Developing North-South economic links is now of secondary importance to the challenges facing the two economies separately, writes John Bradley
When I observe Northern Ireland from Dublin, I have a sense of frustration at the glacial pace of political progress, and am conscious of how this stagnation is impeding economic renewal and reform within Northern Ireland.
But worst of all is a sense of sadness that so few of the bright expectations of the 1990s, on the path from the Downing Street Declaration to the Belfast Agreement, have been realised in terms of renewal within Northern Ireland, as violence faded and new all-island and global vistas opened. Yesterday's executive summary of the comprehensive report on an all-island economy puts a brave face on the situation, but its claims for the benefits of greater North-South links are greatly exaggerated.
As I look at our two island economies, I see people who share very little common ground, and who perceive very different opportunities and threats.
Northern Ireland has only recently experienced a sustained period of peace and remains mired in a protracted and tortuous process of negotiating its internal system of political and economic governance. It faces four major challenges:
1) The perpetuation of a situation of very limited regional policy-making autonomy combined with a lack of informed political consensus as to the wisdom of seeking out greater policy autonomy in the context of the Belfast Agreement. This implies a continued dependence on a narrow range of UK regional policy instruments that have proved ineffective in the past.
2) Difficulties in modernising its manufacturing base away from its traditional specialities of textiles, clothing, engineering, etc, towards more modern and higher value-added products.
3) A continuing dependence on Britain as its main external market. Although a benefit during the past few years, when the major economies of the EU suffered slow growth, it is likely to be undesirable in the longer term if the UK remains outside the euro zone.
4) Economic isolation within the UK, a relatively low standard of living among the UK regions (80 per cent of the average), massive dependence on external financial aid in the form of the so-called "subvention", with consequential lack of dynamism in the local private sector economy.
The challenges that preoccupy us here in the South are very different:
1) A need for continued creative use of our modest but significant scope for national policy-making freedom against a background of a progressive ceding of fiscal and monetary policy autonomy to the institutions of the EU.
2) A high emphasis on openness to inward investment and stimulation of local development, using a tax-based system of industrial incentives and improvements in physical infrastructure, human capital and institutional reform.
3) The need to consolidate our recent convergence gains in a competitive global economy, in order to sustain a high standard of living and improve social equity.
International experience suggests that with strategic postures so far apart from each other, certain consequences follow inevitably. For example, any crude attempt to detach the Northern economy from the UK fiscal union (by, say, granting it a different tax regime) will require an extraordinary degree of policy sophistication, flexibility and commitment that have been completely absent from the discussion to date. There is nothing in the present report to suggest that the internal UK debate on this issue has either progressed, or, indeed, is any of our concern!
The arguments that many people (including myself) advanced on the basis of earlier research - that greater North-South links could produce island-wide synergies and beneficial spillovers - now hold to a much weaker extent, as the South has globalised and the North has drifted further into a public sector-dominated, post-industrial pattern of dependency.
Of course we can realise minor gains from integrating our island infrastructure and institutions (as set out in the report). But the ability to attract and keep skilled labour from, say, Poland, is now infinitely more important to us than a preoccupation with North-South labour market concerns.
Within both the Republic of Ireland and Northern Ireland, under present and any conceivable future constitutional arrangements, the primary focus of economic policy-making must be internally directed at local strengths and weaknesses. This focus should include policies, institutions and businesses, their needs, their entrepreneurial capabilities, be they locally or externally owned.
While local strengths and weaknesses are addressed, careful attention must be paid to external opportunities and threats. For Northern Ireland, the most important external factor is currently Britain. Other global influences tend to affect the North through British policy reactions to them. For the Republic of Ireland, the most important direct external influences are, and will remain, the US, the EU and other global economies.
For both regions, the North-South economic dimension is now a secondary factor. It may have some modest power to boost island performance, but could never replace either the primary focus on the quality of internal policies, institutions and business characteristics, or the dominating external factors.
Only when all Northern parties agree to formulate serious economic policy initiatives broadly within an agreed framework can some progress be made.
The challenge for unionists of all shades will be to make good their assertion that greater Northern dynamism could realistically be brought about mainly through building on the British link, to the neglect of the North-South island dimension. The challenge for nationalists will be the need to refocus on the internal problems of the Northern economy in a UK context, and to accept the unpalatable truth that the North-South connection could at best be a secondary force for economic progress and development.
The challenge for the insulated Northern civil service policy-makers - a powerful, though largely invisible force - will be to present sound policy choices to whatever administration may come to power, and to give up their hollow assertions that everything is fine with the economy, and that the jobs pipeline is full.
My judgment is that businesses here in the Republic of Ireland have already internalised something broadly along these lines, but that our Government policy-makers face a delicate task of balancing support for nationalist and unionist political and cultural ambitions with the inescapable logic of the hard economic facts of life that confront our vulnerable globalised economy.
Dr John Bradley was formerly a professor at the Economic and Social Research Institute in Dublin, and is now an independent consultant