Towards an Acceptable Level of Violence: Institutional Lessons from Northern Ireland

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Towards an Acceptable Level of Violence: Institutional Lessons from Northern Ireland

Institutions have returned to the forefront of economic analysis in recent decades. By way of illustration, Nobel Prizes were awarded to Ronald Coase and Douglass North in the 1990s for their pioneering work in developing the theoretical and applied framework of what has become known as the ‘New Institutional Economics’. Oliver Williamson and the late Elinor Ostrom shared the prize in 2009 for developing these insights further. This framework has greatly increased our understanding of the connections between institutional and economic development. There has unfortunately been all too little overlap between institutional analysis and the economics of terrorism. Counterterrorism economics has been dominated by game theoretic and econometric approaches. While such analytical tools have undoubted explanatory power, there are opportunity costs associated with a purely technical focus that downplays institutional context and historical evidence. There needs to be a methodological pluralism and this is suggested by insights from a more contextual or historical approach.

Historical evidence provides a kind of “laboratory” for economists interested in terrorism. By way of illustration, institutional lessons associated with economic analysis can be are developed from the “laboratory” of the Northern Irish experience. Four policy lessons emerge. Firstly, economists traditional framing of counterterrorism as a tool choice between carrot and stick is found wanting. Indeed, the use of single tool is unlikely to bring about a satisfactory outcome. Secondly, Richard English’s observations on the role of intelligence should be extended. Illegal paramilitaries, like the firms traditionally studied by economists, are not “black boxes”. Information flows and organisational structures affect the operation of paramilitaries just as they affect the effectiveness of conventional economic actors. Third, terrorism need not imply the two (or even three) sided game beloved by some editors of economic journals. Violence had a tit-for-tat element and this made it more like the kind of (albeit less formal) institutional analysis developed initially by Elinor Ostrom than an exercise in pure game theory. Finally, policy-makers need to optimise a wide range of constraints. The choice between centralisation and decentralisation is far more nuanced than the earlier economic literature has suggested. Economic research has more recently begun to develop this insight.

The traditional economistic approach leads to the danger that policy narrowly focuses on “deterrence” the use of stick. More recently, a contemporary economistic approach can be discerned that suggests “benevolence” (or carrot) rather than deterrence should be adopted as a counterterrorism strategy. The more recent contemporary approach promoted by economists assumes a decentralised economy offers insulation against terrorism. Interventionist economic policy is thus not part of the counterterrorist toolbox. A more complicated picture of interconnected socio-economic problems that emerges from the archival evidence and the evidence demonstrates that economic considerations were part of counterterrorism from early in the conflict. Economists would do well to consider how trade-offs between economic, political and military objectives laid the groundwork for the political settlement of the 1990s.

Economic instability preceded the outbreak of violence. Such weakness can be diagnosed from the inequity and inefficiency that characterised Northern Ireland by 1969. The inefficiency of the economy, as indicated by poor productivity and unemployment performance, was matched by the more widely known problems associated with inequality (such as sectarianism and discrimination). As early as June 1971 a survey on the economic impact of violence had been commissioned and reported back to the Ministry of Commerce. Considerations of the economic aspects of the conflict hence preceded the introduction of Direct Rule in 1972. Furthermore, the archival evidence indicates that those economists who have equated the persistence of efficiency problems (in particular the productivity gap) with the failure of regional industrial policy are ignoring the fact that policymakers had to juggle among competing political, security and economic objectives. If the productivity ball was dropped that is more understandable given the others that needed to be kept in the air.

The rise and fall of the DeLorean Motor Company Limited (DMCL) should be reinterpreted as a story about tradeoffs. Policymakers balanced the firm’s dubious (and ultimately unsuccessful) commercial prospects against its possible security and political benefits. Contrary to the predictions of contemporary counterterrorist economics, interventionism was a price worth paying for the prospect of success. The postponement of Thatcherite economic reforms – such as privatisation and trade union reform – and the failure to introduce the community charge is also explicable for similar reasons. The political benefits of supply-side reform were modest to say the least. Likewise, trade union support was required in the area of anti-discrimination legislation. The brake placed on economic decentralisation was a clear example of the requirement to balance political and security requirements against the need for extending the efficiency agenda of supply-side reform to Northern Ireland. Historical evidence, as the failure of internment demonstrates for instance, indicates that it is necessary for a combination of benevolence and deterrence to be utilised if a ‘backfire’ scenario is to be made preventable.

Centralisation in the polity and economy was the basis of counterterrorism strategy until the situation, as exemplified by the Good Friday Agreement in 1998, allowed for political decentralisation. The continued pursuit of political progress and the closely related equality agenda rather than supply-side restructuring, such as rebalancing the economy away from a large public sector, has remained the dominant focus since 1998. However, the region’s recurrent problem of weak competitiveness and the proposals for changes in the corporation tax regime indicates that a more decentralised or ‘rebalanced’ approach may about to be followed. Institutional factors mattered in the specific case of Northern Ireland, and economists in general should pay much greater attention to institutional analysis when they study or provide policy advice on issues of terrorism and counterterrorism.

Period05 Dec 2012

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  • TitleTowards an Acceptable Level of Violence: Institutional Lessons from Northern Ireland
    PersonsGraham Brownlow