GDP – Like “A Dog Chasing Its Tail”

A personal opinion by Tony Orman

New Zealand measures the nation’s progress by gross domestic product, commonly known as GDP.  Dr David Hall, senior researcher at the Auckland University of Technology recently explained GDP – “To put it crudely, you add up all the goods and services produced over a certain period and if the sum is greater than the last time you measured them, then the economy is growing.”

I recall in 1999, the National government’s Minister of Finance Bill Birch saying no one would want to go back to 1972.  “New Zealand was not completely happy,” he claimed.

Why Birch picked that year, I’m not sure because in that year, the National government suffered a crushing election defeat by Labour led by the charismatic Norman Kirk. Significantly the election issues were strongly environmental such as “Save Manapouri” campaign in protest at the National government’s plans to raise Lake Manapouri to supply discounted below-cost, electricity to the foreign owned Bluff smelter. Other issues were the selling of public lands to a wealthy American at Te Anau to exploit fishing and hunting values. 

Trout Farming

Then in 1972 the National government’s plan to introduce commercial exploitation of trout via trout farming was a major issue in key electorates such as Hastings, Gisborne and Taupo – all three regarded as safe National seats.

The “NZ Herald” and “Hawkes Bay Herald Tribune” in election post-mortem editorials identified those three environmental issues as especially significant in the government’s heavy defeat.

Therein lies a connection to GDP.  GDP does not consider environmental quality or social factors such as the health and well-being of people. 

When Bill Birch made his fatuous remarks in 1999 denigrating 1972, in a letter to “The Dominion” I said “my recollection of the early 1970s is of a proud, peaceful nation with a charismatic leader so much so that a pop song “Big Norm” was regularly played on radio.”

Economically the country’s debt was low or non-existent and “society was comparatively caring and harmonious.” 

As a one-time Minister of Finance, Birch was in error slagging 1972.  Due to increased borrowing in the Rowling-Muldoon years, New Zealand’s debt rose. In 1999 the year when Birch slated New Zealand in 1972, the debt had risen to $100 billion.

Narrow Focus

GDP has a sole focus of dollars, i.e. the economy, measured as according to Dr Hall by “goods and services produced.”

Henry Thoreau an American 19th century philosopher, noted conservationist and author wrote a classic book “Walden.” He argued that “if in a nation’s haste to ‘progress’ the economics of ecology are disregarded by citizens and policy makers alike, the result would be an ugly America.”

Thoreau would reject the notion that the Gross National (Domestic) Product should be the index to the state of the nation or that automobile, television set, washing machine sales or figures on consumer spending reflect a healthy society.

Modern life has confused society. One of the paradoxes of the modern society is that while our economic standard of living in terms of material possessions has risen, our environmental standard has steadily declined. Forty-six years ago – in 1972 to be exact – we were an environmentally conscious, outdoor people, fit and relatively contented, each family drew sustenance from the soil and good values and crime rates were low.

Today we have fallen prey to the weakness of an urbanised society and the flabbiness and obesity of sedentary society. New Zealand should hang its head in shame that for just over five million people, it ranks high in the world in matters such as teenage suicide and obesity.

Teenagers are committing violent crimes, there is family violence, racial division and city streets down which it can be dangerous to walk alone.

Society in Shreds

Don’t tell me we’ve made economic gains to compensate for tearing society’s fabric to shreds. Our debt is sky-high and balance of payments (exports versus imports) now always in deficit and with consumerism rampant. Environmentally it’s a mess with rivers like Canterbury’s Selwyn in the 1970s, once a revered dry fly trout river, a dry, algae-infested river bed.

The answer might seem radical to mercenary monetary minds. – ditch GDP and use a better measuring system if there is one.

Is there a better way? 

The Council of Outdoor Recreation Assns of NZ (CORANZ) for several elections compiled and sent political parties and MPs an election charter. Contained in the 2017 election’s charter was the urgent need for a population policy as to size, composition etc.

The second point was  that “The index for national prosperity Gross Domestic Product (GDP) based solely on economic indicators, be replaced by a Genuine Progress Indicator (GPI) based on three values – social, environmental and economic to thus fully measure the quality of life”.  Only one or two MPs bothered to reply. 

GPI? Well some economists have already advocated GPI.

Interestingly a system like GPI has been adopted in the USA by Vermont: “Its legislature, with support from Democrats, Republicans and Progressive Party members, has established a state GPI, that uses some two dozen measures of health, wealth, education, leisure and sustainability to measure progress.” Maryland has also incorporated GPI into state measurements of wellbeing.

Back in 1972

And harking back to 1972 and Finance Minister Bill Birch’s derision of it, while National got thumped at the election with trout farming a major issue, there were matters relating to the economy’s functioning. 

In that year 1972 here’s the point, apart from a stable, caring society then, economically the country was run as a profitable business with a trade surplus (i.e. profit) of $3.6 million which equates to $21.6 million surplus in 2025 terms. In 1984, New Zealand went into neo-liberal mode, i.e. “Rogernomics” and has followed it ever since.

When Birch as Minister of Finance in 1999 made his inane comment, New Zealand’s trade deficit (i.e. loss) was $52 million.

Now with New Zealand’s debt at $400 billion compared Kirk’s Labour government’s trade balance at $3.6 million surplus which equates in 2025 to a trade surplus of of $22 million.. 

Successful at Failing

If the country could be run as a sound business in 1972, why have successive governments since 1984 failed so successfully?

The gloom that current finance minister NIcola Willis is now telling us as Budget Day looms is still narrowly focused on GDP and paying off the heavy debt load, which GDP policies dogmatically adhered to for over 40 years has resulted in debt going up and up to the current $400 billion.

The answer from the current coalition government is to bolster economic growth via GDP by increasing exports via exploitation of resources – hence the recent Fast Track Approvals Act which completely ignores the people’s opinion by sidelining the select committee process.  The public’s environment whether it be public lands containing minerals, the water in rivers, etc., is now at the mercy of the political masters. 

Political masters? That’s totally incorrect wording – they were elected as public servants to serve the public interest.

Yes and pigs might fly too.

Politics – yes. Politics cannot be avoided. Politics entering into the quality of living and outdoor recreation is simply “cause and effect”.

Footnote: Tony Orman, of Marlborough, is a past chairman of the Council of Outdoor Recreation Association of NZ