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  • rmacculloch

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 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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