Grigory Potemkin gives Northern Ireland’s workhouse economy a makeover

In early June 2011, the official website of the Northern Ireland Assembly reported that the Minister for Social Development, Nelson McCausland of the DUP, had visited the region’s first 'virtual' street. The Executive Minister was in Dungannon’s Perry Street to inspect what the website described as a ‘Virtual Window Scheme’ that involved painting derelict properties and installing pictorial scenes into boarded-up window openings to create a 'living' appearance and street scene. Mr McCausland was impressed and in the course of his address said that his ‘Department intends to include similar schemes, where appropriate, in its list of options for town centre regeneration initiatives across the Province.’

There is no evidence to hand that Nelson McCausland is a student of 18th century Russian history and economics. His campaign, nevertheless, bears a marked resemblance to that of Russian Empress Catherine II’s finance minister, Grigory Potemkin, who had hollow facades of villages constructed along the Dnieper River in order to impress his monarch during her visit to the Crimea in 1787.

The Social Development Minister can be something of a political maverick from time to time but on this occasion his response to the economic difficulties of Northern Ireland is consistent with that of all parties in the devolved administration at Stormont. In spite of the Six Counties being one of the most economically fragile areas in the United Kingdom, there is a surprising degree of agreement - or perhaps a shared lack of imagination - among Assembly parties on how to deal with the local economy.

In comparison to most other western economies, Northern Ireland appears to have been caught in a state of suspended animation. Over the last couple of generations, many societies have experienced considerable change in their economic fortunes, often defined by the arc of boom and bust. In contrast, the Northern Irish economy appears to be trapped in a more or less permanent condition of underdevelopment. Back in the 1980s, Bob Rowthorn and Naomi Wayne characterised the region as having a ‘workhouse’ economy in which there was little real productivity and most of the population was engaged in policing or providing services for one another. It is quite remarkable how little has changed in the time since that metaphor was first suggested. Indeed, an official report published earlier this year provides a description of the local economy that could have been written at any stage over the last three decades:

‘Northern Ireland is one of the UK’s most disadvantaged regions on many measures. It has the lowest wages and one of the lowest labour productivity rates. It has a weak private sector, with strong dependence on the public sector. These weaknesses reflect a number of unique factors, not least the legacy of 30 years of conflict, the demographic structure and the peripheral location of Northern Ireland, as well as issues surrounding deprivation and rurality.’

This report was drawn up to examine in detail whether a reduction in the rate of corporation tax would yield substantial economic benefits for Northern Ireland. The First Minister, Deputy First Minister and their respective parties have promoted the concept energetically and, in many ways, this appears to be the sum and limit of their economic strategy. Their rationale is that lowering corporation tax will help Northern Ireland to compete with the Republic in the pursuit of foreign direct investment. Some economists view this as flawed thinking because its low corporation tax has failed to protect the manufacturing sector in the Irish Republic from the global recession, a trend evidenced most dramatically in the wholesale redundancies in Dell’s branch plant in Limerick. There is too, they point out, the fact that the British Treasury will insist on a reduction in central government’s ‘block-grant’ or annual subvention to Northern Ireland in return for any concession made in relation to lowering local corporate tax levels.

None of the cures proffered for the North’s economic ills by the Stormont political class are new or original. Lowering corporate taxation, sending the First and Deputy First Minsters to the USA on St Patrick’s Day to pitch for investment, ‘making the workforce more competitive’, promoting tours of an empty shipyard and building Potemkin villages are all ideas that in one form or another have been around for a long time. In practice, they are about as useful as alchemists’ prescriptions for enhancing lead or careers teachers’ advice to pupils to try their luck with the Manchester United first team squad.

Northern Ireland suffers from a different set of economic problems to those identified by the occupants of the Stormont Assembly. Principal among its handicaps is its location on the fringe of a British state that since the Thatcher era has relentlessly promoted the London centred financial services sector at the expense of almost all other forms of economic activity. The decline of Britain’s once mighty manufacturing sector which stretched as far as Greater Belfast is not only due to the impact of globalisation but also to central government bias against skilled labour. Germany, for example, has retained a powerful engineering base thanks to constantly up-skilling its work force. Northern Ireland is not as British as Finchley. It is, however, blighted by the same fate as Britain’s industrial heartlands.

Compounding its difficulties as a fringe region of the UK, the Six Counties suffers from being a sea journey away from mainland Europe, a predilection among its most gifted for the certainties of exchequer funded employment and, more damaging still, an abysmal overall standard of education with a concentration on elite grammar schools for a minority and inadequate training for the rest. The latter handicap is, admittedly, recognised by some within the North’s civil service who have highlighted the importance of promoting Science, Technology, Engineering and Mathematics (STEM). Unrealistically, though, the Northern Assembly believes it can task its weak private sector with financing and implementing the policy.

There are of course no quick and simple answers to an economic situation as desperate as that of Northern Ireland. Years of decline mean that the region needs a long-term programme for addressing its economic difficulties. This has to be geared firstly, as indicated above, towards improving education and skill levels across the board and conducted with a clear and agreed understanding of the overall objective of such a course of action. In order to create the harmony to achieve this there needs to be much less income disparity. In short, we need a better-planned economy with greater equality in the distribution of wealth.

At which point, we are brought back to Northern Ireland’s greatest economic handicap – virulent sectarianism. Above all else, endemic ethnopolitical division prevents the population of the North from uniting to address their situation in a meaningful and coherent fashion. Northern Ireland is administered by an Orange and Green coalition that depends for its continued existence on its two main partners being seen as the champions of their respective sectarian constituencies. This generates an unhealthy and widespread perception among many people that the economy performs like a zero sum game where a gain for one ‘community’ is a loss for the other.

How to persuade a critical mass of the North’s population that their individual well-being is intimately connected with the common good of all remains the real economic task for those concerned with Northern Ireland’s future prosperity. We must hope, therefore, that someone tells Nelson McCausland and his coalition colleagues that they need to discover a better role model for economic development than Grigory Potemkin.