THREE VIEWS OF ATLANTIC CANADA’S FUTURE Three people who have thought a lot about the problems of Atlantic Canada and what to do about them are Brian Crowley, President of the Atlantic Institute for Market Studies, Elizabeth Beale, President of the Atlantic Provinces Economic Council and Wade Locke, professor of economics at Memorial University. Policy Options’ editor William Watson sought their views on the region’s problems and what to do about them in a conference call in the second week of November. Au cours de la deuxième semaine de novembre, le rédacteur en chef d’Options politiques, William Watson, s’est entretenu par téléphone avec trois personnes qui ont longuement étudié les problèmes des provinces atlantiques et les solutions à y apporter, soit Brian Crowley, président du Atlantic Institute for Market Studies, Elizabeth Beale, présidente du Conseil économique des provinces atlantiques, et Wade Locke, professeur d’économique à la Memorial University. William Watson: I’d like to begin by ask- approach to business climate and so the reason for that poor performance. ing each of you for your overall view of on—lagging regions catch up with There’s a whole series of reasons for the questions I’d like to discuss today: more advanced regions at a rate of that but most have to do with the How would you characterize the poli- somewhere between two and three per excessive politicization that it intro- cies that Atlantic Canada has been cent a year. If you look at what we’ve duces into economic decision-making favoured (or cursed) with in the past? done in Atlantic Canada, we have not in the region. It’s got to with the fact What do you think their effects have had such an ordinary policy regime. In that, as a result of particularly massive been, and how do you think the poli- fact, we have had a regime of heroic transfers from Ottawa, governments in cies should be changed? efforts by both federal and provincial this region have been extremely inflat- Brian Crowley: The starting point governments to attempt to close the ed in their importance relative to the for this conversation is both the economic gap between Atlantic rest of society. Governments and their research on and our experience with Canada and the stronger parts of the priorities loom far too large in Atlantic convergence. Convergence is the area Canadian economy in the western part Canadian society, and that crowds out of economics that deals with lagging of the country. The result of that hero- a whole series of business and eco- economies and their relationship with ic policy regime has been a rate of con- nomic decision-making which has and economic performance relative to vergence with the Canadian average resulted in our poor economic per- stronger, more advanced economies. which is less than half what one would formance. What the research on convergence expect to find based on the conver- Wade Locke: I think it’s important shows very clearly is that if you do vir- gence literature. These heroic efforts in any discussion like this to distin- tually nothing—if you just have an have not made up for what would guish between what was done in the ordinary tax regime, ordinary infra- have been an even worse performance past and what’s being done now. structure policies, an ordinary without them, but are, in fact, part of Without question, there were mistakes 12 OPTIONS POLITIQUES DÉCEMBRE 2000 Three views of the future in some of the things done in the past, without really understanding either region’s economy well remember the and they may not have been as effec- the problem itself or the effects of the kind of parameters they were dealing tive as they could have been. I’d take policies on the problem. And some- with back in the late 1960s and early that as given. But we have learned a lot times how policies are implemented 1970s. It’s very easy now to discount or from what has worked and what hasn’t has not been as effective as it could criticize the policies that were followed worked, in terms of both economic have been. then, and there are some that are wor- theory and practical application of Elizabeth Beale: If you look back to thy of criticism, but, in general, I think regional policy here. I wouldn’t argue the 1960s, when the federal govern- they have improved the overall effi- that the policies that were tried in the ment started to expand its more inter- ciency of the Canadian economy and past are policies we ought to concen- ventionist role in this region’s econo- have strengthened the economic trate on now and in the future. But, my, you can point to enormous union—for example, by expanding the these are not the policies we are trying changes, though it is difficult to tie post-secondary education system right now. those changes to effects, either nega- across the country. That has encour- We also want to be very, very care- tive or positive, that took place subse- aged mobility of well-trained individu- ful about drawing direct lessons from als right across the country. some particular jurisdiction or even a Crowley We have had a The programs that were tried have number of jurisdictions and applying pulled up per capita incomes, and they them to Atlantic Canada without con- regime of heroic efforts by have improved overall equity, which sidering their full implications. both federal and provincial really is the goal of a lot of this. The I think past policies have been governments to attempt to problem occurred in the 1990s when effective to some degree. We have close the economic gap all of a sudden the parameters for moved up in terms of our standard of many of these programs changed, sub- living, and in terms of our GDP rela- between Atlantic Canada sidies to business were reduced, and in tive to the national average. and the stronger parts of the mid-1990s several federal pro- It’s also important to make sure the Canadian economy in grams were cut back. It’s not so clear people understand that some things the western part of the whether overall trends in the policy that aren’t usually considered regional environment either benefit or hurt policy end up having very important country. The result of that Atlantic Canada. But some of the new regional effects. For example, Industry heroic policy regime has initiatives that have come up leave Canada has provided support for busi- been a rate of convergence Atlantic Canada fairly exposed. For nesses and research and development with the Canadian average example, we have seen attempts to in central Canada on a much larger pull back on national programs pro- scale than anything that has occurred which is less than half what viding support to EI workers, but a here in eastern Canada. It’s as if we’re one would expect to find refusal to address the longer-term on a scooter and they’re in a car. The based on the convergence adjustment challenges of getting those additional support they have received literature. individuals back into the labour force has allowed them to build knowledge- or providing them with some longer- based infrastructure that has enabled run income support to last out their them to move farther and farther quently. But there were clear reasons lives. So, a lot of the longer-term struc- ahead. why the intervention took place: The tural issues for Atlantic Canada have So, I’m not sure I agree with the high degree of rural poverty and the not been dealt with successfully in this characterization that the policies have total lack of any kind of private sector more decentralized, more provincially- reduced the level of convergence or investment in the major resource oriented environment we find our- reduced other regions’ ability to move industries that were driving the selves in at the end of the 1990s and ahead. Policy may not have been as region’s economy are just two. the beginning of the 21st century. effective as we would have liked—I can Through a whole range of programs, Brian Crowley: I think Elizabeth accept that—but those policies aren’t whether it was regional development properly draws our attention to the in place any longer. Right now, most spending or expansions in personal 1960s as the beginning of a major policies are based upon improving pro- transfers or, indeed, an expanded role experiment in Canadian regional poli- ductivity and competitiveness and for our government-to-government cy in which federal transfers and other enhancing Atlantic Canada’s position transfers, there’s no doubt that policy forms of intervention were really in the knowledge-based economy. In contributed very strongly to conver- ramped up to a very remarkable the past, policy has aimed more at tra- gence, and particularly the conver- degree. One of the things our research ditional industries, and at dealing with gence in per capita incomes. Many at AIMS (the Atlantic Institute for an immense problem of adjustment people who are very active now in the Market Studies) shows is that when POLICY OPTIONS 13 DECEMBER 2000 Beale, Crowley et Locke Locke I have a real problem approach to policy. That’s extremely tives. Though you might applaud or with the suggestion that important. Without it you can have criticize some of them, you have to one type of policy running up against keep that in mind in terms of assessing what went on in the 1960s another type of policy and making the aggregate effect.