Bus Ride to Prosperity
by Margret Kopala

Published in the Ottawa Citizen, February 17, 2009

A recent study cites Ottawa as the prototype for Ontario’s new knowledge economy but Premier Dalton McGuinty might have saved taxpayers a few million dollars by simply noticing that IKEA has announced plans to expand its Pinecrest premises into North America’s largest.

After all, who is buying Ikea product, if not the 40% of Ottawans who comprise its civil service, high tech, think tank and other members of the knowledge economy’s ‘creative classes’? More to the point, he might have asked why is a Swedish furniture maker gobbling up this lucrative market and not an Ontario furniture maker?

He won’t find the answer in the $2.2 million study “Ontario in the Creative Age”. Authors Roger Martin (Dean, Rotman School of Management), and former Carnegie Mellon professor and author (The Rise of the Creative Class) Richard Florida dismiss manufacturing as best left to third world countries - never mind Ontario’s forestry and auto sectors are in free-fall and what that means for its workers.

Their answer to Ontario’s languishing economic fortunes instead builds on Florida’s analysis of the late-1990s tech boom in the U.S. This concluded that the Internet generation now populating the upscale workforces of Silicon Valley wanted, as Steve Malanga observes in a 2004 edition of City Journal, “to move their hot businesses into cool neighborhoods with architecturally rich traditions where they installed basketball courts in their new offices, held meeting with their dogs prancing about and hired young, single workers like themselves, who worried more about a city’s music scene than its personal income tax rates.” Throw in a few Mocha Frappuccinos and Casual Fridays and Ottawa’s eligibity for membership in this exclusive club becomes apparent though, to be fair to Martin/Florida, they advocate earlier and higher education as the means to achieving this enviable lifestyle, not just recalibrating city street-scapes.

No, if Mr.McGuinty hopes to salvage Ontario’s manufacturing sector, best he cast an eye westward where Manitoba’s transportation equipment manufacturing sector is proving the old adage that if you build a better bus the world will beat a path to your door.

A darling of the Toronto Stock Exchange even in these downturned times, New Flyer Industries is headquartered in Winnipeg where with three manufacturing facilities (2 in Minnesota) it employs 2,000 people and is the leading manufacturer of heavy-duty transit buses in North America. On January 15, it announced new orders totaling $2.78 billion.

The secret of New Flyer’s success? “It’s operating a niche business,” says Peter Holle, President of the Frontier Centre of Public Policy in Winnipeg. “And it is offering a product that’s in the right place at the right time. Urban transit is a big market.”

The history of New Flyer dates back to the 1930s but it wasn’t until the arrival of Dutch immigrant, Jan den Oudsten that real innovation occurred. His engineers adapted innovative ideas from Holland, including development of North America’s first articulated 60’ Low Floor bus and its first hydrogen, natural gas and diesel-electric fuelled hybrid buses. All are now in high demand by North America’s rapidly greening urban transit systems, including Ottawa’s.

It also developed good political instincts. Manufacturing facilities in Minnesota meet the longstanding “Buy America” requirement in U.S. government procurement. And though currently U.S. owned, New Flyer’s headquarters and manufacturing base remain in Winnipeg because high capital investment, a streamlined network of suppliers and an efficient workforce make it worthwhile.

Contrast this with Ontario’s forestry sector where a punitive tax regime discourages capitalisation and wood product value is added in the U.S., rather than in Canada. Similarly, consider the failure of its auto sector to find its own niches.

The lessons from Manitoba are probably best revealed in the growing consensus about the causes of the global recession. These, it is becoming clear, resulted from overinvestment by the western world’s social and financial engineers in residential housing at the cost of productivity-boosting capital investment. In the end, lifestyle factors are the byproduct of a sound economy, not its primary instigator.

Martin/Florida are neither financial nor social engineers and education is after all an economic as well as a social good. Further, corporations like Ikea (high concept furniture) and New Flyer (green products) boast elements of the new economy. But education is only a partial answer, one that will not flourish without the fundamentals of wealth creation that produce better widgets, mousetraps, buses and furniture in the first place.

MARGRET KOPALA’s column on western perspectives appears every other week.

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