The imperative of an all-Ireland economy

Introduction

Throughout the book, we stress that a wide consensus exists about the Northern Ireland economy being beset with many problems. The large catalogue of economic weaknesses has been repeatedly set out: a public sector that is too large; too many low wage/low productivity private sector firms; persistently low levels of innovation and entrepreneurship; and a preponderance of small firms with limited potential to growth, and so on. The Northern Ireland economy is seen as being bedevilled by a binding constraint. On the one hand, it needs an annual subvention to sustain living standards in the region. On the other hand, the economy seems caught in a dependency trap, unable to foster high value-added business activity of any significance or scale. Thus, the subvention simultaneously operates as the lifeline and prisoner of the regional economy. In recent years, the underperformance of the Northern Ireland economy has been aggravated by Brexit.

The UK exiting the EU has generated a bundle of economic challenges for Northern Ireland, ranging from reduced access of many businesses to an open supply of labour from many member states of the EU to the disruption of prevailing business models operating in many business sectors, particularly in agriculture and food-processing. But most important of all, Brexit has widened the political divide between nationalism and unionism; relations between the two blocs are currently riven with mistrust and mutual suspicion. As a result, although the local power sharing institutions have been recently restored, they are extremely fragile, and almost certainly in no shape to foster the dynamics of trust and social capital that are considered critical to breaking out of economic dependency.

While Brexit shackled Northern Ireland with multiple economic challenges, it was Northern Ireland that almost pushed the Brexit project near to the abyss. Solving the conundrum of maintaining an open, frictionless border in Ireland after the UK left the EU not only played mayhem with the Brexit negotiations, but also brought British politics to a virtual standstill for nearly three years. In the end, the Gordian Knot of the Irish border was loosened by the so-called Northern Ireland Protocol. The full import of the Protocol will only emerge after the character of any agreement on the long-term future relationship between the UK and the EU is known, if indeed one is actually reached. Nevertheless, the signing of the Protocol should be considered a watershed moment for Northern Ireland. It has created a fork in the road for the region. Lying ahead are two alternative pathways. One pathway involves the Northern Ireland economy being radically re-orientated and becoming more closely integrated with Ireland. The other pathway involves continuing with the same muddling through economic strategy centred on the region receiving the annual subvention from the UK Treasury. The first pathway offers the promise of economic renewal, the second almost certainly copper- fastens the status quo of economic dependency. One argument put forward by Sinn Fein and those of like mind is that the first pathway should be embraced immediately by calling a border poll in the hope that it would result in the enactment of a united Ireland. Chapter 6 argues strongly against such a strategy. It concludes that creating a united Ireland anytime in the near future through some type of constitutional settlement would bring economic calamity, not to mention grievous political instability.

This final chapter develops the case for an incremental, yet decisive programme to renew the Northern Ireland economy. As a way out of the current political and economic stasis in the region, it is suggested that a programme is needed that simultaneously seeks: (1) stronger human capital in the region by recasting the existing system of education and training; (2) a new all-Ireland IDA that treats the island as a single investment zone for FDI; and (3) devising a new institutional structure to deepen all-Ireland economic integration. In combination, these three interconnected policies should kick-start the motors of economic reorientation in the context of the region continuing to receive the annual fiscal transfer from the UK Treasury. Of course, such an economic programme is likely to have far reaching implications for the existing political structures, even status, of Northern Ireland. Yet this economic programme is not tied to one political destination. On paper, the economic programme is consistent with contrasting alternative political outcomes for the future governance of Northern Ireland. An open- ended, incremental and multi-dimensional process is envisaged to recompose the structure and conduct of the Northern economy and as the process deepens so the optimal configuration of the political future of the region will become evident. Under this strategy, it is envisaged that durable political structures will be created through continuous creative action to reinvigorate the economy and not the other way round.

The chapter is organized as follows. The first section assesses a recent analysis of the Northern Ireland economy that argues for an overhauling of the regional system of human capital development. This proposal is seen as having considerable merit, but it is also deemed to not go far enough. After this assessment, it is argued that the role of inward investment in improving regional economic performance must be massively upgraded, but that efforts to achieve this goal hinge on the creation of an all-Ireland IDA not only to end the current rivalry between the north and south in the search for FDI, but also to build a robust platform to deepen all-Ireland economic and business relations. The penultimate section argues for new institutional arrangements to be introduced to progress moves towards an all-Ireland economy. The final section brings together the arguments of the chapter and assesses what is to be done in the near future to implement the programme.