Ending the stand-off on north-south economic cooperation

For a very long time, unionists were deeply suspicious of any moves to deepen political and economic ties between the north and south of Ireland. The intensity of unionist mistrust to cross border economic cooperation is neatly captured with the use of Albert Hirschman’s (1991) three theses about jeopardy, perversity, and futility developed in his seminal book. The rhetoric of reaction. Hirschman argued that these three theses are usually used in some shape or other to build a narrative against change or in defence of the status quo. Unionism traditionally used all three in resisting any moves towards closer economic relations between the north and south of Ireland. First, fostering closer links between Northern Ireland and Ireland, especially economic ties, was seen as jeopardizing the many benefits that arise from being part of an economic union with Britain. In particular, any gains that were to be captured from developing closer economic and business relationships with Ireland would be puny relative to the huge benefits that were secured year-on-year from the big annual fiscal transfer to Northern Ireland from the UK Treasury. Second, developing economic ties with Ireland, particularly if these involved building new cross border institutional linkages, run the risk of having the perverse effect of producing effects opposite to those intended. In particular, building new political and institutional relationships between the two parts of the island may not lead to any significant benefits yet could disrupt already existing policy and business networks between Northern Ireland and the rest of the UK. Third, triggering a search for unspecified economic gains through developing closer cross border economic programmes may be a massive exercise in futility, as the lure for new found economic benefits will more likely than not turn out to be a chimera.

Hirschman suggests that the ‘reactionary rhetoric’ of jeopardy, perversity, and futility is almost always countered by a ‘progressive maximalist rhetoric’ - narratives that are constructed in support of change, normally radical in character. This has certainly been the case in Northern Ireland. In response to the traditional unionist argument that closer ties with Ireland were an economic blind-alley, nationalists usually put forward what might be called the imminent danger thesis. Nationalists not only frequently proclaim that developing closer links between the two parts of the island would bring multiple benefits, but also that moves are needed to be made immediately to capture these gains otherwise Northern Ireland will keep on disadvantaging itself. The underlying assumption behind this argument is that the island of Ireland represents a cohesive economic zone that has been distorted by partition. Thus, for nationalists, fostering closer political and economic ties between northern and southern Ireland not only held out the promise of delivering commercial benefits, but would also restore the natural economic order of things. As a result, in contrast to the perversity claims of unionists, which emphasized the benefits of established patterns of institutional and economic lock-in. nationalists argued the virtues of policy innovations and risk-taking associated with fostering new economic and business ties between the north and south of Ireland. The ‘maximalist’ and ‘minimalist’ rhetoric held by nationalism and unionism respectively became an integral part of the zero- sum politics that fuelled community polarization in Northern Ireland for so many years: on the one hand, fostering closer relationship between the two parts of the island meant selling out unionism; on the other hand, an arm’s- length, adversarial relationship between the north and south was considered by nationalists as thwarting a key component of their political identity.

This zero-sum approach towards political and economic relationships between the two parts of Ireland gradually atrophied during the 1990s. In a lecture in Belfast in 1992, the erudite and formidable Sir George Quigley, the then Chairman of the Ulster Bank and the Northern Ireland Economic Council, developed an argument that challenged traditional thinking, particularly traditional unionist thinking, on the potential benefits of deeper cross border business activity in Ireland. Quigley observed that an important feature of modern economic life was the concentration of business activity within specific geographical areas. The examples he cited included the ‘M4 corridor’ in the south-east of England, Silicon Valley in California, and the Emilia Romagna region of northern Italy. Geographical clustering of firms, he argued, captured external economies of scale - dynamic effects that were external to particular firms, but internal to the region; ready access to specialized skilled labour or specialized finance and business services, for example. Quigley argued that Ireland, north and south, needed to learn from this trend towards geographical concentration of business activity as it was the new' engine for superior economic performance. In particular, he argued that decisive action should be taken to create a Belfast-Dublin economic corridor (see Quigley 1992).

Although the content of such an economic corridor and how it should be set up w'ere outlined in the sketchiest of terms by Quigley, his proposal had an immediate and far-reaching impact. Almost overnight, business groups north and south endorsed the Belfast-Dublin economic corridor idea, immediately putting on the defensive the begrudging unionist position that nothing good could come from deepening cross border business relationships. Within a year, the regional office of the Confederation of British Industry along with its Irish counterpart, the then Confederation of Irish Industry, produced a report A single market on the island (CII/CBI (N1) 1992). This report claimed that trade between the tw'o parts of the island could be trebled, resulting in the creation of 30,000 new' manufacturing jobs and 75,000 new'jobs overall. Although these estimates were treated with deep scepticism by most professional economists, the political impact of the two largest business groups on the island coming out so strongly in favour of north-south economic cooperation w'as far reaching. At a stroke, it legitimized greater cross border business and trade flows and even the idea of an all-island economy; north-south economic cooperation had been put on the political agenda. As a result, north-south cooperation ceased to be marginalized.

The political significance of this development cannot be over-stated for it challenged a core feature of the belief system of unionism; until then supporting deeper economic ties between the north and south of Ireland was seen almost as subversion. When Terence O'Neill, the Prime Minister of Northern Ireland and leader of the Unionist Party sought in the mid-1960s low-level rapprochement with the Irish Republic through fostering better economic relationships, a huge wave of opposition spontaneously emerged inside unionism that ultimately led to his downfall. Accepting that greater north-south economic cooperation could be beneficial led to this longstanding core element of unionism’s belief system being reworked - it now became entirely permissible to be a passionate advocate of Northern Ireland’s Britishness and at the same time support, under restrictive conditions, mutually beneficial economic ties between the tw'o parts of Ireland. The old "reactionary rhetoric' had given w'ay to a new pragmatism.