Saturday, June 15, 2024

Professor Robert MacCulloch: There is no Pākehā GDP, nor Māori GDP.

There is no Pākehā GDP, nor Māori GDP. The Government has published statistics that are wrong. NZ does not have two economies - only one.

I've been thinking - ever since the Leader of Te Pāti Māori said that the new National-ACT-NZ First Coalition wrote a Pākehā Budget for the Pākehā Economy. It's a great line. But does it make sense? Do we have two economies - a Māori one and a Pākehā one, each with its own Gross Domestic Product (GDP)? I am going to argue neither exist. What's more, Wellington has wasted millions of tax-payers dollars calculating incorrect GDP figures for the Māori & Pākehā economy. The term, "Māori Economy", is sometimes traced back to a report published in 2012 by the Bureau of Economic Research Ltd (BERL), a Wellington consulting firm run by Ganesh Nana, the redundant former head of the defunct Productivity Commission. It has now been adopted right throughout government.

For example, the government’s principal advisor on Māori development, Te Puni Kōkiri. (TPK), reports that the level of Māori GDP in 2012 in the Waikato region was "$1.4 billion". How was it calculated? By estimating "the contribution of the Māori economy .. in terms of value added GDP" by "Maori businesses". What are these? Businesses in the TPK data set are classified as Māori "if 50% of the shareholder wages paid have gone to individuals of Māori descent or ethnic group". These businesses can have many (even all) employees who are not Māori. The Government has then calculated the "value-added" contribution of such businesses "to national GDP, in terms of business profits and paying workers". As another example, in 2020, using this method, Māori businesses which had a "known regional council area contributed an estimated $6 billion as ‘value added’ to national GDP".

However, these calculations are wrong. To see why, let's first define GDP. It is the market value of all finished goods & services produced within a nation's territorial boundaries. It can be calculated by aggregating how much is spent on goods & services (the Expenditure Approach). An alternative method is to recognize that the revenues from sales go to paying out the firm's workers & shareholders. One can add up these incomes of wages and profits (the Income Approach). If you get your accounting right, the two numbers should be the same. Using this definition of GDP, by the way, domestically located businesses in NZ which are overseas-owned (like foreign-owned dairy farms or forests) have their outputs included in NZ's GDP. Who owns the asset is, in this case, irrelevant.

Consequently, attributing the full production of a business to the (part) owner, whether that person be a woman, man, Māori, non-Māori, .. does not measure that owner's contribution to GDP. For example, lets assume the owner is a man, but the employees are all women, & the firm is not making a profit. Using the Income Approach, the labour income of women is part of GDP, but since profits are zero, there is no contribution from the capital of the owner. This kind of scenario applies to many firms included in Māori GDP. Why? Since in "Tāmaki Makaurau [Auckland] Māori-owned businesses comprise, on average, 29.8% Māori employees of their total". So many employ only a minority of Māori.

So how can we calculate a Māori GDP? Well, you can't. Just like you cannot calculate the GDP of an employee or an owner, only their earnings. Why? Because we jointly contribute capital & labour & different skills to produce output together. These 'factors of production' come together in a way techs call the "production function". However one can calculate (provided you know the sex or ethnicity of each person, which the Census asks) the share of national income (or GDP) that women, men, Māori, non-Māori, or others, receive. But let's not get carried away. The income share of a group is not the same as its GDP. For example, imagine a man owns a firm that heavily discriminates against women, paying them next to nothing. Or an owner of a firm employing child-labour for nothing in a place that lets them get away with it. Or a non-Māori owner of a business who pays their all-Māori workforce minimum wages, even though they should be paid more, but lack bargaining power. Then the income share going to women, children, or Māori does not at all reflect their importance in production.

To conclude, the thesis of this article is there is no such thing as a Pākehā GDP, or a Māori GDP. The Government has published wrong statistics. NZ does not have two economies - a Pākehā one and a Māori one. We all work together to produce output jointly. In that sense, economically we are one. You may think this a techy point. But is it? Is it a trivial matter that our Government has wrongly defined & estimated a Māori GDP? Is it trivial that the government has promoted a meaningless & misleading concept? Is it trivial that the level of management expertise in Wellington has become so low that it is publishing statistics that are wrong? Is it trivial that millions of taxpayers dollars have been spent on creating bogus GDP statistics?


Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.


Anonymous said...

One very interesting statistic would be how much of the government's money is spent on average on each Maori as opposed to the amount spent on each non-Maori. Someone must have at least a general idea because if more was spent on pakeha there would be howls of racism the length and breadth of the country.

Anonymous said...

So how do we explain the different tax and rating systems?

Anonymous said...

Two GDP? What bollocks.NZ is wasted beyond words if people believe this.

Footnote : how can the troughers have a GDP when they suck the living daylights out of everyone else?

Anonymous said...

There are no Maori, just part-Maori who are also part Pakeha. It’s a nonsense to split the economy into two by ethnicity!

Anonymous said...

And how many $millions, if not $billions, in effort have been expended talking about and introducing new Treaty centric measures - be they Te Reo, Tikanga, Matauranga, and Te Ao Maori - all into all our public services, schools, universities, central and local Govt etc, and for what quantity of actual domestic production? A whole bunch of totally immeasurable hot air and virtue signalling, but very measurable disunity and division.

Anonymous said...

The fact that maori are only part maori is overlooked.

In US Obama is black despite having a white mother and white upbringing.

I accept that skin colour is an obsession in the US but look how destructive it is.

If some people with maori DNA consider themselves disadvantaged let's look at the real issues, not the colour of their skin and shape of their noses.

Violence against part maori children is an example of the absurdity of colour/DNA racism. They abuse their children then insist on their right to raise children in their own abusive environments.

Anonymous said...

mr nana & his grifting hidden as maorification might be a good argument against assimilation by immigrants!!!

Anonymous said...

wasn't mr nana supposed to focus on productivity of nz? it should have been a piece of cake finding why productivity is low - remove the fragility in discussions around the 5-pointed star: treaty, climate change, gender, covid & immigration - and see a boost :)