In a faraway land, the left prospers

Observations on social democracy

Though the left has lost out in the US, France, Italy, Spain, Portugal and Australia, New Zealand stands out in the blue horizon. There, Labour in power has advanced social democracy rather than back-tracking, and has become more popular by doing so. The prime minister, Helen Clark, looks certain to win the early election called for 27 July and Labour may well become the first party to win an outright majority in the country's new proportional representation system.

Labour's present success is all the more striking because, in power from 1984 to 1990, it out-Thatchered Thatcher in cutting taxes and subsidies, privatising and deregulating. This produced rising unemployment and stalled growth, and markets collapsed in the October 1987 crash.

It also split the Labour Party. One group deserted to the left to form "New Labour", which later became the Alliance. Another group, led by the former finance minister Roger Douglas, went right to form the Association of Consumers and Taxpayers.

Labour was ignominiously thrown out in the 1990 election. Comprehensively shafted by both main parties - each of which had promised a return to normality, then imposed more unwanted free-market policies - the electorate took revenge by voting for a PR system to keep politicians on a short leash.

Under Clark, Labour got back in 1999 on the votes of 29 per cent of the total electorate, compared with Tony Blair's 23.4 per cent in 2001. But where Blair got his ridiculous majority of 166, proportional representation gave Clark only 49 out of 120 seats. To govern, she needed a coalition with the Alliance, and some support from the Greens.

Yet Clark's government has been bolder than Blair's. Labour increased top tax rates, renationalised Air New Zealand, revoked the Employment Contracts Act (which had damaged the unions), reversed the conversion of hospitals to businesses, and introduced a People's Bank. Clark, who is not afraid to use the words "social democratic", told me that, like many other countries, New Zealand had been suffering from electoral cynicism and apathy, leading to falling turnout at elections. "We've had a mission to try and restore trust and faith in the political process," she said. "There's a feeling in New Zealand that governments just ran away with the election mandate, did things they'd never foreshadowed at all."

Under Clark, New Zealand has enjoyed economic success - not through free markets and cost-cutting, but through a competitive exchange rate that has boosted production and exports and fed back into investment, employment and higher tax returns. The approval rating of the opposition National Party leader, Bill English, fell as low as 12 per cent, while Clark's rose to 49 per cent. Her decision to hold an election is mainly the result of problems among her partners in the Alliance, which has split in two.

The latest poll puts Labour at 55 per cent and the National Party well behind on 25 per cent. Even if New Zealand doesn't return to single-party government, it seems certain that it will stand out from the drift to the right - and Helen Clark will get three more years to restore social democracy.

Austin Mitchell is Labour MP for Great Grimsby