Written by Curt Peters (a NYC (New York City) Hedge Fund Manager)

(Rebuttal at Bottom)

If you wish to improve the Valley, you must understand the economic structure of the Valley. It’s a bit more complicated than folks suspect. Once we understand the structure, then we can set upon economic solutions which are positive instead of actions which are self-defeating.

There are four major economic activities of importance in the Valley, two are export industries and two are subsidization industries. Except for a few niche industries such as commercial fishing, all the other economic activities exist as service industries to these big four. Take away the big four, the service industries cease to exist (home furnishings, accountants, lawyers, etc) or are too small to survive on their own (tourism). It’s not realistic to think that one of the service industries (tourism) can be made into anything more than a breakeven operation – the Valley is just too isolated from major population centers and has little competitive advantage over other regions closer to population centers.

The two big export industries, as you know, are agricultural products and forestry products. The agricultural products industry, while seeming to be doing well in terms of grains/oilseeds exports, is actually not doing very well for the Valley. The reason is that this industry in the Valley never migrated up the value-chain from primary-producer exporter to processed-products exporter. Thus, as the natural consolidation (fewer farmers, bigger farms) of the industry occurs due to greater efficiencies in technologies, there are no businesses starting up to absorb all those ‘laid off farmers and their sons’ in processing the ag products into finished products for export. Where are the cured meats exporters? The premium cheese exporters? The premium mustard exporters? Instead, much of that excess skilled labor from the farms moved out of the Valley to AB/SK to work in the oil/gas industry. You lost very good human capital as a result, human capital which is very hard to replicate.

The Forestry industry has done better than the ag industry because it migrated from harvesting trees to manufacturing lumber to manufacturing OSB products. That is a move up the value-chain. However, note that it was not Valley entrepreneurs who established the OSB plant nor do Valley entrepreneurs own the plant. It is owned by an outside-the-region entity, meaning that all the profits it captures leave the Valley. The Valley is only able to capture the wages of the labor employed at the plant. In other words, the Valley has been economically colonized by an outside player in the forestry industry. There are spin-off service enterprises from this plant, but the fact remains that Valley residents are not capturing all of the export earning this plant is producing. Contrast that with the locally owned lumber manufacturer. The next step up the value-chain with forestry is to create finished products for export such as furniture.

The two subsidization industries are healthcare and aboriginal affairs. The former extracts revenue from the Province, the latter from the Federal government. Some folks might like to include the education sector in with the healthcare sector as similar, and while on the surface they seem similar, they are not. The reason is that education is primarily about making people productive. Whereas healthcare has evolved into keeping unproductive (retired, sick, old, unworking, etc) people alive – long gone are the days when most hospital beds were full of workers being repaired to go back to the mines/fields/factories. The Valley has an abnormal number (compared to Canadian averages) of old retired people. Most of these people are simply ‘enjoying their retirement’, they are not involved in serious activities necessary for the functioning of the community. That’s normal for retired folks, but when they are quite ill this means that to keep them alive someone has to pay for all that healthcare – and that is where the Province comes in as the funder. This creates an industry of healthcare workers whose primary function is to keep unproductive people alive. Sorry for the callousness, but we must be hardnosed about this. If the Valley had to fund this out of its own export earnings, it could not. Thus, this industry is totally beholden to the ability and willingness of the Province to pay for it. Furthermore, this industry requires sick people in order to exist, and that generally means a lot of old people since they are the sickest. Unfortunately, once the current crop of old folks in the Valley die out in the next 10 years, there aren’t great numbers of working age folks to retire and fill their shoes. Thus, you will require a great deal of working age folks who are sick by way of having very unhealthy lifestyles (food choices, alcohol, drugs, etc), as a source of revenue for this healthcare industry. Yes, the existence of all those healthcare workers in your Valley who contribute to your local economy is necessitated by having a supply of suffering unhealthy people. Even with all the healthcare money being spent, only the wages component is being captured by the Valley - all the equipment, the supplies, etc had to be imported. Perhaps it’s obvious that a large healthcare industry in a rural region is a signifier of local strategic failure, not of local strategic success.

Aboriginal affairs is a subsidization industry very similar in operation to the healthcare industry, though the payer is generally the Feds not the Province. This industry has a few unique peculiarities to it, but the general idea is that aboriginals act as a pass-through-entity for monies which are captured by the local Valley service industries. As such, many businesses have expanded to find ways to get aboriginals to part with their meager monies – gambling halls, liquor, fast-food establishments, illegal drugs, band accountants, reserve housing construction, etc. It’s a growth industry, and like healthcare, it requires a dysfunctional intermediary to operate. Unlike healthcare, this industry creates many negative side-effects - notably it creates reams of drug addicts, homeless, alcoholics, abused children, violent crime, high insurance costs, policing costs, etc. Yet, in turn all those dysfunctions create further spin-off service sectors (policing, government housing, welfare, addiction centers, etc) to keep the dysfunction at a low boil or at least less visible for the townsfolk. It’s a win-win for everyone except the aboriginals – well the aboriginals feel like they are doing well in the heat of the moment. Obviously, this industry is similar to being paid to poison your own soil – there is no good ending for it, though in the short-term some will get rich. The Valley has hit the natural limit on this industry because the crime it spins-off has overwhelmed the Valley’s ability to pay for sufficient policing to keep the crime in check.

How could things be economically different for the Valley? We’ve already hinted at ways the agriculture industry could change by advancing up the value-chain into premium meats, premium cheese, premium mustards, etc. There are also agriculture technologies which could be manufactured in the Valley for export. For example, there is a Hutterite grain-handling equipment manufacturer near Hodgson, MB (middle of nowhere, no railway, Indian Reservations, etc) which does very well. Why did no Valley business create this sort of enterprise? Well, one of the problems is that the Valley elite (wealthy) are more interested in recreation for themselves personally than in creating new businesses which benefit the Valley. For example, the current craze in the Valley is ATV and snowmobile trails. It all sounds innocent enough until you start to calculate the economics of it. The cost of the trails is minimal, but the cost of all the ATVs/snowmobiles is massive – there has probably been more than $30 million of these machines imported into the Valley, and that means that $30 million was not available to be used for creating businesses, instead it left the Valley for a bunch of toys. The Valley doesn’t have $30 million to waste on toys, every dollar used to import something into the Valley is a dollar that had to be earned by one of the four industries listed above in the first place. It is essential that the Valley choose to promote recreational activities which have low cost and are positive for the participants in terms of health. Snowmobiling does not fit this criterion. As an inverse of ‘Field of Dreams’ - Don’t build the ATV trails, they won’t buy ATVs.

Hutterites have some cost advantages over non-Hutterites because the colonies operate as a corporation where all the members are not employees but rather owners – so their labor costs are much lower. Yet the Valley has some advantages of its own which are mostly not being utilized. Firstly, the railway provides a low-cost transport link to anywhere in North America – which is why the LP OSB plant is where it is. The Valley should be using that railway to export other manufactured products – some of which were mentioned above such as cured meats (prosciutto, salamis, chorizo, Spanish ham, etc), premium cheeses (asiago, pecorino, brie, gouda, beemster, etc), premium mustards (Dijon, wholegrain, etc), premium honeys, etc. The Valley also has a large surplus of unskilled labor – who can be put to work at minimal labor costs. An alternative method of operating the aboriginal subsidization industry is to use the Federal subsidies to subsidize the Valley’s export industries in order to out compete other regions. For example, Indian Reservations provide free housing for residents. That’s a huge cost savings for a person’s life. That means a reserve resident needs much less take-home pay to live at the same level of standard of living as a non-reserve resident. If reservations residents are engaged in the workforce as skilled workers, this brings down the overall cost of labor in the region, which gives exporters from the region a cost advantage over competitors from other regions. Even for service industries such as housing construction, employing on-reserve aboriginals is a big cost saving – have a bus/van transport the workers from/to the reserve each day.

The education industry of the Valley is a mixed bag of positives and negatives. The technical training in the trades is ostensibly a positive as it provides a gateway to skilled employment – yet it comes with a few drawbacks which are not immediately apparent. Notably, training which is typically done on-the-job by the employer has now been off-loaded onto the education system. That’s a subsidization for employers, and notice which particular sectors got this subsidization in the Valley: cosmetology, hospitality (food) sector, automotive and diesel-engine repair shops, construction (carpentry and electrical), marketing (graphic design, etc), and forest management. Almost all of these are service sector industries. There is no technical training in anything to do with agriculture, particularly something that would help the Valley move up the value-chain in agriculture products. There is also no training that assists with value-chain progression for forestry. There is welding training, but again this is quite a generic skill that can be learned on the job and it doesn’t drive innovation in manufacturing for the Valley. It’s almost as if this set of technical training at SVRSS was created for the sole benefit of the Swan River service sector business owners – to subsidize them by offloading their training function onto the school system. It gets worse though, since students who are enrolled in these technical programs must take the technical classes, they are unable to (or just don’t) take classes in topics which might grow their knowledge breadth and problem-solving skills. Thus, this creates a cadre of graduates who can turn-a-screw but have no other interests above drinking beer and watching hockey. How can one expect these sorts of graduates to start making premium cheese operations when they have no knowledge of Western Civilization. That’s the big difference between blue-collar workers in Canada versus in Italy – one group is just a pair of hands, the other group has been schooled in their civilization and developed serious problem-solving skills, and so takes pride in advancing up the value-chain into more and more premium products. To be fair, there is massive amount of room for improvement in the ‘academic’ section of SVSD, in addition to the changes in the technical education programs.

The Valley education program does and should promote as much remote-learning as possible, but it also should be very careful to promote those programs which have maximal benefit to the Valley such as Engineering, Agricultural Science, Industrial Design, etc. Nursing programs of course are helpful, but they are secondary for the reasons stated above. You want to drive value-chain progression, so focus the education infrastructure on that. Let the businesses pick up the slack for training as much of the trades as possible, especially service sector trades. You can provide the in-classroom portion of the training for electrician, plumber, steamfitter, etc., but keep try to make the employers pick up as much of it as possible. Do not become distracted with whatever the latest trend is – aboriginal landclaims advisor, wellness consultant, massage therapy, motorcycle mechanic, etc. To put it another way, copy what is done in Germany and Japan.

Comment(s): Well that was a very well written MOUTHFUL of Valuable Information. I concur, you have OPENED my eyes to seeing things from a very different and obviously 'accurate' perspective than my (previous) rose colored vision allowed me BUT (and there is always a 'but') we NOW live in the INTERNET AGE (or GAMER AGE).

• How many GAMERS want a job (like you described)? My guess NONE!

• How many 'old' people 'enjoying retirement', waiting for death, are to broke to afford your 'luxury meats and cheeses'? My guess 80% of the population!

• Does a GAMER (really) care if Google, FaceBook, Tesla, SpaceX, https://TransParentBusiness.com , 123ABC.com, 'their' Community/Government/Country goes bankrupt and FAILS because they couldn't see 'the writing on the wall(s)' and be prepared and adapt quickly? Well maybe they care about GameStop or http://tgs2.xyz or something similar ... BUT more or less NO! ... Lesson #1 Luckin Story https://youtu.be/KnqQPWD4FJc ... with a FREE coupon, they will crucify you if they hear you are in trouble and they want their FREE stuff before you go under ... thank god like Jesus , 'the business' will get a 2nd life after their death (I mean after bankruptcy). As Jeff Bezso said, "ALL customers are your 1st and #1 customer or they go ELSEWHERE!"

Creating a (plausible) Swan River Valley (Exporters) Development Plan

1. Farmers Growing Grain(s) for Export

   1. • Hard Red Spring Wheat

        1. • Animal feed quality

           • Human Consumption quality (eg. Robin Hood Flour)

      • Barley

      • Canola

      • Flax

      • Oats (for Export ?)

      • Beans

2. Farmers Raising Cattle for Export

3. Farmers Raising Hogs for Export

4. Farmers Raising Chickens for Export

5. Loggers Cutting Wood for Export

   1. • Spruce logs

      • Spruce lumber

      • Poplar logs

      • Poplar lumber

      • Poplar chips (pulp)

6. OSB for Export

7. Honey Production for Export

8. Animal Feed(s) for Export

9. Food Manufacturer(s) for Export

   1. • Minish Mustards

      • Retail Brand Honey

      • Plumpy'Nut (BUT) for 1st world Countries https://www.nutriset.fr/products/en/plumpy-nut

10. Global Gaming Items for Export

    1. • Gaming 'bunk house'

       • Gaming 'entertainment'

         1. • tournaments

            • game play

            • game creation

            • education

       • Gaming 'story writing & audio'

       • Gaming 'movie scripting and production'

       • a Gaming VC (Venture Capital) Firm (like) eg. https://equityzen.com/ (that would employ 7300 local residents 'in some way, shape or form')

         1. • train Gamers to 'Dig Their Own Well Before They Are Thirsty' https://www.amazon.ca/Your-Well-before-Youre-Thirsty/dp/0385485468

11. Incentivise 'the GAME' ... https://youtu.be/EcMKLwVlpJk?t=3420

12. Swan Valley population data ... https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/page.cfm?Lang=E&Geo1=POPC&Code1=0911&Geo2=PR&Code2=46&SearchText=Swan%20River