Barrie Davis: Treaty Economy Paradox

In a recent post (here) Professor Robert MacCulloch claimed that, for an economist, the Treaty is self-contradictory in that guaranteeing to the Maoris that they can retain their assets and treasures in exchange for granting government powers to the British created a contradictory, paradoxical quagmire.

Professor MacCulloch points out that a government has the power to tax. A tax on assets at, say, 2% of their value annually will in a few decades, appropriate the asset to the government. So, asset taxes mean that the government can take the property that was granted in the agreement.

The relevant facts are given in The Financial Colonisation of Aotearoa by Catherine Comyn (2023). I will draw from Comyn’s book to show that Professor MacCulloch’s proposition has NOT been true for the case of the Treaty as it is not self-contradictory and in fact resulted in greatly increasing the assets of the Maoris.

Ownership and Pre-emption

The British government had a policy throughout the empire that colonies were to be self-sufficient. Most of the revenue for New Zealand infrastructure came from pre-emption and import duty.

The Treaty does not guarantee the Maoris ownership of land in perpetuity. To the contrary, the second arm of Article 2 regarding pre-emption says the Maoris may sell land to the Crown “at a price agreed to by the person owning it and by the person buying it” (Kawharu back-translation). Comyn says (pp. 90-1), “By 1845, proceeds from land sales since the commencement of the colony totaled £43,543, for which Maori received £5,195.” The requirement for pre-emption was waived by the Crown in 1847 (here).

Indeed, the Maoris sold most of the land to the British in the middle of the nineteenth century. Just two examples cover most of New Zealand:

Prior to the Treaty, on 25 September 1839, 16 Te Ati Awa chiefs including Te Puni and Te Wharepouri signed a deed of purchase for about 160,000 acres of land at Wellington for which William Wakefield gave goods including 120 muskets, ammunition, clothing, cooking utensils, axes, blankets and soap. Wakefield then sailed to Kapiti Island where, on 25 October, Ngati Toa chiefs including Te Rauparaha and Te Hiko signed a deed of purchase for ‘all their rights and claims’ on 20 million acres across both sides of Cook’s Strait. Subsequently, at Queen Charlotte Sound, on 8 November Te Ati Awa chiefs signed a deed with similar boundaries to those of the Ngati Toa deed of 25 October. Thus, Wakefield had claim to the whole of central New Zealand for which he gave goods worth about £400. (Comyn, pp. 54-5, 72; Temple, pp. 246-52; Evison, pp. 23-4.) There has been controversy regarding the deal; but there was an offer, an acceptance and a consideration, which constitutes a sale.

After the Treaty, from 1844 to 1864, Ngai Tahu chiefs signed a series of deeds for most of the South Island, known as the Ngai Tahu Purchase. The largest was on 12 June 1848, when Henry Kemp bought 13,551,400 acres of land for £2,000 on behalf of the Crown. The Crown subsequently made further purchases from Ngai Tahu chiefs to a total of 34.5 million acres, which is about 80% of the South Island. (Bruce Moon, p. 225; Harry Evison, The Ngai Tahu Deeds.) Te Ara gives an interactive graph of purchases, here. Click on each of the nine dots along the bottom to work the graph.

So, rather than appropriate the land by taxation, of a New Zealand total of 66 million acres, the Maoris sold all but 7 million acres of it by the end of the nineteenth century (Comyn, p. 104).

Taxation

Taxation began in New Zealand from around 1830 when Hone Heke and his cousin Titore placed a levy of £5 on each ship that entered the Bay of Islands.

In 1841 the Customs Ordinance Act placed an import duty on certain imported goods including alcohol and tobacco which provided around 80% of the customs revenue, which was £13,733 in 1843, for example. Until 1844 import duty provided more revenue than pre-emption. Maoris comprised around 80% of the New Zealand population then and consumed disproportionately more alcohol and tobacco and so contributed most of the revenue from import duty. In June 1844 a 30% duty was also placed on munitions of war which was a cause of grievance among northern Maoris.

In 1843 Governor FitzRoy received a grant from Britain of £7,545. Even so the administration was insolvent, “the economy was depressed, and many of the settlers were destitute”. Yet, as the infrastructure assets of towns, roads and sheep farms increased, “property appreciated seemingly of its own accord” (Comyn, p. 80, 90-6).

Customs were repealed in September 1844 and replaced by the Property Rate Act which did not require Maoris to pay tax. The Maoris were exempt until the 1882 Native Lands Rating Act. However, the Lands Act required that the land to be rated was to be specified which entailed that it be surveyed. The government-appointed surveyors charged large fees which the Maoris could not pay as they had no cash, so they sold the land. The cost of surveying was around one fifth of the sale price (Comyn, pp. 104-5). By that time the European population was approximately 500,000 and the Maori population about 50,000, so the Europeans retained the burden of financing the country.

That is somehow still the case for corporate iwis today. Mike Butler wrote in 2015 (p. 219):

“The hugely wealthy tribal businesses created over 26 years of generous treaty settlements are entitled to trade as charities exempt from income tax. Sixty-eight tribal groups have received or are soon to receive a total of $3.1 billion. No doubt property developers and agricultural commercial rivals would be aggrieved at the fact that treaty settlement entities hold a substantial commercial advantage over competitors because they pay no income tax. The tax exemption allows for the accumulation of income-tax free funds to grow the business at a faster rate than its competitors. It appears that the government, in awe of the power and wealth of tribal businesses, are reluctant to respond to this increasingly inequitable issue or to debate the matter publicly.”

Scoop reported in “Iwi assets swollen by tax loophole” (23 January 2018, here):

“The New Zealand Taxpayers’ Union says the rapid growth of iwi assets is driven by special tax treatment.”

“Taxpayers’ Union Executive Director Jordan Williams says, ‘The corporate tax rate for Maori Authorities is 17.5%, compared to 28% for other businesses. And because of their ‘charitable’ status, many iwi-run businesses don’t even pay income tax’.”

For example, Ngai Tahu Farming Ltd is a subsidiary of Ngai Tahu Holdings Corporation, which is ultimately owned by the Ngai Tahu Charitable Trust. As a registered tax charity, the Ngai Tahu Charitable Trust is exempt from income tax. (See Ngāi Tahu Annual Reports, here). It’s a sanctioned rort and the Maoris should be paying tax like everyone else. Bruce Moon, in “A Very Greedy Tribe – Ngai Tahu” (p. 223), tells us that “With assets now reported to exceed $1 billion and generous taxation concessions which are unfair to competitors in the various industries, Ngai Tahu have become a financial force to be reckoned with, courted by public bodies.” Recall that Ngai Tahu sold the South Island to the Crown, so the paradox actually is: how can Ngai Tahu have their cake and eat it too? Bruce Moon gives the answer in One Treaty, One Nation which is available from Tross Publishing.

So, the Treaty has not been contradictory in practice. The corporate entities who claim to be the beneficiaries of the Maori tribes of yore are now making a profit from the assets Maoris have retained and are growing the asset. Note that the land today is not the same sort of thing as it was in 1840 because it has been improved by tax financed pakeha taonga: European science and technology has turned bush into improved farmland and European buildings have improved residential and business properties. Therefore everyone, including the Maoris, get a greater return on their investment in land from which to pay tax. That tax is then spent on the common good, such as building the nation and with it a further increase in asset value. We are growing the economy in New Zealand with pakeha taonga and Marois are participating that along with everyone else.

The Ledger

If we are taking an economics perspective, we need to consider both sides of the ledger.

What we read, almost exclusively, is the debit side of the equation. For example, in The Financial Colonisation of Aotearoa (2023), Catherine Comyn writes (p. 3), “Such a reading of our colonial history has far reaching consequences for Maori struggles to secure reparations for the loss of land, resources, taonga, and other foundations of wealth and mana caused by colonization.”

But what is seldom if ever mentioned is the credit side. Everything the Maoris have today, from the food they eat, the clothes they wear and the houses they live in, to the devices they thumb, the cars they drive and the internationally used language they speak and can now write, they have because the British colonized New Zealand. Before that the Maoris were at the subsistence level and the only abundance they have ever had of anything has been due to colonization.

Adam Plover expounds and substantiates that claim in The Benefits of Colonisation, (2023) where he says there are two negatives, tobacco and alcohol (p. 116). To that, I add obesity; and all three are individual choices. We can all choose not to smoke, to drink moderately and to have a healthy diet. They must be an individual responsibility to drive appropriate behaviour and we should not hold the colonists and now the State responsible for those choices.

Plover concludes (p. 118), “The contents of this book show beyond all doubt the benefits of colonization and it is time to put to rest once and for all the lie that colonisation was bad for the Maori. It was, in fact, the most positive and beneficial thing that happened to them in all their history. And much of the credit goes to the Maoris of the time for having the wisdom to accept the new ways, which lifted them out of darkness and insecurity into the light and comfort of modern civilisation.”

John Robinson also writes on “The Benefits of Colonisation”: Under the head “Celebrate” he says (p. 56),

“The greatest benefits of colonization were not rails and axes, pigs and wheat, reading and writing, nutrition and health care – important as these were – but peace, security and recovery from the ravages of war, all made possible by culture change and united efforts as conflict resolution decided by the prowess of warriors was replaced by negotiation and the rule of law in a united nation. Many Maori played important roles, along with missionaries and government. There is much to celebrate in the achievements of colonization, its benefits far outweighing any negative consequences.”

Prior to the Treaty the British Crown was a civilized and civilizing power with advanced philosophy, science and technology. Queen Victoria was sovereign over a quarter of the world’s people and a quarter of the landmass. The Maoris were a tribal Stone Age culture of inappropriate practices including taurekareka, kai tangata, roromi and interminable tribal warfare. Once they got muskets, the slaughter from 1800 to 1840 was horrific. The chiefs were aware of the situation when they signed the Treaty which stopped the carnage. The Maoris were overwhelmed by a more advanced culture. For the Maoris it was a case of adapt or die. They willingly chose to adapt.

In doing so, they wisely deserted their Maori ways in favour of the pakeha taonga. To participate the new economy, they took up European ways, such as insisting that their children were taught only in English at school. In the middle of last century, the bulk of the Maori population migrated from a traditional Maori setting in the countryside into the European towns to more fully participate the pakeha taonga. That uptake of European civilization resulted in a more than doubling of Maori life expectancy and an order of magnitude increase in Maori population.

It is false to claim that the Treaty has disadvantaged the Maoris. It was instead an agreement for the Maoris to participate an advancement of evolutionary proportions. The result has been an enormous increase in the Maori economy and a contrary conclusion can only be achieved by selecting data from the debit side of the ledger.

So, the Maoris have not been taxed out of their previous asset; instead, they have willingly swapped that for a much better one: the first world nation called New Zealand. It is fair and reasonable that the Maoris contribute to creating and maintaining that nation by paying tax with everyone else.

Conclusion

The colonization of New Zealand was intended to be self-sufficient and was initially funded by customs duty and pre-emption. Pre-emption is referred to by Comyn as a tax, but that is not so. The Crown purchased the land at a price agreed to by the Maori vendor and having done so the Crown was free to sell at a higher price. In doing so, the Crown incurred the cost of administering the developing colony and the risk that colonization would not proceed as envisaged. There was no good reason that the British taxpayer should incur the cost of financing infrastructure in New Zealand to create a colony; yet the Crown bought out Wakefield’s ailing New Zealand Company in 1847 for £268,000. Let’s not forget that it was not just the British colonists who benefited; colonization also brought the pakeha taonga to the Maoris.

I have not looked into the high cost of land surveys and the other nefarious practices mentioned by Comyn, which she says caused Maoris to sell their land. At face they were a rort to acquire more land for European settlers. If that is so, then compensation may be appropriate now. But consideration should also be given to the reality that they were to some degree exchanging land for pakeha taonga, which was unfortunately often alcohol and tobacco.

Those transgressions are not a paradox that makes the Treaty inconsistent because it was not necessary or appropriate that the Treaty was applied in that way. They are instead a misuse of the Treaty, much like the claim of ‘partnership’ in the Treaty today. There has been too much reading between the lines. Then as now the government of the day can pass inappropriate legislation with or without the Treaty. The difference is that then the Treaty was leveraged in favour of the British, now it is being misinterpreted in favour of the Maoris. Two wrongs do not make a right and the problem with the Treaty now is that it is anachronistic.

The colonization of New Zealand was like Plato’s story of Creation in which the god takes a copy of his ideas – the Forms – which he stirs into the unformed matter of the Cosmos. Thus the Cosmos is the Forms. That’s why the Maoris were prepared to ‘sell’ the land: they correctly saw that the unimproved land was of little immediate value compared to the European goods they received. It subsequently took a lot of hard work for the colonists to realize their European ideas in the form of farms, towns and roads. The primary good the British brought to the Maoris was their superior European culture and knowledge which they worked into the undeveloped land of New Zealand. Thus New Zealand is European.

Yet it is now the done thing to vilify the colonists. Why? Because the complaining Maoris and their deluded sympathizers do not want to have to admit that the colonists created the assets that constitute this wonderful country. The government did not take back the asset by taxation: the government created the asset by taxation. The government did not initially tax the Maoris because there was no asset to tax. It was the colonists’ taxes on the profits of their sheep farms that paid for the infrastructure such as roads and towns. Once the colonists commenced creation of the asset then their government began to tax the Maoris in 1882.

Now the government has handed a significant portion of the colonists’ legacy for all New Zealanders to a race-based faction of tax-evading corporate entities. How dare they? Because they believe you to be compliant and they are afraid of the Maoris. They are even prepared to throw democracy under the bus to avoid confronting them.

You have been rorted, ripped and ruined and in return your representative Parliament has protected, apologized and paid. Just not to you.

Further Issues

Maori Land Sales

It may be useful to include in the above discussion the outcomes of the British purchases of land from Maoris. I suspect that at least some of them have been too readily disallowed. In my view, if there was an offer, acceptance and a consideration, there was a sale. If the vendor subsequently changed their mind that should not become the problem of the purchaser.

Confiscations

It may also be useful to reconsider the validity of confiscations of land and their return after the Maori War. I note that those given by Plover (p. 84) total to: Original confiscation, 3.2 million acres; Returned or purchased from them, 1.6 million acres; and Final confiscation 1.6 million acres.

Maori Economy

Last but not least, Professor MacCulloch has it the wrong way around: it is now the Maoris who are taxing the nation. The Treaty is being used to draw one-off and ongoing payments (‘relationship redress’) from public funds into a separate Maori economy (here). That economy has no obligations, low costs and its objective is to accumulate strategic assets with low-risk revenues while the public coffers are emptying; the failed Wellington Airport sale, for example. This warrants further consideration because you are becoming the Maori taurekareka.

Barrie Davis is a retired telecommunications engineer, holds a PhD in the psychology of Christian beliefs, and can often be found gnashing his teeth reading The Post outside Floyd’s cafe at Island Bay.

References

Catherine Comyn, The Financial Colonisation of Aotearoa. Auckland, New Zealand; Economic and Social Research Aotearoa, 2023.

Peter Creswell, “Property Rights – A Blessing for Maori New Zealand” (pp. 52-8), Twisting the Treaty: A Tribal Grab for Wealth and Power, Revised. Wellington, New Zealand: Tross Publishing, 2018.

Mike Butler, “Wealthy tribes exempt from tax” (pp. 219-22), One Treaty, One Nation: the book every New Zealander should read. Wellington, New Zealand: Tross Publishing, 2015.

Bruce Moon, “A Very Greedy Tribe – Ngai Tahu” (pp. 223-38), One Treaty, One Nation: the book every New Zealander should read. Wellington, New Zealand: Tross Publishing, 2015.

Philip Temple, A Sort of Conscience: The Wakefields. Auckland University Press, 2003.

Harry Evison, The Ngai Tahu Deeds: A Window on New Zealand History. Christchurch, New Zealand: Canterbury University Press, 2006.

John McLean, Sweat and Toil: The Building of New Zealand. Wellington, New Zealand: Tross Publishing, 2020.

Adam Plover, New Zealand: The Benefits of Colonisation, 3rd ed. Wellington, New Zealand: Tross Publishing, 2023.

John Robinson, “The Benefits of Colonisation” (pp. 47-56), One Treaty, One Nation: the book every New Zealander should read. Wellington, New Zealand: Tross Publishing, 2015.

Tross publications may be browsed and ordered here: www.trosspublishing.com

One Sun in the Sky by Ewen McQueen (2020) may be ordered here: www.onesuninthesky.com