Sunday 28 March 2010

Unionist economics

One of the least intelligent, yet most frequent, arguments that unionists use to argue against Irish unity is that ‘the south could not afford us’.

This argument clearly refers to the massive subsidies that Northern Ireland receives from Britain, that in the minds of unionists are permanent and inevitable. Unionism, therefore, believes that Northern Ireland is a failed economic entity.

The subsidies that Northern Ireland receives are designed to provide an equivalent level of public services in Northern Ireland as in Britain, and the ‘cost’ of a region like Northern Ireland to the British state is a simple sum: taxes raised minus transfers = cost. So London and the south east of England contribute to the budget, and unproductive regions like Northern Ireland are net recipients.

Such a give-and-take system is far from unique – it is institutionalised in Germany, controversial in Belgium and Spain and is the basis of the EU’s Structural Funds. It is a consequence of the concept of solidarity within a political structure, either a state like the UK or a super-state like the EU.

However, for unionists to argue that the south ‘could not afford’ the north, implies a belief that Northern Ireland, within the UK, could not ever aspire to rise from the ranks of the welfare-dependent regions to become a net contributor. The unionist argument is an admission of Northern Ireland’s failure and backwardness. When the south joined the EU it was a net recipient – it was a relatively poor country. By the beginning of this century, though, it had far exceeded the average and had become a net contributor. So progress is not impossible.

If the south could do it, why could the north not?

There are several answers to that question, with varying degrees of likelihood:
  • Unionists do not actually wish Northern Ireland to do well, because if it did, then re-unification becomes economically possible. This is an unlikely scenario, and would involve coordination of a level impossible to conceal. It would require the state to actively suppress economic development, entrepreneurship and innovation. Despite the criticisms many Northern Irish businesspeople have of InvestNI, it can hardly be accused of active suppression of entrepreneurship.
  • Welfare dependency – as long as people in the north believe that London will pay for them to enjoy a lifestyle that has no direct link to their productivity, they have no real incentive to produce more. In fact, it would be economically irrational for the north to increase its private sector, because the British state would respond by slimming down its make-work public sector. A welfare trap, in other words – the mere existence of UK solidarity ensures that regions like Northern Ireland have no incentive to work any harder. Again, this explanation requires some sort of conscious decision by the private sector not to try to grow, which is unlikely. Much more likely is the fact that the public sector out-bids the private sector in terms of salaries and job security, and that the private sector cannot match the public sector rates.
  • Northern Ireland is simply too small and peripheral to be economically viable, except as a low cost ‘off-shore’ location. It is in the UK, but separated from most of it. Although part of the UK economy, it cannot play a full part in it because it is separated by a logistically important body of water. So it cannot easily be supplied by, or supply to, central warehousing operations (often located near the great motorway junctions in the English midlands). All products brought to Northern Ireland must cost more, and all Northern Irish-made products must be less competitive than those produced in, say, Birmingham.
The only explanations that make any sense economically are the second and third, and they are closely linked. Northern Ireland’s membership of the UK guarantees it a certain level of public sector expenditure, but Northern Ireland within the UK is simply too small and peripheral to fully participate in the UK’s economy. Hence either Northern Irish products are too expensive in Britain (due to extra transport and logistic costs), and thus un-bought, leading to a smaller private sector, or Northern Irish labour costs have to be lower than those in Britain in order to restore competitivity – leading to relative poverty that has to be ‘compensated’ for by UK transfers – often in the form of unnecessary and duplicated public sector jobs.

So it is the fact of Northern Irish membership of the UK that makes it ‘unaffordable’ for the south. By cutting Northern Ireland off from the south the border ensures duplication of services, administrations, rules and infrastructures; different tax regimes; different regulations; different labour market systems; and so on. The artificially restricted size of the Northern Irish economy makes it uneconomical and thus requires UK subsidies. An all-Ireland economy could lead to efficiencies, business policies fit for purpose and economic success – the south, though smaller than an all-Ireland economy, has already demonstrated this.

A foreign investor looking to invest in the UK wants to be close to markets, suppliers, transport routes, with a ready supply of skilled labour. Northern Ireland provides none of that. A foreign investor looking to invest in the Euro-zone, but with an English-speaking workforce (think Google, Intel, etc) will go to the south. What possible reason would anyone have to invest in Northern Ireland? To supply its tiny market? Or to take advantage of low wages?

The very existence of Northern Ireland is what ensures its economic backwardness and thus its transfer payments from Britain. For unionists to then say to nationalists ‘you’re better off in the UK’ is intellectually bankrupt. Their forced inclusion in the UK robs them of the chance to play a full part in the Irish and the European economy – and the negative consequences of the north’s peripherality in the UK are then ‘compensated’ by London. Much better for all would be to remove the border and let Northern Ireland fully join with the southern economy to provide a modern base for industry in the Euro-zone.

The truth is that Northern Ireland is only ‘unaffordable’ for the south because it exists. A Northern Ireland that no longer existed would be no more ‘unaffordable’ than Leinster or Munster. On the contrary, able to fully participate in a larger all-Ireland economy, fully integrated into the European and world economies, Northern Ireland would develop economically and would not pose any more of an economic drag than any other part of the country.

The unionist boast of their unaffordability is caused by the border – it is not a reason to keep the border. On the contrary, a proud people should not see their future as welfare spongers – they should seek to pay their way and to build their own prosperity. To use the negative consequences of their border to try to justify keeping that border is simply bizarre, and demonstrates yet again that unionism has no economic basis.

34 comments:

menaiblog said...

London is a net recipient too methinks

menaiblog said...

Why would anyone locate a factory in the North when they could could do so in the South where corporation taxes are far lower.

It's a no brainer is it not?

Anonymous said...

All this is true, if slightly laboured, but it also misses a key point: "you couldn't afford us" is a sneer not the real reason. Unionists would like to remain British no matter what. It's a matter of identity not economics. So they say.

But they were very happy for their cows to be sold in mainland Europe as Irish beef when British beef was banned.

In the event of Britain's relationship with the EU changing (far from impossible) they might well be more amenable to being Irish when in Ireland and British when in Britain. That's assuming that the south resumes its economic growth, which notwithstanding current difficulties, has seen it achieve a higher standard of living than the UK.

paul said...

quality post lad.

Anonymous said...

Great post, really great post.

To anonymous, "It's a matter of identity not economics."

You are ofc 100% right, but the aim for nationalism now is to move away from catholic/protestant, hibernian/anglo-saxon etc. etc. and turn the question of reunification into a matter of practicalities; pros and cons.

The pros, as it turns out, stack up even higher than nationalists would have dared to believe, and this is one of those areas.

Northern Ireland is ludicrous both in a sovereign/cultural sense, and in a political/economic sense - the point is, unionists are going to have to be won over to reunification somehow and the only way that will be possible is with a political/economic argument.

Even then it's going to be hard ofc, we're dealing with perhaps the most pig-headed people in the history of our species, but hey it's worth a try.

New times, New approach said...

Horseman,
This quality of in-depth informed analysis is really refreshing to read. I mightn't agree with every detail of it and in places I think you can be selective in which facts you bring to bear, however when compared with the daily diet we are fed by most of our politicians it absolutely excels.

Have you ever considered bringing these skills into the political domain? And, no, I'm not pulling your leg. I am completely serious.

Horseman said...

New times, New approach,

I'm flattered, thanks! In my own small way, though, I hope that what I say has a small influence on political affairs. That is, I suspect, the most that a blogger can hope for. I cannot do more, for professional reasons.

Paddy Canuck said...

A really interesting and well-considered reply to the old chestnut. It was wonderful to read and I think you've provided every nationalist with strong points whenever the issue raises its head. To demonstrate that the existence of Northern Ireland itself is what makes it "unaffordable" is a terrific exposure of circular logic. Bravo. :)

Anonymous said...

Maith an fear!

MPG .....

menace said...

Horseman, remember what Wilson said about, in particular, the Unionist population in this part of Ireland.
There is an expectation that they will be maintained, so in 1998 when it was mooted, and possible, that 12% Corporation tax could have applied in all 32 counties, the opposition came from the Unionist voices, lower costs, living standards etc. would have led to greater investment but was unaffordable to international business, juxtaposed as we are with the rest of Ireland.
The fact remains, with six county infrastructure, history and education we can command the same wages I earn in Dublin throughout the six counties, jobs will come, Unionisms continued reticence to re-join the rest of the nation shows an appalling ignorance, being they would assume immense electoral power in a Dail with maintainence of their devolved administration in Stormont.
It reminds me a little of Jim Molyneaux' statement on RTE about 30 years ago, in response to a question on the potential of a 'nationalist majority' he replied it was his opinion catholics would vote to remain in the uk as the social security benefits attaching were better than in the Republic.
In other words know your place, or, croppy lie down, times have changed and an all-Ireland economy must preface political reunification to advise our Protestant citizens that their living standards will not reduce upon achievement.

bangordub said...

http://sluggerotoole.com/index.php/weblog/comments/dup-regaining-confidence-or-is-there-an-election-coming-up/

Broad sweeping conclusions here Horseman. (eg Comparing a European to other elections)
Your comments would be welcome?

Anonymous said...

Good argument, but perhaps unionism is not using economics as the primary reason
to resist Irish unity.. these days they seem to use "culture" an awful lot. How their culture is not compatible with "gaelic" culture, etc.

So in that sense, I think the real nut to crack is separating culture from constitutionality, much like you have done here with economics.

In other words, why must it be a prerequisite that NI remain a British territory, merely because
many of its people have a British identity?

Sure loads of Dubs identify hugely with British culture, sometimes moreso than they do
the rest of the south. But.. so what? Most Aussies and Kiwis are basically Brits too, a few generations removed. Again, so what?

Why do the NI British feel the need to remain inside the UK bubble in order to fully express their culture?

Perhaps this is the kernal - that unionism fears its Britishness being subsumed and destroyed by a gaelic Irish state. This is pertinent given the backdrop of the last few decades.

Without those fears being geniunely allayed, there can be no unity. After all, a unified Ireland would have to be a state for everyone on the island, not just the cultural majority.

New times, New approach said...

I'm not sure I agree with a unionist claim that (to paraphrase), 'Our culture is British and therefore incompatible with a Gaelic one'.
Firstly, who resembles the Ulster protestant most in mannerisms, use of idiom, sense of humour etc. You're right - it's the Ulster catholic. To integrate with the rest of Ireland does not require the sacrifice of 'Our freedom, religion and laws'. Nor does it necessitate fluency in Irish, familiarity with the exploits of the Fianna or an ability to recite the 1916 proclamation from memory. Ireland now, like every other European nation is a country of diversity, but also retaining a pride in an essential Irish identity. It has accommodated our protestant countrymen for many hundreds of years and many of them too have contributed substantially to that Irish identity.
Secondly, what other citizen of the United Kingdom would say, I am British first, but (for example) Scottish second. My loyalty, sense of identity and culture is fully encapsulated in my Britishness. I am (e.g.) Welsh second (or I deny my Welshness), and I don't know why some of us choose to use a long dead language on our signposts.
Something important is missing in the lives of those people who need to invent a nationality of 'Britishness' to compensate for the rejection of their own national identity. It is something not deficient in the make-up of the Scot or Welshman. It is also something that they are deprived of only by their own refusal to accept it.

Dazzler said...

Horseman, figures on deaths in the north for 2009 have been published http://www.nisra.gov.uk/archive/demography/publications/births_deaths/deaths_2009.pdf

hoboroad said...

http://blogs.telegraph.co.uk/news/edwest/100031984/will-the-tories-break-up-the-united-kingdom-who-cares/

hoboroad said...

http://www.newstatesman.com/blogs/public-accounts/2010/03/cameron-salmond-party-scottish

Horseman said...

Dazzler,

Thanks, I'll look at them, but it won't be for a day or two as I'm just about to head off on business.

hoboroad said...

http://news.bbc.co.uk/1/hi/northern_ireland/8595547.stm

Anonymous said...

New times, New approach, you are in a small minority if you consider British for primary identity and Welsh secondary. Most people on the island of Great Britain associate more with their particular nation than anything else, and the term "British" is more a technicality.

This true of the English more than anyone else, in fact there are fewer unionists in Britain than in any other part of the UK.

Anonymous said...

"Sure loads of Dubs identify hugely with British culture"

Q: The Red Devil Bar is located on which famous Irish street?

1. O'Connel St
2. Patrick St
3. The Falls Rd

A: 3

You'll find as many Premiership-following, Eastenders-watching, Sun-reading 'West Brits' in West Belfast as you will in Dublin, if not more. It was only in 1982 they stopped voting for Redmondites who took their seats in the British parliament, Dubs stopped doing that in 1918.

New times, New approach said...

Anonymous (17:26)

Read what I wrote again. You have completely misunderstood it.

'what other citizen of the United Kingdom would say, I am British first' is a question.

We agree!

Anonymous said...

Northern Ireland is a "failed economic entity" because a 30 year PIRA campaign purposely failed it. Look at the economic targeting of infrastructure and town centers, industrial decline bit hard at the start of the troubles but if you look at the north of England or the Clyde region of Scotland they recovered.

We didn't in Northern Ireland as the PIRA kept the economic boot stamped hard on all of our faces and ripped everything they could out of the guts of the social and economic fabric here.

At opportunities for compromise groups like Peoples Democracy did all they could to make sure there was no back off and to keep the pot boiling, and their leaders are now to be naively immortalized in film for this?

I feel no association to the south other than the people are generally friendly if narrow minded and the landscape pretty in places, I certainly don't intend to join with them just because the PIRA armed by Fianna Fail wrecked the Northern Ireland econommy.

Before the troubles the south was a basket case, their senior FF politicians armed the PIRA to destroy the Northern states economy and it's status in the United Kingdom.

I have no interest in joining with them, it's bad enough watching the murders they armed sleeze their patronising, blood soaked, fake political correctness veneered way around at Stormont.

My culture (TM) and values bare little relation to those that prevail in the south, there is nothing on offer for me there and a good number of southerners I have met are openly massively bigoted against northern protestants when they have not quite realised my background. The "do they speak irish" test they quietly try out is always my favorite. An expression of culture indeed...

Anonymous said...

ta for the links hoboroad.

Colm said...

Excellent work a chara. Having been a regular reader of this blog for quite some time, I think this is the finest article you have posted yet. While I admire much of what your blog sets out to achieve, I feel that it is the economic, rather than the religious/tribal argument that is the most progressive and realistic means of achieving a united Ireland in our lifetimes. As a republican from Dublin I put your argument in this article to a friend of mine, a Catholic SDLP member happy to maintain the union on the basis that the south couldn't afford a united Ireland. He grudgingly ceded the point that anyone making the argument that Ireland couldn't afford to be united is admitting that Northern Ireland is a failed political entity. Ireland has long suffered from a lack of belief in our potential as a nation. Convincing Irish people that our economic potential could best be realised through unity is no small task. This article points us at least some way in the right direction.

hoboroad said...

The good people of Liverpool don't read the Sun newspaper after the papers coverage of Hillsborough. So that makes less British in your eyes?

Paddy Canuck said...

New times, New approach said:

"Something important is missing in the lives of those people who need to invent a nationality of 'Britishness' to compensate for the rejection of their own national identity. It is something not deficient in the make-up of the Scot or Welshman."

Bravo, NTNA! You really deftly thread the needle.

Paddy Canuck said...

Anonymous said:

"At opportunities for compromise groups like Peoples Democracy did all they could to make sure there was no back off"

Are you at all aware of the hows and whys of the failure of the Sunningdale Agreement...? Do the words "unionist general strike" mean anything to you?

Paddy Canuck said...

Colm said:

"Ireland has long suffered from a lack of belief in our potential as a nation."

That's true, and it's been greatly to the benefit of mainland Britain, North America, and Australia. With the help of the expatriate Irish, all those lands became what Ireland should have been. Ireland is by far the European country with the largest diaspora relative to its home population.

Anonymous said...

PC@1april 1

"benefit of mainland Britain,"

I only know of Mainland Ireland.

New times, New approach said...

I'm sure in referring to mainland Britain, PC was distinguishing it from it's satellite islands such as Hebrides, Isle of Skye etc. which, unlike the mainland have not benefited from the Irish diaspora. Or not since Colmcille at any rate. :)

Paddy Canuck said...

"I only know of Mainland Ireland."

I take your point, believe me; but I'm using the reference because, like it or not, NI is currently a constitutional constituent country of the UK, and the shorthand for that is "British". But I don't consider the movement of people from, say, Monaghan to Armagh (or vice-versa) to constitute 'immigration' in the real sense, probably for all the same reasons you wouldn't. On the other hand, I think we'd all agree that someone moving from Monaghan to Manchester fits the bill. Hence "mainland Britain".

hoboroad said...

http://oconallstreet.com/2010/04/05/dup-u-turn-on-corporation-tax-reduction-jobs-obviously-not-a-priority-for-them/

hoboroad said...

http://www.mirror.co.uk/news/top-stories/2010/04/05/gordon-brown-to-make-7-60-an-hour-living-wage-election-pledge-115875-22162834/

Anonymous said...

Coming from the south I always somewhat suspected that "you couldn't afford us" might be a vieled threat - namely that after reunification the costs would soar due to security issues - the presumption that the south (or New Republic) would have to spend as much on security in the north as th UK government had to in the 1980s.

I know this is probably southern ignorance and typical paranoia on NI issues. But it does hang in the back of a lot of minds.