Why does economics matter so little in Northern Ireland?

Why does economics seem to matter so little in Northern Ireland?  The biggest political debate in the UK’s contemporary history – whether or not to pull out of the European Union – is now taking centre stage in British politics and will stay there for most of the next two years. It is basically about two things: national sovereignty and national economic self-interest. An answering debate is starting in Ireland, initiated, inter alia, by a thought-provoking book of essays, Britain and Europe: The Endgame – An Irish Perspective, published recently by the Dublin-based Institute of International and European Affairs¹.

A key conclusion of the chapter on Northern Ireland, by the economist John Bradley (who has written extensively on both the Northern and cross-border economies), is that NI faces two broad choices in the potentially tumultuous period ahead: one is to muddle along with “agendas crowded by the mistrust, recrimination and divisiveness of history”, bobbing impotently in the wake of decisions taken in London with not a moment’s thought for the province’s particular needs. The other, which it will certainly not take, is to seize the opportunities offered by ‘island of Ireland’ economic synergies (including a common low corporation tax), lessen the cosy stranglehold of the British subvention’s dependency culture, and take the brave, if risky, first steps towards a possible future as a revitalised European region.

In his remarks at the Belfast launch of this book, Bradley elaborated on his thesis. He said that not only Northern Ireland but all the UK’s regional economies (including northern England) would have to face up to how ‘Brexit’ would affect their futures. “Will there be a preference for remaining inside the EU, with its commitment to greater regional cohesion and equity; its evolving social institutions and protections; and (for NI) a benign context within which North-South and East-West problems can be handled? This is clearly Scotland’s choice.”

“Or will there be a preference for leaving the EU and embracing the exciting, brave new post-‘Brexit’ world, a decision that will be driven by the obvious opportunities for a strong economy in the English south-east, focussed on London, but would tend to be neglectful of the development needs of the less strong regions?” Northern Ireland’s particular weakness as an external trading economy would be “cruelly exposed” in such a situation, he believes.

Few people in London ever think about Ireland, let alone Northern Ireland. The report by the OneEurope think tank on ‘Brexit’ earlier this year contained just three references to Ireland. Two were on British-Irish trade (Ireland is the UK’s fifth largest trading partner and the only one with which it has a surplus) and the third, the most revealing of south-east England’s supreme indifference to this island, was an admission that, in costing ‘Brexit’, the writers had not taken into account the cost of re-establishing the line of customs posts along the Irish border that a UK withdrawal from the EU would almost inevitably require (and which would immediately become a target for some reinvigorated republican paramilitary group).

In Northern Ireland the problem is not one of indifference, although the almost total absence of any public debate there on the massive changes looming for the UK is something I have remarked on before in this column. The issue, as to do with so many things in the North, is identity.

Because in Northern Ireland – unlike in more secure and normally functioning parts of the developed world –  identity always trumps economic self-interest. Senior Unionists will say (the more sensible of them slightly apologetically) that even the province’s unionist-minded farmers  – who have a huge amount to lose if the UK pulls out of an EU powerfully influenced by their counterparts in France and Germany – will plump for following London into the international free market jungle (the words ‘turkeys’ and ‘Christmas’ spring to mind).  Generous agricultural and regional EU support programmes like CAP and the Structural Funds (not to mention PEACE funding) will count for nothing when British identity is at stake.

And it’s not only the farmers. Ireland (the republic) is a bigger trading partner for Northern Ireland than the rest of the EU (outside the UK) put together. Many small and medium-sized firms – by far the largest private sector employers of the province’s workforce – are particularly dependent on the South as their premier export market, a market that the cross-border body InterTradeIreland has worked successfully over the past 16 years to expand. An external EU frontier running from Derry to Dundalk would have an extremely damaging effect on those relatively new relationships. North-South trade over the past couple of years has recovered from the 2008 crash to reach just over €3 billion, not far off the €3.6 billion it reached at its height in 2007.  All that will be in danger from ‘Brexit’.

Does any of this count in the thinking of the North’s politicians and people – and particularly those of the unionist persuasion? I doubt it.  Economic self-interest will take second place as the mindset of a fearful frontier people, with their age-old dependence on an indifferent and unsympathetic metropolis, wins out.

Paradoxically, the debate on the consequences of a possible ‘Brexit’ for both economies on this island has the potential to bring our policy makers closer together, rather than to divide them. The British market looms large for both regions and a UK withdrawal from  the EU threatens the crucial small firm sector in both jurisdictions in broadly similar ways. It would be tragic if the process of mutual strengthening of the island’s two economies through North-South trade and economic co-operation were to be disrupted by a ‘Brexit’ that neglected our geography, our special relationship, and our deep economic and business links.

I want to finish on a different note. I think the power-sharing Northern Ireland Executive in its present form is now doomed, despite DUP finance minister Arlene Foster’s last-ditch ‘fantasy budget’ which is likely to be passed by the Assembly in the next few days (only a provincial assembly where economics doesn’t matter could pass a ‘fantasy budget’ that is £600 million short of actual spending commitments!). I simply don’t see Sinn Fein signing up to yet another round of large welfare cuts as part of the £12 billion in overall UK cuts signalled by  British Chancellor of the Exchequer, George Osborne, for 8th July.

But that doesn’t have to be the end of the world, or rather of the Executive. Watch out for a forthcoming article by my friend Paul Nolan, author of the highly regarded NI Peace Monitoring Reports, who will suggest that Sinn Fein should simply move to the opposition benches at Stormont (with the assurance that  ‘petitions of concern’ can now block any abuse of majority rule). In one stroke, this could bring about the advent of the ‘normal’ left-right politics in Northern Ireland that many of us have been praying for since about 1910!  The DUP, the Ulster Unionists and Alliance could then push through a right-of-centre cost cutting budget, while Sinn Fein and the SDLP could oppose it from the left.

1. Britain and Europe: The Endgame – An Irish Perspective, edited by Daithi O’Ceallaigh and Paul Gillespie. IIEA 2015.

 

 

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2 Responses to Why does economics matter so little in Northern Ireland?

  1. I like the basis of this article, but is it not completely self-contradictory?

    It suggests we should move away from relying on British subvention, but then suggests Nationalists should oppose “cost-cutting”. Yet the British subvention is the only thing between us and, er, cost-cutting.

    Your “solution” doesn’t make any sense either. Even if Nationalists leave the Executive, they can use the Petition to block a Budget. Thus the Fantasyland deadlock remains.

    The British subvention is also the answer to your question. We don’t debate economics because we don’t have to; the real societies who actually debate economics have to create their own wealth, whereas we get guaranteed British living standards even without doing so – we can simply rely on someone else’s wealth.

    Hence we get to spend all our time obsessing about identity to the extent that even “right” and “left-wing” positions are a matter of identity. To be clear, neither “side” actually supports tax raising to maintain public spending and neither actually supports reducing public spending to maintain taxes at current levels, neither is actually “left” or “right”.

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