‘Business as usual’ won’t drive economic recovery

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This article was published 02/03/2022 (1692 days ago), so information in it may no longer be current.

IS “business as usual” best for business in Manitoba? Manitoba’s government seems to think so.

Last week it created an Economic Development Board of cabinet to attract investment and promote trade. In the highly competitive post-pandemic race for growth in a newly destabilized world with declining private-sector investment in the province, Manitoba announced it is launching — wait for it — a new government committee.

This is not to say it will not do some good. It will, at the margins. But if Manitoba wants to leapfrog ahead, it needs a new approach to economic development with sharper tools, a brand boost and a new attitude.

That is exactly what the final throne speech and budget of the Pallister government was putting in place. It included a new private sector-led investment and trade agency called Invest Manitoba, a venture capital fund and a tax competitiveness review.

Each offered a new, different and, yes, conservative way to create jobs and growth. Together, they promised a significant departure from past economic development practice.

Once advocated by the province’s business community, these initiatives are now either dead or dormant. The Stefanson government nixed Invest Manitoba in favour of a politician-led economic development board. It remains silent on creating a venture-capital investment fund, despite the province reaping only $5 million from just three private venture-capital deals in the first half of 2021 — the least in the country, according to the Canadian Venture Capital Association.

And it put tax competitiveness at the bottom of its first throne speech, signaling a lower priority.

This is a miscalculation. Manitoba’s economy weathered the pandemic relatively well. Employment levels today exceed pre-pandemic levels. Last month, the unemployment rate was the lowest in the country on a yearly average basis. The built-in resilience of the province’s diversified economy, coupled with provincial and federal financial support for businesses and employees, worked.

But a rebound is not a springboard. Manitoba is just back to where it was before; that does not guarantee it can get to where it needs to be.

The inescapable reality is this: growth is essential to generate the revenue to pay for more health care, education and social services and, yes, balance the budget. It’s why the Pallister government’s last budget said this: “We will grow our way out of deficit and back into balance by investing in more jobs, tax relief and economic growth.”

The single biggest determinant of that growth is new private-sector capital investment.

Three years ago, the province set a target to be in the top three provinces for growth in private capital investment. In 2018, Manitoba was third; in 2019, fifth; and in 2020, with the pandemic contraction, ninth. The province needs to focus relentlessly on private-sector investment to ensure this slippage does not turn into a slippery slope.

Which brings us back to Invest Manitoba. This province has a slew of local or sectoral economic-development organizations, pursuing mostly different and unco-ordinated agendas. Unfortunately, the Pallister government itself contributed to this imbroglio by creating a new rural economic-development agency and economic-development secretariat within government, rather than tackling the jurisdictional problem at its core – until its Invest Manitoba idea.

The mandate of this now-defunct initiative was to market Manitoba abroad by creating a one-stop, single-window agency to funnel new investment into the province and promote trade out of the province. Crucially, it was to be led by the private sector, which knows best where and how to secure capital investment.

Government’s role was to get out of the way of that investment, by clearing the bureaucratic underbrush of regulatory roadblocks and red tape that prevented new capital from being capitalized on. It would not pick private winners with public money, but instead lean in with supporting infrastructure investments such as road or water and sewage projects.

Helmed by a private-sector board and armed with a new venture-capital fund, it was meant to have the independent drive, business savvy and financial tools needed to attract new investment and promote trade in the province.

Most of all, it was to be the foundation of a new brand promise for Manitoba as the best place in Canada to invest, grow and live.

In politics, being comfortable is easier than being bold. With the economic world around us changed since COVID-19 and the geopolitical world altering even more with the Russian invasion of Ukraine, reaching backwards for guidance is a risky strategy.

The province’s announced approach gives up a breakthrough strategy for more of the same. It smacks of corporatism, not conservatism. Frankly, it would not be out of place in past NDP governments.

A chance remains to recover from this missed opportunity. Manitoba’s first formal post-pandemic budget is coming soon. Perhaps then, Manitobans will find out whether “progressing together” is genuinely different or simply business as usual.

David McLaughlin was Clerk of the Executive Council in the government of Manitoba in 2020-21. He was campaign manager for the PC Party of Manitoba in the 2016 and 2019 elections.