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There was an interesting article in the Globe and Mail's Report on Business (Tuesday, June 3, 2008) titled Iceland's Meltdown. This tiny, import-dependent island with a population of 313,000 people, which occupies a land mass smaller that Newfoundland, has recently started a precipitous downward implosion - economically speaking. This tiny country has been coping with sky-high interest rates, a rapidly deteriorating currency and a credit squeeze from domestic banks. All of these circumstances have brought this country to its knees from a financial perspective. On top of this nasty scenario this recent economic powerhouse has had to deal with other shocks such as the global credit crunch, high oil prices and a deteriorating cod industry. Up until a few months ago, I personally felt this was a "best in class" country - smaller than the population of New Brunswick - that we could as a province use to try and emulate. It was built on the back of the aluminium smelter business, which took advantage of Iceland's relatively low cost hydro and thermal power. That has all changed for the worse and quickly.

This week a stunning decreases in year-over-year sales at Ford, General Motors and Chrysler have made it necessary for these once powerful manufacturing behemoths to close manufacturing plants in both Canada and the U.S. In particular a truck plant in Oshawa, where approximately 2,600 jobs were affected, is going to have an adverse effect on Ontario and its economy. Add to this the Canadian dollar at par with its US counterpart wiping out a long term cost advantage Canada had enjoyed for the better part of 25 years in vehicle manufacturing, not to mention all manufacturing.

We now are at a huge disadvantage when we compare ourselves to the Americans - the worlds largest economic consumer.

There are a number of industry analysts and economists commenting that we are sowing the seeds of a hard crash if the current manufacturing trend continues unabated.

This is the tale of two distinct economic economies, commodities which are booming and manufacturing which is collapsing. What happens when the commodity boom subsides and we are left with the remains of what was a world class manufacturing industry?

Jobs in manufacturing create spin off jobs of which some people say are 7.5 per 1 manufacturing job. If we let manufacturing jobs deteriorate further they will probably be gone forever as international companies shift production to low cost countries such as Mexico, China and India. Without a strong manufacturing base the commodity industry won't and can't carry the load as manufacturers constitute 70% of world trade and Canada is a huge net exporter of both commodities and manufacture products.

The Shawn Graham government announced on June 5, 2008 that it is considering tax reform and in essence rebalancing the tax system towards a consumption tax relieving business and citizens from the burden of hefty income tax with a flat tax by 2012. This would bring $500 million in tax savings with $415 million in personal income tax savings and $30 million in corporate tax cuts.

This is a very bold, proactive and innovative approach to surviving in the modern era. This change of direction may just be what the "doctor ordered" so to speak to "rev up" our provincial economy and protect the manufacturing jobs that are still left. Let's get at it Mr. Graham, because this reform will provide hope in what some may deem to be a hopeless manufacturing sector. Income tax reform here in New Brunswick and across Canada might be the single catalyst in reviving a declining manufacturing sector.

Rick Buckingham is president and CEO of Canadian 2 for 1 Pizza Inc. based in Fredericton. He can be reached by e-mail at rbuckingham@nb.aibn.com. His column appears Tuesdays.

Editor's note: David Campbell's column, which ordinarily runs Wednesdays, appeared yesterday by error and under Rick Buckingham's byline.