Privatization in Northern Ireland -- Making Politics Normal

by Nick Elliott

For most of us, party politics may be a dubious blessing, but for Northern Ireland it seems to be just what they need. While in mainland Britain, strenuous debates have been fought about government intervention in the economy, Northern Ireland has been excluded. Not only would market reforms boost the Northern Ireland economy, they also would improve its politics.

Of all the provinces of Britain, Northern Ireland has been least touched by privatization and deregulation. The British government has done little to reduce the $5 billion annual subsidy that goes from the mainland to Ulster. Northern Ireland has been excluded from much of the free market legislation affecting the rest of Britain. The great issues that have fueled debate in Britain over the past 10 years -- essentially about government involvement in the economy -- have yet to be introduced to Ulster.

There are plenty of suitable targets for market reforms. Northern Ireland has an unusually large public sector, which provides 42 percent of all employment. While in the rest of Britain self-employment has grown impressively, Northern Ireland has a much lower start-up rate for new businesses. Little attempt has been made to stimulate indigenous enterprise, and the tradition of outside ownership remains a characteristic of the economy today.

Part of the problem has been a conditioned reliance of Northern Ireland business upon subsidies from the British government. Subsidies to the manufacturing sector for 1986-87 were equivalent to $64 per week per employee. (Average earnings in Northern Ireland are $300 per week). Subsidies have distorted the Northern Ireland economy, keeping jobs and capital in trades where there is no longer any comparative advantage, and keeping resources out of potential new enterprises.

While employment in the rest of Britain has moved out of industry and manufacturing into services, and while the mainland economy has become far more dynamic, the past has been preserved in Northern Ireland. The Northern Ireland economy has failed to bring the same prosperity that has been enjoyed in the rest of Britain; unemployment has remained at 17 percent, while it has fallen in the rest of the country to 9 percent.

Politically, it isn't good for Northern Ireland to be so dependent upon the British government as an outside benefactor. Rather than resulting from impartial economic decisions, jobs and investments take on political overtones. Even when civil servants try to be scrupulously impartial, their decisions appear to have political implications for those rewarded or disappointed. By contrast, profit-seeking decisions taken by firms in the market are not seen as a vote for one side or the other.

A freer economy also would reduce the importance of sectarian politics to ordinary people. As is true the world over, when you pick a product off a shelf, there is usually no way of knowing if it was made by someone who is black, white, or yellow. Trade crosses many boundaries, including sectarian divisions. Northern Ireland would benefit from business becoming more important, because this would diminish the importance of politics.

British politicians often have maintained that their Keynesian policies are necessary to "keep Northern Ireland afloat." They never seem to consider that subsidies may just prolong inefficiency and dependency. They also have been unwilling to stir things up with radical policy changes, because they hold a cautious suspicion of Northern Ireland politics. British leaders could do nothing better than to upset the stale politics of Northern Ireland by shifting the focus of debate.