Politics & Government /  

Development Incentives :  Costs and Benefits  

A quick glance at our provincial government’s web site reveals that the message we have been sending is “We are open for business”.  We want companies to locate here. We’re willing to be “flexible” and “supportive” in order to encourage new business.   And that’s not a bad thing.. unless it reflects a system of misplaced priorities that places economic development  on a pedestal as a goal unto itself. The goal should be the creation and maintenance of a society built upon a consensus of values. Economic development should serve that. I think there is cause for concern that we have been led towards  blindly accepting that economic growth as measured by traditional yardsticks is automatically a good thing.   The current theory is that the creation of more jobs will benefit all, and that the way to create more jobs is to entice companies to locate here.  The problem is that  the pro-business approach,  taken by the government and blindly accepted by almost everyone, also makes it easy, and in some cases practical,  for businesses to leave Manitoba at will.  It’s a bit of a conundrum - attract business on the basis of “Positive business climate” and “ flexible” approaches (Quotes from Gov’t Web Site) and that same positive climate makes it easy for them to feel free to do absolutely nothing for Manitoba.  

What an irony it is that at the we always seem to be on our knees begging (not to say offering gifts and bribes) some call centre company to relocate here so that it can offer dead-end soul-destroying jobs, so that the government can pretend that it is helping boost employment, so that we can continue to condone and support those annoying intrusions and promotional phone calls; at the same time we are allowing (for one example) our soft drink and beer producers to create their product out of province, and then allowing them to use (and destroy) our publicly funded highways to truck the stuff back here.  We’ve paid them to move away!  We’ve encouraged (in the name of free trade) some businesses (usually union shops with full time real jobs) actually producing something ) to leave while begging others to move in. (Call centres, Big Box stores - offering part time work at low wages.)  

John Ralston Saul comments that “...economic activity is less a cause than an effect - of geographic and climatic necessity, family and wider social structures...”  p115 Doubter’s Companion.   This helps to explain the poor success rate of new businesses that are the product of what I would call “artificial innovation”.  A business for business’s sake approach.   What our government has been doing is operating in the realm of an abstract theory.  And though this particular theory (the same old trickle-down economics) may be much discredited, Saul’s point would be that all economic theories are basically useless and can’t work. Even if the trickle-down theory has any merit it has to be applied in the realm of the concrete.  The businesses created or supported have to be a natural outgrowth of the people and the place.  The effects of the operation of the business must be in alignment with the goals and shared values of the community they inhabit.   We’re going at it backwards. We’re trying to foster economic growth in the hope it will provide wealth, with the understanding that we’ll deal with any other implications later.

The correct way would be to decide, starting at the community level, what kind of a world we want, what standards we would like to see upheld in the areas of environment, human rights, education, health, and standard of living, and then look at what we can do to provide them.   Recent government policy - with it’s emphasis on entrepreneurism, and support for unexamined business speculation - has been based on a false premise. It seemed to be based on the belief that entrepreneurs, and existing businesses small or large, need to be encouraged or enticed to expand or increase their profits.  That we need to encourage them, that they are somehow timid fledglings at the edge of the nest  needing  some guidance as they take flight into the fresh updraft of profit generation.  


Any business person or entrepreneur worth having wants to expand, wants to innovate, wants to create new products and markets,... WANTS TO MAKE MONEY! And good for them - they are the ones we want.  They don’t need our corporate welfare and cozy deals. They don’t need to be mollycoddled either.  We do need the private sector, and we need a system that encourages and takes advantage of the private sector. But we also need a government that takes a look at what we want as a society and then sets the rules - rules that allow the private sector to make a justly deserved profit (not an easy one, not an automatic profit, not an exploitive profit), and rules that allow for a lifestyle we want on our communities.  

But that’s not what’s been happening.   Many years ago the city of Brandon went to its knees to bring the Maple Leaf Hog Plant to Brandon. We hopped into bed with them and turned a blind eye to as they busted the union in another location and promised to be good corporate citizens here. (I did beat my last wife honey, but I would never do it to you ... promise...).  After signing the deal, the implications surface.  Is the waste treatment ready to go? Will the hog prices take a dive? What will it cost to provide services to the new population? Are our streets and roads adequate for the increased transportation?  I’m not convinced that all the necessary and appropriate questions were asked.  

We need to examine the complete balance sheet.  Yes a certain number of jobs are created, that’s good. Yes the company pays taxes (if we don’t bargain all that away). Yes some people will move to Brandon and perhaps that’s also good. The questions is what are the costs? More people means the city will be required more services - education, health, street repairs, and above all - hopefully sewage treatment so that the nice folks downstream don’t have to pay for our good fortune.   And after all that it may still be a good deal to have the economic growth the hog plant will provide. But as soon as we bend over backwards to make it easy for such a company to move in we’ve sown the seeds that make it just as easy for them to move out.  Because we should only want new development if it comes because this is a viable place for the enterprise and if an enduring balance can be struck between the owner’s need for a profit and our community’s standards.  If we have to turn around in five years and say, “Oops, sorry but the wages you’re paying have created a situation whereby the increased social services we’ve had to provide for the influx of workers hasn’t been counterbalanced by the taxes received.”  Or - “Oops, Sorry but we need to have you spend a whole bunch more money to meet environmental standards. “ then, they’ll be gone like a shot - because there will always be some community desperate enough to accept them.  

What has been happening is that in making our development decisions we have not been doing a complete cost-benefit analysis.  Admittedly, real cost-benefit analysis is a difficult task and imprecise at best. But we should at least be making the effort. Instead we are accepting new development based on the ideology that all growth is automatically good. Investors, speculators, and owners of businesses that might benefit from contracts to build and supply materials for both the construction, maintenance and operation of a hog plant, a call centre, or any other new business certainly expect to benefit. And so they should, and more power to them if they do. But what bothers me is that they would like to pretend that I as a citizen am going to share in this benefit.   It’s all about expanding the tax base I’m told. So the taxes have gone down … right?  

Okay, so we shouldn't expect something crazy like that – but they’ve gone up at a slower rate than otherwise? Right.  

Quick bonus question which community will have the higher taxes – city or town?

Additional question: Is that what we mean when we say bigger is better?  

And it’s also about jobs.   It is pretty obvious that in Brandon, Maple Leaf has created jobs that no one wanted very badly. The work is unpleasant.  In the not-too-distant past a meat packing plant solved that problem by paying good wages. Today our strategy is to import foreign workers. I love the fact that the foreign workers have given Brandon a more multi-cultural feel, but our schools, health care and other services have felt the strain.   It’s always amusing when a business leader proclaims that “we’re in the business of creating jobs”.   What rubbish. They are in the business of making a profit - if they’re not I’d have no respect for them.  Businesses should not be bragging about creating occupations which pay far below any reasonable poverty line.

The purpose of enterprise is the generation of wealth for owners and indeed much of that has incidentally been beneficial for the country. But don’t tell me you’re doing it for me!  I don’t expect to benefit from your investment of time and energy. All I want is to make sure that your efforts don’t harm me in some way. And for that I’d like to depend on government to set rules that ensure that new development is of the sort that does enhance my community rather than detract from it.  

What then is the proper role of government?

The movement to save our rural areas through “entrpreneurship and supported development. (Is this any different than the “boosterism” that existed at the turn of the century.   Eg. The New “Boosterism”  : How the new spirit of entrpreneurship will save our Rural Paradise - and persuade people to move to “Hog Barn Heaven.”   3.         And a third based on an examination of the government’s emphasis on attracting business.  The theory being that the creation of more jobs will benefit all, and that the way to create more jobs is to entice companies to locate here.  The problem being that  the pro-business approach,  taken by the government and blindly accepted by almost everyone, also makes it easy and in some cases practical for businesses to leave Manitoba at will.   Boosterism. Sinclair Lewis explored it in “Babbitt”. James Friessen makes mention of it in his history of the Prairies, Maggie Siggins examines some of it’s consequences in “Revenge of the Land”. It was the tendency of the business elite of small towns and aspiring cities to get everyone to buy in to the “growth, All Growth, and Any Growth is good” philosophy.  Perhaps it was a necessary optimism generator in the birthing process of our modern rural society. Perhaps it did more harm than good, that’s hard to measure.   Well, it’s back in a new set of clothes. And it now seems to be government policy (or rather it takes the place of government action.) Now it’s called, Rural Development, Entrpreneurship, Rural Futures, .. whatever.   For nearly a decade we’ve been bomdarded with so much propaganda about the new world order, global marketplaces, the “New Entrepreneurship”, that we’ve come to accept without question that it’s the road to salvation.  What we need to do about unemployment, about poverty, about rural depopulation, about .. anything is  FIX IT OURSELVES!  No better yet - lend every possible type of freedom and support to entrepreneurs and it will FIX ITSELF. Instead of spending money on heath, education and those pernicious welfare handouts, spend it on government programs to encourage people to.. make money?   When “Entrepreneurship” courses started appearing in high schools we should have started to clue in.   Some important questions need to be asked before we accept this new religion.   Where is this coming from? Who stands to benefit the most? What is the motivation?     And even before that, we have to ask.. is there a problem at all?   The problem we hear about is rural depopulation.  The population in some parts of rural Manitoba is declining - there is a rural to urban shift taking place. Shocking statistics are passed around, out of every 10 high school graduates only two are staying in their home communities, small school are being closed, rural elevators, that other lynchpin of the prairie town are disappearing and curling clubs are having trouble scaring up enough members for a decent 4 event bonspiel.   I’ve been hearing this for decades. Lets look at the main point - rural depopulation.   First - these people aren’t disappearing off of the face of the earth, they’re not dead or dying, they’re not languishing in some urban purgatory  - they just decided to MOVE AWAY!  And usually if not always ... BECAUSE THEY WANTED TO!   Lets take Child A.  He wants to be a television reporter. He takes the course and passes with flying colors, he’s good at it.  Guess what there are no TV Stations in his old home town. What to do? Can’t really see the sense in moving the TV station so maybe he’ll be the one to move. He knew that going in.   The Changing Face of Rural Manitoba   Rural depopulation has been a hot topic in the coffee shops, beer parlours, town council meetings, and school staff rooms of western Manitoba for decades, but the real change in the prairie breadbasket is just beginning to take effect.  The closure of many rural schools,  the abandonement of prairie rail lines and grain elevators,  the cutbacks in postal services,  the “re-organization” of health services have all been noted and examined.  Much has been said and written about them, but the cumulative effect of these decades of changes is just beginning to make a real difference that is visible and unmistakable even at a glance.   Take a drive, south from Brandon, on Highway #10 at about eight in the morning. If there is a real trend to rural depopulation you wouldn’t know it from the traffic on this stretch of two-lane blacktop. If there is no one down on the farm, maybe it’s because they are all on this road!    Well that’s partly true.   They are all heading into Brandon: many to work, some for medical, legal, or business appointments, and some to just shop.  They are caught in an economic Catch-22.  There are not adequate services, goods, and jobs in their home towns so they make regular trips to Brandon. Or... because they make regular trips to Brandon it’s not profitable for local businesses in their home town to provide services, goods, and.. jobs.   The small town Chambers of Commerce and the municipal and village councils have been grappling with the problem with varying degrees of success since the sixties. “Shop at Home” promotions were common. The most recent of which has local banks offering interest free loans for Christmas shopping - on the condition that you spend it locally.   Another interesting twist is the attempt to lure not only business, but inhabitants. In the late 1980’s the village of Rossburn advertised in Toronto papers and attracted some permanent residents. As of Jan 99 their Internet Home Page contained two telling items :  “Wanted Resident Dentist” and “Commercial Property For Sale :  Incentives may be available.”   Other towns tried selling building lots for $1, on the condition that you built a home a resided there.   And some of these promotions worked. After all there are some real benefits to small town life in Manitoba. You can sell your expensive city home and buy a comparable one for a low as half the amount.  If you don’t need the city for your livelihood, if you are retired, able to telecommute or self-employed in an industry with low transportation overhead, lower housing costs can mean an enhanced lifestyle. Additional benefits include intangibles like a lower crime rate and a sense of community. And despite the size, some services are easier to access.     But..   As rural centres stand on the brink of a possible revitalization they are shooting themselves in the foot by being lured into environmentally unsound agricultural expansion in the form of large hog barns, giant grain terminals, both of which have impacts that have not been carefully considered.   What do you do when a hog barn moves in next door?  Eg.  Diane and Gary G  /  Sheryy G.   What effect will increased grain hauling distances have on prairie roads?   History Insert.  From Book Intro.  

  Transportation   - From rail lines and elevators every 5 miles to semi trailer and giant grain terminals.             traffic on country highways             costs to small farmers prohibitive   Farming Methods               Big machinery             big hog barns             speculation and corprorate investment   ** Recent Hog Farm bail-out - who gets the federal $$$$       How did this happen, who decided that this was the course we should take. It just happenned.   And now ... is it too late to stop?                   The Hog Industry   Will the “new” hog industry developments, the processing plant in Brandon and the ever growing contingent of hog production facilites in the surrounding rural area provide a net gain to the lifestyles of the citizens of the area?   A series of articles from a North Carolina Newspaper examined the effect of the explosive growth in the hog industry in that state and came up with some unsettling findings. True, we should be able to learn from their mistakes. But will we?     Carolina   The backbone of the new system is a network of hundreds of contractors like Stephens, the franchise owners in a system that more closely resembles a fast-food chain than traditional agriculture.   Opponents, however, say the corporations have created a perfect system -- for themselves. They say the hog companies are saddling hundreds of small farmers with huge debts, with no guarantees that they will ever reap the kinds of profits they were promised.   "Why invest your capital when you can get a farmer to take the risk?" asked former state Rep. Joe Mavretic, an advocate for stronger legal protections for contract farmers.   "Why own the farm when you can own the farmer?"   Risky business?       There's a twist to the pork statistics coming out of the state Agricultural Department, one that is sometimes overlooked: Despite the phenomenal growth in hog production here, the number of hog farmers is dropping -- rapidly.   Since 1983, about the time corporate hog production was just starting to ignite, more than 16,000 North Carolina hog farmers have left the industry -- roughly two-thirds of the 23,400 growers who were in business at the time.   Some, like Sampson County farmer W.E. Warren, are closing down for good.   Others -- producers like Norman Denning, chairman of the Johnston County commissioners and a 54-year veteran of the pig business -- are cutting back.   "It's just a matter of who hangs it up first. There're too many hogs," said Denning, whose herd size is dropping from 125 sows to 45.   The independents are the biggest losers as the swine industry goes corporate. And as they disappear, a way of life is vanishing with them.         The problem is manure. Small hog farms, with one hundred pigs or less, don't generate enough manure by themselves to cause great environmental concerns. But, as hog barns get bigger and more productive, they also produce more manure. As that manure is produced, it is collected and stored in clay-coated lagoons designed specifically to hold it. The manure is kept in the lagoons until fall when, once the grain harvest is completed, it is used as fertilizer on surrounding farmland according to arrangements made with nearby farmers. What happens with that manure while it waits is what worries Irving. She fears that the waste will make its way into the ground and, sooner or later, into the ground water.   "It's not just the manure. There's also chemicals used to clean the barns and medicine used on the animals that is dumped as well," Irving said. "And we still believe, emphatically, that the water will be polluted. Run-off water, ground water, surface water- everything will be affected."     Example of Corporate Blackmail :   After dealing with the Kelvington residents, Possberg said the company won't put up with the same situation again. It's just as easy to take his business out-of-province than it is to spend time in the courts. "I'm not interested in spending half my time fighting with people," said Possberg. "We do not want a repeat of Kelvington."   Irving says the decisions on hog production in the province are political ones, not environmental ones. Rod MacDonald, who heads a provincial environmental group, the Saskatchewan Action Foundation for the Environment, agrees. The function of MacDonald's group is to look specifically at the decision-making process in issues that affect the environment and evaluate whether or not those considerations are taken into account. "The decision-making process is being skewed by political pressure," MacDonald said, pointing the finger at Saskatchewan Environment Minister Lorne Scott for allowing his department to be pushed around by Upshall.   The problem, he said, is that the Department of Agriculture and Food is looking to "make decisions first, then get the environment department to deal with it later." That way companies looking to invest and start operations in Saskatchewan can be inked to a contract before they get scared off by debate over whether or not what they do is environmentally viable.   Scott denies these charges, saying that his office works in conjunction with Upshall's office and that the government "as a whole" considers the "balance" between development and regulating environmental impact. "The fact that the industry, without government money, is prepared to invest and develop hog production, that is great," said Scott. "Of course the environment is equally as important to the economic and job opportunities as well."   MacDonald disagrees. The way he sees it, when considering industry expansion, the decision making process either includes the environment or it doesn't - and in this case, the environment has clearly been left out. "You can't just say, 'Oh good, we're going to create 28 jobs," said MacDonald. "That's not good enough; it's just short term."   Is there a payoff?  How do we measure prosperity. When someone states “The area is booming - as news articles have in regards to construction and real estate in Brandon, what does it mean for the citizen - the majority of citizens who aren’t happenning to be selling  there family home right now and aren’t interested in a hog industry job. What is the benefit to them - all that can even be promised is that a tax benefit will eventually ease their tax burden - guess again!       "These hog farms are putting money in people's pockets," Brinson says.   "Duplin County is booming."   But even here, some people bitterly resent the way the industry has transformed the way the countryside looks and smells.   Some say their property has gone down in value. Others note the contrasts in the economic picture. In Duplin County, just 70 miles east of the booming Research Triangle, the population hasn't grown in 10 years. Farm jobs are dwindling despite the rise in hog production.   Derl Walker, a newly elected Duplin County commissioner, says he hears these complaints constantly. If this is prosperity, he says, some of his constituents would just as soon do without it.   Suposed Benefits   The major hog-producing counties can point to statistics showing solid economic gains. Total property values are up; farm income is up; per-capita income has improved. In some cases, the additional tax revenue from hog farms enabled governments to postpone tax increases, according to an informal survey of county managers.   Older firms have benefited from this expansion, and several spin-off companies have been created. The Newton Grove-based company Hog Slats Inc., launched 25 years ago to manufacture concrete slat flooring for hog barns, now employs 500 people in North Carolina and has built a plant in Iowa.   Brinson sees more boom years ahead. The proposed IBP slaughterhouse, which he strongly supports, would add at least 1,500 jobs and open the door to a new phase of expansion.   Concerns   The plant created jobs, she says, but relatively few of them are held by native Tar Heel residents. Plant officials say about half the workforce is now made up of immigrants from Latin America.     The job numbers for hog production are lower than for North Carolina's other agricultural giants, tobacco and poultry, which bring in about the same amount of revenue.     There's more at stake here than pigs and profits. Inevitable or not, the shift to contracts and corporate farming represents a profound change in the way rural societies are structured, socially and economically.   One noted economist calls the new order "post-industrial feudalism."   "The founding of our country was basically an escape from the feudal system in Europe in which the lords owned all the land and the serfs worked it for them," said Harold Breimyer, extension economist emeritus at the University of Missouri. "Now we're moving toward an industrial situation where the farmers become wage employees, and their masters are a few large corporations."   Breimyer believes the pork industry is in the early stages of this "feudalistic" era, following a trail blazed by poultry producers, retailers, restaurateurs, newspapers and others.   "Each mega farm," Breimyer explains, "replaces many smaller ones, knocking out the profit for individual producers and shifting it to the corporation." The process is clearly well under way in North Carolina, where the number of producers has declined from 23,000 to 8,000 in 10 years while hog production tripled.   The Problem With Regulations   Is that they often aren’t followed.  Eg  Pesticides.   You can’t trust to the goodwill of corporations or anyone driven by as profit motive. You need regulations with teeth.       “The whole thing goes on and on. I don't think mega-hog farms are viable unless they are allowed to pollute. If they were required to spread their waste based on crop needs, spreading costs would remove all profit gained by animal crowding and mechanization.” From a letter by Ellen Francis   Nexus   Manitoba Agriculture recommends not spraying when wind speeds exceed 15 km/hour, but both ground and aerial sprayers continued to spray in very windy conditions during the summer of 1995. For four consecutive days, July 30 to August 2, wind speeds averaged 30 km/hour with gusts in excess of 50 km/hour. All four days both ground and aerial sprayers continued to spray all day long. The worst part of all of this is that these so called "licenced" sprayers did not pay any attention to their licence. I am told by some Manitoba Agriculture employees that no one will lose their licence because it is too political; because the Minister of Agriculture has to sign the paperwork and he does not want to lose votes.   So, who loses? The mother and baby hospitalized overnight after an aerial sprayer failed to stop spraying as he flew over their yard? The farmer who was sprayed while out fixing his fence line? What long-term effects will this have on their health?