Finding a pathway to economic diversification

By Ainslie Pierrynowski (AIMS on Campus Student Fellow)

Nearly twenty years ago, a community organization in Bridgewater, Nova Scotia embarked on a mission to transform the town’s economic landscape. Between 2000 and 2017, the Bridgewater Development Association (BDA) spearheaded a number of local initiatives, including the establishment of the Bridgewater Area Family Health Centre, the construction of the Bridgewater Marina, and the extension of Glen Allan Drive. These projects—as different as they might seem from each other at first glance—were all informed by the Association’s overarching goal: diversifying Bridgewater’s economy.

In this context, economic diversification refers to expanding the number of strong, productive sectors and livelihoods. Essentially, in a community reliant on one predominant industry, the entire local economy can suffer when said industry experiences a downturn. Conversely, an area which is home to multiple well-performing economic sectors is less vulnerable when one (or more) local industries encounter difficulties. Given the economic stagnation wrought, in part, by the decline of key industries like coal and steel production—not to mention many communities’ current reliance on tourism and other seasonal sectors—Atlantic Canada has good reason to pursue greater economic diversification. In the words of Bridgewater Mayor David Mitchell, “We want to make sure that Bridgewater is not a one-industry town because we’ve seen what happens to communities when they rely on one industry.” Economic diversification, however, is no easy task. It may require developing new training and continued education programs, devising a strategy to attract investment to the area, gaining access to markets beyond the local community, and creating the infrastructure necessary to support new, burgeoning economic sectors. How, then, should communities in Atlantic Canada go about diversifying their economies?

First, effective local organizations like the BDA can be instrumental to economic diversification. They can identify community needs, act as intermediaries between investors, local businesses, and other stakeholders, and enhance accountability. Garrett County, Maryland (US) provides one such success story. When the focal point of its local economy—a glasses factory—closed its doors, Garrett County lost a substantial number of jobs, including indirect jobs supported by the county’s economic base. To boot, the displaced workers often lacked transferable skills. Amid the economic uncertainty, local leaders met to assess the situation and formulate a response to the crisis. These discussions produced a short, concise economic growth strategy aimed at utilizing existing local assets and enhancing the area’s economic infrastructure. This initial step was soon followed by an ongoing planning process where five key local economic development organizations and several different industry sectors provided input on the county’s future direction. Overall, Garrett County’s economic diversification strategy proved successful. The county is among the most economically diverse municipalities in the Appalachian region. As well, Garrett County experienced above average employment and income growth between 2002 and 2009, with more recent years bringing stable employment and some small employment gains in the manufacturing and recreation sectors. By working with local stakeholders from the beginning, the local government could respond quickly to funding opportunities at the state or federal level. That is, rather than spending time forging coalitions, businesses, community organizations, and local leaders could instead draw on pre-existing partnerships when presented with funding opportunities. The area’s success stems not only from this collaborative approach, but from that fact that the country’s economic diversification strategy was effectively implemented. In particular, the strategy was reviewed every few years, thereby ensuring that Garrett County’s economic diversification strategy was attuned to the community’s current circumstances. Moreover, the partners involved in the planning process agreed on how to measure the outcomes of their economic diversification efforts. This allowed communities to hold those involved in implementing the plan accountable. Garrett County’s response to local economic decline could therefore prove fruitful for post-industrial communities in Atlantic Canada facing similar challenges.

Beyond the local level, regional economic development agencies, particularly the Atlantic Canada Opportunities Agency, could take a new—and potentially more successful—approach to economic diversification. As this article notes, regional economic development agencies could improve public confidence in their operations, promote openness and accountability, and potentially make more informed decisions by adopting a transparent, depoliticized process for selecting which communities will receive funding. Additionally, these agencies could further promote economic diversification by placing a greater focus on funding the programs needed to support economic diversification—such as education and training programs, or high-speed Internet in isolated communities—rather than emphasizing more traditional programs like business loans.

Ultimately, while businesses, workers, organizations, and policymakers seek to ensure Atlantic Canada’s long-term economic prosperity, it is essential that we not only diversify the region’s economies, but carefully consider how we will achieve economic diversification. As the experiences of Bridgewater and Garrett County illustrate, direction, accountability, and adaptability are needed if the region is to prepare for its economic future. In the words of Mr. Mitchell, “Economic and community development are linked…we have to look at every component and determine the strengths we have and identify areas that still need work.” Communities throughout Atlantic Canada would do well to take heed.

 

 

Leave Cannabis Distribution To The Private Market

By Samantha Goodman (AIMS on Campus 2017 Essay Winner)

The cannabis industry has the potential to be a vibrant, entrepreneurial market bursting with creativity and innovation. Look at Amsterdam where the streets are lined with pot candies and stores have a menu with drugs of the day – including specials. Despite the legalization of marijuana in Canada, it is doubtful it will flourish in this way because of the present distribution model that has been proposed.

Each province is making plans for its own distribution model. This past September, the Ontario government announced its plan to eradicate illegal marijuana storefronts and create the cannabis control board in its place. This board will open up to 60 storefronts in the first year while managing the sale and distribution of cannabis in Ontario. The idea is to follow the model of the existing Liquor Control Board of Ontario (LCBO) stores and set a precedent for other provinces to follow suit.

By being in charge of the cannabis market, the government will crush all entrepreneurial and creative spirit of retailers. Consumers will receive the bare minimum instead of the best. There will be no competition between stores to create new products, innovate the current selection, have lower prices, and stay open later.

Retailers with the incentive to keep their businesses open and know the cannabis market are the ones who will be able to provide the best service for consumers. These stores are incentivized to do everything in its power to cater to the public.

The question of public safety tends to crop up in regards to marijuana being provided by private entities. To properly ensure public safety, the government should create a licensing system where every retail store must abide by certain safety conditions such as an age restriction. After that, the government needs to take a hands-off approach in order to allow the marijuana market to thrive.

The Ontario government’s current solution is far from hands-off. The distribution model is based on squeezing out the “underground market” to ensure public safety. There is the perception only criminals sell marijuana and they must be stopped. The proposed solution is the government has to come in and control the entire distribution system. Except, why is there this idea that government control will indefinitely eliminate the underground market?

For one thing, there will be no competition for government stores to innovate and push their business models further. What will happen when there is a gap between what the consumer wants and what the government stores offer?

People will turn to the underground market. As an example, what will consumers do when they want to purchase marijuana after hours? The government stores will not be open late as there is no reason for them to be. There is no competition threatening to be open later and steal business. The underground market will do this and consumers will turn to it to fill their needs.

Aside from failing to quash the underground market, another concern within the public safety debate has to do with minors gaining access to cannabis. People believe the government will make sure this does not happen but it is not always the case.

Currently, the private sector does a better job in ensuring minors do not obtain age-restricted products. This has been proven in a study conducted testing underage secret shoppers. The results were 1 in 4 minors successfully purchased age-restricted products from LCBO compared to 1 in 8 for convenience stores. This study proves the government’s intervention is not the sole proprietor for public safety, the private sector can actually do a better job.

A different approach has been proposed by the province of Manitoba through its “hybrid model.” It includes the Manitoba Liquor and Lotteries Corp. securing the supply of marijuana and tracking it, but allowing private retail stores to be in charge of selling it. This model allows private stores to sell marijuana but controls its supply which can be a problem depending on the demand.

There is no perfect model but history has proven the government does not have the best track record. While models such as the LCBO do work, it does not provide the best experience for Canadian citizens. There is no competition for citizens to have access to the best services possible.

In Canada, there is the opportunity to create a thriving marijuana industry. By leaving it to the private market, the government can allow competition to provide leading products for its consumers while ensuring public safety through regulation.

 

 

 

 

 

What makes municipal amalgamation work?

By Ainslie Pierrynowski (AIMS on Campus Student Fellow) 

In October 2017, five communities on Prince Edward Island’s South Shore took the first steps toward potential amalgamation. Their goal: to pool the towns’ resources together, reflecting an existing political push for “fewer but larger communities” in the province. These words may ring familiar for many communities across Atlantic Canada. Municipalities in Atlantic Canada often grapple with depopulation, rising administrative and service delivery costs, and seemingly inefficient, overly decentralized, or redundant forms of local governance. Amalgamation is frequently invoked as a possible solution to these difficulties. This idea has spread throughout the region, from the much-studied 1996 merger that created the Halifax Regional Municipality (HRM), to the formation of the Regional Municipality of Tracadie-Shelia in 2014, on to talk of a potential amalgamation of Labrador City and Wabush, as of 2017. Nonetheless, several voices have questioned whether amalgamation has truly made the region’s communities better off. Indeed, a closer look at amalgamation in Atlantic Canada reveals that while it can be a powerful way to address the area’s demographic and economic challenges, amalgamation does not necessarily lower costs and produce more effective governance in and of itself. Rather, several key considerations must be taken into account for successful amalgamation to occur.

To begin, how the initial stages of the amalgamation process—research, economic analysis, and consultations—are carried out can influence whether amalgamation ultimately proves beneficial for residents. In particular, former AIMS President Brian Lee Crowley points out that relatively few municipal services have substantial economies of scale, a term referring to situations where the per unit cost of production decreases as the size of one’s operation increases. It is true that some public services, such as policing in the HRM, can benefit from increased economies of scale post-amalgamation. Yet, failure to distinguish between which services may see greater economies of scale and which services may experience few or no cost-saving effects can distort financial projections with regard to amalgamation can produce unexpected, costly challenges for newly amalgamated municipalities.

The governance structure of amalgamated municipalities also matters. Rather than rendering service delivery more efficient, single-tier, centralized governments overseeing large municipalities may find it difficult to determine which services residents want and what they are willing to pay for. In contrast, local government structures focused on smaller communities have an advantage in this area because residents, as Crowley notes, “cannot vote themselves benefits at the expense of other taxpayers” elsewhere in the municipality. Instead, the smaller scale of such municipalities means that residents, generally speaking, solely request the services which they want and are able to pay for.

That is not to say that small municipalities are always the answer, nor that amalgamation should be taken off the table. In fact, given regional demographic trends, many small communities in Atlantic Canada have ageing, shrinking populations—and thus a declining tax base—which makes it difficult to afford public services. Instead, successful amalgamation requires a careful balance between the coordinated regional economic development afforded by centralized, unified municipal governance structures, as with the HRM’s public-private development partnership, and the key role of municipal governments in addressing specialized, community-level needs and concerns. This balance can vary due to how much power the Mayor and executive have relative to the council, whether councillors are elected or appointed by the Mayor, whether elected public officials are voted in by ward or at-large, the population distribution and rural-urban make-up of a given municipality, and whether municipal services are delivered by regional agencies or at the local level. Indeed, amalgamated municipalities seeking to reconcile regional and local concerns might adopt a two-tiered political system with provisions for local, small-scale governance like that initially proposed for the amalgamated City of Toronto—although this approach requires a clear delineation of the powers and responsibilities of each component of the municipal government, to avoid confusion and political deadlock.

Overall, Atlantic Canada’s demographic challenges and the growing political and economic importance of cities globally suggest that the amalgamation debate will continue to occupy a central place in the region’s political discourse. It is crucial to remember, however, that the decision to amalgamate is a complex one with a variety of potential outcomes. It is an option which entails significant preliminary economic analysis on a case-by-case basis. Additionally, the choice to amalgamate is merely the first step in a long process that can produce many, diverse forms of local governance, each with multiple, important implications for the futures of the residents therein. As more and more communities in Atlantic Canada opt for amalgamation, we would do well to bear these considerations in mind.