David Cormack: GDP hides the real truth in our economy

Society is built to be easy for the rich. Photo / Getty Images

COMMENT

The GDP figures came out last week. For the quarter that ended in June, the GDP output rose 1 per cent. Which I'm told is good. So good in fact that it was the largest increase in two years. Great GDP-ing!

This came off the back of a barrage of attacks on the Government for decreasing business and consumer confidence. Strangely, when the new GDP figures came out, Business NZ chief executive Kirk Hope was very silent. I guess this was because just a couple of weeks back the business confidence survey his organisation administered was found to railroad chief executives into saying the Government's proposed employment law changes were bad by giving no positive option. Oops.

But while many on the Government's side crowed about what a success this meant the coalition was and how great at managing the economy they were, very few stopped and took stock of what it all meant.

Robert Kennedy once criticised GDP as a metric by saying that it included cigarette advertising and prisons but did not include "the beauty of our poetry or the strength of our marriages". While the last part may now be a dubious sign of positivity, I think the point is clear. To reinforce; GDP goes up if banks take more risks with lending, even if the quality of that lending goes down. And we only have to cast our minds back ten years to remember how well that worked out.

But this GDP metric was such a raging success that the credit agency Moody's affirmed our triple-A rating and said our economy's future looked rosy. Choice! But, again, we only have to cast our minds back ten years to remember how good Moody's ratings are at not causing a global financial crisis.

What we seem to measure our economy by is how well rich people are doing. Our whole economy is rigged against people who aren't in the top tier. New Zealand's GDP grew faster than at any point in the last two years! Wooh! As you read this column are you feeling materially better off as a result?

Society is better for the rich. And I don't just mean it's great to be rich. I mean that society is built to be easy for the rich. One weekend, a friend from a well of family and I drove into the city, and he parked his very expensive European car in a loading zone. I told him that you could still get fined for parking in a loading zone on a Saturday. He said that it just cost him $40 to park there on a Saturday. The fine wasn't a deterrent. The fine was just the cost for him to park there.

If something is punishable by a fine, that means it's actually legal for the rich. Losing $40 was for him a fee. For many, losing $40 would mean not eating proper meals that week, or being unable to afford to go to the doctor.

And so far this Government hasn't shown itself to be a great mate of the struggling. I mean sure, they're better mates than the last lot, but increasing the petrol tax? That's the same as a fine. Rich people can afford a few more cents a litre without it affecting their day to day life, poor people drop further back in society. There was a recommendation for a sugar tax as well. Same deal. Any tax that isn't progressively increased is, by its nature, unfair.

The Government needs to stop making poor people pay a disproportionate amount of their meagre incomes for its projects. I guess it's at least making noises of being aware of the faux-indicator of GDP. It wants to introduce wellbeing measures into next year's budget, which is great if they can do it.

It's not just government rules that make it crap to be poor, outside of government we try to screw down people as much as possible. During just about any job interview you'll get asked how much you think you should get paid. They don't really mean "how much is your labour worth on the labour market?", what they really mean is "how low will you sell yourself for?". If you go too high, you can kiss that job goodbye.

So we're incentivised to say a low figure. We sell houses by tender, which is the reverse of a job interview. We ask people how high they're prepared to go and put them in invisible competition with one another thus driving up the price. It's like the system is designed to give the majority as little money as possible.

There's a boring old cliché that you get more conservative the older you get. I don't think this is an age thing. I think it's true that you get more conservative the richer you get, and historically this was tied in with age.

But as more and more of our income gets trapped at the top tier of society, and getting older no longer means getting richer, we'll see more disruption in society all around the world. What sort of grading will you give that, Moody's?

David Cormack has worked for the Labour and Green Parties and interned for Bill English while studying