Professor Robert MacCulloch: How NZ's economy became broken....

Now We Know how NZ's economy became broken: The Judiciary wrote a Communist-style Constitution with no Consultation; without People Knowing.

The Treaty Debate is great. We've just found out, courtesy of our Kings Counsels, what has broken the economic back of this country. It has only just been revealed, thanks to their letter to the PM, that the judiciary invented their own set of Treaty Principles, the main one of interest to economists being the requirement of "equitable outcomes", which are now fully part of our Constitution.

So much so, that Kings Counsels label them "settled" constitutional law, which cannot be overturned by Parliament, let alone upstarts like ACT's Seymour, the likes of whom they swat away by referring to as merely being part of the "government-of-the-day". According to the lawyers, we, the little people, just vote for day-to-day administrators, whereas the profound, unalterable constitutional principles governing us in an enduring sense are written by people with bigger minds - our judges. Most of us had heard about the "principles" before, but until the Treaty Debate was opened recently, we had no idea that they were so embedded into our Constitutional arrangements.

Many countries have affirmative action programs. However I know of no country that has a constitutional requirement of "outcomes", not opportunities, being equalized amongst the citizenry, other than maybe a few Communist States that failed & no longer exist. The reasons are obvious to economists, but not to our Judiciary, who typically never study the subject. Our Judiciary maybe proud of their "equitable outcomes" principle, but there is a principle in economics that an inexorable trade-off exists: attempts to make outcomes equal and equitable lower efficiency and productivity. So the NZ Judiciary signed us up to being a poor country - but that's okay with them, provided we're all the same. They probably thought they were only talking about "equitable outcomes" between two ethnic groups, but that is not remotely how it works in practice. How do you compare two groups? Do you use mathematical averages? But that ignores within-group inequality. What happens if there is high inequality within one ethnic group, but the average outcome is still the same as the other? What happens if every member of Ethnic Group A becomes better off than every member of Ethnic Group B, except for one very wealthy member of Group B who makes the average outcome that group higher? Do you redistribute? None of it makes any sense.

Because equalizing outcomes is a hopeless quest & consigns nations to a lack of prosperity and dynamism, economists focus more on equality - or freedom - of opportunity, of equal rights. And so do most Declaration of Independences and Constitutions - except for, it now turns out, New Zealand. Many nations have affirmative action programs but they're nothing to do with having a Constitutional Requirement to achieve equality and equity in outcomes. For that reason, such programs can even be charged with being unconstitutional. Again, our Judiciary seem not have the foggiest idea of the economics of the problem. Once you put equitable outcomes, not opportunities, in a Constitution, you're requiring governments to raise massive tax revenues to achieve equalization. That means you have removed powers of taxation from elected officials and put them with judges. Its unworkable. Lets be grateful to our Kings Counsel, and to Seymour, for at last explaining why New Zealand's standard of living has been slipping, harming the lives and livelihoods of all ethnicities in the country. 

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.