The centenary of the creation of the Irish border offers a chance to reflect on the economic performance of the two Irelands over the last 100 years, as well as looking at some policy lessons from the past.
Newsletter from 30 April 2021
I was born in 1971, the year Northern Ireland turned 50. On 3 May, it will become a centenarian.
For all of my childhood and the first decade of my adult life, Northern Ireland was a country marked by destructive terrorist violence. Bomb scares, army checkpoints, riots, sectarianism and brutal murders were part of daily life. The statistics of the violence make for grim reading: between 1969 and 1998, 3,720 people were killed, 47,541 were injured, 16,209 bombings took place and there were 36,923 shootings.
Behind these statistics were real people such as a classmate from my school, who had just returned from his holidays and gone to get some groceries with his father: both were killed by a car bomb. Another young man, with whom I had played as a child, fell under the influence of paramilitaries, and was killed by the army when he opened fire on their checkpoint.
Terrorist violence also affected the rest of the UK, with bombings leading to loss of life – from a Birmingham pub to the Grand Hotel in Brighton to Harrods to Warrington town centre. Those days are thankfully well behind us.
The deep roots of Ireland’s partition and political violence can be found in the Great Irish Famine of 1845-52. This was a catastrophic event of biblical proportions. From a population of 8.2 million, one million people died and another million emigrated. The population of the island of Ireland, which today sits at 6.8 million, is still well below its pre-Famine level – see Figure 1 for this reflected in the European mirror.
Áine Doran, Chris Colvin and Alan Fernihough of Queen’s University Belfast have explored the legacy of the Famine, as well as lessons for policy-makers today when it comes to dealing with catastrophic events such as famines and pandemics. Chief among them is that conventional wisdom and policy constraints should be ignored when dealing with catastrophic risks.
During the Famine, the British government provided insufficient support because it was shackled by economic orthodoxies and ideology. This inadequate relief effort set in motion the push for Irish independence. Perhaps herein lies the greatest lesson for policy-makers if they fail to do whatever it takes to address catastrophes.
Figure 1: Population change in Ireland (versus the rest of Europe), 1840-2010
Source: Maddison Project
Note: Ireland = the 32 counties of the whole island; Republic of Ireland = the 26 counties of the present-day country; Northern Ireland = the six counties of the present-day nation.
Brexit has weakened the ties between England, Scotland, Wales and Northern Ireland. Polls carried out by LucidTalk for the BBC reveal that a majority of people in Northern Ireland believe that it will have left the UK within the next 25 years. Another survey reported in The Economist shows that support for a united Ireland is at an all-time high. And next week’s Scottish election on 6 May is ultimately a poll on whether to hold a fresh referendum on independence.
So, what might be the cost of independence? Eoin McLaughlin of University College Cork has examined the economic consequences of Irish independence in 1922, and draws out two principal lessons for Scottish independence.
First, a large part of Ireland’s economic success came from the fact that it had a banking and monetary union with the UK for the first 57 years of its existence. Second, in the years after independence, Ireland had to cut social security payments so that it could live within its means. An independent Scotland may well have to do the same.
The independence of Ireland meant that the northern six counties of the island formed a separate state – Northern Ireland, which remained in the UK. The partition resulted in sporadic paramilitary violence in Northern Ireland right from its inception. But from the late 1960s, civil unrest and paramilitary violence intensified: the ‘Troubles’, as they came to be known, plagued Northern Ireland for the next three decades.
Graham Brownlow of Queen’s University has looked at the economic consequences and legacy of the Troubles. They imposed a range of costs on the economy, which may have been as large as 20% of GDP. Nevertheless, many of the failings of the Northern Irish economy - low productivity and industrial decline – preceded the civil unrest.
The continuing economic legacy of the Troubles can be seen in Northern Ireland’s excessive dependence on the public sector, educational underperformance and inefficiencies arising from a segregated school system. More worryingly, 23 years after the agreement finalised in Belfast on Good Friday 1998, illegal loyalist and republican paramilitaries continue to exist and have adapted their criminal ‘business models’. The continued existence of these groups distorts Northern Ireland’s economic and political development.
Another legacy of the Troubles is lower productivity – see Figure 2 for the sectoral productivity gap with Great Britain. As David Jordan of Queen’s University suggests in his look at Northern Ireland’s long-standing productivity problem, the province’s ‘brain drain’ and long-term health problems linked to the Troubles have lowered productivity.
Furthermore, the many previous attempts to close the productivity gap with Britain have failed because industrial policy has been shaped by political needs rather than economics. The inherent instability and in-built sectarianism of Northern Ireland’s Assembly mean that productivity and economic prosperity will continue to lag behind the rest of the UK.
Figure 2: Northern Ireland’s productivity gap relative to Great Britain by sector in 2016 (%)
Source: Mac Flynn, 2016. Sectors employing less than 1% of the Northern Irish workforce not shown
The Celtic Tiger
Northern Ireland’s economy has performed poorly since its formation 100 years ago – and the Troubles and their legacy have only made things worse. What about its southern neighbour? Robin Adams (Queen’s University), Alan de Bromhead (Queen’s University) and Ciarán Casey (University College Dublin) paint a picture of an economy that lagged behind the rest of Europe for its first 50 years, but which has surpassed most other European Union (EU) economies since the 1980s.
What was its secret? EU accession in 1973, which resulted in trade becoming less reliant on the UK, seems to have been the key to the Republic of Ireland’s rapid export-led growth, and it earning the moniker ‘the Celtic tiger’.
Brexit and the resignation of Arlene Foster
Northern Ireland and the Irish border held centre stage during the Brexit negotiations. Neither the EU nor the British government wanted to create a hard border on the island of Ireland. The subsequent solution, agreed by both parties – the Northern Ireland Protocol - was that Northern Ireland would in effect remain in the EU’s single market for goods, and that there would be an economic or regulatory border in the Irish Sea for all goods coming from Great Britain.
At the Economics Observatory, we have had articles on the detrimental effect that this has had on the Northern Irish economy and supermarket supplies. Unfortunately, the Protocol has also been a factor behind recent violent protests. In addition, it was an important reason behind this week’s forced resignation of Arlene Foster as Northern Ireland’s First Minister and leader of the Democratic Unionist Party.
Mrs Foster’s ousting signals a pivot towards greater opposition to the Protocol as well as to operation of the north-south institutions associated with the Good Friday Agreement. Indeed, the Protocol is likely to be a constant source of political instability since every four years Northern Ireland’s Assembly is due to vote on whether to renew it. Brexit will continue to cast a long shadow over the nation.
A happy people
I wouldn’t want to end the week having you think that Northern Ireland must be a miserable place to live. Despite the legacy of the Troubles, poor economic performance and the problems of Brexit, the results of the annual survey by the Office for National Statistics Measuring National Wellbeing Programme consistently reveal that people in Northern Ireland report the highest levels of life satisfaction, wellbeing and happiness in the UK. The nation also tops the Lloyds Bank UK Happiness Index.
The happiness of the Northern Irish people will get a boost today with the re-opening of all retailers, while pubs and restaurants will now be able to open outdoors. Even the notoriously inclement Northern Irish weather won’t put a dampener on this party!