By Jonathan Freedland

"Helen Clark is proving that social democratic parties can take on the corporations, stand up for workers’ rights, tax the top five percent of earners, curb defence spending and open up the government – and still ride high in the polls."

Let’s start with a far away Labour party that has ditched its flirtation with Thatcherite economics and come home, relocating itself on the unashamed left.

Let’s imagine this Labour party is speeding through a program so progressive it would make radicals everywhere drool. It has raised the taxes of the rich and transferred the cash to pensioners, students and the needy. It has stopped privatization dead in its tracks, even re-nationalizing one public service because Labour believes there are some things the free market cannot get right.

. It has given trade unions their rights back and boosted spending on schools and hospitals. It has rewritten employment law, moving the country away from what the prime minister calls the "loony edges of a deregulated labour market."

She enforces a stoutly non-nuclear defense policy—and has dared confront the right by scrapping an order for 28 swanky new U.S. fighter planes, arguing that the country does not need them and cannot afford them. She wants her army to be the world leader in peacekeeping and to shift from militarism to humanitarianism.

She has also moved to decriminalize cannabis and encouraged a freedom of information regime so liberal that cabinet papers are available to anyone who wants them within three months.

Best of all, this left-wing government is not besieged on all sides by a hostile press or conservative public opinion. Instead, it is surging ahead in the polls, leaving the opposition to gasp with envy.

But enough of such fantasy! Surely no such party can exist, able to govern from the left even as it carries a grateful nation with it. Can it? The happy answer is that it can, and it does.

The country is New Zealand, and the party is Labour, under its new prime minister, Helen Clark.

What she is up to does not just make a fascinating tale from the South Pacific. It also provides a warning lesson for Tony Blair and New Labour [and also for the NDP in Canada] in what can happen to parties of the left that march too far rightward in the pursuit of power.

Those forecasting the shape of Britain’s New Labour in 2010 don’t need to gaze into the crystal ball: they can look down under. For Clark and her party were Blairites a decade before Blair. Their 1997 came in 1984 when, just like New Labour, they were elected with a large majority. They promptly dumped every economic principle that had once been Labour holy writ.

The party converted to the free market with a zeal that out-Thatchered Thatcher and out-Reaganed Reagan. If it moved, Labour and its Finance minister, Roger Douglas, privatized it. Taxes were slashed, workers’ protection, abandoned. New Zealand became the citadel of the New Right.

At first it worked. N.Z. Labour achieved, Blair’s hallowed goal---winning a second term. The party had seduced rich middle-class New Zealand, winning voters old Labour couldn’t reach.

"But the heartlands started to go off us," Clark told me from her office overlooking Wellington harbour. Labour’s core supporters were "pretty appalled at what was happening."

Here is the warning for Blair: New Zealand‘s heartlands rebelled in what Clark calls— using the plain English that has helped make her so popular–"disgust" at the rightward thrust of their party. Barely into its second term, Labour revolted. Divisions led to a massive election defeat in 1990, with the left breaking off to form a new party and Douglas’s right eventually doing the same. Labour was reduced to a rump. With fewer than 5000 members, the new leader–Helen Clark– began the 1990's with what is said to be the lowest approval rating in world polling history: 2%.

The remedy was to return to Labour’s core values. "We’d had experience of going right; we knew there was no market for that," she explains. "But we also knew there was a appetite for an alternative."

It took nine years and two more election defeats to get it right. Clark is in no doubt why it took so long: "We weren’t left enough."

Could this be the fate of British Labour? Could Blair win his precious two terms, only to see his party serve three more in opposition—rejected for its failure to provide an alternative to the Conservatives?

Still, Britain may have something to learn from this country half a world away. For Clark is proving that leaders of social democratic, "First World" parties do not always have to talk like conservatives to win and keep power. They can respect the basic rules of sound economic management—and then take on the corporations, stand up for workers’ rights, tax the top 5% of earners, curb defense spending, strip the constitution of privilege and deference, and open up the government. They can do all that and still ride high in the polls.Clark met Blair in Downing Street last May. Apparently he asked lots of questions about her flying start in government; let’s hope he was taking notes.

Jonathan Freedland is a correspondent for The Guardian Weekly , where this article was first published.