The 4 Things You Can Do With Money
Discussing the difference between sucking and blowing in the film business
Understanding the Difference Between Spending and Investing in Nova Scotia
Recently, the Nova Scotia government announced a new incentive to attract film productions to the rural regions of our province. Predictably, social media lit up with criticism, arguing that these funds should be "spent" on pressing needs like housing, healthcare, homelessness, and highways. This reaction, while understandable, suggests a fundamental misunderstanding of the difference between spending and investing.
Who Am I To Talk About This?
By the early-1990’s I had developed an unusual mix of skills with a degree in Finance and a couple major label record and publishing deals. It put me at the creative crossroads where art and commerce meet. As weird as it seems my conclusion was that I should walk from all this and become a deep-sea treasure hunter. And, in some ways that’s exactly what happened, which I can explain in other posts, but there were some detours along the way.
Because of this odd mix of skills I was fortunate enough to be hired by Dr. John Savage’s Liberal government to set up… something… some sort of incentive program to attract film and TV to Nova Scotia. I spent the next two years doing economic models and arguing - ultimately successfully - with the Nova Scotia Finance Department, the Federal Finance Department, and CRA, for a labour-based, industrial, tax credit to replace the hodgepodge of funding pots that existed for film and TV investment.
It worked. Within a year the Nova Scotia Film Tax Credit took the provincial industry from about $6m a year to $60 million.
Here’s a handy timeline history from The Coast
By the second year, the Federal Government copied our program line for line and replaced its clunky old programs with an exact copy of our tax credit. Soon other provinces and states caught on, but for more than a few years Nova Scotia had a true competitive advantage that even shook the power brokers in LA. to the point, that they ran ads and billboards to stop “runaway” productions to Nova Scotia. It was enough to establish an industry beachhead that brings in tides of cash to this day.
I also have master’s degrees from the London School of Economics, HEC Paris, and NYU Stern School of Business where I studied Finance under Aswath Damodaran.
That’s all to say I should be able to say something smart about all this. So here it is. Folks have to understand there are only four things you can do with money and we all should do a little of each.
The Four Things You Can Do with Money
To get to the heart of this issue, it's important to understand that there are only four things you can do with money: spend it, save it, invest it, and give it away. Individuals, households, and governments alike manage their budgets by balancing these functions based on their priorities and the state of the economy.
Spending: This is money used to buy goods and services for immediate consumption. In government terms, spending covers essential services like healthcare, education, and infrastructure. These expenditures are crucial for maintaining the quality of life and ensuring the well-being of citizens.
This is made somewhat more complex because dissembling politicians tend to call all spending “Investing” and grouchy citizens tend to call all investing “Spending” while opposition parties and pundits call it all “waste”.
Saving: This is money set aside for future use. Governments save by building reserves, which can be used in times of economic downturns or for unforeseen expenses.
Investing: Investing involves putting money into projects or initiatives that are expected to generate returns over time. For governments, this means economic development programs that attract businesses, create jobs, and stimulate growth. The incentive to draw film productions to rural Nova Scotia is a perfect example of this. It aims to bring in outside capital, create employment opportunities, and promote regional development.
Giving: This is money given away with no expectation of return, such as grants, donations, and welfare programs. While essential for supporting those in need, it does not generate a direct financial return.
Investing in Economic Development
Nova Scotia, like most provinces and states, traditionally invests about 2% of its budget in economic development. This strategic allocation is designed to stimulate the economy by attracting businesses and fostering innovation. Economic development initiatives, such as incentives for film productions, are investments that yield long-term benefits by creating jobs, boosting local businesses, and increasing tax revenues.
The criticism that funds for economic development should be redirected to other pressing needs, like healthcare or housing, overlooks the fact that a healthy economy can ultimately provide more resources for these very needs. By attracting film productions, we are not just "spending" money—we are investing in our province's future. The influx of film crews and associated industries will bring in new money, create jobs, and promote Nova Scotia as a vibrant place to live and work… and visit.
A Balanced Approach
Governments, much like households, must balance their budgets to cover immediate needs and plan for the future. In Nova Scotia, healthcare consumes about half of the annual operating budget, reflecting its importance. However, without investing in economic development, the province would struggle to generate the revenue needed to support such significant spending in healthcare and other critical areas.
A Better Track Record
It's worth noting that the current government's economic development strategy shows a much better track record compared to some of the debacles of past administrations. For a GREAT review of some of the past disasters I highly recommend these books:
Excessive Expectations: Economic development in Nova Scotia to Confederation
Bootstraps - Economic Development In the Maritimes
Backwater - Nova Scotia’s Economic Decline
Visiting Grandchildren - Economic Development in the Maritimes
And there’s one more unintentionally funny one I have around here with entries on every economic development mistake imaginable from coal mines to sports cars, but I can’t remember the name of it right now… any ideas?
Edit! With help from a reader, I got the book: Failures and Fiascos by Dan Soucoup
Thoughtful investments in IP (Intellectual property) sectors like film production are part of a broader strategy to diversify the economy, reduce dependency on traditional industries, and create sustainable growth. You may have noticed that economies are increasingly built on the buying and selling of more ethereal things like apps, ideas, and entertainments, rather than hard goods.
The Difference Matters
Understanding the difference between spending and investing is crucial for informed public discourse. Investing in economic development, like the incentive for film productions, is not a diversion of funds from essential services but a strategic move to enhance the province's economic health. By fostering growth and attracting new industries, we create a more robust economy that can better support healthcare, housing, and other vital services.
In short, a balanced budget isn't just about spending wisely—it's about investing smartly to ensure a prosperous future for all Nova Scotians.