Consideration of Irish unity needs careful preparation, argues Seamus McGuinness, research professor at the Republic’s Economic and Social Research Institute. He suggests looking to the example of Hong Kong, where the handover of control was undertaken over a 13 year period. Seamus was talking in the latest Holywell Trust Forward Together podcast.
The difference in economic performance, North and South, sits “at the centre of debate around constitutional change,” believes Seamus. “I come at it from the perspective of someone who worked as an economist in Belfast for the first 10 or 12 years of my career, and now has spent around the same amount of time looking at the issues relevant to the Irish economy.
“There are a number of differences, but the central differences between the economies North and South really relate to differences in the level of productivity and the extent to which they exhibit dynamic growth and are able to respond to shocks.”
Seamus explains: “There are fundamental underlying differences that drive lower productivity… The first relates to human capital – we see that levels of educational attainment in the North are really lagging other British regions and the Republic of Ireland. I have to say this, actually, was a shock to me as someone who works in the Republic and is domiciled in the North. When I looked at the data.”
Seamus points out that in 2015, over 35% of young people, 24 to 30, in Northern Ireland were educated only to the lowest level, compared to 11% in the Republic. And while 40% of young adults in the North hold third level qualifications, the figure was around 60% in the Republic. “So that’s a key aspect,” of the difference in economic performance, argues Seamus.
Another factor is that the Republic is much more export-focused than is the North. Exports are worth about 15% of Northern Ireland’s economy, or 35% if GB is included, compared to 54% in the Republic. In addition, “the export sector in the Republic is much more value added than in the North.” And, of course, the Republic has been very much more effective in attracting foreign direct investment than the North, with the South’s FDI being highly productive.
The composition of the two economies also differs. While that in the North remains highly dependent on public services, the private services sector in the Republic is very much larger than that of the North. The Republic also has a large presence in the pharmaceutical, technology and advanced services sectors. “A lot of that really stems from the success of the IDA,” the body that promotes inward investment and economic development in the Republic, “in bringing these large multi-nationals into Ireland – and the policies that have facilitated indigenous companies to grow up around them.”
One of the disappointments about Northern Ireland is that the Good Friday Agreement did not stimulate a greater economic impact. “When I looked at the data, one of the things that baffled me was that we should have seen a peace dividend of some description…. I do wonder why foreign direct investment has not been a bigger feature. And why bodies such as Invest NI have not been more successful over the period in bringing large multinationals into the North, as the IDA has been in the South.”
The difference in effectiveness between the IDA and Invest NI points to the opportunities that might be achieved by greater cross-border co-operation, irrespective of whether the constitutional settlement should change, believes Seamus. “Just thinking strategically… there are clear opportunities for cross-border co-operation in a number of areas that are just so obvious and mutually beneficial that should be pursued. The obvious case is health services. Another is around infrastructural planning, but another is economic development…. You can only imagine that the North would be a net beneficiary of that joint approach.”
Seamus concedes, though, that Brexit does reduce the attractiveness of Northern Ireland as a foreign direct investment location. What Brexit achieves instead is accelerate the debate over Northern Ireland’s constitutional situation – generating a much louder conversation over Irish unity. This stimulated a major research publication, The Political Economy of the Northern Ireland Border Poll, from Seamus, along with colleague Adele Bergin at ESRI.
“Without a doubt, in the absence of Brexit we wouldn’t be having this conversation…. The issue of Brexit has put the question of the constitutional future of the North more centre stage. Even without Brexit we know that there are continued demographic changes taking place that are likely to make a border poll arise at some point in the future… But Brexit has made this likely sooner rather than later.”
What is essential, believes Seamus, is to avoid the mistakes of the Brexit referendum by having an evidence base “so that, when the time comes, people can make an informed opinion”. That evidence base should consider the economic arguments, which include, says Seamus, that households in the South are almost €3,000 a year better off after tax, while households in the North are at a substantially higher risk of poverty compared to those in the Republic.
Seamus admits that at present it is not possible to predict the overall impact of unification, nor to know the process by which it would take place. These are questions that planning and inter-government negotiations must address. But it is “absolutely crazy”, he says, to think that constitutional change would happen overnight, instancing the 13 year transition of Hong Kong from UK to Chinese rule.
This latest podcast in the second Forward Together series is available here on the website of peace and reconciliation charity Holywell Trust. It is funded by the Community Relations Council’s Media Grant Scheme.
Disclaimer: This project has received support from the Northern Ireland Community Relations Council which aims to promote a pluralist society characterised by equity, respect for diversity, and recognition of interdependence. The views expressed do not necessarily reflect those of the Community Relations Council.
Paul Gosling is author of ‘A New Ireland’, ‘The Fall of the Ethical Bank’ and other books. He is part-time policy advisor to Sinead McLaughlin MLA, the SDLP’s economy spokesperson.