Men cycle to work in Addington in 1946, when New Zealanders still saw themselves as "Better Britons".

OPINION: This is the story of a small nation which tried to move beyond its history as a British colony to become a more open and diverse society.

It is also the story of how that country's national identity was fundamentally altered in the process, to the point where many of its citizens are no longer sure who they are, or where their society is headed.

The story begins in 1986 when the new Labour Government of David Lange and Roger Douglas steered New Zealand in a radically new economic and cultural direction. It was widely believed that Lange's predecessor, Sir Robert Muldoon, had allowed the country to become fixed in a view of itself that owed much more to the past than the present. Lange's government was determined to modernise and open-up New Zealand to a new way of organising its "Polish shipyard" economy.

Dean Kozanic New Zealand today: Part of the audience at Christchurch's Diwali celebrations.

This determination went well beyond opening up the economy. An important part of New Zealand's insularity, it was argued, stemmed from the narrowness of its immigration policies.

Prior to 1986, New Zealand's immigration policies were driven by one, over-riding consideration: too preserve the country's essential "Britishness". For most of New Zealand's history this objective had been interpreted quite literally. New Zealanders were proud to call themselves "Better Britons" and looked upon the United Kingdom as "home".

From the 1930s onwards, however, this attitude underwent an important change. More and more New Zealanders, while acknowledging their British heritage, were determined to transcend it by constructing a nation that was more progressive, less hidebound and much more independent than the colony it had started out as. This view of New Zealand was given a huge boost by the reforms of the First Labour Government (1935-1949) and contrasted sharply with the more traditional view of New Zealand's national identity espoused by the National Party.

By the 1980s, however, this Kiwi nationalist position was being widely dismissed as an unhelpful barrier to moving New Zealand into the new "global" economy. The survival of the sort of society favoured by New Zealand's left-wing nationalists depended on the continuation of economic and cultural protectionism. But, with the tides of history running strongly against them, the Left's preferences were fast becoming untenable.

The country's almost entirely monocultural institutions added another complication. Since the land wars of the nineteenth century, New Zealand's indigenous Maori people had been largely shut out of national life. Progressive New Zealanders demanded a new, bi-cultural, definition of nationhood. They also wanted New Zealand's foreign affairs, defence and trade policies to reflect its geographical location in the Asia-Pacific region.

The inquiry launched by Lange's Immigration Minister, Kerry Burke, in 1986 touched upon all of these considerations. It's findings represented a decisive shift away from the de-facto "White New Zealand" policy that had, hitherto, preserved the country's narrow ethnic profile.

Labour's new immigration policy, like the free-market policy it was intended to complement, would take as its starting point the economic needs of New Zealand. Immigrants would be admitted on the basis of a culturally-neutral "points" system. Social cohesion, formerly achieved by its cultural homogeneity, would now be secured through strong economic growth. New Zealand was to become an increasingly diverse and multicultural nation.

Very little of this new population policy was known to New Zealanders. And the politicians of both major parties were in no hurry to inform them. There were clues, however, such as National Prime Minister Jim Bolger's peculiar claim that New Zealand was an Asian nation.

By the time the rapid influx of non-European immigrants became impossible to hide, National and Labour could rely on most political journalists and a growing number of academic and business leaders to reassure the public that the new multicultural New Zealand was an entirely positive development. Those who objected, most notably the leader of the anti-immigration NZ First Party, Winston Peters, were condemned as racists and xenophobes. In the city where most new immigrants settled, Auckland, rapidly rising property values reconciled native-born citizens to its changing ethnic balance.

What the authors of New Zealand's current immigration policy failed to account for, however, was the social inequality which free-market economics almost always generates. Where economic growth is based on large migrant inflows – as it is in New Zealand currently – and wealth is distributed unequally across the population, social cohesion begins to break down.

New Zealanders have been slow to turn against their country's economic, social and cultural transformation. Most accepted the changes of the Lange government and its successors, at least initially, as necessary and positive. Thirty years on, however, the consequences of those changes are all around them.

The global economy, with its free movement of goods and people, lacks the reassuring consanguinity of the homogeneous nation state. When a people looks in the mirror, it expects to recognise its reflection.