British Prime Minister Theresa May addresses a news conference following talks with German Chancellor Angela Merkel at the Chancellery in Berlin, Germany July 20, 2016.HANNIBAL HANSCHKE/Reuters
A while ago I asked a senior executive at a big Canadian pension fund why the fund was investing so much money in Britain. The answer is today laden with irony: Britain is a politically stable society with a strong, growing economy that is part of the European Union.
It's probably too late for the fund manager to shift into reverse gear.
And the bigger problem is that we just don't know which way Britain is heading, other than away from Brussels. Indeed, so much has changed that there is a risk that important signals are being ignored while we stare gobsmacked at the earthquake.
For example, a Tory government is back in Downing Street with a sharp bias to the right in its cabinet ministers. You might think that this new Brexit administration would be libertarian in inclination, in favour of lower taxes, lower spending and a deregulated economy.
But listen to Theresa May, the new Prime Minister: She has pitched her tent slap bang in left field. Her leadership campaign manifesto could have been written by the Labour Party, with impassioned promises to help "ordinary, working-class families," the ones "who made real sacrifices after the financial crash" in putting up with lower wages and job insecurity.
More astonishingly, this provincial, small-town Tory lady talks about going after "unscrupulous bosses." She wants employee representatives on the boards of public companies and she wants to curb boardroom pay with mandatory binding shareholder votes on bosses' remuneration. If that wasn't enough to scare the plutocrats, she wants to bring back state economic planning.
It's not quite Soviet, but she wants a "proper industrial strategy to get the whole economy firing." This will direct infrastructure spending, housebuilding, research and development and energy policy. Canadians may not find this astonishing – Justin Trudeau has been using similar language about a plan for manufacturing – but this kind of talk has been anathema in Britain for decades. Since the Thatcher revolution in the 1980s, no British government, including Labour, has dared to suggest that government has an active role in the economy, other than in setting taxes and public spending.
This is, potentially, a big change in direction, and Ms. May even fired a broadside at foreign investors – not just those who don't pay their taxes but corporate predators who might have their eyes on British assets. "Transient shareholders – who are mostly companies investing other people's money – are not the only people with an interest when firms are sold or close. Workers have a stake, local communities have a stake," she said, promising that her industrial strategy would mean an active policy of defending economic sectors that were important to Britain.
In France, such talk would be considered normal, but political meddling in corporate takeovers is a revolutionary idea in Britain. And it is interesting that there was no attempt by Ms. May's new government to block SoftBank Group Corp.'s proposed acquisition of ARM Holdings PLC. No doubt the extensive undertakings to maintain ARM's Cambridge headquarters and massively increase employment and investment were considered adequate.
Still, this brave new Britain is now full of political contradictions. The Prime Minister's pitch to the left and social justice is at odds with the romantic libertarians in her cabinet, such as Boris Johnson and David Davis, who made Brexit happen and who dream of a free-trading, low-tax Britain, a Singapore offshore of Europe that's open for business to anyone and everyone.
But Ms. May knows that the millions of ordinary struggling people who voted for Brexit don't want that high-risk Britain of economic freedom. They want social justice; they want the bosses to pay; and they want Ms. May to make it so.
The Canadian pension fund may be in for an exciting ride.