On summer evenings throughout the North you can hear the bands practising, beating out marching tunes from Orange Halls, looking backwards rather than planning for the future. And the future is arriving quickly in Northern Ireland, not just in a post-dated demographic cheque revealing a substantial nationalist majority under the age of 25, but in the quiet success of what might be termed the island economy. Whether the loyal brotherhood like it or not, the economies of the North and its much larger cousin, the South, are integrating slowing but surely. This will continue because it makes commercial sense.

For economists, the division of Ireland created something close to an economic laboratory. The same people, more or less, on the same island, with the same natural endowments are cleaved apart by a border. One part begins much richer than the other and is tied to one of the richest countries in the world. The other heads off on its own, without capital or any real plan other than not liking its neighbour. The outcome is the economic equivalent of the nature versus nurture debate.

In the case of this island, it seems that nurture has trumped nature. The poorer part has ended up much richer, which means that policy matters, jurisdiction matters, as do legal, educational and tax systems. But something else matters too, something more nebulous. Call it the mood of the nation or the purpose of the endeavour.

The purpose of 21st-century Ireland is prosperity. We can argue over what prosperity means and in particular the success otherwise of its just distribution, but there is little doubt that prosperity for the many is the socioeconomic goal of the Irish State. This is the purpose of the endeavour, the point of the exercise.

The point of Northern Ireland is not prosperity. Right now, among unionist politicians, the central strategy seems to centre on the immiseration of the people in order to inflate the likely future cost of any united Ireland, so as to scare off lukewarm nationalists of “middle Ireland”. How else can you interpret the oft-heard expression “The South can’t afford us” other than “We” are going to remain impoverished as a negotiating strategy? It doesn’t matter what sort of poverty we endure as long as it’s red, white and blue poverty. It’s worthy of Flann O’Brien.

However, this tactic is not working because the story of the past 25 years since the signing of the Belfast Agreement has been the quiet, modest but obvious success of the integration of the island economy. Commerce always finds a way. Thirty thousand people cross the Border every day to go to work. Since Brexit, and through the Covid years, cross-Border trading has increased. In 2021, Ireland exported €3.7 billion to Northern Ireland and imported €4 billion, a significant increase from 2020, when exports stood at about €2.5 billion. Imports from Northern Ireland to the Republic also increased, Central Statistics Office (CSO) data shows.

Overall, exports to Northern Ireland as a proportion of all Irish exports to the UK increased from 16 per cent to 23 per cent in the past two years. Similarly, the share of UK imports coming from Northern Ireland has shot up. Politics might be trying to create borders, but trade is doing its own thing.

The orientation of trade in Northern Ireland has been transformed by Brexit. The Republic is Northern Ireland’s single largest export market, accounting for 40 per cent of total exports outside exports to Britain. Before Brexit, Northern Ireland exports to Britain were 3.7 times greater than exports to the Republic; now that figure is only 2.5 times greater. Trade between both parts of the island is flourishing. The value of exports from Northern Ireland to the Republic increased by 23 per cent between 2020 and 2021, according to the Northern Ireland Statistics and Research Agency (NISRA); a much larger increase than the change in total exports.

Brexit is not a wedge between both parts of the island. Rather, it has proved to be a bridge – precisely what the protocol is designed to do. Northern Ireland has the best of both worlds, one foot in the EU and one in the UK.

But there is a long way to go.

The Troubles are estimated to have reduced Northern Ireland’s GDP by up to 10 per cent. However, in the quarter century since the Belfast Agreement, a real divergence emerged between the North and South. Economic indicators make it abundantly clear that the peace dividend went to the South.

From 1998 to 2021, the Northern Ireland economy expanded by about 38 per cent in real terms, considerably less than the Republic. Even taking the GNI (gross national income) measure, which strips out the distorting effects of multinationals on the economy, the Irish economy has grown by about 83 per cent in real terms, more than double the rate of the North.

Central to this economic underperformance of the North relative to the Republic is its poor productivity performance. Productivity is the key to driving improvements in living standards, and Northern Ireland has the worst productivity (measured in terms of output per hours worked) of any UK region, about 17 per cent below the UK average as a whole. (The UK itself is among the worst performing economies in the OECD.) In contrast, productivity per worker is about 40 per cent higher in the Republic relative to the North. Wages can’t rise when productivity is so low, which explains why wages are so much lower in the North, running on average about 64 per cent of those in Ireland.

But here is the opportunity. The Republic has too much demand and not enough supply; the North has too much supply and not enough demand. Integrate further and gains accrue to both jurisdictions.

Take commercial rents, which are far lower in the North. Prime rents in Belfast are £23 (€26.73) per sq ft as opposed to €65 in Dublin. Surely this gap can be bridged as companies move? The average monthly rent in the North is £773 (about €900), as opposed to the average rent in the Republic, which stands at €1,750 – almost double that in Northern Ireland. The average cost of a home in Northern Ireland is £197,800 (€229,902); it is €308,497 in the South.

As both jurisdictions integrate further, companies and talent will locate where there is best value. With improved infrastructure, specifically improved train and road access to the North, it is highly likely that commercial and financial ties will solidify. So much so that the economic distinctions between North and South may have almost disappeared by the time a Border poll is called.

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