POLICY WORKING PAPER #2

Re-Thinking Economic Strategies

“…aspects of a nation, which some call cultural, cannot be separated from economic outcomes.” Michael Porter, The Competitive Advantage of Nations

British Columbia grew and prospered as a province by exploiting its resource base. British Columbians came to view themselves as living in a “wealthy” province, and to expect first-rate social services. But since the early 1980’s, their sense of economic well-being has become more tenuous, at times faltering badly. The province’s sense of confidence in its future was most badly damaged by the at times almost hysterical rhetoric of the political opposition in the late 1990’s. And because the election of the Liberal government in 2001 did not have the magical effect promised, the economic confidence of many British Columbians is continuing to erode.

In fact, the lagging economic performance of the province over the past 15-20 years can be attributed in large part to the lagging economic performance of its leading industry. Between 1984 and 1999, the provincial economy grew by about 60 percent, while the forest sector has expanded by less than 15 percent (R.E. Taylor and Associates, 2003, p.3, report prepared for Forestry Innovation Investment). Currently, the forest sector’s direct contribution to provincial GDP is only about 7 percent, and continuing to decline.

The impact of the declining role of the resource industries in the provincial economy is of course greatest in communities where resource related jobs, especially forest sector jobs, have been the linchpin of the local economy, and where job losses in traditional industries are not easily offset by growth in other sectors. But even in the major urban centres, the decline of the resource industries, and conflicts and turmoil associated with that decline, have had a negative impact, both on the real economy and on people’s general sense of economic well-being and economic confidence. And the real sense of uncertainty and dislocation associated with an economy in transition has been badly exacerbated by politically motivated, sky is falling rhetoric.

The economic malaise effecting British Columbia will certainly not be cured by the radical tax and service reduction experiment currently being carried out by the Campbell Liberals. Nor will it be cured by ignoring the forest sector and other resource industries, or by attempting to restore them to their former glory. What is needed is a new economic vision which supports communities, knits together the most vital, forward looking components of all sectors of the economy, and inspires a dynamic new economic and cultural identity for the province.

Priority initiatives

Keeping communities whole

• Key foundations to a dynamic, modern economy are first rate health and education systems. Over the long haul, maintaining high quality, accessible health and education services will prove more important to the economy than any economic plan.

• Economic outcomes are a lot about expectations and confidence. Communities worried about what services or jobs will be cut next, year after year, are very unlikely to be thriving communities. Decisions relating to provincial government services should be biased in favour of stabilizing communities, not destroying them.

• Reaching land claims agreements needs to be a first order priority, to provide aboriginal and non-aboriginal communities the certainty they need to build their futures.

• Annual spending on necessary public infra-structure – roads, bridges, public transportation, schools, hospitals, sewage and water systems – should be returned to levels which are equivalent to annual rates of depreciation. Over time, under-investing in infra-structure is a form of dis-saving, no different than borrowing money, or selling off long-lived assets to fund current expenditures.

• In addition to the health and education sectors, arts and cultural networks should be regarded as essential contributors to our economic vitality. The health, education, arts and cultural sectors should be supported for three reasons: for their own sake, for their long term strategic importance in an economy where quality of life factors increasingly drive new economic activity, and because they build other industries, such as tourism, new media and exportable related high-value services, such as educational software.

Getting serious about value added, and getting it right

• Often lost in the concern over soft-wood duties and mill closures is one bright spot in the forest economy. The value-added wood products sector is currently growing at about 10 percent per year (R.E. Taylor and Associates, 2003, p. 8), and could, if that growth continues, be by the end of the decade as significant to the provincial economy as either the primary wood products sector or the pulp and paper sector.

• The value-added sector is also the most entrepreneurial, innovative and employment intensive part of the British Columbia forest harvesting economy. Compared to other jurisdictions, very few jobs are created in British Columbia per unit of wood harvested. In 1998, for example, about 1.4 direct jobs were created for every 1000 cubic metres of wood harvested. Incremental jobs created in value-added activities range from .41 to 23.3 additional jobs per 1000 cubic metres of wood (R.E. Taylor, 2003, p.8). Based on this analysis, it would appear that the most important forestry related initiative that could be undertaken in British Columbia would be to ensure adequate fibre supply will be available in the future to the value-added sector.

• The appointment of a Royal Commission on Forest Tenure, with a mandate to make recommendations on what forms of tenure will best promote the long-term economic, social and ecological vitality of British Columbia, and laying out a plan for creating that tenure regime, would address the issue of how best to ensure long-term fibre supply to value-added applications. The introduction of any new legislation related to tenure, such as the working forest legislation being proposed by the current government, in advance of the establishment of a Royal Commission, should be strongly opposed.

Re-imaging, re-imagining

• Most theorists of economic development now stress the importance of entrepreneurial clusters, the existence of a critical skill/knowledge mass, and a facilitating institutional and legal framework as key to the development of strong economies.

• What does this mean? In the context of providing support for the value-added wood products sector, it means that in addition to having a secure fibre supply, value-added producers should be supported by other institutions, such as first-rate design schools. The creation of a cutting edge design school in a centre where there is an emerging cluster of innovative value-added producers would be a catalyst for further growth, stimulate the local economy where it is located, and strengthen linkages between regional growth centres and the major urban centres of the province.

• Just as Whistler has expanded the notion of what tourism can mean in British Columbia, we should re-think how we use the province’s natural resources, with an eye to the highest and best use. This idea applies to all the province’s resource based industries, and cannot be summed up in a single policy, but rather requires a shift in attitudes.

• In general, attitudes toward different industries should be less compartmentalized, and more focused on synergies than conflicts – an example where this is already happening successfully is agriculture related tourism.

• Opportunities for the provincial government to help build a new image for British Columbia should be grasped at every available opportunity. For example, public spending earmarked for the Olympics should be carefully managed to demonstrate the innovative use of new British Columbia products and design.

• Landmark events, such as the Olympics, can be useful catalysts for renewed economic vitality, but 2010 is long way away. Are there other major events which could be held sooner, for example a festival celebrating and exploring new directions in design, material use, architecture and urban spaces? Such an event would bring together good ideas from all areas of the province and could be a major international tourist event and re-shaper of our self-identity.

Smart economy, smart economics, smart money

• The diverse, dynamic new culture identity which is shaping Vancouver, and our strong economic and cultural ties with the Pacific Northwest and the huge economy of California, provide us with strategic advantages few other jurisdictions possess. More than ever, we need to know what’s going on in the world, and be prepared to take advantage of new opportunities as well as be alert to risks.

• We need to foster a climate where innovation and creative thinking are fostered and rewarded. Small businesses have always been places where this type of thinking – and hard work – have been in good supply. Glen Clark’s government recognized this when they lowered small business taxes, and we should continue to shape policies to support dynamic new enterprises.

• We need to recognize that the “new economy” is still being created, and that it will most likely thrive in places where people most want to live.

• It’s a complicated, fast-changing world, and that reality must inform public policy decision making, especially in regard to the economy. Good government doesn’t mean having all the right answers, but it should mean asking the right questions. And it means recognizing that social values and economic values are deeply connected, and that building a good society requires a smart, compassionate and at times activist government that is prepared to invest in the future.