Though New Zealand had started off as an unwanted sibling of Mother England, it had soon transformed itself into a devoted daughter who could be relied upon in times of crisis. New Zealand had supported Britain in South Africa at the end of the nineteenth century and was now called upon to do the same in World War I . Locally born pakeha now outnumbered immigrants and, in 1907, New Zealand had traded its self-governing colony status for that of a Dominion, giving it control over its foreign policy; but the rising sense of nationalism didn't dilute a patriotism for the motherland far in excess of its filial duty. Altogether ten percent of the population were involved in the war effort, 100,000 fighting in the trenches of Gallipoli and elsewhere. Seventeen thousand failed to return, more than were lost in Belgium, a battleground with six times the population.

At home, the Temperance Movement was back in action, attempting to curb vice in the army brought on by the demon drink. Plebiscites in 1911, 1914 and 1919 narrowly averted national prohibition but the "wowsers" succeeded to the point that from 1917 pubs would close at 6pm for the duration of the war. Six o'clock closing entered the statute books in 1918: not until 1967 did its repeal end half a century of the " Six o'clock swill ", an hour or so of frenetic after-work consumption in which the ability to tank down as much beer as possible was raised to an art form. This probably did more to hinder New Zealand's social development than anything else: pubs began to look more like lavatories, which could be hosed down after closing, and the predilection for quantity over quality encouraged breweries to churn out dreadful watery brews.

The wartime boom economy continued until around 1920 as Britain's demand for food remained high. Things looked rosy, especially for pakeha returned servicemen, who were rehabilitated on newly acquired farmland; in contrast, Maori returned servicemen got nothing. These highly mortgaged and inexperienced farmers began to suffer with the rapid drop in produce prices in the early 1920s, fostering a sense of insecurity which pervaded the country. Political leadership was weak and yet New Zealand continued to grow with ongoing improvements in infrastructure - hydroelectric dams and roads - and enormous improvements in farming techniques, such as the application of superphosphate fertilizers, sophisticated milking machines and tractors. New Zealand remained a prosperous nation but was ill prepared for the Great Depression , when the Wall Street Crash sent shock waves through the country. The already high national debt skyrocketed as export income dropped and the Reform government cut pensions, health care and public works' expenditure. The budget was balanced at the cost of producing huge numbers of unemployed. Prime Minister Forbes dictated "no pay without work" and sent thousands of men to primitive rural relief camps for unnecessary tasks such as planting trees and draining swamps in return for a pittance. With the knowledge of the prosperous years to come it is hard to conjure the image of lines of ragged men awaiting their relief money, malnourished children in schools and former soldiers panhandling in the streets.

Throughout the 1920s the Labour Party had gradually watered down some of its socialist policies in an attempt to woo the middle-ground voter. In 1935 they were swept to power and ushered in New Zealand's second era of massive social change, picking up where Seddon left off. Labour's leader Michael Joseph Savage felt that "Social Justice must be the guiding principle and economic organization must adapt itself to social needs", a sentiment translated by a contemporary commentator as aiming "to turn capitalism quite painlessly into a nicer sort of capitalism which will eventually become indistinguishable from socialism". State socialism was out, but "Red Feds" still held half the cabinet posts. Salaries reduced during the depression were restored; public works programmes were rekindled, with workers on full pay rather than "relief"; income was redistributed through graduated taxation; and in two rapid bursts of legislation Labour built the model Welfare State , the first in the world and the most comprehensive and integrated. State houses were built and let at low rental, pensions were increased, a national health service provided free medicines and health care, and family benefits supplemented the income of those with children.

Maori welfare was also on the agenda and there were moves to raise their living standards to the pakeha level, partly achieved by increasing pensions and unemployment payments. Much of the best land had by now been sold off but legal changes paved the way for Maori land to be farmed using pakeha agricultural methods, while maintaining communal ownership. In return, the newly formed Ratana Party , who held all four of the Maori Parliamentary seats, supported Labour, keeping them in office until 1949.

New Zealand's perception of its world position changed dramatically in 1941 when the Japanese bombed Pearl Harbor. The country was forced to recognize its position half a globe away from Britain and in the military sphere of America. As in World War I, large numbers of troops were called up, amounting to a third of the male labour force, but casualties were fewer and on the home front the economy continued to boom. Foreign wars aside, by the 1940s New Zealand was the world's most prosperous country, with a fabulous quality of life and the comfortable bed of the Welfare State to fall back on