All Commentary
Friday, September 1, 1989

Privatization in Northern IrelandMaking Politics Normal

Nick Elliott is a British free-lance writer and press consultant.

For most of us, party politics may be a dubious blessing, but for Northern Ireland it seems to be just what is needed. 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.

Ever since the partition of Northern Ireland, the political parties there have been sectarian. The largely Protestant Ulster Unionists and Democratic Unionists want to maintain the union with the mainland. The SDLP (Social Democratic and Liberal Party) and Sinn Fein are mainly Catholic and advocate amalgamation with the South. The two main parties in mainland Britain, the Conservatives and Labour, do not stand candidates in Northern Ireland.

There are, no doubt, conservative Catholics who would support the Conservative Party, given the chance. And there undoubtedly are socialists who support the Unionists, but who would prefer to have a Labour Party to support. The parties in Northern Ireland do not represent the diversity of opinion existing there. The great issues that have fueled debate in Britain over the last 10 years—essentially about government involvement in the economy—have yet to be introduced to Ulster.

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 it sends from the mainland to Ulster. Northern Ireland has been excluded from much of the free market legislation affecting the rest of Britain.

Recently, however, the government has announced that Short Brothers, the aircraft manufacturer, and the Harland & Wolf shipyard are to be privatized. These plans have provoked controversy, and what is most interesting is that all of the sectarian parties have come out in opposition. The only indigenous group to support the plans is the recently formed North Down Conservative Association.

This is possibly an encouraging first step toward making Northern Ireland politics normal. If the people in Northern Ireland were allowed to argue about the same things that people do in the rest of Britain, then politics would lose much of its sectarian nature.

There are plenty of suitable targets for market reforms. Northern Ireland has an unusually large public sector, which provides 42 percent of all employment. One of the most encouraging trends in Britain over the past decade has been the growth in self-employment—many more people now own their own businesses. The trend has yet to spread to Northern Ireland. It has a comparatively low start-up rate for new businesses, and the mainstays of the Northern Ireland economy are still staple industries such as shipbuilding, textiles, and agriculture. Little attempt has been made to stimulate local enterprise.

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.) Between 1976 and 1985, over half of the subsidized firms received two or more grants—which is a worrying sign of dependency.

Preserving the Past at the Expense of the Future

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.

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. It is also likely that government funding has “crowded out” more efficient investment by the private sector. During 1984-87, government grants to industry amounted to 75 percent of all industrial investment.

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. The government has laid itself open to charges of Protestant bias by heavily subsidizing the Protestant company Shorts. By contrast, profit-seeking decisions taken by firms in the market are not seen as a vote for one side or the other.

The politics of Northern Ireland would benefit from a climate of enterprise. In addition to reducing subsidies, the government might encourage employee share ownership in Northern Ireland companies. Workers would feel less reliant on the British government for livelihood, and these steps would help to develop an enterprise culture as an alternative to the political culture.

Market reforms would bring other political benefits. Northern Ireland has been excluded from the radical reforms of secondary education being implemented in the rest of Britain. These reforms put parents in charge of running schools, allow them to opt for financial independence from government, and fund schools according to the number of pupils they attract. In England, Wales, and Scotland these reforms will introduce competition and raise the standards of education, but in Northern Ireland the reforms could foster political improvement as well.

Many of the funded schools in Northern Ireland have a strong religious bias. Parents have no choice but to send their children to these schools, even if they would prefer a secular or non-denominational education. Greater choice in education, as engendered in the mainland reforms, would allow more parents to avoid sending their children to sectarian schools.

A freer economy also would reduce the importance of sectarian politics to consumers and workers. 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 if business became more important, because the dominance of politics would diminish.

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.