TIME: What kind of New Zealand did you inherit?
Clark: I think it would best be described as a somewhat disappointed nation, somewhat cynical. This was a country which had been promised that going down a certain path would deliver a lot economically and to the benefit of ordinary people. Years down the track, people felt worse off. They felt that whoever they elected, they got governments that did things they hated. I think they were looking for a real change. They were looking for people who put human values to the fore again, not always being obsessed with the bottom line. Economic rationalism had run its course. A lot of the people who voted for us would share my assessment that economically what had happened was a failure, that society was fragmenting, and a lot of individuals fell through the cracks.

TIME: How will your government go about restructuring the country?
Clark: We're a fairly deliberate sort of government. We've set modest objectives that are achievable. They're not flipping the society back to pre-1984, but they're about moving forward in ways more familiar in Europe under social democratic governments. The sort of changes you'd like to see you can't achieve in three years.

TIME: How are you finding the operation of the coalition?
Clark: It's exceeded my wildest expectations. One of the worst fears that people developed with mmp [the mixed member proportional electoral system, introduced in 1996, in which voters cast two ballots, for a party and a local M.P.] was that their governments would always be in chaos and fighting. If the public seriously thought we could return to the situation where a single-party government had absolute power between elections, I think you'd find support for mmp would shoot right up again. That's because mmp was a reaction to an untrammeled single-party government abusing its power.

TIME: How would you characterize your style of leadership?
Clark: Direct, open, blunt, a lot of contact with media. You get accused of being the Minister of Everything, but I think most journalists would admit that the reason I offer opinions on things is because they ring and ask, and I do have a fundamental belief that the buck stops at the top and that people are entitled to know what the Prime Minister thinks.

TIME: Is there a leadership role for New Zealand in this region?
Clark: In terms of having views and being prepared to express them, yes, I think New Zealand's had a leadership role in a lot of things. Nuclear disarmament, obviously. The last nine years were a bit of a dark spot, but if you go back to the previous era, when Geoffrey Palmer was Minister for the Environment, he did a lot of good work on the Law of the Sea and environmental issues. New Zealand's been pretty quiet on human rights issues, which we will be taking rather more interest in, and in international labor issues. New Zealand, for its size, does quite well in terms of leadership on issues.

TIME: Has the country had to pay a price for its loyalty to some of those issues?
Clark: No. I don't accept there's been a cost at all. What has been the cost?

TIME: Perhaps not such a terrific relationship with Washington?
Clark: The relationship's fine. We were told that we are a friend, not an ally, and we're good friends.

TIME: What about the restructuring of the armed services, especially in terms of allies?
Clark: Best described as a work in progress, in terms of what's going on with defense policy here. One of the early decisions we had to take was on the purchase of the F-16s. We went into it saying, "If purchasing these planes was a higher defense priority, then the Americans offered us a very good deal. Unfortunately we can't see the purchase as a high priority." So that was the honest position and they accepted that New Zealand would set its own defense priorities. >>MORE