Governments make poor bosses

Governments make poor bosses
by Fred McMahon

——————————————————————————–

08/22/1999
The Halifax Daily News

Two fish plants in northern New Brunswick have thrown a devastating light on the idiocy of federal and provincial economic policy in Atlantic Canada.

The first plant is in Petit-Rocher. That plant closed because it couldn’t afford to process crab. That left workers without enough weeks for employment insurance. The provincial government stepped in with a make-work project.

Then a fish plant in Maisonette offered work processing herring, enough to qualify for EI. The employees turned it down. The 90 minute trip to Maisonette, the workers said, was too much to expect, even for the few weeks needed to qualify for EI. They seemed unconcerned their actions threatened other jobs in this job poor region of New Brunswick.

The company offered to provide transportation. No, said the workers. They preferred the government’s make-work project. The farce came to an end when the New Brunswick government said it would stop funding make-work projects in areas where employers were in need of workers.

This story made national news. It was played as an oddity, something to amuse Central Canadians about those weird self-destructive Atlantic Canadians. It’s no oddity. It’s a regular event, and it’s devastating our economy.

We bribed people through make-work projects and regionally extended Employment Insurance to snub private sector jobs unless they provide enough “stamps” to collect unemployment.

This isn’t simply a New Brunswick story. It happens throughout the region.

Many Canadians remember when unionized workers in Cape Breton burned down an apartment building being constructed by a non-union firm. Here’s a more shocking story. A few weeks later a bank in Sydney needed its roof repaired. The manager was too intimidated to even think of non-union workers. He was willing to pay whatever it cost for union workers.

No unionized workers in Sydney could be found for the job, though unemployment was over 20 per cent and up to 80 or 90 per cent in the construction trades. The bank had to hire a Halifax firm and pay Halifax workers to go to Sydney to repair the roof.

Union members wanted work on large construction projects that provided enough stamps for unemployment. Forget work that only took you off unemployment and didn’t provide stamps for a new round.

This story happens dozens of times throughout the region. Imagine the message that sends about investment and private sector job creation.

Atlantic Canada can trace its problems back to the early 1970s, particularly Pierre Trudeau’s near election loss in 1971. Atlantic Canada became the swing region, the difference between victory and defeat. The Liberals unleashed the spending gates and billions of federal dollars cascaded out.

Few now realize how well Atlantic Canada had been doing in the 1960s prior to this “regional development” thrust. Atlantic Canada’s unemployment had fallen towards the national average through the decade.

By 1971, believe it or not, New Brunswick’s unemployment rate had dipped below the national average. That’s never happened again. PEI’s unemployment rate was also below the national average. Nova Scotia’s unemployment rate had fallen below the national average in 1970.

Private sector investment in Atlantic Canada was rising toward the national average. Tens of thousands of private sector jobs were being created throughout the region. People labeled this astonishing time the “Atlantic Revolution.”

Then Ottawa stepped in to help.

Need make-work projects? A rich regionally extended unemployment program? Subsidies for uneconomical fish plants? Subsidies for declining industries? Subsidies to make winged cars in New Brunswick? Subsidies for heavy water in Cape Breton? Atlantic Canada became the most politicized, government-dominated economy outside the Soviet block.

Instead of building a new economy, politicians directed money to where the votes were, existing and declining industries – coal and steel and the fisheries. Bureaucrats picked the winners of the future, like winged cars.

Unemployment payments became a right. We subsidized unemployment and got more of it. Atlantic Canada’s unemployment rate – which had been falling so nicely – shot into the double digits. That’s half the story. In many months, twice as many people collected unemployment as were officially unemployed. That’s changed with recent reforms but still in many months more people collect EI in Atlantic Canada than are officially unemployed.

Despite double-digit unemployment in the 1970s, businesses throughout Atlantic Canada began complaining of labour shortages and escalating pay demands. They had to compete with government make-work schemes and unemployment payments. Many employers simply couldn’t afford it. Private investment tanked.

These perversities remain entrenched. We need to get the government out of our economy and stand on our feet. That’s the way to repeat the region’s astounding performance of the 1960s.

Maybe then we could look forward to the day when New Brunswick can brag of low unemployment, and ship off equalization dollars to British Columbia which seems intent on replicating our experiment with a government-run economy.