The recipe for growth is well-known. Most economists would agree that lower taxes and less regulation can encourage entrepreneurship and job creation. Yet, many countries shy from such reforms. A key reason is concern over a voter backlash. 

Jean-Claude Juncker, a likely candidate for the EU-presidency after two decades as Luxembourg’s Prime Minister, famously lamented “We all know what to do, we just don’t know how to get re-elected after we’ve done it.” 

Based on an analysis of 109 governments in developed countries, we would suggest that Juncker’s exasperated sigh was mistakenly gloomy. Although market-oriented reforms may initially meet fierce resistance, governments that introduce them are more often than not rewarded by voters. 

In our book Renaissance for Reforms we look at the pace and direction of reforms in 29 OECD governments between the mid-1990s and the end of 2012. In general we find that in contrast to Juncker’s view, governments that pushed market reforms were also most likely to become re-elected.

Surprisingly, this correlation is driven by governments on the left. 

The development in New Zealand lends support for our thesis. The Labour government of David Lange that was elected in 1984, and re-elected in 1987, introduced far-ranging market liberalisations, which were continued by Jim Bolger – at least during his first term. The so-called Kiwi reforms were followed with great interest around the world, inspiring change in other traditional social-democratic countries. 

Since 1993, a market-backlash has been seen in New Zealand. Still, at least during the three latest elections the governments on both right and left which have increased economic freedom have been rewarded with re-election, whilst Labour lost in 2008 after having reduced the level of economic freedom. Although the level has again fallen somewhat during the latest period of government, New Zealand’s commitment to economic freedom continues to inspire change in other parts of the world.

Nima Sanandaji is a policy analyst and holds a PhD at the Royal Institute of Technology. Stefan Fölster is professor of economics at the Royal Institute of Technology, and director of the Reform Institute. The authors’ book Renaissance for Reforms was co-published by Swedish think tank Timbro and the London-based Institute of Economic Affairs on Thursday.