Britain's recently appointed Conservative Prime Minister Theresa May was propelled to power on the back of the surprise Brexit vote. Her political project going forward, therefore, is to address those populist concerns that put her in office, without gutting the soul of her Conservative Party. This week, in a speech to the Confederation of British Industry (Britain's equivalent to the Chamber of Commerce), May demonstrated that she understands the populist mood that is shaking the West, and has a (still fuzzy) plan to soothe it.
In her speech, May said she wants to "lead the world in understanding the extent to which some people feel left behind by the forces of capitalism." She declared herself a firm believer in the greatness of capitalism, free markets, and businesses, and outlined some vague measures, promises, and announcements that are an odd and exciting mix of the free market and the dirigisme. She reiterated that she wants Britain to have the lowest corporate tax rate in the G20, for example. And at the same time, she wants measures to curb executive pay, encourage worker and consumer representations at the highest levels of companies, spur R&D, and encourage what she calls "patient capital." She also announced that her government would pursue an "industrial strategy."
In many ways, the not-so-free-market points of her agenda are a throwback to the post-war European model of paternalist capitalism, with a government-driven industrial strategy and worker representation on company boards.
In other ways, her plan is very forward-looking, and could ensure that "everyone shares in the benefits of economic growth," as May so desires.
For example, May's plan really could spur innovation. Forward thinkers have long argued that investor short-termism holds back innovation and growth, and May has commissioned a team to examine "how we can break down the obstacles to getting long-term investment into innovative firms."
May's plan for better worker and consumer representation is a great idea, too. Unions have long been a burden on companies and innovation, but at the same time, worker voice is an essential feature of a well-run company. One way of addressing the dearth of low-skill jobs plaguing the West is to encourage companies to invest in their workers over the long haul. Amazon provides a great example of this done well. Following negative stories about its low-paid, low-skill warehouse workers, the company now invests in training those employees. Another example is Starbucks, which helps some baristas get their degrees, which in turn helps the company attract and retain better workers.
Finally, we come to May's plans for more "industrial strategy." This is the idea that the government should be involved in deciding which sectors to invest in, or fund ambitious industrial projects. Such a strategy has often been an excuse for crony capitalism, but not always. Some countries have benefited tremendously from it. South Korea, for example, has had the highest long-term post-war growth of any country in the world, and government-led industrial strategy played a role, as did an embrace of free markets. In France, it has been a mixed bag: Betting on nuclear power has been an enormous economic, technological, and even geopolitical and environmental success. The country's transport infrastructure is among the best in the world, but telecoms are subpar and had to be privatized to become effective. Rapidly developing and highly disruptive initiatives like the Hyperloop have shown that we probably need to start thinking hard about 21st century infrastructure, and decide how governments will play a role in helping us manage that infrastructure.
Theresa May may not have all the answers, but she's asking the right questions.