No guts, no GDP.

Last January, Republican big-wigs called 24 chief executives in the Business Roundtable to Washington and scolded them about their performance in the 1996 elections. Too middle of the road, too squishy, too Democratic, too non-Republican to offset the AFL-CIO's massive effort.

What's a chief executive to do? Avoiding politics entirely is precluded by the fact that every modern economy is a political economy. The alternative answer: take principled stands in favor of open-markets, lower taxes, less regulation, and zero tolerance for business subsidies. In short, support restoration of the rule of law add limited government.

Being "pragmatic" has not worked, nor can it. Using government to gain temporary advantage in the marketplace at the expense of others remains a bad idea, both morally and economically. Overall vitality of the economy - not purloined prosperity for one company or industry - is crucial. Back in 1952, General Motor's Charlie Wilson summed this philosophy up in the first part of his notorious declaration: "What is good for the country is good for General Motors, and what's good for General Motors is good for the country."

But can a principled, economy-wide political approach by CEOs succeed? Yes. New Zealand, a beautiful nation of 3.6 million down under, offers an example. Anemic growth since World War II and a background belief that state rigidity had outlived its usefulness set the stage for radical change. Supply-side replaced Keynesian demand-side thinking as the key to prosperity, and in a blitzkrieg, financial and foreign exchange markets were liberalized in 1984, while input and product markets followed. Perhaps most remarkable was the 1991 Employment Contracts Act passed largely to dismantle the state straitjacket in labor markets. Unions are now completely voluntary, and membership has slipped from 42 to 25 percent of the work force.

The reforms have succeeded, with the country enjoying a sustained economic upturn since 1991, as well as markedly improved economic prospects. Employment, labor productivity, and straight-time pay are up, while state benefits have been cut by 10 percent, the budget is in surplus, inflation has held at 2 percent per year, and government debt has fallen from 50 to 30 percent of GDP. Admittedly, there is a long way to go - taxes, for example, are 38 percent of GDP - but the track looks clear.

The New Zealand Business Roundtable, founded in 1986, played a pivotal role in this transformation. NZBR was "an exact prototype of the U.S. Roundtable," according to Executive Director Roger Kerr, with chief executives originally drawn from 30 of New Zealand's largest businesses. "There was a lot of debate over the free market in the early days, and there were only four or five [genuine supporters] - guys with guts," reports Alan Gibbs, a prominent New Zealand businessman. "Nearly half the companies went broke after liberalization - they were only there because of protection," he recalls. "CEOs rolled over too, and since the 1980s, the debate stopped because we're in control." Gibbs claims that because of the clarity of the debate, New Zealand now has "the most economically literate society in the world."

According to Gibbs, the new government recently insisted on $100 million in new business subsidies for "venture capital" and was booed off the stage by a resounding protest from a unanimous business community, which rallied to the cry: "We don't want subsidies; give us back our taxes!" The ideology of efficiency and free markets has changed the culture, according to Roger Kerr, who says, "It's now bad form to endorse subsidies and protection."

A key part of the NZBR's success has been its investment in research. "We're halfway between a think tank and a business organization," says Kerr. "Our statement of purpose laid down a national interest perspective, an economy-wide view, and we searched out the best minds and work in the world to apply here." Self doubt among chief executives evaporated as Kerr and NZBR researchers, including many American economists, grappled with policy foes and vanquished them.

Business often exerts undeserved influence for ill purposes, but the NZBR has had a huge and positive impact in New Zealand. The irony is that although proponents of free-market are abundant in the United States, their political influence has been nil. Chief executives and business organizations, look afar to see what the kiwis have wrought!

Pete du Pont is a former governor of Delaware and policy chairman of the National Center for Policy Analysis in Dallas.