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Updates from the Prairie Centre Policy Institute from Regina, Saskatchewan.
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web posted July 19, 2004
Perception is reality
By Allan J. Evans
I just read an interesting commentary by Paul Martin (the Saskatchewan Paul Martin) from the December 2003/January 2004 edition of Saskatchewan Business Report. Entitled “Seeing the intangibles”, the article quotes the Institute of Chartered Accountants of Saskatchewan (ICAS) in their recent Saskatchewan Check-Up to make a case for the argument that perhaps “the business community is part, if not all, the problem” associated with the lack of investment in this province.
In the study ICAS found that from 1993 to 2002 Saskatchewan corporate profits rose by an impressive 154 per cent (compared to 155 percent for Alberta). During the same period taxpayer supported debt declined and labor productivity gains outpaced labor compensation increases. All are positive indicators that confirm Saskatchewan really is a good place for business and investment.
ICAS also found, however, that while Saskatchewan may be a good place to invest, it’s not attracting the kind of investment it should - as evidenced by the fact that neither the level of investment nor the GDP have risen. This leads to the question, Why not?
According to the ICAS report, “Intangible factors are holding the province back. One of those factors may be that the decision makers have a more negative perception of the province’s economic conditions than the indicators suggest.” In Martin’s words, “what ICAS found is quite intriguing – the policy wonks have done their job, now it’s up to the rest of us.”
It’s not often I disagree with Paul Martin or the chartered accountants, but they have this all backwards. Saskatchewan has an extremely dynamic and capable business community that embraces both private and public sector operators. It’s a business community that has demonstrated innovation and leadership on many fronts. It’s a business community that has invested heavily in this province. And it’s a business community that continues to move us forward – often despite ill-conceived public policy.
It seems to me the lack of investment has more to do with a negative perception of public policy than anything to do with the state of the business community or economic conditions. The fact is that Saskatchewan is perceived to be downright hostile to business and thus, a poor investment risk. Remember, it’s not business that puts up the roadblocks. It’s not business that equates profit with greed. It’s not business that wants to eradicate capitalism. It’s government, and the people who elect it.
Quite frankly, I doubt that big money gives a lot of thought to this province when it comes to investment. If you want to know why, just put yourself in their shoes. How would you view the potential of a region where the government owns all or part of about eighty crown corporations (or whatever you choose to call them) and, in one way or another, has its tentacles in many more privately-held businesses? Would you risk investing your money in a province where the government faces dozens of law suits from investors who have lost millions of dollars? And what would you think about a government that has the Regina Manifesto posted on its website?
Martin goes on to say, “The business community has long complained about government investing in enterprise but, the numbers show, we don’t bother to fill the gap either. We can’t have it both ways. Either we, in the business community, want to play the leadership role in investment or we don’t. If we don’t perhaps we should remain silent when government does.
Well, I don’t know many business people who are opposed to government investing in enterprise if it’s a strategic move that benefits the province as a whole. But what business does complain about is having government tax them to the hilt then use taxpayer dollars to pretend they’re entrepreneurs. Nothing discourages business investment more than a government that uses their money to compete with them or to invest in risky ventures around the world. Nothing discourages investment more than public policy that makes government look like the good guy and business look like the villain.
If Saskatchewan is going to realize its potential, it must have a mechanism capable of allocating capital into wealth-creating projects. Would it not be better to provide incentives that encourage private investment, rather than putting the taxpayer’s money into one risky business venture after another? And what better incentive is there than making a profit and getting to keep some of it.
Mr. Martin ends his piece with, “It’s about us – our beliefs and attitudes about the place. For years we’ve carped about the business climate here and, even when it gets turned around, we don’t notice. Perhaps there’s something to this The Future’s Wide Open campaign and its budget should be doubled, not trimmed back.”
I’m sure we can all agree that Saskatchewan really is a great place to live, work and raise a family, and that it has all the ingredients needed to be prosperous - very prosperous. With a few changes, it could be a great place to invest - then you can tell the world the future is wide open in Saskatchewan and they might believe it.
Al Evans is Executive Director of the Prairie Centre Policy Institute.
web posted July 5, 2004
Is It Too Late For Saskatchewan?
By Allan J. Evans
The Prairie Centre Policy Institute was honored to have Herb Pinder, Sr. speak to our group at breakfast last week. Mr. Pinder is a prominent member of the local and national business communities. In addition to operating the family enterprise that included a chain of drug stores, he was one of the early players in the Saskatchewan oil patch and has served on the Board of Directors of many national companies. In the 1960's he served as the Minister of Industry and Commerce in Ross Thatcher's Liberal government. Needless to say, Mr. Pinder brought a lifetime of knowledge and experiences to the podium.
Mr. Pinder's message was simple. After sixty years of socialist thinking, government has become too intrusive in our lives and we have become too dependant on government. If Saskatchewan is to grow and prosper we must change the culture of our society and its negative attitude towards business.
Mr. Pinder discussed his early experiences in the Canadian oil patch. He talked about the days when the action was centered in Saskatchewan and all the big oil companies had their headquarters in Regina. He talked about Tommy Douglas and his fight with the oil industry over drilling requirements, royalty fees and other such issues and, as a result, how the industry picked up and moved to Calgary. The Saskatchewan government had become too hostile and unfriendly to deal with.
This sent a signal to the business community that Saskatchewan might not be a good place to invest. Subsequent events like the nationalization of the potash industry, the failed attempt at partnering with the private sector to establish a potato industry, and the numerous lawsuits filed against the Government have cemented that perception of us.
Mr. Pinder also talked about Tommy Douglas's penchant for crown corporations. He told us that the CCF no sooner came into power when they began getting involved in a myriad of businesses from brick making to box factories, most of which are no longer in existence. But the initiative that had the most far-reaching effect was their move into the insurance industry. When they created the Saskatchewan Government Insurance Office they forced all levels of government, school boards and other public institutions to deal with this crown. Without competition, it became reasonably easy for SGIO to make a profit and turn the surplus over to the government. This not only drove up the cost of insurance for the public sector, it also gave the politicians access to a new pool of taxpayer's money.
This is significant because, as Mr. Pinder reminded us, Tommy Douglas had nothing to do with creating the public utilities that went on to become SaskTel, Sask Power and Sask Energy. They were brought into existence by previous administrations. So, it seems the reasons for creating crown enterprises and getting into business had more to do with political ideology than the public good.
Since that time, government has burrowed deeper and deeper into the Saskatchewan economy and created a monster that won't go away. Today, the Saskatchewan taxpayer owns all or part of over 80 business entities that for all intents and purposes can be called crown corporations. In addition, the Province provides loans to, purchases goods and services from, or regulates the activities of many others. The fact is, very few businesses can operate in this province without having to rely on a government department or crown corporation.
The monster is a bureaucracy that terrorizes, strangles and often destroys or chases away business and investment with its red tape, incompetence and self-serving manipulation. From a public policy perspective, nothing epitomizes the problem Saskatchewan faces better than the half-baked SPUDCO debacle. Here is a situation where the government encouraged the private sector to invest by making false promises. What should have been a great opportunity turned out to be financial disaster that has ruined many lives. (Over the next few weeks, the Prairie Centre will be examining this issue to determine what policy needs to be in place to ensure this doesn't happen again.)
The monster also manifests itself in the widely held belief that health care, education and other such services the government provides are free and that everyone is entitled to them. As a society, we seem to have developed the socialist attitude that the supplying of human needs and the making of profits are not compatible. And while many other jurisdictions that once embraced this ideology have changed, here in Saskatchewan we seem to think that everyone is wrong but us. It's the society we live in.
Mr. Pinder's parting question was "where do we go from here - or is it already too late for Saskatchewan?"
Al Evans is Executive Director of the Prairie Centre Policy Institute. “Where Do We Go From Here?” is a feature service of the Prairie Centre.
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