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.