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# Tuesday, August 26, 2014

The Ivany Report

The Nova Scotia Commission on Building our New Economy began its work in November 2012 at the behest of the then NDP Government.  The project nevertheless had all party support.  The Commission was chaired by Ray Ivany, President of Acadia University and included four other members the most prominent of whom was John Bragg, Founder and CEO, Oxford Group of Companies.  

During 2013 the Commission used 35 public meetings, a web site and the social media to gather opinions and gauge public and business angst across the province.  The Commission also relied on assistance from various government departments and private sector sources.  The Commission published its Report in February 2014.  It identified twin problems: (1) an aging and shrinking population, (2) very low rates of economic growth.  The Commission pointed out the “economy today is barely able to support our current standards of living and public services, and will be much less so going forward unless we reverse current trends.” 

The Conclusion

The Commission stakes the recovery on the private sector “the logic is inescapable, if the economy is to grow there must be more enterprises and the rates of business success and expansion have to improve significantly” … “the wider public needs to understand and support this imperative (growing the economy) by openly addressing attitudinal barriers to business development and entrepreneurship.”  But how do you accomplish this in a province where almost one third of the working population are government employees?  They are better paid than the private sector (40% higher in some cases), have pension plans that 99% of the remaining population cannot afford, and have entrenched job security.  The powerful civil service unions fiercely resist any attempt by the private sector to compete for “their” work.  Politicians quail before them, civil servants form a powerful voting block in a province with low voter turnout (2013—59%).  The mere whisper of a strike threat or “sick day walkout”, especially in critical areas such as health care or education, quickly brings the political establishment to heel.

The Commission confessed itself mystified as to why the province is lacking in entrepreneurs.  Whilst acknowledging that the province has produced some exceptional business leaders it enquired why “if the right foundations are in place in Nova Scotia, hasn’t the private sector “taken off”?  Why hasn’t this province seen comparable levels of business growth and diversification over the period as Ontario, Manitoba or British Columbia, to say nothing of less advantaged regions such as South Korea, Singapore and Brazil?  Why haven’t we had the positive population trends of similar sized provinces like Manitoba and Saskatchewan?”  

Well it could be the water … or perhaps it is something to do with the fact that, in an economy stifled by government, there is restricted opportunity for the private sector to compete, innovate and grow.  That’s certainly been our experience operating in Atlantic Canada for the past thirty eight years.  It is frequently necessary to purchase services from government agencies, municipal and provincial, because they have a monopoly.  Invariably the services are over priced, delivered reluctantly and are of poor quality.  Complaints are treated with distain or completely ignored.  There is a comfortable contempt for the general public; indifference is the governing principle.  

In most cases these same services could be provided much more efficiently by the private sector … but they are not allowed to compete.  A “circle the wagons” philosophy prevails.  The impact is to truncate the growth of the private sector whilst impairing its effectiveness.  To rub salt in the wound the public sector then uses taxpayer funds to compete for labour, offering compensation and pension benefits that the latter has to fund, but cannot afford.  In those cases where the public sector outsources work it does so by tender … using a process which is often opaque … or by “selective” sourcing (perhaps to blunt or eliminate criticism?).

The Solution

The Commission concluded that “Nova Scotia is today in the early stages of what may be a prolonged period of accelerating population loss and economic decline.  These negative prospects are not however, inevitable or irreversible”.  It refrained from offering a solution, other than indicating leadership was required coupled with a complete change in mindset.  

However the problems facing the Province, indeed all of the Maritime Provinces, are neither unique nor insoluble. They are in fact, very similar to those faced by the United Kingdom, Ireland and New Zealand three decades ago … and Greece Italy, Spain and Portugal today.  A sclerotic economy held to ransom by powerful public sector unions, a large portion of the workforce in government employ, and a weak private sector beholden to the public process.  Their recipe was to create an open, competitive economy by transferring decision making power from the politicians and civil service to informed and empowered consumers.  Unless there is radical … bold … reform the private sector will continue to splutter and the province will persist in its inexorable slide to financial collapse.  

On June 9th 2014 the Province of Nova Scotia appointed a panel to study the Ivany Report and make recommendations on ways of turning the economy around.  It is tempting to confuse process with progress:  only bold political action, or the lack of it, will determine whether the Ivany Report heralds Nova Scotia’s sunrise … or sunset.

For a précis of the Ivany Report and our own analysis of solutions that have worked elsewhere click on the link: 

www.turnerdrake.com/newsresearch/documents/SunriseorSunset.pdf.

Tuesday, August 26, 2014 4:28:55 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada