Northern Ireland has a much better infrastructure than the Republic. Its educational and health services are far better staffed than ours. And for much of the life of our State average material living standards in the North were substantially better than here.
Thus, when I first compared the two economies in the winter 1956 edition of Studies, using the first Northern Ireland national income estimates, its material living standards in 1953, measured in terms of private consumption per head, were about one-third higher than ours.
But by 1969, when I wrote Towards A New Ireland, that differential seemed to have fallen to around a quarter. And by 1990, a year when the cost of living in Ireland and the UK is estimated by the OECD to have been similar, personal income per head was only 5 per cent higher in Northern Ireland than here.
Five years later, in 1995, personal income per head was 5 per cent lower in the North at the prevailing exchange rate. But as in that year the cost of living is estimated to have been 8-9 per cent higher in the UK than here, this implies a living standard differential of well over 10 per cent in our favour, subject to the extent to which the prices level in the North may then have been somewhat lower than in the UK. In the past two years, during which output here has grown by 10 per cent more than in Northern Ireland, this differential must have risen even further.
To what extent can we in this part of the island help to accelerate the lagging growth of the Northern Ireland economy, thus minimising the growing gulf between North and South?
A contribution to answering this question is to be found in a paper presented at the Economic and Social Research Institute last Wednesday week by John Bradley of the ESRI and Douglas Hamilton of the University of Newcastle, as part of the Border Crossings project administered by Co-operation Ireland and funded by the EU Special Support Programme for Peace and Reconciliation. First of all, the public sector in Northern Ireland is twice as large as in the rest of the UK. Moreover, because the North's economic performance has been worse than that of any of the other 10 UK regions, the subvention from Britain has since the 1960s averaged 25 per cent of Northern Ireland GDP - five times as big a proportion of GDP as the transfers we have secured from the EU. These transfers to Northern Ireland absorb almost 5 per cent of UK income tax receipts. The report fears "the possible perpetuation of dependence on external financial aid in the form of the `subvention', with consequential loss of dynamism in the regional economy (i.e. a Mezzogiorno problem)". Moreover, the authors of this report add bluntly that "the problem with industrial policy in Northern Ireland is not just that it must operate under much tighter restrictions than in the Republic of Ireland, but that it has simply failed. A range of studies carried out since at least the early 1980s provide a damning indictment of industrial policy, especially that delivered by the Industrial Development Board, (which) has singularly failed to create employment."
Clearly, the IRA campaign of violence has made its own contribution to this failure of Northern Ireland industrial policy, not merely by discouraging investment both foreign and domestic, but also, this recent Bradley/ Hamilton study suggests, because a combination of discrimination and the segmentation of the labour market as a result of the two communities segregating themselves has "made it difficult to mobilise the resources of both private capital and labour to bring about fundamental changes". Another factor, the authors say, has been "the unwillingness (or inability) of the Northern Ireland authorities to make a break with previous areas of specialisation" - such as textiles and shipbuilding.
How can closer North/South economic links help the economy of Northern Ireland?
A CII study in 1990 suggested the Border had reduced the total level of trade within the island by £3 billion and that on an "island economy" basis there was thus a potential to increase employment by 75,000 jobs. But this always seemed to me to be wildly optimistic, especially as for years past the only real obstacles to North/South trade have been psychological.
A further study in 1992 suggested more realistically that the additional trade that could be generated would be more likely to be of the order of £1 billion, perhaps half of which would displace sales by other Irish producers, and that this would yield an employment increase of 10,000-15,000, including the indirect impact of this additional industrial activity upon the service sector.
By the middle of this year trade between North and South had in fact expanded by half this amount, which suggests that as a long-term projection this calculation may have been well-founded. But, useful though this expansion of trade has been, (especially for small and medium-sized enterprises in Northern Ireland, for which the Republic is twice as important a market as for Northern Ireland industry generally), crossBorder trade increases on this scale are clearly not going to transform the whole economy of Northern Ireland.
What might have such an effect, however, would be a radical new approach to industrial policy, involving fundamental changes in key social and economic policies within Northern Ireland as well as a joint North/South approach to industrial promotion to replace the existing competition between the IDA and IDB, which is self-defeating so far as the IDB is concerned.
A new devolved administration in Northern Ireland might have the imagination and courage to attempt such a revolution - but for that purpose it would need a much freer hand than Whitehall has hitherto been prepared to concede. The three key elements of a new policy would need to be:
First, educational reform, sweeping away the stultifying English 11-plus and A-level systems which inhibit the development of talent and which by too early specialisation deprive Northern Ireland of the resource of adaptable and flexible labour which our system provides.
Such a reform should also involve a major expansion of higher education in Northern Ireland to remove the obstacle that forces three out of every eight students seeking higher education to go to Britain. Second, a lower corporation tax regime to bring Northern Ireland closer to our proposed 12.5 per cent. This should have been negotiated with the British during the Holy Week talks, when the Northern Ireland parties had considerable leverage with Tony Blair, but it may not be too late to persuade him to overrule Treasury opposition to such a concession - one which the European Commission would, I believe, readily accept.
And, third, an all-Ireland industrial promotion body modelled on our successful IDA, through which could be channelled to Northern Ireland some proportion of the level of employment that the IDA is currently generating but which within a couple of years will exceed our capacity to cater for, due to a combination of a drop in the number of education-leavers, (reflecting the one-third fall in the birth rate after 1980), and the likely disappearance of our pool of unemployed as the percentage out of work decreases to around 4 per cent to 5 per cent by 2001.
It would be fatal for Northern Ireland to reject the possibility of such a development simply because of some ideological hang-up about North-South joint action in significant areas of economic policy. Northern Ireland economic interests should urge the case for such a joint body on the First Minister, David Trimble, who is at present under short-sighted political pressure to oppose North-South joint action in this and other areas where such action could help revive the Northern economy.
David Trimble has in the past taken the position that North-South co-operation should be based on economic rather than political considerations. It would be absurd for unionism to reject a joint North-South industrial promotion body simply because in addition to offering great economic benefits to Northern Ireland such a move would also be politically welcome to nationalists such as Seamus Mallon.
Now that the issue of re-unification without consent has been finally laid to rest, the only consideration in the formulation of Northern Ireland economic policy should be the economic recovery of the area while it is still possible to retrieve it from the fate of the Mezzogiorno and perhaps also east Germany - viz, a potentially irreversible dependence on external aid.
