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Never one to be out the news for long, Professor Michael Baker has penned an article for the (deservedly) bankrupting Newshub. Apparently we could be on the verge of yet another pandemic. Seems we must live our lives in constant fear of imminent annihilation. But don't fear. NZ could always invite Jacinda Ardern back from her foreign exile, vote back in our former never-ending-Auckland-lockdown Covid Minister, Chris Hipkins, as PM, and the two of them could then bring back the likes of Professors Baker & Hendy to start back up where they left off last time. The thought of it.

Anyhow, Baker says the following in his Newshub article, "Some commentators [at a recent World Health Assembly meeting] had advocated to incorporate the experience of countries in the Asia-Pacific region that used an elimination strategy to delay the spread of Covid, giving time to roll out vaccines & other interventions. Such measures protected both high-income islands (Aotearoa New Zealand, Australia, .. ) as well as low & middle-income nations in continental Asia (Vietnam, Thailand ..)". However, having read Baker's British Medical Journal (BMJ) article, Elimination could be the optimal response strategy for covid-19 closely, as well as listened to his pronouncements, my understanding was that he never advocated elimination to "delay the spread of Covid" in order simply to buy time. His BMJ article (below) states repeatedly his aims were "Achieving & sustaining disease elimination". That is the heading of an entire section of his article, in which he argues that the "NZ & Australian experiences of the Covid-19 pandemic offer lessons for achieving & sustaining elimination". The Key Message of his paper is elimination is "achievable and sustainable".

Today in Newshub, Baker reverses himself by saying only that NZ "used an elimination strategy to delay the spread of Covid". This Blog argued at the time it was important to delay Covid's spread until scientists knew what we were dealing with (that was obvious to all of us - you didn't need a medical degree to work it out). However the pursuit of a long-term "sustainable" policy of keeping the virus out of NZ forever was never achievable. Instead the pursuit of the sustainability objective by Baker, Arden, and Hipkins, even way into 2022, imposed massive economic costs that NZ is still paying for now, in terms of high borrowing, inflation & a cost-of-living crisis. Our health system is presently starved of funds because of our stagnant economy, which was the direct cause of the aim of "sustainable" elimination.

To now try pretending the Ardern-Hipkins Covid health experts, like Baker, only ever viewed their policies as temporary attempts to buy time is, in my view, a re-writing of history.


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 these fictional economies. 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 the level of Māori GDP in 2012 in Waikato was "$1.4 billion". As another example, in 2020, Māori businesses having a "known regional council area contributed .. $6 billion as ‘value added’ to national GDP". What are "Māori businesses"? The TPK data classify businesses as Māori "if 50% of the shareholder wages paid have gone to individuals of Māori descent or ethnic group". They can have many (even all) employees who aren't Māori. Once identified, then the "value-added" contribution of such businesses "to national GDP, in terms of business profits & paying workers" is found.

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 the firm's workers & shareholders. One can then add up these incomes of wages & 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 or non-Māori, does not measure that owner's contribution to GDP. For example, lets assume the owner is a man, but their 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, only 29.8% Māori employees of their total". Many employ a small minority of Māori.

So how can we calculate a Māori GDP? You can't. Just like you can't calculate the GDP of an employee or an owner, only their earnings. Why? Because we jointly contribute capital and labour and different skills to produce output together. These 'factors of production' come together in something economists call the Production Function. You can calculate (provided you know each person's sex or ethnicity) the share of national income (or GDP) that women, men, Māori or non-Māori, receive. But let's not get carried away. The income share of a group is not the same as GDP. Imagine a man who owns a firm that discriminates against women, paying them little. Or an owner of a firm employing child labour paying them nothing in a place that turns a blind eye. Or a non-Māori owner of a business who pays their all-Māori workforce low wages, even though they should be paid more, but lack bargaining power. Then the income share going to the women, children, or Māori in these examples does not 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 work together to produce output jointly. You may think this a techy point. But is it? Is it a trivial matter that the Government has wrongly defined & estimated a Māori GDP? That it has promoted a meaningless concept? That the level of management expertise in Wellington is now so low that our national statistics are wrong? Is it trivial that millions of taxpayers dollars have been spent on creating bogus GDP numbers?


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Robert MacCulloch

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