June 28, 2006

North a 'junkie economy' reliant upon state handouts

Posted in Irish Economy ·

In the opening lines of “The Protestant Ethic and the Spirit of Capitalism” Max Weber observed that:

“A glance at the occupational statistics of any country of mixed religious composition brings to light with remarkable frequency a situation which has several times provoked discussion in the Catholic press and literature, and in Catholic congresses in Germany, namely, the fact that business leaders and owners of capital, as well as the higher grades of skilled labour, and even more the higher technically and commercially trained personnel of modern enterprises, are overwhelmingly Protestant.

“This is true not only in cases where the difference in religion coincides with one of nationality, and thus of cultural development, as in Eastern Germany between Germans and Poles. The same thing is shown in the figures of religious affiliation almost wherever capitalism, at the time of its great expansion, has had a free hand to alter the social distribution of the population in accordance with its needs, and to determine its occupational structure.”

And one of his students, Martin Offenbacher , who studied the difference between the two Christian denominations in Baden in Southern Germany at the turn of the 20th century and upon whose research Weber lent heavily, went on to contend that, “The Catholic is quieter, having less of the acquisitive impulse; he prefers a life of the greatest possible security, even with a smaller income, to a life of risk and excitement, even though it may bring the chance of gaining honour and riches.

“The proverb says jokingly, ‘either eat well or sleep well’. In the present case the Protestant prefers to eat well, the Catholic to sleep undisturbed.” These ideas were not new, but Weber in his ‘Sociology of Religions’ constructed an entire theory – which appeared to have empirical resonance – linking being a good, upright Protestant to being a wealthy, materialist citizen. Flowing from this theory, there is a sense that the free market is the economic handmaiden of Protestantism. The image of the hard-working Protestant was subscribed to by many intelligent people for many years. In contrast, Catholics were seen as lazy and more concerned with equality, community and social cohesion. Admirers of this cultural approach to economics also contend that “old religion” rather than “new ideology” was the determining factor in explaining how societies and economies work. They show this by facts such as that 200 years after both their revolutions spoke of liberty, equality, and brotherhood, the value system of the Catholic Republic of France believes that inequality is the number one social ill, while the Protestant Republic of America believes that inequality is a fair reflection of hard work, effort and individual guile.

Whatever the merits of these arguments (and they are interesting), Max Weber would turn in his grave if he was to wake up in that self-acclaimed “Protestant Province” of Northern Ireland today. Just as the Orangemen kick off their marching season, celebrating, amongst other things, the superiority of the Protestant way of life, an extraordinary statistic revealing just how sclerotic is the economy of the North was published last week.

According to a new study, the Northern economy now relies for a remarkable 71.3pc of its economic output on the public sector, by far the highest proportion in the western world. Economists at the Centre for Economics and Business Research (CEBR), who carried out the study, have also warned that this dependency is growing (if that were possible).

THEY reveal that comparable figures in the rest of Britain show the next most dependent region in the UK is Wales, where public spending is equal to 62.4pc of its economic output. At the other end of the spectrum, London had a mere 33.4pc public sector share of Gross Domestic Product. According to the OECD, the Republic’s comparable figure is 31pc.

Northern Ireland is now a junkie economy, hopelessly addicted to handouts from the British exchequer. It is difficult to see how it can wean itself off. Far from benefiting from an economic “peace dividend”, the North has become progressively more reliant on handouts. In the past, when the IRA were bombing and maiming, it was possible to explain the North’s financial neediness on the “war”.

Today, more than 10 years after the ceasefire, that no longer holds water.

Why is the North such an economic basket case, more akin to East Germany than Western Europe? Why are all its unionist leaders happy to be the most craven region of the UK? (My targeting of the unionist in particular is based on the assumption that nationalists are not happy with London full stop. That said, Sinn Fein’s economics and those of the DUP seem remarkably similar and essentially Statist). Why are they happy to simply stick out their economic forearm for yet another fix? Why do we not hear someone talking about the economy and the need for the North to stand up on its own two feet? After all, ask people down here and (despite our problems) most will attest to the liberating nature of getting the economy right finally.

The main reason for the North’s inertia seems to be that there is no need to do anything else. Someone else is paying the bills and there is no one telling the province to pay for itself. Drive around the North and, while it does not feel dynamic, it certainly feels prosperous.

On a quality of life basis, its schools and hospitals are pretty good and the latter are certainly in better shape than ours.

Traffic is not a problem in the main and shops in Belfast are busy. And it is hardly surprising with a public sector so large that unemployment is low.

Survey data suggest that people are reasonably happy with their lot but it is a concubine’s contentment because their lifestyle is being maintained by other people’s money. Any attempt to wean the North off its dependence would lead to economic cold turkey on a monumental scale. However, ultimately this dependence on the public sector will destroy what’s left of the fabric of the Northern economy.

It will elbow out other investments because such public sector dominance leads to the phenomenon of “subsidy fishing” where every venture is dictated not by its merits but by the amount of grant it extracts.

Real entrepreneurs will leave to set up businesses elsewhere and ultimately, the productivity of the region will collapse. If productivity falls, so too in the end, will living standards – even if the UK exchequer continues to bankroll the place. There are some signs that the North’s politicians are waking up. They are trying to lobby London to reduce their corporation tax rate to 10pc so as to compete with us. However, there is more to winning global investment than just tax. Skills are key, together with local management know-how and probably equally important is the workforce’s “can-do” attitude.

These are not present in the North because the cushion of the public sector with its restrictive work practices is the norm. To overcome this, the North should be agitating for a more ambitious 0pc corporate tax rate, like Estonia. In this regard, we should help them. It is not in our interest to have a junkie economy in the North.

We would benefit from a creative, dynamic Northern Ireland. It is the same country after all and we are part of the same economic space. We need lots of bits of the North from its labour force to its electricity grid.

In fact, our bloated economy needs the North’s excess capacity. It could be our greatest economic resource. Our government should be generous now that we have the cash and aggressively work at convincing London that the North is a “special case” within Britain. In every aspect of our dealings with the North, it is up to a successful Republic to be helpful, not vindictive, open-minded rather than triumphalist and forward thinking not backward looking.

SO when the Orangemen swagger up the Queen’s highway next week, it behoves us to see the big picture. In 10 years time – 100 years after the Rising – there will, at current rates of absorption, be more immigrants on the island than unionists.

We have to see all angles and one of those is to help the North out of its economic cul de sac now. Sometime in the past century, the North’s Protestant majority swapped Max Weber for Karl Marx. We should now help them to re-convert and see the true light.

  1. S Wall

    The unionists have always (mistakenly) maintained that
    the Celtic Tiger’s success was down to massive EU handouts.

    It should be pointed out that other EU countries (Greece,
    Spain, Portugal) received large sums of money for
    infastruture etc but have not used the funds as wisely as
    the republic.

  2. Billy Waters

    Thats all we need, another junkie on our doorstep joneseying
    for another hit.

    The North has to change. If only for the reason that Rover
    has stopped making cars. The province belongs to a bygone
    era and their laissez faire attitude to the Protestant work
    ethic is yet another example of them wanting to have their
    cake and eat it.

    They see us as a Papist lawless country when in fact we are
    routing the Catholic Church in a way they could never
    imagine. Religion is just legalised madness. Old fashioned
    superstition that divides people and gets them killed.

  3. Dónall Garvin

    Northern Ireland has for too long focused on politics not
    economics. Britain’s policy of job creation was mainly
    achieved through the public sector as private sector jobs
    are harder to secure and maintain. This is ever more
    relevant in today’s “globalised world.”
    Interestingly the main historic reasons for Ulster
    remaining with Britain were economic (e.g. the successful
    port, heavy engineering, linen industry etc…) It would be
    hard to put your finger on why Northern Ireland should
    remain with Britain now, except perhaps that Unionists are
    incapable of reassessing their current position.

    Peter Robinson has been speaking about the North’s need for
    economic growth and its capacity and potential for this
    growth. However, the high level of state dependence in the
    North has lead to the “concubine contentment” which is a
    cutlural problem. There is no easy answer to this problem
    but at least Peter Robinson is beginning to ask some hard

  4. Laura

    I wouldn’t be so sanctimonious about the North. According
    to Marc Coleman in the IT a few weeks back Ireland has
    overshot targets for public sector workers by about 40,000
    staff. He reckons this has artifically reduced the dole
    queues by 2%.

    Then there is the – heavily subsidised – multinational
    sector (not to mention the effective subsidy caused by low
    corporation tax).
    And the – heavily subsidised – building industry –
    responsible for 12.5% of all jobs.
    Bit worrying when you look at it that way.

    Finally we don’t even start to count huge numbers of folks
    on lone parent payments, disability payments etc (the
    number of people I know getting disability for suffering
    from occasional but not totally disfunctional depression is
    truly frightening). Then there are the thousands
    of “missing” people on SWB (supplementary welfare benefit) -
    people who are not disabled, and not interested in
    working, but paid handsomely by the government (plus their
    rent and medical card of course) for the privelige.

    We’ve a cheek to talk about a junkie economy in the north.

  5. Deco

    Weber missed the point, and was sectarian in his outlook.
    The best scientists/innovators/intellectuals of his age
    were either Catholic or Jewish. These were the people whose
    contribution to humanity has been the most lasting.
    Progress is not all about the accumulation of material
    wealth, and showing off your status. Hilariously enough the
    ultimate status symbols of the last century were all
    industrial products from Italy, France and Bavaria. But you
    are right about the American and French Republics. This has
    been a great insight. In the current age in Europe both
    Catholic and Protestant life models have narrowed their
    differences in Europe considerably, to the point where they
    now share a great deal in common. Besides, I have met many
    greedy materialistic Catholics, and many community
    concerned Protestants. Weber has been relegated by the
    passage of European societal progress, but in some places
    he probably still has his fans.

  6. Scott

    There are two sides to everything.

  7. S McNicholl

    When Northern Ireland has a proper leadership i.e a
    Government, in place then maybe we should give them a few
    years and make comparisons between it and the Republic or

    Ireland and England both has leaderships that you can blame
    for the economy failing – Northern Ireland doesnt.

    “Skills are key, together with local management know-how and
    probably equally important is the workforce’s “can-do”

    You have practically just summised that Northern Ireland is
    a skip with nothing but stupid, ignorant and lazy people.

    Also, to say that the skill set doesnt exist in the North
    must be some kind of ignorant joke. Nothern Irelands
    universities are turning out some of the best graduates in
    the UK. We have 4 VERY GOOD universities into the bargain -
    namely Queens, UUJ, UUC and UUM.

    I am from the North and a graduate from one of its
    universities. The only reason I am in Dublin working is
    because of the lack of opportunities. Should the economy
    change and businesses are attracted to Northern Ireland then
    I would be the first one in my car driving up the M1 and
    taking my skills with me.

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