Theresa May’s one substantive campaign speech before taking office as PM was striking in highlighting the need to address the nation’s economic dysfunctions: inequality, low productivity, excessive executive pay and the lack of an industrial policy in Britain. These are not problems caused by the EU or immigration, but by longstanding structural issues with the economy left untackled by previous governments.

In his final statements as chancellor, George Osborne made the extraordinary claim that the economy is in a strong condition to face the uncertainties of Brexit. The opposite is the case. Fiscal austerity – even with interest rates at rock bottom – has drained demand. Business investment has not returned to its pre-financial crisis trajectory – reflected in low productivity and a record trade deficit. And companies are obsessed with short-term returns, not long-term investment and innovation. While executive pay has soared, in the eight years since the crisis real wages have suffered their sharpest decline since records began.

May’s speech acknowledged the need for a radical change of direction: requiring more effort to raise productivity, expose pay inequalities and reduce insecurity. She talked about corporate governance, putting workers and consumers on boards, increasing competition in utility markets, reforming takeover rules, introducing a proper industrial strategy, and ensuring everyone shares in the nation’s wealth.

Reading her speech, it was possible to wonder if Ed Miliband had made a shock comeback as leader of the Conservative party. May borrowed directly from Barack Obama when she acknowledged that the creation of wealth is a collective endeavour: “No individual and no business, however rich, has succeeded all on their own.” She called for a different kind of Conservatism, one that does not “hate the state” but “value[s] the role that only the state can play”.

‘To address the problems she identified will require a complete departure from Osborne’s failed plans. But more than that, it will require a departure the orthodox economics that shaped them.’ Photograph: Jonathan Brady/PA

Can May succeed in building an economy of broadly shared prosperity? Only if she is willing to govern with the revolutionary zeal seen in that speech. To address the problems she identified will require a complete departure from Osborne’s failed plans. But more than that, it will require a departure the orthodox economics that shaped them.

Policymaking over the past half-century has relied on a narrow school of economic thought, dominated by a simplistic idea of “markets” and “market failures”, of “competition” and “shareholder value”. May’s new agenda will need to draw on a much richer palette.

As argued in our coedited book, Rethinking Capitalism – contributors include the Nobel prizewinner Joseph Stiglitz and the Bank of England’s Andy Haldane – markets are not external forces that bind firms to inevitable choices. They are created by the decisions made inside private and public institutions, as well as pressures from civil society. So not only can policymakers fix “market failures”, but they can also actively reshape and create markets for better ends.

Reform of finance is vital, to boost investment and to rebalance the economy towards manufacturing and exports and disadvantaged regions of the UK. But this requires a shift of focus, from the quantity of finance to its quality. Long-term, strategic and “patient” capital is needed. With the government now able to borrow at close to zero interest, a state investment bank should be set up to create demand and support innovation. To drive up employment and wages, austerity has to be reversed, with public spending driving demand.

This is not only about infrastructure but providing a new direction and vision to transform production, distribution and consumption in more sustainable ways. A market-shaping framework understands that wealth is not created by the private sector alone, but by the private and public sectors, and the rewards need to be shared as much as the risks. Inequality is as bad for prosperity as it is corrosive to society. And further, if growth is not low-carbon, it cannot be sustained at all.

The inclusion of “industrial strategy” in the name of the reformed business department is promising if it signals a true integration of policy. It could even become the basis for a green transformation of the economy rather than, as some fear, a downgrading of climate change. But it will require a radical strengthening of the civil service, reversing the cuts and ideological outsourcing of recent decades.

We will find out if May means what she says in the weeks ahead. So far it does not look reassuring, with the government’s reaction to the ARM sell-off suggesting no substantive change in direction. ARM is a reminder of the strategic long-term public investment in technology the UK used to make, not a reason to celebrate that the country remains “open for business”.

Globalisation and technological change create huge challenges for modern economies, but they are not uncontrollable forces of nature. The economy we have is the economy we choose to build. It is time to make different choices, and show that capitalism can be remade.