North-South economic divide in Ireland is wider than ever

Both sides of the Border would benefit from greater co-operation in trade

This column has, no doubt, many failings. None has been more serious than its neglect of issues related to the northern part of this island. The week that marks the 15th anniversary of the signing of the Belfast Agreement provides an opportunity to make some amends.

Let's start by stating clearly that identity politics trumps economics as the most important dynamic in divided societies such as Northern Ireland. The 1960s was a time of rising prosperity, but it was then that the Troubles began brewing, eventually igniting by that decade's end. Equally, the notion that bad economic times turn young people to terrorism is not borne out by experience on this island, or anywhere else.

That needs saying because economic determinism has often been given excessive weight in analysis of the North’s problems. All the prosperity in the world will not prevent flare-ups such as that recently over flag-flying at Belfast City Hall. But economics matters: for the prosperity of everyone on the island, and because commerce brings people together and helps break down barriers.

Although there will be two polities on this island for as far into the future as anyone can see (that was underscored by an opinion poll earlier this year on northerners' preferences for their constitutional position conducted by the BBC's Spotlight programme), having one integrated economy is in everyone's interests and threatens nobody.


Alas, we are very far from that position, despite being part of the EU's single market and despite the Belfast Agreement. A report this week by the Nevin Economic Research Institute usefully brought together much of the (limited) data on the North's economy to make comparison with the Republic.

The figures show the Border still matters a lot. The rate of joblessness in Northern Ireland is almost half that of the South’s, and the numbers at work have risen (slightly) since 2008, compared to a precipitous decline of more than 300,000 in the Republic.

Average weekly earnings in the South, though considerably higher than in the North, at €692 in 2012, have fallen (slightly) since 2008. North of the Border, they have risen gradually over the same period, to reach £360 (€445) last year.

Indigenous deficit
If the two economies are very different, they both face enormous challenges. The greatest all-island challenge over the longer term is the development of a stronger indigenous business sector.

In the Republic, and notwithstanding the heroic efforts of so many people in business to keep their firms afloat under depression conditions, the most dynamic sector of the economy remains the portion that is foreign-owned (indigenous companies, for instance, account for just one-tenth of exports).

North of the Border, the public sector plays a much larger role in economic activity than is usual in any market economy. This is in part a legacy of the Troubles, but a weak private sector cannot be explained solely by the crowding-out effects of a large public sector.

InterTrade Ireland, a body established under the Belfast Agreement, published a fascinating study of the quality of management on the island in 2009. It was uncomfortable reading, with managers north and south ranking equally poorly among more than a dozen economies evaluated.

The Centre for Cross-Border Studies – among the best think tanks in either jurisdiction on this island – has recently published two excellent studies on how cross-Border co-operation and development can be fostered.

Widening gap
Figures for cross-Border trade in merchandise goods show that rather than becoming more closely integrated, the two economies are less integrated than ever before.

In 1998, companies in the South sold goods worth €1.5 billion north of the Border. Their Northern Ireland counterparts earned €1 billion from southern sales. While modest increases in trade were registered up to 2007, by last year both were (marginally) below 1998 levels.

Last summer at an SDLP conference on the island's economy, the late Sir George Quigley spoke eloquently of growth not as one mighty river but many small tributaries. There is much potential for more tributaries flowing in both directions across the Border.