The Republic of Ireland
and Northern Ireland


by Jessica Becker

SECTION I: GENERAL 20TH CENTURY POLITCAL HISTORY 
The two Irelands were one under the British rule until the 26 southern counties were granted independence from England in 1921 with the Anglo-Irish Treaty.  With the treaty Ireland was independent but remained a member of the British Commonwealth (a status similar to that of, for example, Canada).  At that point, the six counties that make up Northern Ireland remained under the economic and political control of London (like Scotland and Wales).
ECONOMIC HISTORY

By the end of World War II, Great Britain’s economy was in shambles as the war effort had completely drained financial reserves.  It was no longer affordable to govern the vast, global empire held the previous century, and its colonial empire disintegrated.  Around this time, in 1948, Ireland completely withdrew from the British Commonwealth and became a truly free, independent republic.  In 1973, Ireland joined the European Community, today’s European Union (EU).  The Irish government created its own currency, the Irish pound, the exchange rate of which was closely linked to the British pound.  When the common EU currency, the euro, was introduced throughout the union as a replacement for the individual currencies of the various EU members, the Republic of Ireland voted to convert to the use the euro as its primary currency.  Great Britain joined the EU, but not the Economic and Monetary Union (EMU).  Therefore, Northern Ireland’s economy has always and continues to function under the British pound, and does not participate in the euro currency bloc.

THE CURRENT SITUATION IN THE IRELANDS

Known for its pub culture and green, bucolic countryside, Ireland’s economy thrives on tourism.  It is estimated that over 90% of the population is Catholic.  As the country is relatively small, with a population estimated at 3.8 million in 2000, it depends greatly on exports, especially to the EU member states and the United States.  Recently, due to high amounts of foreign direct investment and the development of multi-national corporations headquartered in Ireland, the Irish economy has witnessed unprecedented economic growth and the economic, social and political benefits and drawbacks that accompany such growth.  Because of historically high levels of poverty, Ireland faced a large emigration rate until recently, as the economic boom and the benefits of previous investment in infrastructure have improved overall living standards.

Northern Ireland, commonly referred to as Ulster, consists of the northern six counties of the Irish isle.  Like Scotland and Wales, Northern Ireland is under British sovereignty.  About 2/3 of the population of 1.8 million is Protestant, and the majority of the remaining population is Catholic.  It is historically one of the poorest and troublesome areas of the United Kingdom, greatly due to uneven development that has led to religious conflict between the Protestants and Catholics.  With the recent peace prospects due to the Belfast Agreement, the citizens’ newly found confidence has manifested into benefits such as greater peace of mind, increased property values, a more developed tourist industry, etc.
SECTION II: THE TROUBLES
PRE-INDEPENDENCE (1921)

Social movements have existed from the beginning of Irish independence in 1921 for reunification of the two Irelands, as civil upheaval between the Catholic and Protestant population clashed over the issue.  The seeds of the religious conflict grew from the 17th century when English Protestants built plantations on valuable Irish land.  The Irish Catholics felt deprived of their resource and grew resentful.

POST-INDEPENDENCE (1921)

The long-existing tensions were exacerbated in 1921, the year that the Republic of Ireland gained independence.  The northern 26 counties commonly known as Ulster, the “wealthiest and most Protestant part” of the isle, remained under the jurisdiction of the United Kingdom.  In these better-endowed areas settled, for the majority, those loyal to England, the Protestants.  As they had in the 17th century, the British benefited financially from the valuable resources available in that region and the Catholic population, again, felt suppressed.

THE TROUBLES

The geographic partition of Ireland mirrored the divide within society, as the Catholics were left with embittered sentiments that Ulster belonged with the rest of Ireland, and the Protestants were content to remain under the rule of Great Britain.  Each side strongly and passionately believed in their cause, and the result was hostile conflict.  Over the last several decades, the climax of the clash between the two groups culminated in Northern Ireland’s capital of Belfast with years of harsh violence and terrorism that came to be known as “The Troubles.”

 

POLITICAL FACTIONS

Political groups formed to lobby for each side’s cause.  The Catholics, pro-reunification with Ireland, were commonly referred to as nationalists or republicans, and the Protestants, loyal to the British, were called loyalists or unionists.  An example of a nationalist political party is the Sinn Fein, the group credited with the 1921 victory that led to independence of Ireland.  The infamous Irish Republican Army, or IRA, which sometimes resorted to terrorism in the fight for its cause to fight for reunification, was associated with the Sinn Fein.   An example of a rival loyalist party is known as the Ulster Unionists, a group with staunch beliefs in support of maintaining the union with Great Britain.

INEQUALITY

As stated by Political Geography Professor Syed Hasnath, “If existing cultural hostilities are the fire, inequality is the fuel to the fire that leads to terrorism.”  The Irish Catholics historically felt adverse feelings toward the British for centuries of subjugation, with British financial and military superiority preventing the Irish from doing much to oppose them.  When the better endowed northern counties were those counties retained by the United Kingdom in 1921, levels of inequality increased even more.  This inequality instigated rage among the people and eroded social cohesion.  Inequality by definition suggests that some people are better off than others; some are “haves” and others “have nots.”  In the case of the Northern Ireland and Ireland conflict, the Catholics considered themselves the “have nots,” and in that position, felt they had nothing to lose in the fight for their cause.  This led to the use of terrorism by radical groups such as the Irish Republican Army and social fear and instability.

 TALKS FOR PEACE:  THE BELFAST AGREEMENT, OPPOSITION AND HOPE

In April of 1998, the British and Irish governments came together in an historic attempt to settle the conflict that had taken thousands of lives through brutal acts of terrorism of both the Catholics and the Protestants.  After long negotiations between 12 Northern Irish political parties, it was agreed that “Britain (would keep the) province, but (the) Republic gain(ed) a voice in its affairs.”  This agreement came to be known as the Belfast Agreement, or the Good Friday Agreement, and was signed on May 22, 1998.  A Northern Ireland Assembly with 108 seats was established in which both Catholic and Protestant representatives would jointly govern Northern Ireland.  The Republic of Ireland agreed to amend its constitution by eliminating claims on Ulster territory.  Other councils were set up to improve relations between the governments, including the North-South Ministerial Council (between Northern Ireland and the Republic of Ireland) and the British-Irish Council (between the Republic of Ireland and Great Britain) to name two examples.

The Belfast Agreement, although seemingly beneficial to all involved in the conflict, was signed with some opposition.  One example of a group opposed to the Belfast Agreement is the Unionist party, the pro-British political faction in Ulster, who very firmly believed and continue to believe in the importance of maintaining the union with Great Britain.  As they strongly state on their website, www.ukup.org (United Kingdom Unionist Party):

“The United Kingdom Unionist Party advocates full and equal rights for everyone, regardless of their political, religious or cultural orientation. The Party's central purpose is to maintain the UNION between Northern Ireland and Great Britain, as this is in the best interests of all of the people of Northern Ireland.

 This Party fully supports the aim of peace and reconciliation and is determined that those who use or threaten violence and retain the means to do so shall no say in the governance of Northern Ireland. To do otherwise would be to accept peace at a price that no democrat should be asked to pay. The UK Unionist Party remains resolutely opposed to the immoral provisions of the Belfast Agreement that have violated the basic principles of democracy by installing the front men for terror into Government. There can be no role whatsoever in any democratic institution for those who remain inextricably linked to terrorist organisations. UK Unionism seeks to apply the same standards of democratic accountability as available elsewhere in the United Kingdom.”

Despite the opposition, to the world and many Irish people (both Catholic and Protestant), the Belfast Agreement offered a promise and hope for a peaceful settlement to the decades of conflict in Northern Ireland.  The Agreement allowed Catholics and Protestants to work together to govern their territory; this mutual cooperation is unprecedented in the history of the Irelands.  Countless benefits such as a more peaceful state of mind for those living in the area, less crime, increased property values, and other positive economic, political and social effects result from the Belfast Agreement.  However, the Agreement is just a first step.  In a speech one year after the signing of the Agreement, Prime Minister Tony Blair spoke in support of the Agreement, hailed the efforts that had been made since the signing, but declared that more progress would be made with continued cooperation.  The Belfast Agreement is encouraging, but there is still much more to work on, as centuries of unrest and bitterness cannot be erased with one treaty.
SECTION III:

ECONOMIC HISTORY

 Historically, both the Republic of Ireland and Northern Ireland had been known for high levels of poverty and inequality within their populations.  Beginning in the 1840s (the time of the Irish Potato Famine) until the 1970s, Ireland faced a consistently high emigration rate, due greatly to impoverished peoples searching for better opportunities in other countries.

Before 1921, the 26 counties of Ireland and 6 counties of Ulster were governed under British rule, and therefore, the British pound.  Since Great Britain did not join the EMU, Northern Ireland continued to use the British pound.  After the signing of the Belfast Agreement, Northern Ireland remained a British holding, and therefore, again, functioned still under the British pound.

CURRENT ECONOMIC CONDITIONS IN THE REPUBLIC OF IRELAND

Alternatively, the Republic of Ireland established its own currency, the Irish pound, once it became independent.  In 1973, Ireland joined the European Union, and agreed to, in join the EMU in launching a single European currency, the euro, with the Maastricht Treaty of 1991.  According to the European Union Online, a single currency offers “five advantages to the citizens of Europe:

·         a more efficient single market after disruptions to trade and investment by exchange-rate adjustments have been eliminated

·         growth and employment will be stimulated by better borrowing conditions and a currency based on sound economic foundations

·         an end to the costs of converting between currencies

·         greater international stability by means of a new currency on an equal footing with the dollar and the yen

·         monetary sovereignty regained through collective management of a single monetary policy. A national monetary policy is no longer a sustainable option with capital flowing freely between interdependent economies.”

 

The EU’s Economic and Monetary Union is considered a liberal application of economics in its promotion of more open economic relations and exchanges, whether in labor, financial, trade, or other markets.  Ireland’s liberal policies, low corporate income tax, and highly skilled but relatively inexpensive labor force attracted especially American foreign direct investment and multinational corporations throughout the 1990s.  The result was high GDP growth, averaging around 9% over nine years.  So much foreign money had been funneled into Ireland that in 2000, the difference between Gross National Product and Gross Domestic Product in Ireland was 16%.  Unemployment has steadily decreased since 1997.  Such historic growth caused some to call Ireland the “Celtic Tiger.”
However, economists speculate that the juggernaut-like growth of the Irish economy could overheat, and such growth could not be sustained.  With Irish technology industries relying heavily on exports to America, U.S. recessions could result in similar recessions in the Irish economy.  The textile industry, in comparison with the growth of the high tech industry, has lost sales greatly due to less expensive goods provided by Asian and Eastern European competitors.  The agricultural industry has been called inefficient and also faces competition, but from other members of the European Union.  While Ireland’s growth has been historic and a significant achievement, the government must be cautious in relying on similar growth rates for future economic decisions and planning.
CURRENT ECONOMIC CONDITIONS IN NORTHERN IRELAND 

The United Kingdom has been a global financial powerhouse for centuries.  It has to date not joined the EMU, as its currency is one of the strongest in the world historically and in the present.  Therefore, Northern Ireland continues to function under the pound.

The government in London sent Northern Ireland large amounts of economic aid during the Troubles, but until the signing of the Belfast Agreement, “no investment was enough to stabilize the situation.”  The prospects of peace created by the signing of the Belfast Agreement have been beneficial to Northern Ireland economically.  It has allowed property value to increase due to the peace of mind of citizens.  A tourism industry has grown, attracting visitors who were once afraid to see the sites in Northern Ireland due to the violence associated with the religious conflict.
STRATEGY 2010 

In Northern Ireland, a new plan for economic development called Strategy 2010 was introduced in 1999.  Strategy 2010 reports on economic conditions affecting Northern Ireland, including economic statistics on topics such as unemployment and sector production in relation to GDP.  The plan recommends an economic strategy to be pursued through the first decade of the century.

According to statistics in Strategy 2010, many economic trends in Northern Ireland follow trends in Great Britain.  According to the plan, “This is to be expected; Northern Ireland and GB share common fiscal, monetary and exchange rate policies; GB is Northern Ireland’s main external market and the Exchequer makes significant transfers to Northern Ireland to enable the region to maintain UK levels of provision.”  Accordingly, unemployment was higher in Northern Ireland than Ireland in 1998 at 6.8%.  The major economic sector is manufacturing.  GDP per capita in 1998 was 20% below the UK average at $19,048, as compared to $23,498 in Ireland during the same year.  Strategy 2010 places importance on the need of investment in knowledge, that is, improve the skills of the labor force, and to invest in research and development.
ECONOMIC SIMILARITIES BETWEEN THE IRELANDS

Both the Republic of Ireland and Northern Ireland are presently demonstrating the economic benefits that follow carefully planned political liberalization and government assistance.  These benefits have led to higher standards of living in both countries never before experienced.

In Ireland, the political integration with other European states in the EU led to the joining of the EMU.  Membership allows the Irish people to vote for issues that arise in the EU, as they did in favor of ending their currency for the euro.  But this liberalization was assisted by the government’s actions.  By keeping corporate taxes low and encouraging foreign direct investment, multinational corporations were attracted to the country.  The relatively inexpensive but skilled labor force was another asset to the multinational corporations, which helped to decrease unemployment in IrelandIreland has been called “one of the most open economies in the world” due to the high number of foreign firms in Ireland and as evidenced by a 16% gap between GDP and GNP.  Thus, liberal policies in Ireland allowed for an economic boom unprecedented in Irish history. 
In Northern Ireland, months of negotiations led to the historic and promising Belfast Agreement.  The National Assembly created with shared power between Protestants and Catholics inspired hope to the people of Northern Ireland.  This peace in combination with further planning and direction via Strategy 2010 has resulted in vast improvements in Northern Ireland’s economy in just the last couple of years.  Peace of mind of citizens increased values of homes, a tourism industry is developing quickly, business seems intent on moving forward with innovation, etc.  Liberal policies have also benefited Northern Ireland.
SECTION IV: AN ECONOMIC FOCUS ON EXPORTS IN THE IRELANDS
Because Ireland and Northern Ireland are relatively small economies, they depend on exports to drive their economies.   Both economies have seen a dramatic increase in exports due to the pursuit of liberal policies.  However, Ireland has witnessed such growth in the industrial and services sector while Northern Ireland’s growth has been mainly in the manufacturing sector.  The influx of multinational corporations in Ireland for reasons previously stated led to large levels of high-tech exports and was a major factor in the high growth rates experienced in the 1990s.  The production of industrial goods accounted for 40% of GDP in 2000. 
Ireland exports 59% of its commodities to the European Union, 29% of which is shipped to the United Kingdom alone, and 18% to the United States.  According to the CIA World Factbook, the most popular commodities exported from Ireland are: “machinery and equipment, computers, chemicals, pharmaceuticals, live animals, and animal products.”  These products coincide with the strongest sectors of the Irish economy:  industrial, services, although it has decreased significantly since 1992, agricultural.
Northern Ireland, with Strategy 2010 in action, is currently encouraging investment to launch the economic growth.  With the peace of the Belfast Agreement, the manufacturing industry has had the opportunity to grow and most exports are associated with this industry.  The manufacturing industry is considered less advanced than the lead sectors of industry and services in Ireland.  With increased investment being filtered into the economy of Northern Ireland, Strategy 2010 aims to launch the growth of these more advanced sectors, considered “knowledge-based.”
Through the 1990s, Northern Ireland witnessed an 11% increase in exports as a percentage of total sales, from 28% to 39%.  As in the Republic of Ireland, membership in the EU makes it beneficial to trade within the Union due to, for example, lower tariffs, and therefore about one-half of Northern Irish exports are to Europe.  The second largest trading partner is the United States.  This increase was a main cause for Northern Ireland’s position as the fastest growing economy out of the Scottish, Welsh, and Northern Irish regions in the 1990s; GDP growth in the last decade was at 82.9% as compared with 71% in the United Kingdom.  The main exported manufacturing goods include transport, electrical, and optical equipment.  With strategy 2010 in place, business is in the process of making a transition from concentration on manufacturing to the information technology sector.  High tech foreign corporations are investing in Northern Ireland, creating more jobs and continuing the electronics, telecom, and international traded software focus.  As in the Republic of Ireland, the relatively small size of Northern Ireland requires a high level of exports for maximum economic benefit.

 

 

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