CAIN: Democratic Dialogue: Politics: Continentally Challenged (Report No. 5)

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Continentally Challenged

Truthful with the economy

Post-Fordism and 'flexible specialisation' are not words that trip off everyone 's lips in Northern Ireland. But, like every other region, Northern Ireland needs to come to terms with the competitive challenges recent changes in the international economic environment signal.

If global financial markets now severely constrain the autonomy of nation-states in macro-economic policy, at the other end of the economic chain, increasingly individuated and demanding consumers are no longer satisfied with the standardised, production-line goods pioneered with Henry Ford's ('any colour so long as it's black') Model T. Instead, the trend is towards batch production of specialised goods, with 'just-in-time' stock inventory techniques and rapid innovation to meet consumer fads.

As the nation-state has retreated somewhat in macro-economic management, regional economic strategies have come more to the fore. Changing production trends have meanwhile placed a high premium on investment, education and training, application of technology, and research and development. Yet factors like investment and training suffer from what economists call 'co-ordination failure': it is in everyone's interest to invest and to train, since everyone benefits, but not for individuals to make that commitment in isolation, since they may not benefit and/or others might (such as when a firm poaches another firm's trained labour). Combining these two considerations suggests that those regions which have appropriate institutional structures, pursue co-ordinated economic development strategies, ensure the workforce is well trained and educated, secure high levels of investment, and advance technology transfer and R&D may win out in the competitive struggle.

This was the issue, with Northern Ireland in mind, which the Northern Ireland Economic Council invited Michael Dunford and Ray Hudson to investigate, in a comparative study of EU regions. Contrary to continuing (and utterly baseless) official triumphalism about the region's workforce, research in the late 80s showed that, as compared with the former West Germany, Northern Ireland had only 45 per cent as many graduates and 49 per cent as many technicians working in manufacturing; the republic, meanwhile had 88 per cent as many graduates and as many technicians as West Germany The same applies to the region's much-vaunted education system, seedcorn of the future: whereas 62 per cent of German 16-year-olds in 1990-1 reached the equivalent of GCSE grades A-C in mathematics, the national language and one science, only 22 per cent of Northern Ireland students achieved this modest standard that year.[1]

One index of the quality and marketability of goods any economy produces is its expenditure on R&D. Research for the Industrial Research and Technology Unit has shown that in 1993 total civil expenditure on R&D by Northern Ireland businesses amounted to just 0.4 per cent of regional gross domestic product. Only Greece and Portugal, among EU members, spend less.[2] All in all, as Gerard O'Neill puts it, "Northern Ireland no longer has a sizeable core of indigenous, world-class manufacturers who can confront the challenges of global economic change in the decades ahead."[3]

These are not ethereal issues. For if firms cannot compete on quality, they must compete on costs, particularly of labour. It is thus no surprise that average (male) full-time earnings in manufacturing in Northern Ireland have been driven down, relative to Great Britain, from 97 per cent in 1981 to 84 per cent in 1995.[4]

Dunford and Hudson's research shows that decentralisation of governance to regions is not in itself enough to guarantee economic success. They point to Saarland in this regard - nearer home, one could point to the dismal record (in this as in all other regards) of the old Stormont government. In particular, they stress the need to place a premium (clearly not a feature of the latter experience) on "trust, co-operation and social inclusion".[5]

Nevertheless, they conclude that "the most active regional governments are to be found in the most economically successful regions, and the fact that they can exercise this degree of pro-activity is predicated upon their location within national states characterised by decentralised systems of governance. These involve dense and overlapping networks of institutions, within both the state and civil society, and bridging the boundaries between these two spheres."[6]

The previous EU regional affairs commissioner, the former Scottish MP Bruce Millan, came to the same conclusion from practical observation. Struck by the growth of "regional assertiveness" after he took up the portfolio in 1989, he believed it was no accident that the strongest economies were those with powerful regional governments-"they provide a focus for initiative and enterprise".[7]

While stressing there is no simple transferable model, Dunford and Hudson highlight a number of features of successful regions from which Northern Ireland can learn. Prosperous EU regions, they discovered,

  • exhibit a high degree of social cohesion and inclusion;
  • achieve co-operative industrial relations, matching flexibility with security;
  • enjoy inter-firm co-operation and networking;
  • 'embed' high-value-added inward investment in the regional economy;
  • pursue strategies to foster innovation
  • and technology transfer;
  • have enabling institutions of governance, which have 'learned to learn';
  • maximise the potential of cross-border
  • synergies; and
  • manifest a vibrant civil society, to which the state is permeable.[8]

They conclude with a warning for Northern Ireland, that a regionalised Europe could simply become a framework for further divergence between strong and weak regions: "This is especially so in the context of moves towards the single European market and Economic and Monetary Union, which, ceteris paribus, will lead to strong regional divergence, with the gap in levels of economic competitiveness and wellbeing between the 'successful' and 'less favoured' European regions rising sharply."[9]

In its significant statement on the research it commissioned from Dunford and Hudson, worth quoting at length, the NIEC pulled no political punches. Urging a 'culture of commitment' throughout the political, economic and social spectrum in Northern Ireland, it said:

One of the themes to emerge from the case studies is the importance of developing governance and institutional arrangements based on co-operation and trust. These make it easier to develop a strategic and integrated policy approach and they facilitate a shared culture of commitment involving the public and private sectors as well as local authorities and the voluntary and community sector. While it is undoubtedly the case that all of these sectors are showing much increased signs of effort and enthusiasm to resolve economic problems, it is also clear that these efforts are taking place against a backdrop of long-standing and deep division within society. The vital ingredient of local political leadership has been lacking. In these circumstances, it is highly questionable whether it is realistically possible to generate the degree of co-operation and trust that are found to be at the core of other more successful parts of Europe. This places great emphasis on reaching agreement on governance structures for Northern Ireland that will promote successful economic development.[10]

Thus, we are back once more to the debilitating effect of the failure of the major parties in Northern Ireland - especially the Ulster Unionists and the Social Democratic and Labour party - to develop the politics of common understanding that could alone make such a dynamic regional polity possible. As with the urgent issue of social exclusion, progress is thus subject to generalised political veto.[11]

But this is not cost-free. In the new European configuration Keating identifies, "Some subnational territories will have considerable scope for autonomous action in the interstices of the national and international order, blurring the distinction between independence and internal autonomy. Others will be reduced to new forms of dependence, on the national state or the international market."[12] Or, as Hooghe puts it, "In the European reality, regions, in particular those with elected authorities, are the core players."[13]

Such an authority would have, of course, to make an early appointment with Dublin.


1 Paul Gorecki, figures presented to an Irish Congress of Trades Unions seminar, Armagh, October 1996
2A Gough, 'Northern Ireland civil expenditure on research and development', Economic Outlook and Business Review, vol 11, no 4, December 1996, pp 13-14
3Gerard O'Neill, 'The northern dimension', in Paul Gillespie ed, Britain's European Question: The Issues for Ireland, Institute for European Affairs, Dublin, 1996, p136
4Gorecki, op cit
5Michael Dunford and Ray Hudson, 'Decentralised models of governance and economic development: lessons from Europe', in Northern Ireland Economic Council, Decentralised Government and Economic Performance in Northern Ireland, NIEC occasional paper 7, Belfast, 1996, p199
6 ibid, pp 2 05-6
7'Regional focus for the future', Guardian, June 25th 1990
8 Dunford and Hudson, Successful European Regions: Northern Ireland Learning from Others, NIEC research monograph 3, Belfast, 1996, pp 186-98
9ibid, pp 198-99
10ibid, pp xxviii-ix (my emphasis)
11 See Paul Teague and Robin Wilson, 'Towards an inclusive society', in DD report 2, Social Exclusion, Social Inclusion, 1995, p96.
12 Michael Keating, 'Regional autonomy in the changing state order', Regional Politics and Policy, vol 2, no 2, 1992, p60
13 Lisbet Hooghe, 'Subnational mobilisation in the European Union', in Jack Hayward ed, The Crisis of Representation in Europe, Frank Cass, London, 1995, p175 (my emphasis)

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