Businessmen considered risks of investing in Northern Ireland too great, writes Garret Fitzgerald.
The IRA's often sectarian murder campaign against individual unionists, especially in Border areas, was paralleled by a campaign of physical devastation, designed to destroy the Northern Ireland economy. In some perverse way this was seen by the IRA and Sinn Féin as a contribution to the achievement of Irish unity.
However, its effect was virtually to treble the dependence of Northern Ireland on financial transfers from the UK budget, raising these to a level that now adds a huge additional economic obstacle to the already existing political barrier to the unification of Ireland. The IRA campaign of violence has thus proved totally self-defeating.
The scale of the North's increased dependence on financial transfers from Britain may be deduced from the fact that in 1953, and still in 1969, the differential between living standards in the two parts of this island was only seven or eight points greater than the differential between their per capita output. This reflected the quite limited extent to which Northern Ireland's own output needed to be supplemented by the UK government before the IRA campaign of violence began.
But by 1983 this divergence between output and consumption had risen to 17 points, and by 2005 it stood at around 20 points. The fact is that the North now has to depend on Britain for more than half of the cost of its government and of its investment. This is because private consumption absorbs over 80 per cent of Northern Ireland's output - in contrast to the Republic, whose population consumes only 46 per cent of its output, leaving well over half available for its governance and for investment. This negative impact of IRA violence on the Northern economy was already evident in 1983 - the year in respect of which the New Ireland Forum published an expert comparative study. That study contained a special section on the accumulated cost of violence to Northern Ireland (loss of output, damage to tourism, and the impact of the destruction of the North/South electricity inter-connector), which it calculated at IR£4 billion in 1982 terms, or almost €15 billion in 2008 money.
Incidentally, the mindset behind the repeated blowing-up by the IRA of the North-South electricity inter-connector, and of the railway line between Belfast and Dublin, remains quite impenetrable. No one outside the ranks of that organisation has ever been able to fathom how those attacks were expected to contribute to Irish reunification.
However, the long-term cost of the IRA campaign has been far greater than that €15 billion. In March 1983, a survey of 460 leading US, British and German businessmen showed that 60 per cent of them considered the risks of investing in Northern Ireland too great, and at that time the North was placed 19th out of 20 possible western European locations for industrial plants.
Even when, in the years after 1993, the IRA was approaching the end of its campaign of violence, and when a new industrial revolution was creating a vast inflow of new industrial investment to western Europe, especially from the US, (of which the Republic of Ireland secured a quite disproportionate share, rising at one stage to 25 per cent of the total), Northern Ireland lost out, as it also did in relation to the subsequent wave of financial investment.
It is this loss of any significant share of that investment in our island that has done the most long-term damage to the North, contributing more than anything else to the North/South economic gap that now poses such a huge additional obstacle to any future reunification of the island.
It is at least possible that the intensification of Northern unionist resistance to the idea of Irish political unity as a result of the IRA's campaign of violence may soften at some future point, beyond our present time horizon. A later generation of Northern Protestants might conceivably, like the Protestant population of our State during the second half of the 20th century, eventually reorientate its loyalties towards the island of Ireland.
But, even if that were to happen, the damage the IRA did to the economy of Northern Ireland during the last one-third of the 20th century has created a quite new obstacle to Irish reunification. For, unless the taxpayers of the Republic were prepared to replace British financial transfers by increasing their annual tax payments by some €10 billion, or almost one-quarter - which is frankly inconceivable - the political reunification of the island would now require the members of both sections of the community in Northern Ireland to accept a reduction of about one-fifth in their living standards.
What prospect is there that the Northern Ireland economy could catch up with that of the Republic, a process which alone could eliminate this fresh IRA-created obstacle to Irish reunification? Very little chance indeed, I fear, because of the failure to address this crucial economic issue in the course of the negotiation of the Belfast Agreement of 1998.