Proceedings of the Conference ~ Cape Breton in Transition: Economic Diversification and Prospects for Tourism

edited by William A. O'Shea ,
Carol Corbin and Eric Krause
(October 20-21, 1998)

INDUSTRIAL POLICY AND THE "NEW ECONOMY":

Cape Breton Confronts an Uncertain Future

David Johnson

As we enter the "fin de siècle" years the contradictions in the political economy of Cape Breton abound. We have witnessed some three decades of regional development policies initiated by both federal and provincial governments; we have observed hundreds of millions of dollars expended on projects designed to enhance the economic and social well-being of Cape Breton; we have seen a variety of federal and provincial crown agencies mandated the task of buttressing the local economy from decline and of promoting the growth, diversification and expansion of that economy.

And yet, despite the decades of such efforts, the economy of Cape Breton is weak and the Island remains a society with a siege-like mentality. Popular concern is repeatedly expressed over a number of seemingly chronic problems: unemployment, underemployment, youth outmigration, the economic decline of the traditional natural resource-based industries, the difficulties in attracting new manufacturing and service industries, declining tax bases, a corroding infrastructure, a neglectful Halifax-dominated provincial economic agenda, a loss of excitement for the future, and a social malaise.

How are we to understand these dynamics? How are we to make sense of the seeming chasm between policy objectives and practical results? Between government initiatives and socio-economic realities? What theoretical approaches to regional economic development have been confronted by governments and which have been undertaken? What has been the role of the state in Cape Breton's recent past and to what extent has this role been successful? Given that federal and provincial governments have seen fit to play a major interventionist role in the economy of Cape Breton, and given that the socio-economic health of Cape Breton remains precarious at best, how have governments, and their lead development agencies, comprehended this dichotomy? To what extent do we witness alterations to the practice of development strategy? And equally important, if not more so, to what extent do we witness a reorientation to the theoretical understanding of development strategy, and the state's role within such strategy?

It is these simple, yet profound, questions which establish the framework for this paper. The objective of this study is to offer an exploratory, yet critical, appraisal of the nature and working of historical and contemporary regional development policy in Cape Breton. Given the vast range of such policy initiatives found in this sub-region of the country over the past three decades, this paper will primarily devote attention to the life and times of the Enterprise Cape Breton Corporation and its antecedent development agencies. The origins of these bodies will be traced, their mandates and operational strategies reviewed, and their works evaluated.

As will be demonstrated we have witnessed the theory and practice of regional development undergo many transformations over the past 30 years. While governments have confronted two broad theoretical approaches to government - a free market-oriented approach and a statist interventionist approach - development policy in Cape Breton has consistently been conceptualized and operationalized through an interventionist perspective. Moreover, government's have struggled to find the "best" strategy by which to intervene.

In rough sequence there has been a concerted effort to support the traditional natural resource industries; there have been undertakings to facilitate the relocation of large-scale, off-Island, manufacturers to the Island; there has been attention devoted to the promotion of small, locally-based enterprises geared to the local attributes of the Island, such as tourism and crafts; and more recently there have been initiatives to restructure the Cape Breton economy away from its traditional roots by promoting the development of high technology, information technology and related service industries within the Island, while also placing greater developmental focus on the technological, educational and entrepreneurial capacity of both firms and citizens rather than on the funding of particular large-scale industrial projects, inclusive of crown corporations.

This latter, contemporary approach to development is currently in vogue within the ranks of federal and provincial development agencies and amongst senior policy advisors to these bodies and their relevant ministries. While this "technological", "human capital" approach is highly acclaimed within both the public and private sectors and amongst certain academic circles, it will be detailed below that this approach is fraught with difficulties for Cape Breton, forcing those concerned with the economic development of this Island to address some very complex issues which may very well lead to yet another reconfiguration of development strategy. This said, the current thinking regarding economic development is provocative in its approach to the Island's past and visionary with respect to its future. There is much promise in the new economic thinking alive amongst those interested in the development of Cape Breton. As the Island confronts the 21st century, great opportunities present themselves, as do great challenges.

THE LEGACY OF INDUSTRIAL DECLINE

The history of economic hardship which has confronted Cape Breton for over half a century is well documented. "Black Friday", 13 October 1967, the day the Dominion Steel Corporation (DOSCO) announced that its Sydney steel plant would be closed, was neither unprecedented given the post-war economic history of Cape Breton, nor was it to mark the decisive turning point in the Island's economic development. From the end of the First World War the coal and steel industries which had formed the industrial backbone of the Cape Breton and Nova Scotian economies had been in decline. Under dual pressure from alternative sources of fuel and more economical and efficient producers of steel in central Canada and the northeast United States, DOSCO sought to gain competitive advantage through restraining labour costs and specializing in the nature of its steel production. Through the fifties and sixties this strategy resulted in the closing of collieries, the reduction of its labour force through mechanization and downsizing, and the development of a narrower range of steel fabrication produced by Sydney Steel.¹

Despite these initiatives the competitive structural problems confronting DOSCO were so deep as to imperil its continued commercial viability. In April of 1966, DOSCO and its parent corporation, A.V. Roe Canada Ltd., announced that DOSCO's coal operations would be terminated. This action precipitated a crisis situation in Cape Breton and Nova Scotia resulting in the federal government moving to nationalize the Cape Breton collieries and, in February 1967, establishing a federal crown corporation - the Cape Breton Development Corporation (DEVCO) - to oversee the gradual phasing out of the coal industry in Cape Breton while also promoting the development of new industries to provide a sustainable economic base for the future of the Island.² The DOSCO decision of October 1967, though upsetting to a vast majority of Cape Bretoners, was not unique. The series of events initiated by this decision in turn led to the provincialization of the DOSCO steel plant - renamed the Sydney Steel Corporation (SYSCO) - and the initiation of some two decades in which the major industrial actors in the Cape Breton economy were these crown corporations.

The decades following 1967 continued to witness Cape Breton bedeviled with the economic problems associated with the coal and steel industries and the difficulties of establishing industrial policies capable of entrenching new industries within the economy. SYSCO has been a problem child of the provincial government since 1967. Facing stiff competition domestically and internationally, SYSCO management has continued with the daily policy set by its predecessor. Cost control has been effected by workforce reduction, technological innovation and product specialization. From a workforce of 4,000 in 1968, the number of SYSCO employees has steadily declined over subsequent decades. By 1985 it stood at roughly 1,500, and with the introduction of electric arc furnace technology in the late eighties, the workforce has been reduced to its current figure of roughly 700. Concomitantly the range of steel products capable of manufacture has been reduced essentially to railway rails.³ While the corporation now claims itself to be capable of profitability, thus being a viable subject for privatization, this claim must be seen in light of annual losses in the late eighties and early nineties in the $50 million a year range and a history of provincial subsidization which, since 1967, has amounted to some $1.5 billion being directed to SYSCO's operations.⁴

The history of DEVCO has been equally problematic. Initially established to oversee the elimination of the coal industry on the island, DEVCO management, in its early years of operation, closed two of the four mines it inherited, with a third abandoned following a fire. Between 1968 and 1973, coal production had declined from 3.1 million tons to just roughly 1 million tons. But then the vagaries of the international economy intervened with this planning. The dramatic escalation in world oil prices in the mid-seventies created new markets for coal, in turn significantly increasing the price of the product, thus convincing DEVCO management that coal production could continue to be a viable undertaking for the corporation. The policy of phasing out the industry was duly halted and enhanced production was planned. Over the mid-seventies two new mines - Lingan and Prince - were opened, old No. 26 was refurbished, and a major policy of mechanization was undertaken.⁵

By the late seventies coal production had risen to 2.6 million tons, while between 1976 and 1978 the monetary value of such production doubled. Despite these improved circumstances, though, DEVCO continued to record losses which had to be covered through federal subsidization. In fact, between 1975 and 1991, the corporation never recorded a profitable year. With the decline in world energy prices in the early eighties, DEVCO's coal production came under strain once gain with weak revenues forcing the corporation to list record losses. The year 1984 also witnessed a deadly fire in No. 26 colliery forcing its closure and the layoff of some 800 miners. While Phalen mine was introduced in 1987 to replace No. 26 the corporation was dealt another blow in 1992 when flooding at Lingan became so severe as to require its closure. From the mid-sixties to the mid-nineties one factor stands in sharp relief - the decline in employment associated with coal mining. From a workforce of roughly 6,500 in 1968, employment levels at DEVCO fell to 3,500 in 1988. In 1993 DEVCO's workforce numbered 2,335.⁶

In this wake of increasing economic difficulties the corporation was subjected to a thoroughgoing review by the federal Department of Regional Industrial Expansion (DRIE), and through this process significant managerial restructuring occurred. With the advent of a new Chairman, Joe Shannon, taking command of the corporation in 1985, DEVCO was instructed to undertake its operations in a commercialized fashion. As a part of this reorientation, the corporation placed enhanced emphasis on its need to be profitable. Over these years it was still recording annual losses and was still in need of federal subsidization. In 1984 alone the corporation was the recipient of federal funding of $324 million. The commercialization initiative was given greater endorsation in 1989 when the federal government instructed DEVCO management that it was on a five-year commercialization track, meaning that the corporation would no longer be eligible for federal subsidization following 1995.⁷ In its most recent annual report for 1993 the corporation stipulates that it is now a profitable organization and well placed to make this transition to "independent" status.⁸

A further point of this reorganization initiated in 1985, though, involved the corporation disestablishing its general industrial development role. At the time of its creation DEVCO had been mandated the task of promoting the establishment of new industries in Cape Breton to compensate for the anticipated loss of the coal industry. This task was one fraught with difficulties and failures, yet it is still this project which excites so much interest and concern within the Island. It is to the theories and dynamics of economic and industrial development that this paper now turns.

ECONOMIC DEVELOPMENT IN THEORY

As Cape Breton and other regions in this country have confronted major economic difficulties associated with resource depletion, enhanced national and international market competition, and technological change, federal and provincial governments confront two major policy approaches for addressing such circumstances. As Brodie has outlined, one approach is market-oriented. It views the prime force responsible for economic growth and development as being the business decision-making of particular entrepreneurs and firms. As these actors respond to their economic environment through the logic of capitalist supply and demand, the economic profile of any given region will take on a natural equilibrium of industrial capacity, productivity, labour usage, income and wealth generation, and economic growth. Within this approach, the market reigns supreme, and state actions designed to intervene in the market so as to "adjust" certain inputs to or outputs of the market are viewed as undesirable distortions of rational economic dynamics.

Within the market approach economic growth is viewed as being an outcome of private decisions responding to the given local market with growth itself resulting from firms seizing upon their comparative advantages. In a case of a region such as the maritimes, these advantages have historically been perceived as being low wages, a politically moderate workforce and easy access to abundant natural resources. The market approach would then hold that economic decision-making here should be concentrated in the hands of private firms capable of exploiting such factors to their commercial advantage. The role of the state, in turn, is viewed as being to support such private initiative through the establishment of taxation and regulatory regimes supportive of this private entrepreneurial orientation. As Brodie has outlined, appropriate government policies are perceived as being inclusive of: low corporate taxation, low minimum wages, limited unemployment insurance and welfare provisions, and state abstinence from involvement in industrial support programmes. The role of the state is to facilitate the working of the market, not to alter or direct it.

In contrast to this neo-classical approach, the challenge of economic difficulty can also elicit a quite different, statist approach to economic development. Brodie has commented extensively on the broad state-interventionist approach to development which posits the state - federal or provincial - as playing a leading role in reviewing the economic plight of a region, restructuring and reorienting its economic focus and reinvigorating the technological, industrial, and commercial life of the region through its economic leadership. In this approach the state can and should undertake a range of specific policy initiatives so as to generate economic activity and growth. Initiatives can range from: technical-managerial support of private sector firms; the retraining and re-education of the workforce; the promotion of technological research and development; the promotion of business knowledge and entrepreneurialism amongst existing and emerging firms; the promotion of existing traditional primary and secondary industries; the promotion of new, innovative primary, secondary and tertiary industries making use of emerging technologies; through to the creation of nationalized state industries themselves. Within the framework of state intervention, activities can extend from the mild to the extensive; from the reform liberal to the doctrinaire socialist.

These two broad approaches to economic development have marked the parameters of discourse on industrial policy in this country over the past 40 years, with various federal and provincial governments, of varying political orientation, experimenting with each approach in an effort to grapple with the complexities of economic development in the "real" world. Brodie, Savoie and Brooks, amongst others, have highlighted the federal government's alternating search for interventionist solutions to the problem of regional government, while Courchene and Lipsey stand as firm advocates of the market approach. This approach, moreover, has come to attract significant practical political support. Its ideas resonate within the ranks of the Reform Party and the Progressive Conservatives, and the Albertan Conservative government under the leadership of Ralph Klein have rooted their provincial economic policy to a market-based orientation. The current federal Liberal government led by Jean Chretien has also been assessed by many mainstream analysts as moving to the right, increasingly adopting market-based approaches to economic policy in an effort to rein in federal spending so as to reduce the deficit, thereby reassuring business communities at home and abroad of the fiscal responsibility of the government. As the market approach has come to be associated with conventional economic and political thought within this country in recent years, it is interesting to note that this approach has never become a dominant perspective in Cape Breton.

As the federal government and that of Nova Scotia have sought to address the economic difficulties of Cape Breton, they have both operated from within the statist approach to economic development. This orientation has been reflective as much of past dominant ideas in development theory as of the power differentials between government agencies and the indigenous private sector in Cape Breton. This approach then has witnessed the leading role in development initiatives being played by a changing host of federal, provincial, and regional crown corporations and development authorities working, at times harmoniously, at times discordantly, to devise a method and a practice of economic revitalization for this region. But Cape Breton is not immune to broader ideological currents found within the country. Thus, with the rise of market ideas, we now witness a new rapproachment in official and unofficial thought respecting the roles of the public and private sector. A rapproachment witnessing the state still playing an important interventionist role, but one in which its objective is less to act as the leading agent of economic reform, but rather to be an advocate, educator and facilitator of reform to be achieved by private sector actors.

ECONOMIC DEVELOPMENT IN PRACTICE: THE WORK OF PROMETHIUS

Over its first 20 years DEVCO engaged in three different theoretical strategies of statist economic development in Cape Breton. The first, from between 1968 to 1971, witnessed the corporation using its funding to offer subsidies to secondary industries from outside Cape Breton but willing to relocate there if the financial support package was substantial. This effort to attract so-called "footloose industries" left much to be desired. Both Bickerton and George stress that this period was one of industrial development failure. Of nine such projects launched during these years, costing some $30 million, only two survived past 1971. Most outside firms, once having exhausted their DEVCO funding, simply pulled up roots and departed.⁹

In 1971, following a management shuffle, Tom Kent, former Deputy Minister of the Development of Regional Economic Expansion, became the new DEVCO Chairman. Under his leadership the focus of development strategy shifted from the enticement of outside firms to the promotion of locally-based small enterprises seeking to capitalize on Cape Breton's distinctive economic potentialities: tourism, handicrafts, and specialty products. The projects initiated in the early to mid-seventies ranged from the enhancement of tourist facilities, including the creation of the golf course Highland Links, to the establishment of sheep farming and wool production, to the development of a scotch whiskey distillery. A further part of the initiatives under Kent's leadership was the promotion of local entrepreneurship - the nurturing of small business dreams of Cape Bretoners, coupled with feasibility and cost-benefit analyses of proposed projects. The corporation came to believe that a part of its role was to instill within a part of the Island's population a desire to enter business, and to give such men and women the practical skills and education to help their initiatives to work.¹⁰ As outlined by George, the seventies was a time period of great experimentation in DEVCO's Industrial Development Branch, witnessing many small scale successes. But these victories were neither of sufficient number nor scale to offset economic problems and job losses elsewhere.¹¹

Kent left the corporation in 1976 and in the years leading to the accession of Joe Shannon the corporation's strategy of industrial development became one of ad hoc responses to initiatives which blended the search for outside firms with promotion of local initiatives. While support for small scale enterprises continued, DEVCO also offered financial assistance to the Stora Pulp and Paper Mills at the Strait of Canso, as well as support to the Gulf Strait refinery and two heavy water plants. As with so many other "outside" firms, with changing economic situations and the decline or demise of DEVCO funding, the commitment of most of these firms to Cape Breton proved short-lived. The oil refinery closed in 1980 and the heavy water plants ceased operation in 1985, leaving around 1,000 jobless.¹²

It was in light of this checkered record that Shannon, upon assuming the Chair of the Corporation in 1985, opted to review the corporation's industrial development strategy, with the Board eventually deciding to reduce its economic support programmes for industry. DEVCO would cease to perform any entrepreneurial development function itself and would offer support only to those enterprises which could already demonstrate the potential for strength and self-sufficiency over the long term.¹³

As Cape Breton entered the mid-eighties then, the core institution mandated the task of promoting the industrial renewal of the Island was itself expressing doubts about its ability to successfully implement this function. This dissatisfaction with the course of economic development in Cape Breton was, in turn, not unique to the Island but one shared throughout the maritimes. As federal and provincial governments were experimenting with SYSCO and DEVCO in particular, they were also experimenting with approaches to broad regional development in general.

THE GENESIS OF ENTERPRISE CAPE BRETON

Beginning in the early 1960s the federal government launched a number of statist undertakings to promote economic development in chronically depressed regions. Through such initiatives as the Agricultural Rehabilitation and Development Act (ARDA), the Atlantic Development Board and the Area Development Agency, the federal government made funds available for industrial incentives and infrastructure improvement. In 1969 regional development was elevated in status, being made the preserve of DREE. Between 1969 and 1982 DREE acted to stimulate regional development through measures devoted to sectoral and area development opportunities. Initially, DREE administered Special Area Programmes designed to promote initiatives in chosen locations, such as the Strait of Canso. In 1974 a policy reformulation resulted in the substantial decentralization of DREE's programme development and implement-ation. Concurrent with this reform was the establishment of General Development Agreements (GDA's) aimed at promoting both area-specific and sectoral programmes. Under the Nova Scotia GDA the Strait of Canso and Sydney received area support, while sectoral assistance was directed to the fisheries, agriculture, and tourism. Under the GDAs, though, the thrust of DREE programming was to promote the development of regional "growth centres" defined as such cities as Halifax, Moncton, Saint John and St. John's. These sites were to be promoted such that they developed a critical economic mass as to become self-sustaining centres of economic activity within the given province. Other urban centres would exist as secondary sites of economic development.¹⁴

As the federal government came to be increasingly disenchanted with the low level of federal visibility under the GDA approach, actions were undertaken in the early 1980s to once again reformulate federal regional development programming. In 1982 DREE was replaced with DRIE and in 1984 the system of GDAs was replaced with new Economic and Regional Development Agreements (ERDAs). These differed from GDAs essentially only in the federal-provincial cost-sharing arrangements and the greater latitude the federal government had in planning and launching, on its own, regional development projects. With respect to substantive policy approaches, however, ERDAs were quite similar to GDAs. Attention was still placed on area and sectoral development with emphasis directed to major centres. Within Nova Scotia the one ERDA aimed specifically at Cape Breton was designed to assist the economic projects underway at the Strait of Canso; Sydney was not a designated growth centre.¹⁵

By the mid-eighties, Atlantic Canada in general and Cape Breton in particular had been the focus of regional economic development policy for nearly 20 years. But far from possessing an economy markedly stronger than had been the case in the mid-sixties, the Cape Breton economy in the mid-eighties showed signs of great stress. Whereas in 1971 goods-producing industries had employed 37% of Cape Breton's labour force, by 1986 this figure had declined to 30%. The decline in employment accounted for by the steel and coal industries was most noticeable. Whereas these industries had accounted for 20% of the Island's labour force in 1965, by 1985 this figure had dropped to 7%. The general unemployment rate in Cape Breton in 1984 stood at 20% while that for Nova Scotia was 13%. These figures, reflective of the great difficulties faced by

SYSCO and DEVCO, and the limited successes engineered by the latter's Industrial Development Division, generated nothing but concern for those interested in the economic health of Cape Breton. Certain events of the mid-eighties only exacerbated these concerns. As mentioned, in 1984 a fire in No. 26 colliery resulted in its closure with the loss of some 800 jobs, while in 1985 the two heavy water plants in Canso and Glace Bay closed, with the loss of some 1,000 jobs.

In light of these blows to an already weak economy the new Conservative government led by Brian Mulroney appointed an advisory committee to recommend ways and means by which to promote economic development on the Island. In September of 1985 the committee called for the establishment of a specific development project - to be named Enterprise Cape Breton (ECB) - which would possess a mandate to provide financial assistance to existing businesses and would-be entrepreneurs seeking to expand or establish themselves in Cape Breton.¹⁶ The government responded favourably to this suggestion, establishing ECB later that same year, and giving it jurisdiction over two new funding programmes: the Cape Breton Investment Tax Credit and the Cape Breton Topping-Up Assistance programme.¹⁷ While ECB was inaugurated with a reporting relationship to DRIE, it is interesting to note that the creation of this body in no manner affected the formal development mandate vested in DEVCO; this agency continued to have responsibilities for Cape Breton economic diversification and development.

THE EARLY YEARS OF ECB AND THE GENESIS OF ECBC

With the creation of ECB the federal government was quick to proclaim its key role in the cause of economic renewal for Cape Breton.¹⁸ Other observers were more guarded in their praise for the initiative, but were nonetheless supportive of the general policy direction heralded by the agency. The Nova Scotia Federation of Labour spoke for most groups when it simply asserted that "ECB is a step in the right direction".¹⁹ In its first five years of operation ECB became a significant actor in the Cape Breton economy authorizing roughly $217 million worth of funding to nearly 700 projects proposed by 356 firms. Even as this agency was beginning to undertake its role, and even as it was struggling to define an approach to economic development, the federal government, however, proceeded to engage in yet another major reform to Atlantic Canada's regional development policy. This reform, in turn, was to have direct impact on development policy in Cape Breton.

In 1987 the federal government moved to reorient regional development by dis-establishing DRIE and placing regional development policy in the hands of two new agencies: Western Development, to deal with such policy matters in Western Canada and the Atlantic Canada Opportunities Agency (ACOA) to promote regional development policy in this region. As with so many regional development organizations of the past, by 1987 DRIE had come to be viewed not only by many stakeholders, but also by the government, as an exceptionally bureaucratic, uneconomic and inefficient organization more concerned with industrial expansion in Ontario and Quebec than the promotion of economic growth in the peripheral regions.²⁰ ACOA, in turn, was designed to reorient regional development policy in Atlantic Canada by stressing the importance of entrepreneurial development in the region. To this end, ACOA was given authority to plan and implement development measures in the region with emphasis being placed on more streamlined decision-making designed to promote entrepreneurship, greater market knowledge, awareness of new technologies and greater liaisons between the private sector and the region's universities. Despite this call for bold new steps, however, ACOA could not totally escape the past history of Atlantic Canada's development policy. The new agency inherited DRIE's development projects, as well as its Atlantic Canada budget. This, coupled with guarantees of some one billion in new funding over five years, meant that ACOA began organizational life with funding of some $2 billion over five years.²¹

The ACOA enabling legislation also made special provisions for Cape Breton. ECB, barely two years old and already experiencing growing pains, was made the designated agency for the implementation of ACOA designed and approved programmes within Cape Breton. But, furthermore, the act went on to establish a new, wholly independent crown corporation, to be known as Enterprise Cape Breton Corporation (ECBC). This corporation was to inherit the industrial development mandate formerly held by DEVCO, thus freeing DEVCO to concentrate solely on the coal industry. The ECBC mandate specifically directs the corporation to promote the development of industry within Cape Breton and to assist in the general broadening of the economic base of the Island. While its crown corporation status was designed to allow it to be more innovative and independent of ACOA, and thus ECB, it was desired by the government that the two Cape Breton-based bodies would work closely together so as to complement the work of one another. As such, the ACOA legislation stipulated that the Head of ECBC would also be the Deputy Minister of ACOA; the Vice-President of ECBC would act as the corporation's Chief Operating Officer, with this official headquartered in Sydney.²²

With these initiatives given parliamentary approval in 1988, Cape Breton then possessed two federal organizations mandated the task of promoting economic and industrial development on the Island. With high hopes and great expectations both agencies entered the battle of regional development, a battle which had so often resulted in failure, shattered illusions, bitter pessimism and cynical defeatism.

DUAL AGENCY TRIALS AND TRIBULATIONS

Given the enormous theoretical and practical difficulties inherent in the planning and implementation of regional development in peripheral areas it is not surprising that, despite the high hopes, both ECB and ECBC quickly began to experience problems as they sought to undertake their duties. So severe were the problems confronting the former agency to become that they were to result in its disestablishment within four years.

In its first five years of operation, ECB had initiated a substantial number of projects, large and small, with overall funding exceeding $200 million. Of the 356 firms designated for support, 52 received project funding in excess of one million. These firms and their projects thus accounted for 88% of the total authorized assistance of ECB. In turn, of this assistance, 73% was allocated to projects in the manufacturing sector, with 7% allocated toward tourism and 9% toward agriculture. Of the remaining 12% of total expenditure, 135 projects received between $100,000 to one million dollars worth of funding - accounting for roughly $17 million - and 169 projects received funding of under $100,000.²³

A 1991 in-house review of ECB, conducted by Anthony Brait, offers an insightful and critical analysis of the work of this agency. In contrast to the policy thrust of senior agency management, the review team found that large scale projects had decidedly problematic histories, with the greatest project successes being scored by the smallest scale initiatives. The 52 large scale projects were recorded as having a success rate of 29%. Eight projects were never able to become operational, while a further 11 failed in their infancy. Nine others were viewed, as of 1991, as being high-risk with questionable long-term viability. Of the successful projects in this category initiatives respecting food processing possessed the strongest success rates, followed by printing and publishing, furniture and fixtures, and metal fabrication and transportation.²⁴

Of the 135 intermediate range projects with funding between $100,000 and one million dollars, a success rate of 55% was recorded, with projects relating to tourism accounting for 42% of authorized funding while manufacturing projects received 38% of allocations. The tourism projects were reported to be the most successful items in this category, followed by projects involving agriculture, transportation and wholesale. Finally, the 169 small-scale initiatives were assessed with a success rate of 72%. With this category 48% of funding was allocated to firms involved with manufacturing, 20% to tourism, with projects concerning agriculture, forestry, transportation and business services being the next largest recipients. In this category strong successes were recorded across all sectors. Noticeably, manufacturing projects now ranked highly, as did agriculture and forestry and business services.²⁵

Through all such projects the Brait Report claimed that these ECB- funded initiatives resulted in the creation of some 1,800 full-time jobs. This figure, though, was only 49% of the 3,700 jobs which these projects were initially anticipated to establish. Of these 1,800 jobs it is interesting to note that approximately 1,300 were accounted for by the manufacturing sector, 300 by the tourism sector and the remaining 200 dispersed amongst the other sectors. Of the manufacturing jobs, 499 were established in food industries, with 164 accounted for by the electronics industries, 87 in metal fabrication, 55 in transportation and 49 in plastics. It is also instructive that of all 1,800 jobs listed as being created, only 55% were found within the largest 52 firms receiving the bulk of ECB funding. Medium and small-scale firms were able to generate 45% of all ECB-assisted jobs on less than 15% of total funding.²⁶

In analyzing the work of ECB the Brait Report did not restrict itself to an assessment of the programme initiated by the agency. Attention was also devoted to the management capabilities demonstrated by ECB, and here the review was highly critical. The report found that from its inception in 1985 the agency lacked a coherent regional development plan to guide its programme development and implementation. Furthermore, it was argued that management practices at ECB were weak, resulting in numerous instances of questionable decision-making and project analysis. In particular the report asserted that ECB began functioning in an extremely hasty manner which compromised its ability to define a development strategy and to assess project proposals in light of such a strategy.²⁷

Much attention was also devoted to particular management weaknesses. The Brait Report found that ECB staff had little or no private sector lending experience and scant training in industrial development. General management and administrative training and skills were also held to be deficient. It was found that projects were approved with limited documentation and that the filing and record-keeping system at the agency deteriorated over time. The agency was also criticized for engaging in weak economic viability assessments in which the organization failed to realistically assess such business items as cash-flow projections; verification of markets; comparable industry sales trends; credit and reference checks; identity, training and experience of proposed management; and independent market and engineering and technical feasibility studies and the assessment of the relative risk of particular projects. Beyond all of these highlighted failings the Brait Report also criticized ECB for failing to maintain a rigorous and on-going monitoring of on-going projects so as to not only promote the agency's management information system, but also to enable it to provide needed advice to troubled projects.²⁸

This report was to mark the beginning of the end for ECB. Following its release in the spring of 1991, the agency came under vociferous criticism attacking its management practices and its operational impact on the economic problems confronting the Island. There was also much criticism respecting the very awkward and confusing dynamic of there being two different development agencies, possessing almost identical names and mandated separate, yet inter-related, tasks respecting the promotion of economic development on the Island. This was held not only to be difficult to comprehend by ordinary citizens but a direct liability to businesses seeking to interact with these agencies.²⁹ Under such a public pounding the federal government quickly moved to take remedial action. In July of 1991 the Minister responsible for ACOA announced that ECB was to be discontinued forthwith and that its responsibilities and programmes were to be transferred to the authority of ECBC.³⁰

Though ECBC had become the primary development agency in and for Cape Breton, this body possessed an administrative record just as problematic as that of its predecessor. The early years of ECBC witnessed this agency engaged in a form of regional development policy similar in focus, yet different in scale, to that implemented by ECB. In its first years of operation ECBC demonstrated a tendency to promote the agricultural, forestry and fishery sectors, tourism and craft developments and to support mid-sized industrial projects. In 1990, its first full year of operation, the corporation witnessed development and operational expenditures of roughly $20 million. Of this total, $3.8 million was devoted to new business development plans, while $3.7 million was directed to cover the category of "doubtful loans and investments". A total of $3.9 million alone was expended on projects concerned with the development of tourism, agriculture and forestry, while administrative costs came to total roughly $5.6 million.³¹

In particular, the corporation initiated an agricultural and forestry unit centered upon a technology demonstration and resource centre in Point Edward. With regard to the fishery, in 1990 the corporation provided $300,000 to Nova Scotia Clams. Tourism and the craft industry were also recipients of significant funding. In 1990 some $107,000 was provided to support the development of a Cape Breton performing arts industry and in 1990-91, $200,000 was committed for marketing and promotion of the Cape Breton Bed and Breakfast programme, while $258,000 was directed to 97 projects in the craft industry.³²

By far however, the thrust of ECBC's initiatives were directed to a range of various sized industrial projects and to small business ventures. In its first two years of operation the corporation's major commitments in this regard were to Nova Aqua, involved in aquaculture, receiving $1.4 million; Cape Breton Wallcovering, receiving one million dollars; Barkley Systems, involved in office equipment, receiving $300,000; Magi Corporation being given $30,000; and MicroNav, receiving $146,000.³³ These latter two corporations are noteworthy in that they were both involved in the development of information technology and related service applications to particular activities. MicroNav became the most important of all such firms in Cape Breton as it sought to pioneer microwave technology airport landing systems.

Apart from these traditional initiatives ECBC did begin to engage in innovative work in a number of respects. In 1990 a Memorandum of Understanding was signed with the leadership of the University College of Cape Breton, committing both parties to create linkages between government, the university and the business community so as to emphasize the promotion of technology, local entrepreneurship and community development.³⁴ Through this initiative the corporation and the university began to pursue a new approach to regional development. While specific project funding remained the heart of the corporation's development instruments, there was added to this a recognition that the development of research, business knowledge, skills training, entrepreneurship and higher education were also crucial instruments towards future economic growth.

In this same year and in this same vein the corporation moved to establish a special programme designed to promote the entrepreneurial potential of Cape Breton women. At the time of its inauguration the corporation stressed that women had a major role to play in the economic development of the Island, that they, collectively, had been an under-utilized human resource, and that positive initiatives must be taken to promote and enhance the entrepreneurial capacity of businesswomen on the Island. To this end the corporation established the "resourceful women of the 90's" project in which it supported the creation of a collection of material on women and business at the University College of Cape Breton, as well as sponsoring a number of conferences and workshops on the nature and distinctiveness of female entrepreneurship.³⁵

Following the aftermath of the Brait Report and the elimination of ECB, the federal government moved to reorient the operational focus of ECBC to one much more concentrated toward entrepreneuralism, high-technology and related service industries, and the skills training and knowledge required by such industries. Increasingly, the focus of the corporation was perceived as not centering on the provision of development capital for specific projects but on the development of human capital capable of engaging in a host of varied occupations over numerous years. With the effects of the recession also being felt the corporation also stressed that it would concentrate on the promotion of smaller projects designed to promote indigenous entrepreneuralism. In this manner the corporation hoped to engage in effective development work with a smaller budget while, hopefully, being free from the controversies surrounding the failures of large scale industrial operations. In this respect it is noteworthy that in fiscal 1992 total corporation operating expenses amounted to $17.8 million, down from the $20 million expended in fiscal 1990.³⁶

This changing orientation was reflected in the operations of the corporation in the early to mid-90's. During these years, small business projects were the leading recipients of corporation funding, followed by tourism projects, initiatives to promote the development and use of technology, and finally undertakings centred on crafts, agriculture, forestry and the fishery. While certain of these categories overlap, as with tourism and crafts and small business and technology initiatives, the essential thrust of the corporation's development approach was discernible. In contrast to the emphasis on agricultural, forestry and fishing undertakings as witnessed in the corporation's early years, the agency was now earnestly seeking to promote small business ventures, preferably possessing either a link to tourism or to the burgeoning high technology and related services' sector.³⁷

Of particular note is that the corporation continued to provide substantial funding to MicroNav, as well as to AGRI, involved in the development of geomatic technology and related applications, and to TSI Sensor, involved in research into the industrial use of integrated sensors. In keeping with this emphasis on high technology, ECBC and UCCB have also co-operated in the establishment of a Cape Breton-based technology advisory group which serves to link together those in business, government and academia concerned with the development and diffusion of theoretical and practical knowledge respecting technologies ranging from information technology through to computer-assisted design and computer-assisted manufacturing. As part of this initiative some one million dollars has been expended in the promotion of a data processing enterprise. The corporation has also been involved with UCCB in the initiation of an environmental technology research project and in the development of a communications network designed to link UCCB to the applied science programme of the University of Waterloo. Beyond these initiatives the corporation also continued to support training programmes designed to promote Cape Breton entrepreneurialism. ECBC established a number of entrepreneurial training programmes for children and young adults while maintaining its project devoted to the nurturing of entrepreneurialism within Cape Breton businesswomen.³⁸

Despite all these programmes and projects, however, and despite the tens of millions of dollars expended by the corporation over these years, ECBC continued to be beset by operational problems, public scepticism and professional dissatisfaction with its development orientation. A number of project failures and difficulties continued to haunt the corporation, such as the collapse of Scotia Ropes in February of 1993 and the long-term questioning of the economic effectiveness of the agricultural research site at Point Tupper. In the fall of 1991, ECBC had been directly criticized by the federal Auditor General for its failure to adhere to ACOA guidelines concerning the assessment of commercial viability for proposed projects and for its inability to undertake rigorous market and feasibility studies of fields in which it was proposing to support new industries.³⁹ With the publication of this report, the first public response of the corporation was to claim that notwithstanding the Auditor General's criticisms, less than five percent of its projects had resulted in outright failures. As is often the case with criticisms from the Auditor General, though, senior officials within ECBC have asserted that following the release of this report, the corporation moved to strengthen its process of project review and to stress to all case workers the need to adhere rigorously to federal guidelines of risk assessment. This aside, officials at ECBC, ECB, ACOA and the Industrial Development Division of DEVCO have always stressed that regional development work is risky and that corporate failures are a part of the environment of such work.⁴⁰

While the corporation has struggled with these difficulties it has also had to contend with a public image which has been problematic at best. The corporation's identity suffered in its early years through the confusing liaison with ECB which resulted in there being great misunderstanding amongst the public regarding the purpose of ECBC. Since the elimination of ECB the corporation has continued to suffer from a mixture of public confusion concerning the development role of ECBC and public criticisms respecting the operational problems experienced by the corporation. Agency officials have long remarked that while the successful initiatives of the corporation are rarely mentioned in the media, its failures are the material of in-depth reviews. The result, according to corporation staff, is a public image of ECBC as being a wasteful bureaucracy with a haphazard mandate exercising little positive impact on the socio-economic life of Cape Breton.⁴¹

Though this image of ECBC is quite unfair, it was precisely this understanding of the corporation which nearly resulted in its elimination in 1992. In February of that year the federal Conservative government announced that the corporation would be dis-established, with its programmes to be merged into a reconstituted ACOA. As part of this proposal DEVCO was also to be privatized.⁴² This initiative was met with a storm of protest from community leaders in Cape Breton, as well as from influential members of the federal Liberal party such as MP's Dave Dingwall and Russell MacLellan and Senator Al Graham. The Conservative government of Brian Mulroney preceded with its plans though, but the initiative floundered on account of unrelated difficulties experienced by the Omnibus Bill of which it was a part. This Bill - C-93 - designed to reorganize a number of federal agencies, was approved in the House of Commons in March of 1992 but met ultimate defeat in June of 1993 when, in a rare display of senatorial power, the Upper House rejected the legislation on a tie vote. This action, however, was the result of significant dissatisfaction over the Bill's proposed merger of the Canada Council and the Social Sciences and Humanities Research Council and the cultural programmes branch of the Department of External Affairs, rather than with widespread senatorial discontent with the Cape Breton aspects of the legislation.⁴³

Regardless of the motivations of the Senate, the life of ECBC was spared in 1993 by the slimmest of margins. Following this reprieve the corporation continued with the implementation of its programmes untouched by federal reform initiatives until the Liberal victory in the federal election of 1993.

The Liberal government of Jean Chretien came to power on the promises of economic renewal and job creation, with great emphasis placed on the stimulative effect of a massive government undertaking to renovate Canada's transportation and public services infrastructure - initially conceived as being of roads, waterworks, sewers and harbours. Within the new government, Cape Breton obtained powerful representation by virtue of the appointment of Cape Breton-East Richmond MP David Dingwall as Minister of Public Works and Minister responsible for ACOA.

Apart from overseeing the initiation of a number of infrastructure projects in the fall of 1993 in Cape Breton, as well as in the rest of Atlantic Canada, Dingwall launched a ministerial review of ACOA and ECBC while recognizing the infrastructural development in Atlantic Canada in general and Cape Breton in particular had to transcend the narrow confines of traditional public works such as roads and sewers. Initial indications of this broader approach to development were witnessed in the fall of 1993 when UCCB received $7.5 million and MicroNav obtained $83 million in federal funding. These initiatives were justified as being investments in the educational and technological infrastructure of Cape Breton.⁴⁴

The most dramatic news affecting ECBC though, occurred in the summer of 1994 when the Minister of Public Works announced that the corporation would assume all responsibility for economic development in Cape Breton, including all of ACOA's programmes earmarked for the Island. In a reversal of the Conservative government's plan of two years previously, now rather than being subsumed by ACOA, ECBC was to stand along as a sole development agency for Cape Breton.⁴⁵

CAPE BRETON, THE NEW ECONOMY, AND NEW APPROACHES

Shortly after this historic announcement, Dingwall also publicly endorsed a development strategy promoted by the Cape Breton County Economic Development Authority (the Brown Report).⁴⁶ This called for a significant reorientation to economic development in Cape Breton, with ECBC being advised to recalibrate its approach to industrial policy by vigorously promoting the growth of the "new economy". The Brown Report stands as a major document with respect to the economic future of Cape Breton and in its call for ECBC to continue to play a significant role in the development of the Island. As such, the analysis found in the Brown Report is designed to set the stage for Cape Breton's entry into the 21st century.

The Brown Report stresses that the economic future of Cape Breton cannot be secured through the traditional ways of thinking that have characterized economic development policy on the Island for roughly 30 years. The Report asserts that the general effect of the development initiatives over these years have been minimal at best - staving off economic collapse but not preparing a sound foundation for future economic growth and revitalization. The legacy of agencies such as DEVCO, ECB, ACOA and ECBC is thus quite problematic.⁴⁷

Explicitly borrowing from the theoretical works of Michael Porter the Report calls for all levels of government, ECBC included, to concentrate their economic development initiatives on a select number of economic clusters viewed as being integral to the Island's economic and social future well into the next century. The clusters which Brown highlights are those of government services, information technology and related services, and tourism. It is these fields, according to the report, which will provide the Island with the best foundation for a stable, innovative and growing economy.⁴⁸ Explicit within this study is the argument that the coal and steel industry can not and should not be viewed as viable foundations for the Island's economic future. They may continue to exist as economic factors in Cape Breton for years to come, but they should be viewed only as tertiary aspects of the Island's economy.⁴⁹ In similar fashion, but more startling to many, is the position that the agricultural, forestry and fishery future of Cape Breton. According to Brown, these are industries of the past which will continue to exist in various shapes and forms in Cape Breton but they also should not be viewed as avenues of future economic growth.⁵⁰ Rather, the report asserts that governments should place stress on those economic sectors that they can control, or which can be competitively viable in Cape Breton with proper nurturing, or which already exist and thrive as an element of the Island's competitive advantage within the broader national and international economy. Hence, the three clusters emphasized in the report.

Brown suggests that government services should be considered as an economic cluster integral to Cape Breton's growth on account of the economic stability and income generated within any area possessing a significant number of public sector organizations. Brown makes note of the fact that those maritime urban centres with substantial public service employment experience unemployment rates 25-30% below their provincial average.⁵¹ The report then calls upon the federal and provincial orders of government to make a commitment to decentralize some 1,000 government jobs to industrial Cape Breton, to be concentrated in downtown Sydney.⁵² While the federal Minister of Public Works has endorsed this recommendation, other federal ministers and agencies have remained silent and the provincial government has not commented.⁵³

In arguing in favour of the promotion of information technologies and related service industries, the Brown Report is both endorsing the recent past policy approaches of ECBC while calling upon the corporation and other development actors to devote even more attention to these avenues of growth. Brown takes note of the development of high technology industrial clusters in various locations in the United States, especially Massachusetts, while stipulating that these developments are contingent more upon initial government support of firms involved in innovative and dynamic technologies and services than upon the factors of low production costs and proximity to markets.⁵⁴ In keeping with the theoretical works of Porter and Reich, Brown contends that the development of the "new economy" will be led by industries committed to the elaboration, application and management of information and intelligence. While there will always be industries devoted to the production of goods, the conceptualization of these goods and their specialization to match the various and numerous demands of their users will be the field of industrial activity in which value is added in the productive process. This process, in turn, will become the one feature of any economic activity which is most valued by any particular firm and by any particular region or nation.⁵⁵

In following his intellectual mentors, Brown stresses that the development and application of technological and applied service intelligence can be undertaken anywhere an information technology cluster forms. While there is a recognition that such formations possess a number of contingencies, location in major urban centres near substantial markets is not held to be one of these factors. Of much more importance is governmental support for the initial development of the cluster and the development of a synergistic relationship between technology development firms, firms involved in the applied use of technology services, local universities and government.⁵⁶ Furthermore, there is the need for the promotion of cooperation in the development of basic research and technology application between these actors yet also the inculcation and prioritization of an entrepreneurial spirit amongst the private sector actors. These factors, as Brown contends, can be established in Cape Breton just as easily as they can be established in greater Metropolitan Toronto, or Massachusetts, or Silicon Valley in southern California. Technological ingenuity and the development of related service applications is not spatially deterministic. The great promise of the communications and technological revolution of the latter part of this century is that it is turning economic activity into a global, or at least a trans-national, human dynamic in which sub-national economic regions can be just as integral to economic growth and development as major national metropoles.

Apart from the promise of new information technology, the Brown Report accepts that one traditional part of the Cape Breton economy can be maintained and invigorated as being a vital component of the Island's competitive advantage; this element is the tourism industry. While this is not surprising, what is noteworthy and at times controversial in the line of analysis found in the Report, is the position that the tourist industry on the Island, far from flourishing, is underdeveloped, by being parochial, amateurish and lacking in a creative vision. While Brown argues that the Island should never lose its "down-East" folksy charm, there is much that can be done to enhance the tourist potential and profitability of such locations as Louisbourg and its Fortress, Glace Bay, and the Sydney waterfront and its downtown. Brown's recommendations range from transferring jurisdiction for the Fortress of Louisbourg from Parks Canada to ECBC, through the beautification of Glace Bay, to the extension of the Sydney boardwalk, the creation of a pedestrian mall in downtown Sydney, and the enhancement of wharf facilities for handling a greater number of cruise ships.⁵⁷

Though the Report was commissioned solely by the County of Cape Breton, its analysis and recommendations are significant for the entire Island and for ECBC for no other reason than that industrial Cape Breton is the economic heart of Cape Breton. In light of this it is interesting that Dingwall has enthusiastically endorsed the proposals of the Report while ECBC has expressed support for the theoretical and practical orientation of Brown's analysis.⁵⁸ In fact, the line of thinking found in the Brown Report is quite consistent with the basic development approach taken by ECBC in the 90's. The corporation has come to stress the importance of high technology, the development of information technology and related service industries, and the development of the entrepreneurial and educational skills of Cape Bretoners. Increasingly, there has been an emphasis by ECBC to promote the development of human capital; while significant funding in the form of grants and subsidies is still directed to particular firms and projects, there has been a conscious effort by the corporation to enhance the "intelligence" found in Cape Breton with respect to those industries commonly associated with the "new economy".

While the thrust of the Report is in keeping with the basic development approach adopted by ECBC, a number of Brown's recommendations, however, have elicited some concern from the corporation. In particular, the call to de-emphasize the place of agriculture, forestry and the fishery has been held by some senior officials at the corporation to be misguided given the historic importance of these industries to the Island's economy, and given the proposition that all of these industries, if managed properly, can be economically viable and self-sustaining. It is noteworthy that even with the collapse of the fishery in recent years, ECBC has always remained committed to offering support to the fishery stressing the importance of developing value-added methods of improving the quality of fish products.⁵⁹

Though the response of ECBC to the Brown Report is essentially positive, it must be noted that this new approach to Cape Breton development heralded by this Report is nonetheless highly problematic.

Firstly, as with all other regional development initiatives launched since the 60's this approach is highly contingent on close federal-provincial and sub-regional cooperation. Many of the core elements of the Brown Report require either direct federal-provincial undertakings or substantial federal funding. The development of a public administration cluster in Industrial Cape Breton, for example, is contingent on the federal and Nova Scotian governments actually relocating some 1,000 public sector positions to Sydney. While there are no administrative requirements preventing the decentralization of substantial numbers of public sector jobs away from the environs of Ottawa and Halifax, the politics of such an initiative are highly controversial. These cities have opposed decentralization in the past and will likely oppose it in the future. Indeed, Haligonians can claim that decentralization in favour of Sydney runs counter to that approach to regional development which observes Halifax as being a growth pole for the maritimes. Moreover, if decentralization is accepted by these governments as a desirable course of action, there is no surety that the two governments will agree to promote decentralization in favour of the development interests of Cape Breton. Once decentralization of government positions is endorsed by either government as a means to promoting the development interests of disadvantaged sub-regions, then Cape Breton will not be alone as a claimant requesting special consideration. As other sub-regions - from across the country and across Nova Scotia - petition for developmental consideration, we may very well witness co-ordination between levels of government faltering, if not failing altogether; and without such coordination a vital element of the Brown Report would find itself in grave doubt.

Secondly, and related to this first problem, is that of self-interested divisions within Nova Scotia. Just as there can be a lack of co-ordination at the federal-provincial level, there can be a lack of co-ordination at the provincial level. The strategy in the Brown Report calls for a concerted effort to be made by the provincial government in supporting the developmental interests of Cape Breton. But certain factors can militate against the realization of such concerted provincial leadership. Development policy designed to benefit Cape Breton by directing job creation, public spending and economic protection to the Island will likely be opposed not only by many in Halifax but also by other sub-regions within the Province. The Brown Report can result in two mutually compatible positions being taken by those in other parts of the Province interested in sub-regional development. One is that the Report is one-dimensional in that it focuses solely on Industrial Cape Breton. The other is that those concerned with development in other parts of the Province can endorse the theoretical strategy outlined in the Report calling for the provincial government to promote such development initiatives in "their" sub-region. If and when these political dynamics emerge, the ability of the provincial government to respond expeditiously to the Cape Breton issue will be diminished.

Thirdly, the development approach outlined in the Brown Report is simply difficult to operationalize due to its innovative nature and the leadership demanded of avant-garde entrepreneurs in the private sector. The reconfiguration of an economy from one rooted in "traditional" natural resource industries to one closely engaged with high technology and related service industries is not an easy task. Apart from the difficulties of governmental co-ordination with respect to these matters, the identification and nurturing of appropriate "new age" winners is very difficult. The current concerns respecting the competition between global positioning technology and microwave landing systems is just one illustration of how the volatility in technology, and decision-making respecting its adoption, can threaten the best laid plans of development planners. With the U.S. Federal Aviation Authority's approval of global positioning technology over microwave technology as the standard for air-traffic control, the commercial viability of MicroNav has been undermined. In April of 1995 the federal government announced that it was ceasing its support of this enterprise; a firm that was hopeful of being on the "cutting edge" of a new and important technology has now been rendered defunct, with the loss of some 100 valuable technology-related jobs in Sydney.⁶⁰

In seeking to enter these volatile fields, a development strategy is as highly contingent on the capacity of the private sector as it is on the public sector. The research, development, application and entrepreneurial skills of business persons involved in high technology and related services must be high and ever improving to meet rising expectations and demands from competitors and consumers, just as their own business administration skills must be finely honed. Business intelligence is crucial, with weaknesses leaving a firm, and a development strategy, open to spectacular failure. One need only mention such names as Bricklin and Sprung, and now MicroNav, to gain an appreciation of the point. This is not to suggest that such a strategy for Cape Breton, as envisaged in the Report, will fail, but that success is contingent upon a dynamic private sector of high technology firms which gets ever stronger. The approach by ECBC to promote the technological and entrpreneurial calibre of Cape Breton business people is clearly valuable in this regard; but despite the laudable efforts made by ECBC and UCCB in past years, the question remains as to whether Industrial Cape Breton has a research, application, and entrepreneurial base sufficient to enable it to succeed in the challenging world of high technology. The question is haunting but the response from ECBC, the leadership of UCCB, the Brown Report, as well as the line of analysis flowing from the works of Porter and Reich is, in turn, striking. High technology and related services represent the economic future and either locations such as Cape Breton become capable players in this future or they will economically stagnate and decline.

In considering this adjustment to the "new economy" a fourth problem arises, one related to the issue of entrepreneurialism and business capacity. The Brown Report places great stress on the importance of industrial clusters to the economic development of Cape Breton. In this regard, Brown borrows heavily from the theoretical work of Porter. Lacking in the Brown Report, however, is a rigorous explication of the cluster concept and its operationalization. As Porter contends, effective clusters are groups of private sector firms active in a common industrial-technological field. These firms are in competition with one another yet are also at times capable of forging alliances to promote basic research and development and market research and identification beneficial to all members of the cluster. Integral to the well-working of the cluster, though, is the dynamic of vigorous competition.⁶¹ As Porter argues, it is through this dynamic that technological innovation is spurred, new productivity methods advanced and applications and products conceived and reconceived, designed and redesigned. The key to economic success, according to this approach, is the steady redevelopment, reconfiguration and recapitulation of technology and the products and services derived from such technology. And this dynamic can only flourish when a number of similar firms are clustered together, driving forward in this quest for innovation and progress.⁶²

This understanding of cluster theory poses a problem for its application to Cape Breton. Effective entrepreneurial interaction within a cluster is contingent upon a plurality of like firms existing within a given cluster, and with the cluster possessing close and fruitful ties to a major university complex. Significant doubts can be raised as to whether Cape Breton has a sufficient number of high technology firms to effectively establish a number of high technology clusters as well as a university of sufficient size and scope. On these points the Brown Report is underdeveloped. Indeed, the Report's stress that high technology itself and public administration will be growth clusters belies a limited appreciation of the cluster concept. These can clearly be fields of strategic concentration but they are not clusters; a number of clusters, however, could form within each field. The formation of clusters, though, is not a given. This requires a critical mass of private sector firms, precisely the forms which are limited in number in Cape Breton; and one firm cannot comprise a cluster. In similar vein while UCCB is crucially important to the future of Cape Breton and while it has been making an important contribution to the technological, entrepreneurial and intellectual foundation of the Island, one can nevertheless query whether UCCB alone can provide the Island and its developing economy with all the university resources which they require.

It is at this point that the interconnectedness of the provincial and regional economies and societies come back into consideration. Though these interrelationships can weaken federal and provincial initiatives to advance a Cape Breton centred development strategy, these linkages can also be integral to the development of high technology clusters. These clusters, though, may very well have to be provincial or regional in scope in order to gain such critical mass as to be viable. Similarly, the relationship between firms and universities may have to be provincial or regional. Cape Breton-based firms may be called upon to interact with other Nova Scotian or Atlantic Canada universities just as UCCB can develop as a resource available to firms far beyond Cape Breton's borders. All this, however, will necessitate the establishment of a development strategy that extends beyond the borders of Cape Breton. The nature of the "new economy" and of cluster theory as a developmental approach to that economy may require the reinvigoration of provincial and regional planning, long the mandates of the provincial Department of Economic Development - now the Economic Renewal agency - and ACOA. In seeking to find ways and means to promote Cape Breton social and economic development we may simply be back at the position that the security of Cape Breton is dependent on the economic well-being and development of Nova Scotia in particular and Atlantic Canada in general.

ECBC, ECONOMIC DEVELOPMENT, AND THE FUTURE

As ECBC struggles to define a new approach to regional development it must be prepared to address and resolve the various problematics which it will confront. There is nothing unique to this dynamic; any development strategy which any development agency has ever initiated has been replete with controversies respecting the strengths and weaknesses of the particular approach selected.

For all of the problematics which the Brown Report approach to Cape Breton regional development entails, however, it must be noted that a variety of significant opportunities also present themselves. While a policy orientation predicated on public administration, tourism and high technology and related services will mean disappointment to some, it will also privilege others. Clearly the socio-economic losers in such a scenario will be those involved in the traditional industries of steel and coal, as well as of agriculture, forestry and fishing. Of course, the degree of loss, of displacement, will not be uniform across these sectors and it is possible that certain components of these sectors may flourish in the future - such as value-added food processing or speciality steel production - but the general thrust of the economic history of this region over the past 30 years is unmistakable. These industries will not form the foundation of Cape Breton's economy in the 21st century.

On the contrary, however, should ECBC struggle to support and operationalize the policy directions outlined in the Brown Report, and should the promise of this approach begin to be realized within Cape Breton, then certain social groups will likely benefit in particular. Economic development is not neutral, it does not bestow wealth, prestige and power equally across all actors in society. Rather, differing forms of development will benefit differing social groups. It is intriguing to speculate on the types of groups which will likely succeed under the "new economy" envisaged by Brown and ECBC. Apart from the entrepreneurial interests involved, it seems likely that the social groups which will predominantly benefit will be women, the better educated and the young.

Women can be highlighted as strong potential beneficiaries for the prioritized industries are "non-traditional" industries and it is precisely these types of industries in which women have made significant inroads in past decades. In contrast to the steel and coal industries in which women comprise only a small proportion of labour, women comprise significant numbers of the federal and provincial public services just as they form significant proportions of those involved in the tourism and craft industries. Likewise, as the jobs of the "new economy" will be highly reliant on the manipulation of language and information, on computer literacy, and an appreciation of high technology and its applications to business and government, then those with an advanced education will be privileged over those without. Educational capacity, in turn , will not be limited to the traditionally male dominated disciplines of science and technology, but will also derive from familiarity and competency in the arts and social sciences. To borrow from Robert Reich, the leading industries of the future will be those requiring the work of "symbolic analysts" - and symbolic analysis is predicted on an advanced education, the type of human resource which roughly equal numbers of women and men now seek to obtain through post-secondary training.

In turn, a stress on education will tend to privilege the younger over the older. This is so simply because the younger tend to be better formally educated than the older. The promotion of access to community colleges and universities over the past three decades has resulted in an ever increasing educational capacity within Canadian youth. The Canadian workforce is better educated now than at any time in the past, and the formal education possessed by young Canadians has never been higher. The great tragedy witnessed in Cape Breton and throughout the Atlantic region is emigration, the "brain drain", as young, well-educated men and women move away from the region to Ontario, the West and the United States in search of employment commensurate with their desires and capabilities. These individuals represent amongst the best educated persons in the region and their loss is crippling to Cape Breton in particular and the region in general, just as their reception in other locales is a tangible socio-economic gain, subsidized by Atlantic Canada. A developing Cape Breton economy geared to government services and high technology and related services would serve to staunch this bleeding, providing solid reasons for the young, well-educated to remain on the Island and to thrive there.

CONCLUSION

As Cape Breton confronts the dawn of the 21st century we witness the initiation of yet another approach to regional development; another chapter of a 30 year saga is about to be written. Over this time period we have observed both continuity and change. Continuity in that the economic plight of Cape Breton has remained a serious cause of concern for both federal and provincial governments as well as for the inhabitants of the Island. Continuity also in that over these decades, federal and provincial governments have been committed to state-directed regional development strategies. While the rationale for such commitments vary from an ideological belief in the role of the state to provide for the socio-economic needs of Cape Breton to the partisan electoral benefits to be gained through such initiatives, the reality of this continued interest in Cape Breton has made regional development policy one of the most fascinating public policy matters affecting the Island.

Within such continuity, though, there has been substantial change. Development initiatives have evolved from being designed to support the traditional industries of steel and coal, to those meant to encourage the in-migration of large scale heavy industrial plants. Development initiatives in turn moved to focus on the promotion of small business and local entrepreneurialism. Related to this was active support for ventures in the fields of agriculture, forestry, fishing and tourism. From here the orientation toward development shifted yet again to being one centred as much on the development of human capital as on the promotion of relatively small-scale capital projects. And now, of late, there has been yet another recalibration of focus. Apart from a desire to buttress the local economy with the strength of permanent public service employment there is also stress on the promotion of skills and industries affiliated with the fields of high technology and related services. Through this orientation one can observe regional development policy-makers and programme administrators reflecting the emerging dynamics of contemporary thinking in both this country and abroad respecting the best modalities of achieving economic and regional development.

The challenges facing Cape Breton are great. A small Island on the east coast of the country, the supposed periphery, struggles to overcome terrible economic and social burdens and preserve, strengthen and invigorate a society which is in its own manner distinct. As this challenge is addressed it is noteworthy that the concept of "periphery" becomes strained. Contemporary thinking regarding regional development in Cape Breton is hardly peripheral, is hardly marked by conceptual understandings which are "parochial" and "out of the mainstream". Rather, current development initiatives are geared directly to certain of the leading theoretical approaches to economic and regional development extant in government, business and academia within the western world. In this respect the success or failure of this most recent Cape Breton approach to regional development is important not only to the citizens of the Island but to all those interested in the theory and practice of regional development. Far from being on the periphery, Cape Breton is, in its own way, a player at centre stage of a fascinating social, economic and political drama. The future is uncertain, of course, but such has always been the history of Cape Breton and the development of regional development.

NOTES

1. James Bickerton, Nova Scotia, Ottawa and the Politics of Regional Government (Toronto: Univ. of Toronto Press, 1990), pp. 196-97.

2. Ibid., pp. 198-99.

3. Only in the fall of 1994 has the corporation reintroduced the manufacture of slab casts for construction purposes to its line of production.

4. Sydney Steel Corporation, Financial Statement, 1994.

5. Bickerton, pp. 292-95.

6. See Cape Breton Development Corp., Annual Reports, 1965-1993.

7. Ibid., 1989.

8. Ibid., 1993, p. 4.

9. Bickerton, pp. 248-49.

10. Ibid.

11. R.E. George, "The Cape Breton Development Corporation", in

A. Tupper, G.B. Doern, eds., Public Corporations and Public Policy in Canada (Montreal: IRPP), pp. 369-72.

12. Bickerton, pp. 292-95.

13. Ibid., p. 294.

14. Donald J. Savoie, Regional Economic Development: Canada's Search for Solutions, 2nd. ed. (Toronto: Univ. of Toronto Press, 1992), Chapter 5.

15. Ibid., pp. 88-93.

16. Ibid., pp. 102-03.

17. Ibid., p. 103

18. See The Chronicle Herald, "C.B. Promotion Agency Unveiled", 07 December 1985.

19. See The Cape Breton Post, "Mayor Welcomes New Development Agency", 07 December 1985.

20. Ibid., p. 115.

21. Ibid., p. 125.

22. Canada, Government Organization Act, Atlantic Canada, 1987, Statutes of Canada, 1988, Chapter 50.

23. Canada, Report of the Enterprise Cape Breton Assessment Team: From Dependence to Enterprise. Prepared for the Minister responsible for the Atlantic Canada Opportunities Agency. February 1991. (Known as the Brait Report), pp. 59-66.

24. Ibid., pp. 63-67.

25. Ibid., pp. 67, 73-76.

26. Ibid., pp. 78-80.

27. Ibid., pp. 96-99.

28. Ibid., pp. 98-100.

29. See The Chronicle Herald, "Agency Reviews Mixed", 20 March 1991; and The Globe and Mail, "Report Blasts ECB", 20 March 1991.

30. See The Globe and Mail, "New Name, New Focus", 05 July 1991.

31. See Enterprise Cape Breton Corp., Annual Report 1990, p. 14.

32. Ibid., pp. 6-8; and Annual Report 1990-91, pp. 8-9.

33. Ibid., Annual Reports 1989-1991.

34. Ibid., Annual Reports 1990-91, p. 9.

35. Ibid., p. 2; and Annual Report 1991-1992, p. 5.

36. Ibid., Annual Report 1991-1992, p. 19.

37. Ibid., pp. 2-3.

38. Ibid., pp. 9-11.

39. The Chronicle Herald, "ACOA Slammed in Report", 04 December 1991.

40. Personal interview, Enterprise Cape Breton Corp., summer 1994.

41. Ibid.

42. The Cape Breton Post, 26 February 1992.

43. Ibid., 12 June 1993.

44. Ibid., "Jobs", 04 December 1993.

45. Ibid., "ECBC Swallows ACOA", 08 July 1994.

46. C.B. County Economic Development Authority, Strategic Economic Action Plan, August 1994. Principal author, Keith Brown, Executive Director, C.B. County Economic Development Authority. Hereafter referred to as the Brown Report.

47. Ibid., pp. 7-9.

48. Ibid., pp. 3-5.

49. Ibid., pp. 3, 26-27.

50. Ibid., pp. 3, 5.

51. Ibid., pp. 31-33.

52. Ibid., p. 33.

53. The Cape Breton Post, "Dingwall Delivers Funding", 13 August 1994.

54. Ibid., pp. 35-37.

55. Ibid.

56. Ibid., pp. 37-40.

57. Ibid., pp. 45-57.

58. The Cape Breton Post, 13 August 1994.

59. Personal interview, ECBC, summer 1994.

60. The Cape Breton Post, "MicroNav Technology Unwanted", 08 April 1995.

61. Michael E. Porter, The Competitive Advantage of Nations (Boston: Harvard University, 1993), Chapter 4.

62. Ibid., pp. 140-44.

Published by the Louisbourg Heritage Society
ISBN 1-896218--07-5
© Louisbourg Institute
Extracted from the Proceedings of the Cape Breton
in Transition Conference, October 20-21, 1995