Montreal, July 23, 2006 • No 185




Harry Valentine is a free-marketeer living in Eastern Ontario.




by Harry Valentine


          Over a period of successive generations small towns across Eastern Canada were hives of economic activity. The activity included forestry and forestry products such as paper production; mining and some of its derivative industries; fishing and fish processing plants as well as agriculture and food processing plants. The economic decline of small towns began imperceptibly as new tools that raised labour productivity were steadily introduced to a variety of industries. Tools that raised productivity also changed the nature of economic activity in larger centres and provided opportunities for people who were willing to move from rural areas into the cities.


Moving People

          People moved from small towns into the larger centres as a result of a continually changing and evolving economy that was free from political control. This trend changed during the early 1970's when the North American economy experienced a previously unknown phenomenon that became known as "stagflation." Economic growth had stalled during a period of inflation (prices rising while the central bank increased the amount of money in circulation) and did so in defiance of Keynesian economic theory that claimed that such methods would facilitate economic growth. Both Canadian and American governments tried to remedy "stagflation" by implementing (then abandoning) wage and price controls before resorting to other methods by which to stimulate the economy.

          Canada's federal government followed the advice of economist J.K. Galbraith and introduced an industrial development program that was intended to create jobs in regions of high unemployment. Industries that re-located to such regions were to receive industrial grants that lasted for two years. The program initially benefited small towns in Eastern Canada before many of these industries closed their doors after two years and relocated to new areas where they became eligible for another two years of federal funding. The unforeseen downside of the program was that within two years people lost what they thought were long-term or life-long jobs. The sudden loss of hope and disappointment they experienced happened repeatedly and often resulted in family breakdowns, incidents of substance abuse, bouts of depression and even a few cases of suicide.

          The emotional toll that repeated dashed hopes can have on people were spelled out by Viktor E. Frankl in his landmark treatise entitled Man's Search for Meaning (Simon & Schuster, 1959). A percentage of the people who lived in small towns in Eastern Canada turned to welfare to escape the repeated cycle of disappointment and loss of hope for their future that they endured due to the unforeseen shortcomings of various federally funded programs. Federal officials consistently and exclusively pointed out the short-term benefits that federally funded economic development programs were able to bestow on small towns in Eastern Canada. Several such programs have been implemented in smaller communities across Eastern Canada for over 30 years and they all followed the same theme.

          The programs had good intentions and seemed to be brilliantly conceived at the outset. They showed great promise over the short-term (less than two years) before failing over the long-term (two to five years). Federal funding was used to train people for employment that never materialised and to qualify them for employment in sectors of the economy that were in the process of collapsing (the high-tech meltdown of 2000). State-funded entrepreneurial development programs were intended to create new economic activity by training (unemployed) people to start their own new businesses. The program produced more non-starters and more businesses failures within two years of business start-up than the failure rate of entrepreneurs who acquired their business skills elsewhere.

"Residents from small towns in Eastern Canada who were willing to seek new employment opportunities have been provided with a means to achieve those ends without government assistance. Private companies such as Workopolis and Monster seemed to have achieved much more in assisting them to find new jobs."

          Bureaucrats who administer government funding programs are required to produce results as soon as possible to indicate to policy makers that the programs are doing what they were intended to do. Such results enhance the public image of policy makers except that that approach does not always assure votes at election time. A review of election results outside of major centres across Eastern Canada has revealed that even high-ranking incumbent members (including government ministers) have been voted out of office despite having brought large amounts of federal funding into their ridings. This was how the electorate expressed their sentiments about the roller coaster of successive state-funded short-term jobs and repeated episodes of disappointment they had endured.

Public VS private alternatives

          Residents from small towns in Eastern Canada who were willing to seek new employment opportunities have been provided with a means to achieve those ends without government assistance. Private companies such as Workopolis and Monster seemed to have achieved much more in assisting them to find new jobs. Recent news reports from Western Canada indicate that an increasing number of them are leaving their families behind in order to work in Alberta's booming energy sector. Many of them are the resilient survivors of repeated economic boom-and-bust cycles that plagued many small towns in Eastern Canada. Interviews with some of them suggest that they actually preferred using the private services.

          The fact that people are turning to online personnel and employment companies indicates their disdain for the state-run employment agency. That agency had funded the training for jobs that never materialized and had close ties with other agencies that provided funding to industries that had promised long-term jobs that ended shortly after. Private companies that connect job seekers with potential employers have much to offer the market. An industry insider advised that resume databases could be modified to quickly provide an industrial or commercial client with a summary of the available skills and talents at a chosen geographic location. This information can help their clients assess potential locations where they may wish to open branch offices.

          Several American companies have used this approach to open branch offices and branch plant in China, Malaysia, Indonesia and India. That some of these offices may be in walking distance of the slums of Mumbai indicates that the availability of appropriate skills and talent has high priority with many companies. The approach can be adapted for use in America where economic development agencies in most large cities are a service of the Board of Trade or Chamber of Commerce. Such service may encounter obstacles in Canada where economic development is still a function of the state and is often used as a ticket to public office. The economy of small towns in Canada could benefit greatly from a reduction of state involvement since such involvement has caused greater harm on citizens over the long-term than benefit over the short-term.