The $1.5 billion Maritime Iron project proposed for Belledune is hanging on by its fingernails, and nobody seems to care. The perception of New Brunswick to outsiders is that it is a province struggling to attract investment, which is why some of us who are “from away” were surprised that Maritime Iron hasn’t generated more interest from New Brunswickers.
Then I saw a list compiled by the economist David Campbell which gave me a different perspective on what is happening. Since 2006, the province has passed on around $40 billion in investment. Maritime Iron is just the latest $1.5 billion in investment we are prepared to let go.
New Brunswick does not struggle to attract the interest of investors. Campbell’s “list of the dead” includes a second oil refinery in Saint John, a second nuclear plant at Lepreau, shale gas development, oil and natural gas export terminals, the Energy East pipeline and potash and tungsten mines. His list did not include the failed sale of NB Power, nor did it include the investment opportunities at risk in the province, including Maritime Iron, the SmartGrid Energy initiative, cybersecurity opportunities and the small modular nuclear reactor industrial opportunity. The list does not include mines and industrial operations that have shutdown, like the Glencore smelter and the Trevali mine. I am sure that readers can think of other examples that can be added to the list.
New Brunswickers believe their economic struggles reflect fate driven by external forces, which justifies a collective learned helplessness, or hopelessness, about the economy. It supports a narrative that we always need ever more federal cash to make ends meet because we are not responsible for our economic circumstances. This is a strange narrative when you really think about how much potential investment has been pushed away by politics, protest and indifference.
How big is $40 billion in private sector investment for New Brunswick? Our annual GDP is only $30 billion, so I would say it’s pretty big. If the province had seen all $40 billion of these projects come to fruition, or even the $15 billion in investment proposed since 2010, then our post-2007 GDP growth would have been closer to the national growth rate over 2 per cent annually, instead of no growth.
In a typical year before 2010, New Brunswick had at least $3 billion in annual private sector investment. Since that time, the province has been closer to $2 billion per year, with some recent upticks to $3 billion. What “could have been” with the investment projects proposed in the province since 2010 is investment growing from $3 billion per year to $4.5 billion today. That translates to between 1 and 1.5 percent GDP growth per year over what we had for the decade.
Guess what? That would be enough for the province to reach the premier’s growth target of 2 per cent per year since 2010 with projects that were here.
But that’s only the direct effect of investment on GDP growth. By increasing labour demand, that additional investment would have spurred population growth to around 850,000 in 2020 through reduced outmigration of young New Brunswickers and the attraction and retention of immigrants. Investment would have maintained the pre-2008 growth in labour productivity, which would have increased employment income and tax revenues.
Without the $40 billion in investment, the province achieved the federal climate goal of 30 per cent lower greenhouse gas (GHG) emissions than in 2005. De-industrialization has been a big source of reduction of our GHG Emissions from 20 megatonnes in 2005 to 14.3 megatonnes in 2017. The Maritime Iron project proponents may not have understood how much New Brunswickers value lower emissions in the province when they looked at this province as a place to produce.
To see how much we value lower local emissions, consider that if we had the GDP growth rate from the $15 billion in the proposed investment projects since 2010, then we would have had $3 billion more in annual GDP in 2020. If we count this foregone GDP as the price we have paid for lower emissions, then New Brunswick has annually paid around $500 per tonne for the carbon no longer emitted. And we were worried about an 11 cents per litre tax on gasoline from a $50 per tonne carbon price?
While it is not clear that the province would have seen all of the proposed projects come to fruition, even getting some of them would have changed the post-2010 position of the province. Many of our manufacturers with roots in our traditional resource sectors have been investing in their operations for the last decade, but the expansions are in other provinces and countries. While Saint John did not get a second oil refinery, the oil export terminal or the Energy east pipeline, Irving Oil has acquired two refineries that are not in New Brunswick and has Canadian oil coming from the west coast to Saint John by ship through the Panama Canal.
This is important context for those who are seeking to pivot, or transform, the New Brunswick society into something different. When I moved here in 2016, I often heard statements that traditional resource based industries were holding the province back from moving to a different economy that would be richer, more equal, less volatile and sustainable. I think what most New Brunswickers are missing is that the traditional industries that they dislike so much of late aren’t doing anything to harm them. If anything, New Brunswickers have chosen to harm those industries, believing something better would emerge. No growth is preferred to the wrong kind of growth. After 15 years of restraining the province’s traditional strength, we do have a more equal and less volatile economy, but we are not richer nor is what we currently have likely sustainable.
I expect that even mentioning that list of dead investment projects will draw strong negative reactions. As you can see from the list above, most of these projects involved mining, energy, transportation and heavy industry. Many vocal influencers in New Brunswickers have argued that these investments are targeted at “sunset industries” that will be gone soon. Once projects are driven away, so long as we don’t speak kindly of the dead or impolitely assign responsibility to those who worked to drive the investment projects away, the province seems to move on quickly.
This commentary is not about the relative merits of the dead projects, nor is it about attempting to revive them. The importance of David Campbell’s list of the dead is that it helps us understand what problem we think we as a society need to solve. It is clearly not investment attraction. It is also unlikely that government incompetence explains serial failure to land the investments since the governments have changed often and the investment outcomes did not.
Given the lack of government effort in New Brunswick toward resolving issues like social licence, restoring historic regulatory strengths in mining and resources, improving transportation infrastructure to get goods to market, ensuring secure and predictably priced energy and developing a workforce for the economic opportunities we have, I am comfortable declaring the “anti-growthers” as the victors. Politically, it has been easier to drive away $40 billion in investment than to seek the social licence and the political support needed to allow the investment and growth to happen.
Herb Emery is a Brunswick News columnist and the Vaughan Chair in Regional Economics at the University of New Brunswick.
This article first appeared in Brunswick News publications – July 8, 2020
The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.
