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Cape Breton Provides Pointers for the Adjustment Programs Required by the Decline of the Old Economy

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Cape Breton Provides Pointers for the Adjustment Programs Required by the Decline of the Old Economy Working February 2001 Paper 14 Cape Breton provides pointers for the adjustment programs required by the decline of the old economy Tom Kent Fellow Tom Kent is a former journalist, public servant, policy-maker and business executive. He served as Policy Secretary to Prime Minister Lester Pearson, and later as deputy minister of the Departments of School of Policy Studies Manpower and Immigration and Regional Economic Expansion. In 1971, he became President and C.E.O. of the Cape Breton Development Corporation and subsequently of Sydney Steel Corporation. During the seventies he was also a director of several federal-provincial enterprises, and for a time economic advisor to the Premier of Nova Scotia and chairman of the development advisory committee of the Council of Maritime Premiers. Mr. Kent was the founding editor of the journal Policy Options, and chair of the Royal Commission on Newspapers. The Cape Breton Development Corpora- purpose quite well but were maintained tion need not, should not, be dying in the for little more than a decade. It suggests way it is. “Devco” has been widely repre- that the benefits would have been greater sented as a failure dragged out too long. if Devco had been started earlier in the In fact it had for a time considerable period of postwar prosperity. success in a role too difficult to be often attempted. The main failure was in the The second section comments on the political will to stick to its purpose. enfeeblement of Devco in the 1980s. The removal of its development function also This commentary is in three parts. The weakened, and has eventually led to the first, major section discusses the purpose abandonment of, Devco’s social purpose of Devco and the policies that served the in the operation of coal mining. 1 Third, a short epilogue pointing out that, rapid technological, and hence economic, while the Cape Breton case is extreme, change. Left to the intensities of market there will be increasing need to moderate economics, some of the impact is inhu- the socially disruptive consequences of mane. It is particularly and disruptively so accelerating economic change. There are for a community based on only one or two lessons from the Devco experience: the activities and itself remote from larger longer remedial action is delayed, the centres of industrial growth. Cape Breton more difficult and expensive it becomes, was the major Canadian case of this kind. and the more necessary for its effective- ness is a steady political will. Devco was not established for the purpose that many critics have invented The reason for it. It was not designed to avoid eco- Those of us who were present at the nomic change. It’s purpose was to ensure birth of Devco, some thirty three years that such change took place without the ago, had no illusions about everlasting, or sharpness of social disruption that there even greatly prolonged, life for the coal would otherwise have been. mines on which industrial Cape Breton was built. The reality was already written My viewpoint, and therefore bias, should in history. The entrepreneurs of a hundred be stated. During the conception and years ago briefly promoted Sydney as a early years of Devco I was in Ottawa, second Pittsburgh, but they created no concerned with the development of other way in which coal seams dipping under federal programs in the interface of the ocean could be economically mined economic and social policies. Devco was a for more than a few miles from shore; nor major experiment in that area and there- did they find any way for a plant located fore became a matter of great concern far from major manufacturing centres to when, in its first three years, it seemed market steel on the scale that the technol- increasingly to stumble. I went to Sydney ogy of its production increasingly required. in 1971, as Devco’s second president, remained so until 1977, and continued as In fact the economics that created a board member until 1982. About events Pittsburgh dissolved well before the end after that I can comment only as an of the twentieth century. The economics outside observer. of industrial Cape Breton had become weak before the end of the century’s first Modernised mining, with quarter. For the next forty years a foreign- pensions owned coal and steel industry was main- From the beginning it was apparent that tained thanks only to increasing govern- the public purpose — to lessen the social ment subsidies and at the price, neverthe- disruption from economic change — less, of deprivation for miners and their required four new policies. families. The old policy had come to a forced end. By the nineteen sixties, with the lessons The company, Dosco, set a new condition of the great depression and world war for continuing to operate its mines: learned — and, for a decade or two, government must provide grants to remembered — the federal government finance a modernisation program. This was prepared to recognise hard facts capital was in addition to the long- 2 about the social impact of increasingly established subsidies. In their final year, 1967-68, those cost federal taxpayers $30 areas with good coal close to shore. Two millions. That was before the inflation of new mines (Lingan and Prince) replaced the 1970s and following decades. In real three of the old ones. For the fourth and terms, it was much more — roughly four best (Number 26) substantial modernisa- times greater — than the federal govern- tion was thought worthwhile, and prob- ment’s average annual outlay on the Cape ably would have been if accident had not Breton mines during the subsequent 33 later destroyed it. The third new mine that years of Devco. But memories are too was consequently developed in the 1980s short for critics of federal spending on (Phalen) was not the success of the other Devco to be restrained by the greater two. subsidisation of Dosco shareholders that preceded it. Lingan and Prince greatly improved output per man, and modernisation also In the late 1960s there was virtual meant that the quality of much of the coal unanimity. Politically, Conservatives offered for sale was raised by means of a agreed with Liberals and New Democrats new preparation plant and improved that the mines of industrial Cape Breton handling facilities. More and better coal had to be taken into government owner- with a smaller workforce meant higher ship. It was the one practicable way to wages. Though health and safety condi- avoid the social devastation of sudden tions were not improved as much as they closure. The agreement was not, of course, could have been, the industry did regain to avoid eventual closure. No one outside some of the confidence and purpose that Cape Breton dreamed that was possible. had been absent since oil began to The purpose of public ownership was to replace coal as the energiser of industry, reduce mining employment gradually of rail transport and of shipping (which enough to provide time for effective had been particularly important because economic and social adjustments. This did of Sydney harbour’s Atlantic location). not mean, however, that the existing four mines could be continued, for any signifi- Still, the workforce of the productive cant period, as they were. They were too new mines was — as was necessarily inefficient; there were too many questions intended — a good deal smaller than that about their safety. The phase-down of the of the old ones. Not only did mining industry could therefore be made reliably employment remain much less than Cape gradual, rather than sudden, only if parts Breton’s communities had been built for; of it were substantially modernised. no one could give assurance that mining would be sustainable beyond the working But how? The submarine workings of the life — perhaps 25 years — of Lingan and mines were already too far advanced, Prince. Therefore, while Devco’s basic requiring long haulages of men and coal, policy for the coal industry was moderni- for better equipment in itself to do much sation, a second was equally essential to good; though employment could by that its purpose. means be somewhat reduced, there would be little improvement in the industry’s There had been no regular, committed finances. Hence the most dramatic of pensions for miners. Devco instituted both Devco’s policies: paradoxically, the effi- a non-contributory pension plan (with cient way to phase down gradually was to previous Dosco employment taken into 3 open new mines. There were still two account) and, for those who wished, contributory pensions. They were in structure and demonstration projects as addition to early retirement benefits for well as the financing of many private workers who had to be laid off. The scale enterprises. The fishery was helped to of the plans was not all that a humanitar- diversify before stocks collapsed, and was ian would wish for men who had worked supplemented by aquaculture when that years in the deeps. But it was, for the was hardly known in Canada. Farming was circumstances of the industry, good; and it improved. Small processing and manufac- has done much to ease the impact of turing enterprises, urban and rural, were Cape Breton’s economic troubles. started or expanded. Diversification Such projects were far from removing The third Devco policy was to develop Cape Breton’s entrenched unemployment; other sources of employment in Cape but compared to anything that had been Breton. The difficulties were massive. As done before, they added up to major Devco took over the mines, Dosco walked progress. In the 1970s the earned incomes away from the Sydney steel plant; its of enough Cape Bretoners improved operation, in provincial government enough to constitute an encouraging ownership, has been more precarious beginning for a realistic program of even than mining.
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