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Prosperity: an unlikely challenge

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An aging population. A fall-off in oil production. A doubling of provincial debt within 10 years.

This was the scenario Memorial University economist Dr. Wade Locke laid out to a packed audience at a public forum Wednesday night. Organized by Memorial’s Harris Centre, “A Prosperity Plan for Newfoundland and Labrador” brought together a panel representing business, labour and the social sector to discuss what prosperity means for the province: whether we’ve achieved it, whether it’s within our grasp, or whether we’re letting it slip through our fingers.

Despite some sobering statistics, Locke’s analysis of the current situation wasn’t all negative. His message, though, was that a plan is what the province needs, and it can wait no longer. “We do not need to face a crisis, but we do have to plan to avoid one.”

“If we don’t do anything, we’ll get to the situation where we can’t do anything.” —Wade Locke

The time for a firm plan, Locke emphasized, is now, while the province still has room to maneuver. Many of the province’s oilfields are halfway through production already; exploration for further wells has dropped off dramatically and while there is about a decade of strong royalties to come, beyond that there is very little that can, at this stage, be expected.

Locke also highlighted some of the positive social and economic benefits the oil era has brought. The high point has been GDP. “We’ve come from 65% of the Canadian average since the oil started, and we’re at 125% of the Canadian average now,” he explained. But GDP isn’t everything.

“Personal income has also grown, but not as strongly,” he explained. The provincial unemployment rate – historically double that of the Canadian average – is now 128% the Canadian average. Hourly wages have gone from 80% to 93% of the Canadian average.

Not sustainable

Yet with the oil production fall-off beginning, and many new energy projects not slated to come online for years or decades, current expenditures cannot be sustained, he explained. Within 10 years, it is likely the cost of debt servicing will go from 10 to 30 cents a dollar.

“There’s a situation here we have to think about, and we have to deal with in the next 5 to 10 years.”

“If we don’t do anything, we’ll get to the situation where we can’t do anything.”

Locke’s proposal was a task force to immediately begin work on the issue, and to work with the communities and people of Newfoundland and Labrador to identify priorities and develop a plan. Two key ideas he presented were a debt retirement strategy, and a heritage or legacy fund in which to invest energy and resource revenue. “This is not a government issue, this is a Newfoundland issue,” he said. “We need to identify what defines us as a people, as a culture. That sort of thing gets easily lost in these debates. We shouldn’t let it get lost.”

The panelists – representing labour, social sector and business interests respectively – largely agreed with the need for a plan, and were surprisingly in agreement on many – though not all – of the priorities.

“We must consider who is doing the prospering, and how we can do a better job of sharing it.” —Lana Payne

Lana Payne, President of the Newfoundland and Labrador Federation of Labour, emphasized that prosperity and wealth needs to be measured in ways other than GDP.

“When we talk about prosperity…it’s incredibly important to look at who’s benefiting from that wealth. How’s the pie being divided up, and are we doing a good enough job of dividing it?”

A large crowd at the Angus Bruneau Centre

She pointed out that even before the recession, 37% of the provincial GDP was being funneled into corporate profits, most of which has not stayed in the province; the percentage of GDP which goes into corporate revenue is more than twice the national average. This, she explained, has led some economists to refer to Newfoundland as a “helicopter economy”. It also makes for the only province where corporate profits exceed total wages and salaries – wages which make for the ninth lowest personal incomes in the country.

“This is extraordinary, and we should be asking whether this is an acceptable way of handling our economy…We must consider who is doing the prospering, and how we can do a better job of sharing it.”

She said a major priority from labour’s perspective was skills and training, and took the opportunity to critique recent suggestions from Memorial University administrators that tuition fees should be raised. “Burdening them down with debt from the start will drive them from this province. Given the aging population, pushing young people away is the last thing we need.“

She also emphasized the need for an early learning and childcare strategy. “This is no longer an option, it’s an economic necessity. Early learning is essential in today’s world. It will be essential for our province, and in attracting labour to this province. It’s incredibly important for working parents and will increase productivity.”

Finally, she said, there needs to be a greater emphasis on diversifying the economy, on innovation, on strengthening the public sector and the services it provides to the province, and promoting green energy. Diversification, she emphasized, must not forget the fishery – the province’s oldest industry, and still the most important one in rural Newfoundland and Labrador. “It is, unlike oil, a renewable industry…but restructuring is needed.”

Poverty reduction is also front and centre on labour’s agenda, and ensuring that the multinationals seeking access to the province’s energy resources pay their fair share to the people of the province.

“No citizen should be worse off because of this prosperity…Future negotiations with multinationals seeking to cash in on our resources will need to be even tougher. They want what we have – we now have bargaining power.”

Inclusion and sharing…but also debt repayment

Jo Mark Zurel, representing the St. John’s Board of Trade, provided the business perspective on the panel, yet was in agreement with Payne on the need to ensure a sharing of the wealth.

“Prosperity…to me, is something that’s inclusive.”

He highlighted priorities for the business community, particularly the development of export industries.

“We need to work on developing export markets. I think we can do a better job of providing training opportunities for labour, attracting and retaining youth. We have a shortage of skills, yet high levels of unemployment in many parts of the province.”

“Now we are back heavily relying on a single industry again, and this one is definitely not renewable.” —Jo Mark Zurel

Zurel said the reason the province has high unemployment and debt despite strong economic growth is rooted partly in its historical reliance on a single industry – the cod fishery.

“We learned the hard way that relying on one industry wouldn’t work, that there were a lot of variables we couldn’t predict…now we are back heavily relying on a single industry again, and this one is definitely not renewable.”

From business’ perspective, the two priorities were paying off the debt, and ‘paying it forward’ through investments in education and diversification. He noted that $15.5 million is being spent each week to service the debt. If that money wasn’t being spent on debt servicing, he said, in a matter of weeks it could fully fund education and childcare for the province.

“Debt is not just a number…it has a human element, too.”

He warned that failure to tackle the debt now was like receiving an inheritance and using it to buy a flashy car. He said the result – after the feel-good purchase wears off – will be a slashing of public services, social programs, and increased reliance on Ottawa. “We have a real opportunity, but we need to keep our eye on the prize…We have the next generation looking at us, and wondering what we’re going to leave them.”

Tackling poverty is key to prosperity

Bruce Pearce is the community development coordinator with the St. John’s Community Advisory Committee on Homelessness. Representing the social sector, he highlighted the importance of creative thinking around poverty reduction and affordable housing – hallmarks, he explained, of a sustainable economy. “Without a home, nothing is possible…oil-rich Alberta discovered this the hard way. Homelessness was driven by its boom economy and its ‘prosperity’ was actually squeezing out the people it was supposed to benefit.”

“While I agree we need to bring provincial debt down to manageable levels…we must do so in the context of other choices that will strengthen our economy and increase our well-being.”

“Governments around the world have realized that head office can’t decide everything – you really have to let the reins loose and let local economies flourish.”—Bruce Pearce

He highlighted the achievements of the Community Youth Network, which has used provincial funds to put unemployed youth to work retrofitting local infrastructure to be environmentally sustainable. This has resulted in employment and skills training for youth, and energy savings and increased sustainability for homeowners and businesses. He said the establishment of a legacy fund could help to fund these sorts of initiatives to set in place a cycle of greater prosperity.

Above all, he said, decision-making needs to be expanded to include the wider population – and particularly regional and rural communities – of the province.

“Governments around the world have realized that head office can’t decide everything – you really have to let the reins loose and let local economies flourish.”

He highlighted the rising cost of food as a future crisis that should be addressed now, by providing local communities the resources and funds to start planning and action immediately. “It can’t happen at the Confederation Building,” he emphasized. “It has to happen in our local communities.”

A public full of ideas

The question-and-answer session, chaired by Harris Centre director Rob Greenwood, produced an array of comments and questions from the packed hall.

Debora Scatena, originally from Italy but studying at Memorial, emphasized the importance of supporting small business, providing European examples. “When we talk about prosperity, we always hear about big companies…why is there not an investment into smaller companies in smaller communities?”

Ryan Murphy, also a student, asked the panelists to comment on where they saw accessible education in a prosperity plan, and whether they supported or opposed recent proposals for fee hikes for business students. All panelists agreed on the importance of affordable accessible education: Pearce recommended better alignment of skills training with labour market needs, while Payne recommended expanding the province’s needs-based grants system. She also emphasized that early learning is vital to the labour market, along with post-secondary.

“Education is very important if we’re going to prosper. Affordable, accessible education is part of that. Certainly it must be affordable and accessible to the majority of our population,” said Zurel.

Even Locke chimed in on the point.

“Education is terribly important. It’s the key to our future in terms of having an educated, productive workforce. Education and research and development are going to be crucial…”

Prosperity? Where?

Regional disparity was another theme that arose. Jim Morgan, an audience member, warned that prosperity is being distributed unevenly throughout the province. “Is it too late to share the profits?” he asked. “Not between the companies and the workers, but between geographic areas of the province? Rural areas have suffered immensely during this era of so-called prosperity. The prosperity has been mostly in the Northeast Avalon…we’re not prosperous, there’s only certain parts of this province that are prosperous. Is it too late?”

“It’s not too late,” replied Locke. “We need to acknowledge there’s an issue to be dealt with and we need to plan accordingly. If we look at the problem realistically and try to deal with it realistically, it’s not too late.”

Audience and panelists alike seemed pleased with the event, and with the Harris Centre’s work in expanding dialogue around the issue.

“It was a good moment,” said Payne, noting that all panelists agreed on the urgent need for diversification. “I think it’s ok for people to disagree…I think it’s about more than the hard numbers…I really think we should examine how much wealth we have and where it’s going. This is a key part of the debate in this province which has been missing for a long time. Yes we’re getting these royalties, collecting taxes from mining, but are we getting the right share of it? Is this wealth staying in the province? We have to have a discussion about that and how do we change it up…How do we plan for prosperity, and how do we deal wth prosperity? It’s more than just numbers. We have to factor people into this discussion. If you’re going to develop those resources, we have to make sure people benefit from them.”

Michael Walsh, Director of External Affairs with the MUN Students’ Union, also emerged positive from the event.

“I thought the panel was a great idea. This sort of dialogue, as a greater community, is what we need to do. I was very excited to see that all panelists felt education was very important to ensuring the future of economic and social prosperity in this province. Moving forward we do need a plan to ensure prosperity, and a plan for accessible, affordable education will be paramount to that.”

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