Second wave of COVID-19 lockdowns will test economic lessons of pandemic

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Economic Development Minister Mélanie Joly says the pandemic has taught us a lot about the need to quickly get government lifelines for business from the political mountaintop to the ground. It’s a lesson that will be put to the test in the second wave of COVID-19 lockdowns.

“We want to use what we’ve learned from the pandemic, and make sure that this doesn’t go to waste – use it for the reopening and relaunch of the economy,” Ms. Joly said in an interview on Wednesday.

“We decentralized. We came closer to the ground. We really adopted an approach of proximity with businesses,” she said. “We can’t go back. And we really don’t want to go back.”

That increased proximity to Main Street – the small businesses that have been particularly hard-hit by this unique recession – elevated the role of Ms. Joly’s department. It oversees the country’s network of 57 regional economic development offices, which have emerged as key cogs in the government’s multibillion-dollar economic support efforts.

The half-dozen regional development agencies – long dismissed by cynics as bastions for pork-barrel politics – have shown their value in getting money directly into the hands of local small businesses when they desperately needed it. They have also increasingly served as go-betweens to help businesses tap into the bewildering array of supports from other government departments.

“It’s really [become] a one-stop shop,” Ms. Joly said.

This evolving local delivery system will be a vital one as we weather the latest COVID-19 storm and look toward an economic recovery in the coming months – a recovery that will lean more heavily on government help than any postrecession period in modern history.

The economy’s well-being after the pandemic will depend a great deal on the ability of government supports to reach the small-business segment of the economy that has been hit unusually hard by this crisis. Staving off a surge of small-business failures is crucial if the country is to avert the kind of “scarring,” as economists call it, that would deliver long-lasting damage to the economy and seriously impair the recovery.

And the clock is ticking, especially for businesses in the hardest-hit sectors – tourism, restaurants, entertainment – that face the brunt of the second-wave lockdowns. Ms. Joly said her government is working on introducing more targeted aid “in the coming weeks” to help bridge these sectors across the latest lockdowns, although she declined to be more specific.

“We all know that time is of the essence,” she said.

What we can say is that the Economic Development Ministry is directly responsible for putting more money into the hands of Canada’s small entrepreneurs – much more – than it did before the pandemic. Its normal budget of $1.3-billion has swollen to $3.3-billion – including oversight of the $2-billion COVID-19 Regional Relief and Recovery Fund – to provide micro-credit financing as well as technical assistance to small businesses and start-ups.

And whatever you think of Ottawa’s ability to deliver on its business supports, it’s hard to argue with the bottom-line numbers in terms of keeping small businesses breathing. Business insolvencies in the 12 months through November were actually down significantly from the year earlier. However, the same data also show that insolvencies in the battered retail and arts/entertainment/recreation sectors are on the rise.

We can also safely say that the regional economic development system came into this crisis needing a lot of work.

First, there’s that pork-barrel history. The regional development programs have gained an unfortunate reputation over the years as convenient systems through which a government minister could deliver funding for a high-profile pet project that would curry favour or reward supporters in certain regions. The result has been that they haven’t been taken particularly seriously in Ottawa circles as drivers of economic policy.

Second, this entire delivery system has an alarmingly eastward tilt. In Atlantic Canada (population: 2.4 million), the federal government operates 28 regional development offices; in Western Canada (population: 12.1 million), it has just five. (It has 11 offices in Quebec and 10 in Ontario.)

Ms. Joly came into her job after the most recent election with a recognition that Western Canada was woefully underserved – and the pandemic has underlined a powerful demand for those services throughout the West, felt most keenly in Alberta. The government has announced plans to expand the regional development presence across the Prairies, and to split British Columbia off with its own regional agency.

Ms. Joly recognizes that this is more than just an economic need in the postpandemic recovery; it’s also a national-unity need.

“We need a vision of federalism that makes sense to people,” she said. “We have to make sure that we’re much more rooted in the reality of people in the West, that we’re closer to the ground.”

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