New Zealanders’ enduring relationship with GDP growth as an economic goal is nostalgic, traceable to the 1960s and a fall in the price of wool. Growth goals have reflected who we are as a nation. We are strivers through thick and thin. Looking forward, however, GDP growth would be misplaced as an economic goal given that we know it has an uneven relationship with wellbeing and is coupled with numerous types of environmental degradation that have reached epic proportions. With all due respect to the past, we must strive for new economic goals that are directly socio-ecological. These, too, can reflect who we are, perhaps more so.
The seeds of New Zealand’s relationship with GDP were planted in 1936 when the first Labour government, led by Michael Joseph Savage, set about recovering from the Great Depression with policies that coincidentally mirrored Keynes’ thinking in the UK, establishing a Census and Statistics Department to gather and supply important data. Up to then, national income had been calculated only randomly and price statistics had been kept by a keen amateur who shared his data with the government.
Also in the mid-30s, in the US, Simon Kuznets was formulating GDP, although it would not be widely used for several decades. Through the 40s and 50s, statistical precursors to GDP were adopted in New Zealand under the direction of the Government Statistician, George Wood, following the social accounting approach of UK economist Richard Stone.
As the world recovered from WW2, economists everywhere were bemused to find themselves, as numbers nerds, being invited to high-level government meetings. It was no different in New Zealand. The Cabinet invited Wood onto the Officials Committee on Economic Policy. “Treasury was becoming more interested in our work”, Wood would later recount. The Department was developing statistical data around the country’s key interests as a small trading nation, an exporter of primary produce and a largely urban population employed in manufacturing.
Wood attained global standing in his profession, elected Chairman of the United Nations Statistics Commission in 1959. In 1961, New Zealand became a member of the International Monetary Fund and the World Bank. It was the IMF’s demand for comparable international data that drove New Zealand’s first estimate of GDP in 1962. It turned out that we had the world’s sixth largest GDP per capita at that time.
In the 60s, primary produce (wool, meat and dairy) represented two thirds of export revenue. Suddenly, in 1966, the price of wool collapsed. Understanding that revenues would have to rebound and diversify, especially to protect terms of trade, Keith Holyoake’s National government (1960-1972) convened key industries around ambitious sectoral targets, aiming for annual gross national product growth of 4.5 percent for the next five years.
For the first time, the Statistics Department was tasked with measuring growth.
An integrated framework of accounts was necessary. In 1969, it was agreed to develop a New Zealand System of National Accounts (NZSNA) based on the United Nations system (UNSNA 1968). Ten years of department funding issues meant it would be 1978 before the first official GDP figures were published, backdated to 1971.
The growth imperative amplified when New Zealand’s biggest market, the UK, acceded to the EEC in 1973, just as the country was battling the effects of the oil crisis and global price inflation. There followed two decades of overall slow but wildly fluctuating growth – and tremendous economic upheaval. Robert Muldoon’s National government (1975-1984) tightened control over the economy, borrowed heavily to build up the nation’s energy independence, abolished the national superannuation scheme, refused to devalue the dollar and imposed a wage freeze. David Lange’s incoming Labour government (1984-1989) controversially adopted neoliberal policies, deregulating the financial markets, loosening import controls and paving the way for service sector growth.
Throughout the 1990s and 2000s, policies were adopted to build GDP. Jim Bolger’s National government (1990-1997) cut deeply into welfare programmes and reformed labour laws, achieving one of the fastest rates of GDP growth among OECD nations. Helen Clark’s Labour government (1999-2008) introduced innovation as a central growth theme to “catch the knowledge wave”. John Key’s National government (2008-2016) promised to focus on “significantly and sustainably increasing economic growth”.
Despite these various strategies, New Zealand’s GDP per capita has significantly decreased since the early 1960s, falling to 20 percent below the OECD average in 2016. New Zealand has an enduring productivity predicament. Distance to world markets and a small domestic economy make it difficult for firms to grow, invest in R&D and gain access to technology. And while services account for 70 percent of GDP, New Zealand has a larger share of low productivity agriculture and food manufacturing industries than its OECD peers.
It is well understood by some in New Zealand that GDP results, whether good or bad, indicate nothing about the non-monetary underpinnings of the monetary system or the environmental and wellbeing outcomes of growth-based decisions. In 1988, Marylin Waring, a former National Party MP and founder of feminist economics, called for GDP to reflect women’s unpaid work. A ‘time use’ survey was carried out, but the methodology for GDP did not change.
In the 2000s, the Ministry for the Environment explored indicators for sustainability, while Statistics New Zealand developed a conceptual framework for measuring sustainable development. These ideas were shelved by the incoming government.
In 2011, however, during Key’s tenure, Treasury began to develop the Living Standards Framework as a supplement to GDP, based on OECD standards, as a way for Treasury to connect its economic policy advice to other departments’ non-monetary objectives and provide inputs on intergenerational wellbeing to the Long Term Fiscal Statements. This was welcome, if not long overdue. Empirical studies comparing GDP and the Genuine Progress Indicator have found that they coincide up to the 1990s but diverge substantially after that, indicating that New Zealanders are only half as well off as GDP suggests. What’s more, the environment is paying the price. By 2020, New Zealand was consuming more than three times its fair share of Earth’s resources and atmosphere, exceeding planetary boundaries for land use change by a factor of 2.3, ecological footprint by 3, material footprint by 3.5, carbon dioxide emissions by 3.7 and methane and nitrous oxide emissions by 10.
In 2019, Jacinda Ardern’s Labour government (2017-2023) announced it was adopting wellbeing indicators in preference to GDP (although GDP wasn’t going away). Finance Minister Grant Robertson said: “We want to be a prosperous country, of course we do, but we also care about who shares in that prosperity and how it is sustainable.” The New York Times dubbed it “New Zealand’s Next Liberal Milestone”. Degrowth intellectual Jason Hickel tweeted: “This is huge. Jacinda Ardern’s New Zealand is about to become the first major country to abandon growth as political priority in favour of well-being.” Late in 2022, Treasury’s first compulsory quadrennial Wellbeing Report was published. It revealed that New Zealand is experiencing an intergenerational diminution in social wealth, with burdens falling disproportionately on disabled people, sole parents and Māori and Pacific Peoples.
Yet, the Wellbeing Report was released with almost no government PR and it barely made a ripple in the press. Most news sites opted not to cover it, seemingly tired of the government’s wellbeing rhetoric. The government, itself, after two years of unprecedented levels of spending on COVID-19 measures and heading into an election year, appeared to have judged it politically expedient to minimise its use of wellbeing language, due, perhaps, to the intractability of some wellbeing issues.
Meanwhile, the Reserve Bank garnered many local and foreign headlines for a massive hike in the official cash rate to get inflation under control, engineering a recession projected to amount to a 1 percent contraction in GDP in 2023.
The business outlook is pessimistic, but Robertson has argued that the economy, being “nearly 7.9 percent bigger than before the start of the pandemic”, can weather a recession. Chris Hipkins, Ardern’s successor, repeated this statistic in his Prime Minister’s Statement in February 2023. He noted that the IMF predicts global GDP growth will slow to 2.9 percent in 2023, combined with high inflation, and he stressed that New Zealand would not be immune. He covered several major social issues in his Statement, as any new PM would, but the wellbeing economy per se didn’t get a mention. Growth certainly did. The nation’s economic security depends, Hipkins said, on the growth of the food and fibre sector, while new free trade agreements with the UK and the EU could boost GDP by several billions. This was a nostalgia-inducing statement from the PM, no doubt crafted to calm nerves following Cyclone Gabrielle and appeal to the mainstream of the electorate.
The much-heralded but still nascent concept of a wellbeing economy in New Zealand is being squeezed out by the ever popular but increasingly mythical idea that economic growth is the best and simplest lead indicator of future national prosperity and welfare. Talking about GDP growth seems to be the enduring comfort zone for our politicians, the media, business and the public. It’s as if growth is tied to our national identity, a reflection of who we’ve been, who we’ve struggled to become and who we are. What it seems to say about us is that we are strivers through thick and thin. We’re proud to be like this. Striving for growth reflects our national psyche.
There are, however, things that we must be clearer about in our economy in the 21st century, such as what we are ultimately striving to exceed – our social threshold – and what we will not jeopardise to achieve it – our planetary boundaries. Striving to reach socio-ecological goals is something we could be very proud of. With all due respect to past goals and without losing sight of who we are, we can let go of GDP growth as a goal and, instead, set growth goals for society and nature. Arguably, that would say so much more about who New Zealanders really are.
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