Economy Lab

The Maritimes have no business in show business

The Globe and Mail

Scenes from 'The Bridge' are shot in downtown Toronto in this 2009 on May 17, 2009. JENNIFER ROBERTS FOR THE GLOBE AND MAIL (JENNIFER ROBERTS FOR THE GLOBE AND MAIL)

A few months ago I wrote a column asserting my support for the New Brunswick government’s decision to eliminate its film development tax credit program. I have been writing columns and blogs on economic issues in Atlantic Canada for more than a decade and on occasion people disagree – sometimes strenuously – with the positions I take on economic development-related policy decisions.

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But I was unprepared for the level of criticism that came my way because of my support for the government pulling the plug on the film development tax credits in New Brunswick. I received dozens of poignant e-mails suggesting I was mistaken, and that the decision would crush an important economic engine for the province.

In fact, my opinion was firmly based on the economic impact of the film industry in New Brunswick. The 2008 Input-Output tables published by Statistics Canada contain detailed information on the economic impact of more than 280 industries at both the provincial and national level. With the I-O tables, Statistics Canada traces how the typical dollar is spent in each of these industries.

The film industry falls into the following category: Motion Picture and Video Production, Distribution, Post-Production and Other Motion Picture and Video Industries.

In 2008, this industry generated a negative direct gross domestic product (GDP) in New Brunswick. You didn’t read that wrong. For every dollar of industry output, the GDP created in New Brunswick was a negative $0.16. In other words, as a result of the direct economic activity for each dollar of output, the economy shrank. No other industry in the province generated a negative direct GDP in 2008.

Driving this negative GDP was the fact there was 76 cents worth of government subsidies on products and production in the industry for every dollar worth of direct output. In addition, each dollar of industry output generated only 14 cents of direct wages and salaries in New Brunswick.

It is true there were some positive indirect impacts. But even with indirect economic activity, total subsidies rose to 88 cents and the total GDP was only 9 cents per dollar of direct output.

I am not suggesting the economic activity just evaporated. At the national level there was 52 cents worth of GDP created from that dollar of direct industry activity in New Brunswick and there was 46 cents worth of international imports.

In other words, New Brunswick government subsidies seem to be doing a nice job propping up the film industry, mostly in Ontario and, likely, Hollywood too.

Nova Scotia’s film industry has similar characteristics. For every dollar of direct output, the industry creates a negative 24 cents in direct GDP. For each dollar of direct output, there is 76 cents worth of direct government subsidies. At a national level, however; Nova Scotia’s film industry generates a positive 46 cents worth of GDP per direct dollar of output and 52 cents worth of international imports.

Newfoundland and Labrador, Quebec and British Columbia provide significant subsidies to the film industry as well but at least the industry in those provinces generates positive direct GDP.

It turns out that Ontario’s film industry has relatively low subsidies (10.7 cents per dollar of output), much higher in-province GDP creation and much lower international imports.

How can any provincial government justify investing millions of taxpayer dollars into an industry that is generating very little (and even negative) economic activity?

My critics provided me with two reasons. One, the film industry is telling local stories and strengthening local culture and two, it is building a local, creative culture that brings broader benefit to society.

If the film industry is really about local story telling and about fostering local creativity, it should not be leaking the vast majority of economic output to other jurisdictions.

The New Brunswick government is launching a new program focused on supporting local storytelling by local film makers. This program is one I support.

Using large government subsidies to bring in high salaried actors from other jurisdictions, rent equipment from far off places and access a supply chain outside New Brunswick doesn’t make economic sense.

Ethel Merman tells us “There’s no business like show business”. Except in Ontario, there doesn’t seem to be much business in show business either.

David Campbell is an economic development consultant and columnist based in Moncton, New Brunswick. He also authors a daily blog on economic issues in Atlantic Canada which can be found at www.davidwcampbell.com.

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