Fran O'Sullivan: The best of times, the worst of times

There was a palpable undercurrent at the Business Roundtable's annual Sir Ronald Trotter lecture at Te Papa last week.

Sir Ron - Fletcher Challenge chairman during the 1980s reform era - drove business support for Sir Roger Douglas' economic restructuring.

Each year, the Roundtable celebrates Trotter's achievements by inviting a major overseas "name" to address the senior business community on a liberal economic theme. But this year many found it hard to stay focused.

David Lange, the Prime Minister who led the revolutionary fourth Labour Government from 1984-1989, was in Middlemore Hospital in the last stages of renal failure.

Inevitably, Lange's memoirs, and their biting verdicts on his former Cabinet colleagues, were the conversational topic du jour at my table, where former ministers Richard Prebble and David Caygill were swapping notes and wondering what might have been if this talented but mercurial politician had stayed the course.

Caygill related: "[Michael] Bassett - venomous ... Caygill - dry."

Prebble responded that the verdict on him was "troublesome ... aggressive".

The conversation was bitter-sweet, but tinged with laughter at the sheer madness of how the Cabinet fell apart after Labour scored a second parliamentary term.

The Cabinet ministers whom Lange later double-crossed by single-handedly jettisoning Douglas' 1987 flat-tax package were probably the most talented group of politicians this country has seen.

"Prebs", as everyone called him back in the 1980s, was, with Caygill, part of the Douglas' finance triumvirate. The trio were ideally balanced.

Douglas was incredibly focused on driving through his economic revolution. Prebble was simply out there, blessed with an outrageous sense of humour verging on the ridiculous, which enabled him to sail over opposition to state asset sales.

Caygill was the technocrat who got things done. And after Douglas resigned as Finance Minister Caygill raised taxes instead of cutting Government programmes to bridge a huge structural deficit that had emerged after Lange rejected the next wave of Rogernomics.

Dotted around the room were other 1980s players.

Trotter, as Roundtable chairman, successfully pushed for the liberalisation of the labour market and privatisation of state-owned assets ("it's all up for grabs").

Entrepreneur Alan Gibbs was then one of Douglas' "kitchen Cabinet". Gibbs' plans to "unshackle" the hospital system, however, were beaten back by Caygill and present Finance Minister Michael Cullen.

Former Treasury Secretary Graham Scott, now standing as an Act list candidate, argues today, as he did then, that cutting Government expenditure is a lot more difficult than merely making tax cuts.

You had to be there.

The 1980s era - and the major fallout of the next decade - was a radical time. When I joined the press gallery in 1981 as a radio journalist rookie, Lange was not yet leader of the Labour Party. But he was already a force to be reckoned with. His occasional face-offs with National's Sir Robert Muldoon in the debating chamber were the highlight of the parliamentary day.

Theirs was an era when the major combatants relished taking the gloves off to argue their corner with vigour and passion. They were polar opposites.

Muldoon - the sharp-tongued defender of things as we knew them - would later be majorly upset by the social fallout Rogernomics wrought. Lange was the quick-silver wit who sold a Rogernomics regime he grew to detest.

These days, it is a different climate.

Prime Minister Helen Clark's reign has been characterised by her frequent failure to front question-time. The leadership of National's Don Brash is characterised by his failure to show up and to put the tough questions in the first place.

Before the 1984 election, much of the debate over the direction the economy should and would take was happening behind scenes. The business community existed in a "climate of fear", as the renowned Australian Financial Review editor Paddy McGuinness reported.

But other Kelburn inhabitants (some of whom slipped me an occasional tip) were working with Douglas on the reform agenda that he would reveal to New Zealand after the 1984 election victory.

Lange sounded me out to join his team as a junior press secretary just after his 1984 election victory. I declined - with some regret - as in those days crossing over to the "dark side" was seen as the kiss of death to any hopes of later resuming a journalistic career. These days it is almost de rigueur.

I also decided that while Parliament was where the journalistic excitement was, there were other, more compelling, stories in the outside world where real people - businessmen, farmers, public servants - were grappling with their support structures being cut from under them.

Reporting Rogernomics as a business journalist from 1984-1987 involved telling all those stories:

* The 1980s sharemarket boom, during which shonky paper shufflers were held up as gods, but which then exposed earnings as a mirage after the 1987 crash.

* The farmers who went bankrupt as subsidies were removed (better them than the country).

* The huge price Maori paid - some 70,000 put on the industrial scrapheap - as corporatisation of state assets took their toll on rural communities and lives.

* The folly with which businesses set out to "conquer the world" - on the back of soft loans from Government-owned banks.

These were gripping stories, which gave flesh to the dry bones of reform.

I did not always agree with the sequence of the changes, particularly the lack of help to ameliorate the painful adjustment many had to make. Nor did I have much time for the propaganda which the Rogernomes used to beat back sensible questions over the fiscal sustainability of Douglas' flat tax package.

But there was also an upside: sheer excitment and a sense of nationhood, particularly when Lange himself took an attitudinal approach on the international stage.

It is only with the safety of some two decades' distance that many - including Lange himself - have been able to question the wisdom of banning nuclear-propelled ships from our shores. Back then we did not care about consequences: such as not being in the Western security loop or not getting a United States free-trade deal.

The Lange-Douglas fallout was devastating.

I returned to the Press Gallery as a political editor in mid-1987, one week before the election, when Lange romped home. The agenda was on again as state companies began to axe more employees - jobs they had backed up until after the election.

But it was not such a radical time.

In October 1987, the stage was set for the showdown. In Hawaii for a weekend stopover with the press corps after a Vancouver Commonwealth Heads of Government meeting, the Prime Minister was distracted.

The previous Friday, the United States sharemarket had begun to slide. He was convinced Douglas would bring forward his flat-tax package again.

The story of their resultant fallout has been rehearsed in many obituaries this week.

But what is not often heard is the fact that if Douglas had been allowed to proceed, a huge Budget deficit would have been created.

There are two aspects to this.

We will never know if flat taxes (at 15 per cent) would have spurred a new wave of business investment. Local equity was burned out by the 1987 crash in any event.

Nor will we know if the dynamic growth effects of such taxes would have happened. Douglas and Scott later advised Russia to go down this path.

Ironically, Lange's death occurs at a time when the stage is set for another debate over the respective virtues of tax cuts versus spending.

This time, Lange's former Cabinet ally, Cullen, is the staunch defender of the status quo.

Brash - the former Reserve Bank Governor - could stand (well almost) in Douglas' shoes if he had the courage.

He will announce National's tax cuts package on Monday.

This will not be as radical as anything Douglas could have dreamed up - or so radical as to cause a Lange-style rejection.

* Post-script: In the mid-1990s, when I was in the thick of defending a major action brought by merchant bankers Sir Michael Fay and David Richwhite, I got a call out of the blue from Lange.

We had not really spoken for years. But he had "something I want to say to you" about what went on behind the scenes during a controversial wrangle over the twin bailouts of the Bank of New Zealand.

We met at the chairman's lounge at the then Ansett terminal at Auckland Airport. Lange was frustratingly elliptical. But he later ensured I received some written references which would have been useful if the case had ultimately gone to court (they withdrew).

For that I owe him thanks.