growth. Nowhere can you find the words “climate change” or “low-carbon economy.” This government’s economic vision sees no green economic advantage flowing from the country’s cleanest electricity grid, despite promising to “create a road map to meet net-zero targets by 2050,” “make our energy grid net-zero by 2035” and “make Manitoba a climate leader and a desirable location for new business and low-carbon industries.”

Prime Minister Mark Carney is taking heat these days from climate activists for not prioritizing climate action; perhaps they should be introduced to Premier Wab Kinew.

That’s not to say there are no good ideas in the strategy. A capital-assistance program for business investment, consolidating the manufacturing investment tax credit into a single retail sales tax exemption and raising the small business venture capital tax credit are all useful. Having an inventory of investment-ready sites and a new apprenticeship system offer potential are too. Most actions though are too vague to evaluate for anything but good intentions or are indirectly related, such as child care

In the end, this document is more marketing-driven than mission-orientated. At no place does the strategy spell out how its initiatives will contribute to the goal of becoming a “have” province in the short space of a decade-and-a-half. Economic theory tells us poorer economies tend to grow faster than richer ones, gradually narrowing and even eliminating income disparities over time. This is called “convergence.” It occurs due to the more impactful catch-up effect of physical capital investment in poorer economies than into mature, steady-state economies.

To reach the goal of becoming a “have” province, Manitoba needs to grow its economy at a faster rate than the national economy year after year, on a sustained basis. In the past 20 years, Manitoba’s real economic growth has exceeded Canada’s in only eight years, or 40 per cent of the time. Last year, Manitoba lagged behind all other provinces in economic growth. This year, real GDP growth has already been revised downward from 1.7 per cent to 1.2 per cent. Next year, it is forecast at 1.1 per cent. This isn’t catching up; this is falling behind.

If Manitoba grew on average at two per cent per year while Canada’s economy rose on average at 1.5 per cent per year, it would take until the 2060s for the province to become a “have” province. That’s two decades more than the government says it needs. To meet a 2040s target, Manitoba would have to grow its economy at an annual rate of at least a full percentage point more than the rest of the country. This has occurred only once in the past 20 years.

Ominously, it is public-sector investment, not private, that is driving most of Manitoba’s growth. As TD Economics wrote: “Manitoba’s public sector looks to be doing the heavy lifting for growth this year and could contribute more than half of the province’s 2025 GDP growth.” This is the exact opposite of what needs to occur.

It is good to be ambitious. Governments should have goals. But those goals need to be realistic and achievable, not just desirable. Otherwise, public trust erodes.

Telling voters Manitoba is on a viable pathway to get off equalization with this economic development strategy is abject nonsense. A bold goal without bold backup is simply hype disguised as hope.

David McLaughlin is a former clerk of the executive council and cabinet secretary in the Manitoba government.