Story: Labour Party
Page 4 – Fourth and fifth Labour governments
1984 Lange government
Labour was re-elected under lawyer David Lange in 1984 and looked very different from previous administrations. Most of its MPs had worked as either lawyers or academics. Only five, including Mike Moore – a future prime minister – had backgrounds as manual workers. Labour had been transformed into a party of the middle class.
Neo-liberalism and 'Rogernomics'
The greatest challenge to the first and later Labour governments’ policies on the welfare state and a regulated economy that combined state and private enterprise came, surprisingly, from the Labour Party itself. Taking its cues from mid-20th century neo-liberal theorists, the fourth Labour government deviated sharply from a social democratic path. Led within cabinet by Finance Minister Roger Douglas (who gave his name to ‘Rogernomics’) and a group of supporting ministers, the government removed a swathe of regulations and subsidies, privatised state assets and introduced corporate practices to state services.
Labour Prime Minister David Lange was renowned for his off-the-cuff verbal wit. In 1984 he faced pressure from the US and UK administrations to reverse his government’s policy against admitting nuclear ships to New Zealand. Baroness Janet Young, the UK foreign minister, arrived to persuade Lange to abandon this policy, carrying a large black umbrella. She failed to change his mind and as she left, Lange said, ‘Oh Baroness, do not forget your broomstick.’1
The aim, in contrast to Labour tradition, was to reduce the role of the state in economic activity and to allow greater opportunity for private enterprise in a free-market environment. Many western countries were moving in the same direction. Labour’s foreign policy also broke with the tradition of firm support for Britain and the US, by declaring the country nuclear-free.
The first and fourth Labour governments stand out as the two most radical of the 20th century. Both reset the country's political agenda with the scope of their policy initiatives. But the fourth Labour government's departure from its traditional values and practices fractured the party at all levels. In its second term the cabinet was divided on the extent and pace of further reforms, there was rebellion among party members and disillusion among Labour voters. Prime Minister David Lange resigned in 1988, handing over leadership to his deputy, Geoffrey Palmer, who in turn was replaced by Mike Moore on the eve of the 1990 election. Labour was severely beaten in that election, and its caucus reduced from 56 to 29, the smallest since 1931.
The fifth Labour government
When Labour returned to power in 1999 under the leadership of Helen Clark, this administration differed from all its predecessors. This time Labour was elected under the mixed-member proportional (MMP) system, which was introduced in 1996, and was denied a clear parliamentary majority. Instead, in each of its three terms Labour governed in coalition with, or on the basis of negotiated support from, one or more minor parties. Policy concessions to its partners sometimes steered the government to the left, for example by setting up Kiwibank, promoted by Jim Anderton’s Progressive Party; sometimes to more centrist ground, such as establishing the Families Commission, promoted by the United Party; or towards environmental concerns, such as setting up a solar-energy programme, promoted by the Green Party.
The primary direction of policy, however, was determined by Labour’s retreat from the neo-liberal project of the 1980s. Yet, it neither could, nor wished to, undo all the sweeping changes made in the name of ‘Rogernomics’.