A unified Irish Economy



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A Unified Irish Economy

May 12

2015


Fundamental economic forces determine prosperity, most especially the division of labour. This is limited on the national terrain by the size of the home market. A unified Irish economy allows the home market to reach its potential. In addition there are specific synergies between the economies on two parts of the island which strongly suggest that the whole-Ireland economy would be greater than the sum of its parts.

Michael Burke

A Unified Irish Economy

Michael Burke*

In economics, the geographic context is a more or less immutable given. But political geography is very different, both changeable and changing.

No-one charged solely with the creation of the optimal economic entity on the island of Ireland would dream of separating the north-east corner from the rest of country, and imposing two different currencies, legal and tax frameworks, and two different legislatures either side of that border.

The optimal entity would be a single unified all-Ireland economy. The current arrangements naturally interrupt the free movement of goods, labour and capital with the island which would optimise growth. They also impose a cost on that movement in the form of taxes, currency hedging costs, and opportunity costs in the form of sub-optimal planning and policy cohesion. These are the irritations and inconveniences which are most keenly felt in the border areas but inevitably affect the whole economy.

Yet there is a wider detriment beyond these symptoms. Adam Smith taught us that the basis of all prosperity is the scope for the division of labour, which is itself limited by the size of the market. In the first instance this is the size of the home market.

The history of this island is that it has never been able to establish a single, unified home market on the island, which has important negative consequences for economic development, growth and prosperity.




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