‘About Turn’: An Analysis of the Causes of the New Zealand Labour Party's Adoption of Neo‐liberal Economic Policies, 1984–1990

Abstract

This is an inside story of one of the most extraordinary about‐turns in policy‐making undertaken by a democratically elected political party. In 1984, the fourth Labour Party government in New Zealand embarked upon a programme of extreme economic liberalism that lasted six years, and transformed a heavily state‐managed economy into a largely market economy. In doing so, the New Zealand Labour Party reversed a fifty‐year‐old Keynesian consensus shared by the major political parties, and abandoned its own traditionally social democratic economic principles. The underlying causes of this extraordinary policy shift have not been adequately explained, and it is the aim of this article to remedy that deficiency, by making use of a series of interview transcripts with several of the leading players in that economic revolution. We argue that there were four main causes—structural, institutional, cultural and entrepreneurial—and that the most crucial cause was the last.