1 July 2014 Edition
No news is bad news on economic data
Westminster Government biggest obstacle to identifying and addressing source of long-term decline of Northern economy
IN GENERAL, people love to convey good news and tend to hold back or even cover up anything bad. Perhaps that explains why the economic data for the economy in the North of Ireland is so poor and so sketchy. No one in London (or, specifically, Westminster) can be proud of their economic achievements in Ireland.
At various times, government departments, officials or the media claim that there is GDP data for the Northern economy. This is not true. The closest is the Gross Value Added (GVA) data shown below. But this can only show what is produced in the economy. There are attempts to add measures of income (which would be a step forward) but there is no data on expenditure at all.
Data on the level of investment in the Northern economy is completely non-existent. No one can tell whether what is being produced is being consumed or invested and, if so, who is doing either. Everyone is operating in the dark.
The same applies to a string of key economic data. It also applies to the data on government finances. The political controversy on the ‘subvention’ from Westminster is exceptionally ill-informed. Official data shows spending in the North which does not take place there and fails to record tax revenues that are collected. As a result, the entire debate is a false one.
The chart below shows a measure of all the goods and services produced in an economy known as Gross Value Added (GVA) for a number of economies. It is the same as GDP except it removes the effects of taxes and subsidies on production. It is especially useful in studying a regional economy or can be used for national economies.
The strongest of these economies is Sweden but that is not saying much as its growth has been less than 1% a year. The worst is Greece where, between 2008 and 2012, the economy contracted by nearly 20%. It has got worse since.
Both Britain and the 26 Counties are in that group which has seen real output fall by 3%. There has been some further improvement since but still no proper recovery. But the performance of the economy in the North of Ireland has been far worse, having contracted by roughly 12% since the crisis began.
In terms of international comparisons, the Northern economy has experienced a deep crisis. Only Greece has suffered a greater slump in activity.
To address any problem, it is first necessary to identify it. But it is in analysing economic data in the North and identifying the immediate causes of the crisis that there are the biggest difficulties. The economic data currently provided is so patchy, so incomplete and so riddled with gaps and unsubstantiated statistics that it is really not fit for purpose.
One of the reasons we study history is to understand our past and how it shapes the present and future. All economic data is by its nature historical — the economic events and transactions that it records have already happened. As a result, there is no hope for accurate economic policy-making if the main official data is glaringly incomplete or unreliable.
This absence of economic data is important to every household, every worker, every pensioner and every business operating in the North, and beyond. We all rely to some extent on the accuracy of that data in making our own economic decisions: about buying costly items, saving or investing.
At the level of the economy as a whole, the chart above shows that the Northern economy is one of the crisis economies. It should be note that this is outside the Eurozone and has nothing to do with EU-imposed austerity policies. The economy is faring even worse than Portugal or Italy, or the 26 Counties, all of them part of the ‘crisis countries’.
The main setter of economic policy in the North remains the Westminster Government. Not only does it determine the regulatory, legal and currency jurisdictions that the economy operates in, it also sets the biggest single item of expenditure within it, which is government spending.
Yet it is the Westminster Government, under successive administrations, which has been the biggest obstacle to identifying and addressing the source of the long-term decline of the Northern economy as well as the current crisis.
The responsibility for all this ultimately lies with the Westminster Government. The people of North deserve better.
MICHAEL BURKE is an economist and economic consultant. He was formerly senior international economist with Citibank in London. He is currently an independent economic consultant to private and public sector bodies including trade unions and campaign organisations providing advice commentary and detailed research on international and domestic economic trends, financial markets, and government finances at national and devolved level. He is founder of the Socialist Economic Bulletin.