The world’s scariest economist?

Mariana Mazzucato is one of the world’s most influential economists, according to Quartz magazine.  She has won many awards for her work.  She is an adviser to the UK Labour Party on economic policy; she “has the ear” of radical Congress representative Alexandria Ocasio-Cortez, she advises Democratic presidential hopeful, Senator Elizabeth Warren and also Scottish Nationalist leader Nicola Sturgeon.  And she has written two key books: The Entrepreneurial State (2013) and the The Value of Everything (2018).

Mazzucato is considered radical, even ‘scary,’ by many mainstream economists and conservative politicians.  This is because she has highlighted the important role that the state and governments have played in delivering innovation in technology and in advancing productive investment.  The idea that the state can be a leading force in innovation and investment in useful activity is anathema to the right-wing neo-liberal ‘free market’ views of the majority of mainstream economists and politicians.

In earlier posts, I highlighted her important insights into how government investment and direction were essential to the development pf the new technologies of the internet, the worldwide web, microsoft, apple, the iphone etc.  The IPhone for example was developed using public funds and military procurement projects for microprocessors.  The innovators were publicly funded universities and research institutes, not clever entrepreneur capitalists.  Indeed, there is nothing new about government or state funding for the most important innovations in capitalist accumulation.  The technological advances made during the first and second world wars using government ‘defence’ funds were huge: jet aircraft, radar, telecomms, vehicle construction etc.

So it is no accident that the sharp fall in government investment to GDP in most advanced capitalist economies in the so-called neoloiberal period since the early 1980s has been accompanied by slowing productivity growth.

Capitalist sector investment has failed to deliver faster productivity per person since 1980s than in the period of higher government investment before.  Falling profitability in the 1970s in all the major economies led to cutting state sector investment in technology and ‘human capital’ in order to reduce taxes on capital and keep wages down.  Indeed, privatisation was the order of the day. That helped profitability in the capitalist sector a little (along with successive slumps), but at the expense of productivity growth.

As Mazzucato makes clear in her second book, The Value of Everything, government investment and production does create value ie things or services we need and is not just a (necessary) cost. But as I commented in a review of that book, in Marxist terms, Mazzucato conflates value with use-value.  Yes, government investment in schools, hospitals, transport, infrastructure and technology creates useful things, but under the capitalist mode of production for profit, it does not create value (surplus value or profit).  On the contrary, it can lower overall profitability for the capitalist sector. So there is an inherent contradiction in capitalism between more use-value and value.

Unfortunately, this is not recognised in Mazzucato’s work.  As a result, she sees her task as an economist to show how government can help to make capitalism work by getting governments to create more ‘value’.   For Mazzucato, governments can do more “than play a passive role in fixing market failures” (I doubt that it can even do that – MR) but instead “be allowed to embrace entrepreneurial spirit to steer the direction of innovation and economic growth”.  She wants governments to have missions “to get shit done”.  Now this sounds scary to the mainstream but they need not worry.  Mazzucato does not advocate replacing capitalism with socialism – as she says “I don’t think these words are helpful… there are all sorts of different ways to do capitalism.. that’s what I think needs completely rebooting rather than to start calling things socialism”. Here she echoes the approach of Elizabeth Warren.

Capitalism, socialism; what’s in a name?  Well, behind a name lies a categorisation of the structure of a mode of production and social relations.  Mazzucato wants capitalism to deliver more and better things and services for people, but without touching the private ownership of the means of production.  And talking about replacing capitalist companies with common ownership, planning and workers democracy would be a mistake. “If you start talking about socialism, it’s not going to make companies do anything different from what they’re doing now.”  But will suggesting that big business invest productively without taking into account “shareholder value” work either?

For Mazzucato, socialism is a nice idea but not practical.  “Regardless of what I would like to see in an ideal world, I think realistically we’ll have capitalism”. The problem I have with that conclusion is that being ‘realistic’ and accepting that capitalism will be here for the foreseeable future and so trying to make it work better is what is not realistic!  Under capitalism, can regular and recurring economic slumps be avoided that cost many millions their jobs, homes and livelihoods in every generation?  Can imperialist adventures and exploitations be avoided?  Can extreme inequality of wealth and income be reversed?  Can climate change and global warming be stopped?

Can any of these horrors realistically be removed by getting governments and multi-nationals to have ‘missions’ to ‘get shit done’ while still preserving the capitalist system of production and investment for private profit? That is what is unrealistic.  But it is safer to talk about saving capitalism from itself or making it work better with the help of government than replacing capitalism.  The latter would really be scary for the existing order.

 

 

16 Responses to “The world’s scariest economist?”

  1. stephenhinton Says:

    Reblogged this on Stephen Hinton Consulting and commented:
    Reposting sharp analysis by Economist Micheal Roberts of the role of government in capitalism and talk of a scarey economist who thinks government investment can make capitalism.work better.

  2. Gonzalo I. Gil Says:

    “On the contrary, it can lower overall profitability for the capitalist sector. So there is an inherent contradiction in capitalism between more use-value and value.” Is this avoided by outsourcing functions of the state: like NSA outsourcing, to defunding the NHS, to defunding (on its way to privatizing) the Royal Air Mail. I called the latter, and was informed that if I wanted a tracking number for something I ordered it would cost 10 pounds + some change (trying to make up for defunding for privatization I guess) I understand that defunding may not create overall value, but shift its distribution, and cost onto others. But straight privatization of State assets all the way to outsourcing does seem to open up space for the private sector to re-establish relations of production that are conducive to surplus-value extraction. If the gov´t were to do it, absorbing the mass of labor that could have otherwise be exploited, so they can produce use-values then I could see how profitability, or, in neoclassical terms the opportunity cost of forgone exploitation would increase. So, there is an in-between gov´t absorbing labor and producing use-values, and privatization/outsourcing state services. What do you think of Harvey´s position that infrastructure programs in the late 1880´s in France did in fact addressed a crisis of accumulation of surplus value for capital: would this be their version of outsourcing things the government could produce in a sense?

  3. E. Ahmet Tonak Says:

    Watch the video, especially between 50′ to 55′, if you want to see how one of the most glorified economists could take a profound idea (value creation) and make it instrumental for her academic ambitions, and when she is asked about her own theory of value she bullshits for 5 minutes.

    • michael roberts Says:

      Yes, I just watched it. Gobbledigook talk for five minutes without saying what value is and where it comes from. Mason kindly tries to get her to clarify but she fails. And she has written a book on value! Her only point is that government creates value (yes but what sort?, not value as profit). She ignores any contradiction and goes on to praise Keynes not Marx for her value approach.

  4. vk Says:

    Her equation use value = value has a clearly political intention (the same way Harvey’s realization of value = creation of value has).

    Mazzucato’s rationale is simple: in moments of crisis and/or stagnation of capitalism, the State can show in, make the painful productive investment, then privatize it and let the private sector reinitiate the accumulation process as normal. This is textbook Public-Private Partnership (PPP), and already exists in the neoliberal era.

    This indeed does happen — as she demonstrated in her first book. It also happens to statized infrastructure (or collective capitalist infrastructure) like roads, trains, public schools etc.

    However, her theory is wrong.

    Even when investment is on the State, rising organic composition of capital still applies. The only difference is that it rises for all the capitalist sectors at once, more or less at the same time, instead of the classic technological race so famous in Marx’s era.

    Even when the State is class conscious to the side of the capitalists (as the United States Government — USG — is) and cleverly donates its new technology to one specific corporation (e.g. the Google Maps and Google Streetview technologies was a CIA invention, which it secretely donated to Google in exchange for the establishment of a massive surveilance system/program), it is still self-evident this new technology is created over an elevated stage of development of the productive forces (because the scale is necessarily higher, since rising productivity is a must for profitability): rising composition of social capital is retarded by a pinch, but it still happens.

    State mass investment thus accelerates, not decelerates, the downfall of capitalism. That’s why, even though Mazzucato is an open apologist of capitalism (possibly, also to protect her clients’ images), she is considered “dangerous” by the mainstream economists. If the State was a key ingredient in stopping TPRTF, neoliberalism would not exist in the first place.

  5. ucanbpolitical Says:

    “Yes, government investment in schools, hospitals, transport, infrastructure and technology creates useful things, but under the capitalist mode of production for profit, it does not create value (surplus value or profit). On the contrary, it can lower overall profitability for the capitalist sector.” What you are saying cannot be right because it is one sided. If government investment in housing, education, healthcare, transportation, etc reduces the price of labour power by means of cheaper rents, free education, healthcare, subsidised transport etc it enables lower wages. In short, if the tax to pay for this is less than the increase in the price of these items, were they to be provided by the market, then profitability would be increased, because of the effect this has on wages.

    Today, with the market providing more of these articles that enter into the value of labour power, the government is being forced to subsidies wages with tax credits and rents with housing benefit. Total benefit/credits in this bracket amounted to £71 billion in 2017 versus corporate profits of £108 billion for the same year. I suspect Thatcher never quite grasped how “municipal socialism” increased profit margins by working on the cost side which included wages. The economists advising the Labour Party I suspect do.

    • vk Says:

      “What you are saying cannot be right because it is one sided. If government investment in housing, education, healthcare, transportation, etc reduces the price of labour power by means of cheaper rents, free education, healthcare, subsidised transport etc it enables lower wages. In short, if the tax to pay for this is less than the increase in the price of these items, were they to be provided by the market, then profitability would be increased, because of the effect this has on wages.”

      This is only true from the point of view of the individual capitalist: yes, the businessman would’ve to spend a lot more money if he needed to raise, educate and train his own workforce; instead, this cost is equally divided among all the capitalist and working classes through the State.

      However, in terms of social capital (total capital of one country), the development of the productive forces advances, which means (because we’re talking about a capitalist society) there’s a general rise in the organic composition of capital (OCC).

      Some sectors may see a rise in profit rate, others may see a fall — but, overall, the profit rate will tend to fall. That’s why neoliberalism rose in the 1980s to begin with: cut costs in social spending by the State, thus slowing the rise of the OCC.

      • Anti-Capital Says:

        But did “neo-liberalism” cut costs in the “fixed” sector of government spending? Did it attack the “c” sector, or did it attack the “v” section?

        The real wage in the US declined from its 1970 peak. Wealth was transferred up the social ladder by reducing personal tax rates for the very wealthy, and corporate tax rates across the board

        Defense spending was not reduced. Government budgets were not reduced, but the distribution patterns were.

        In general, neo-liberalism practiced in the US after 1979 was marked by a generally reduced rate of capital investment, increased liquidations through, asset-stripping,, and the sustained attack on wages and social welfare.

  6. kevalbharadia Says:

    Great piece, thanks Michael.

  7. Gonzalo I. Gil Says:

    He asks it the first time, and she sort of hints at it. First value is created collectively…+ work or collectives in working motion. And value is “wealth”. So, from collective minus the determination + wealth (commodities) (first lines of Capital Vol.1) Then Mason asks the same question again “What causes crisis (disequilibrium)?” how is it, or, not related to profits, or how much distance she puts her opinions from the profit squeeze or crisis of profitability position. She is, or, seems to be in line with a less bastardized version of Keynes. Reminds me of something Crotty said about his new book on Keynes. “What is driving the way we are producing and the relation between profits and wages: wages at the losing end of the relationship for the last 40 yrs: increasingly so etc. “Co-creating and shaping markets in a more Polyanskysts way” Those seem to be the center of gravity. Working within the confines of markets and the expected crisis, but be more pro-active so they are not so severe. “Value as co-created, and markets as co-shaped” Yeah the boundary contrains are clear. Yeah, later the discussion shifts, or, seems to shift onto value as “yet to be determined ´less material´ good” and there is a competition between the Gov´t, and capitalists over how things are produced whether, goes unmentioned, it will be under surplus-value extracting conditions, or, not.

  8. Antonio Says:

    ”Under capitalism, can regular and recurring economic slumps be avoided that cost many millions their jobs, homes and livelihoods in every generation? Can imperialist adventures and exploitations be avoided? Can extreme inequality of wealth and income be reversed? Can climate change and global warming be stopped?”
    Exact. It can be said differently but not better. That is the utopia of capitalism. Those are the irresolvable problems of capitalism and of the previous modes of production. That is Mazzucato’s utopia, his hidden lie – There is no Alternative – for which, in addition, he will receive succulent income, income without which he would not say them. That is, it is a necessary and profitable utopia and lie for elites and their intellectual-servants of the palace, and those are the unanswered questions of capitalism. And yes, socialism, as far as we know and in a scientific way, if it responds satisfactorily. I DID IT ALREADY in the 20th century. He did it from the 1st impulse (revolution) of 1917, with real socialism (Stalin and others with his non-working-class democracy apart) and with its indirect effects on the European Welfare States, and he will finish his work on his 2nd impulse, more sooner or later (2033-2050 in the first world?) and, probably, definitely, without setbacks.

  9. Cyryl R Says:

    It should be noted that Mazzucato does not only have the ear of leftists and Scottish Nationalists but rightists as well. The Polish translation of her book was published with a preface by then Deputy Prime Minister for Development, now Prime Minister, Mateusz Morawiecki.

  10. Michael Ballard Says:

    Bill Haywood. Bill Haywood, byname Big Bill Haywood, in full William Dudley Haywood, (born February 4, 1869, Salt Lake City, Utah, U.S.—died May 18, 1928, Moscow, Russia, U.S.S.R.). He was a leading member of the Industrial Workers of the World (IWW, or “Wobblies”) in the early decades of the 20th century. N.B. the first quote she uses in her power point demo, was supposedly made by Haywood in 1929. In that quote, probably made 10 or so years earlier, Bill was attempting to make the point that labour produced the wealth, by mining the natural wealth, gold. The capitalists owned the social product of their labour and sold it, commodified for sale with a view to profit in the market. Capitalists didn’t produce wealth. Capitalists don’t produce commodities. Capitalists don’t create surplus value, labour does. That was Bills point. Mazzucato uses him to make her points about value being produced by workers, capitalists and the State, an absurdity Big Bill would have sneered at.

  11. Eddie O'Sullivan Says:

    My understanding of the presentation of value in chapter one of volume one of Capital is:
    1 Societies where the the capitalist mode of production prevails is characterised by a huge accumulation of commodities (the word Marx used is waere: wares).
    2 Commodities have two characteristics; use value (utility or usefulness) and exchange value (ie a value that is perceived by more than one person).
    That’s it.
    Am I wrong?

  12. Gonzalo I. Gil Says:

    The crucial starting point is what is the endpoint of Marx´s explanation. “Exchange-value perceived by more than one person”: at the production site when wages are accepted, and the use-value of labor-power is given to workers in exchange for a wage (wages will always be less than the total amount of wealth they produce. They will not be able to claim, or, consume the totality of the wealth they produce with them. Here there is an inbuilt asymmetry in the system). When both people engage in it and “perceive it” what the worker is forced to perceive is an illusion. It is supposed to be a contract among free agents (but workers are not free to own their own means of production and be independent of capitalists), and among equals (this is the second fantasy: even though the capitalist cannot work the total amount of hrs worked by all laborers (they are not equal to workers in this sense) he will insist on receiving an amount of wealth that is out of proportion to the working hrs he/she may contribute more than all other workers (he/she are super meta producers etc)

    People = Commodities (lie is forced upon workers. To live their lives by it in a sense) with exchange value hence every product of their labor (every use-value they produce) will have an exchange-value (like their sons bear their last name). They will equal to the objects of their labor not superior to them, nor act as sovereign over them, or, as their rightful owners. The objects of their labor will leave them to marry the capitalist (new owner), and will encounter them as strangers in the market. The fact that people are forced to agree that they are equal to commodities will trigger the entire system of lived and effective ideological fantasies, and the system of production under exploitation into motion. So, it starts with theft: primitive accumulation by dispossessing workers from autonomy and independence (divorced from the means of production) the terror that emanates out of this (the level of existential anxiety experienced) followed by the caped hero of the capitalist arriving at the scene as some sort of savior insisting that he is got something to offer, something that will deliver them from the terror of not having access to the necessities of life. What he is got to offer is “a deal” among “equals” something that will express that “we are free individuals, living in harmony and justice”

    Exchange value is meant to express Value. Value equal the total amount of labor hrs that went into producing the object, or, the commodity for sale. They will be divided into surplus-value (unearned income for the capitalist) and wages (rationing. The capitalist gets to decide how close to the edge of material existence them, and their kids will be at any moment in time, and whenever they feel like pushing them closer they will do so without any impediment. This is a right they insist on having your existence if they are ever to continue to exploit. They will only live with themselves if they earn unearned income under conditions of exploitation, and will not accept this freedom to be done away with)

  13. Gonzalo I. Gil Says:

    You may want to watch:https://www.youtube.com/watch?v=Y651lJy6-JA. One of the many important points in it, you will notice, is that due to pressure to compete for realizing surplus value the capitalist will be forced to invest in Dept 1 or the sector of the economy that is in charge of developing labor-saving techonology. They will be able to accomplish this successfully, but it will lead to a crisis of accumulating surplus-value (it will also at the same time generate higher levels of unemployment to make the labor market a buyers market: lowering wages). They will be confronted with a choice. Having been able to develop the means of production to such an extent where there is no need to fight over the wealth of society in order to satisfy our needs they will choose, without any pressure that is born out of biological need, to go ahead and continue to exploit workers to accumulate surplus value. An empírical example of this is the crisis of the 1970s. Instead of choosing to change the system they decided to move, and outsource to China, and India and the rest of the global south in order to vampirize the life of those people in need. A replay of primitive accumulation and the caped savior described in my first comment. This is what I like to call “core of madness expressions”. This phenomenon was also detected in psychoanalysis in Jacques Lacan´s Kant Avec Sade when he describes Sade´s maxim

    “I have the right to enjoy your body” anyone can say to me, “and I will exercise this right without any limit to the capriciousness of the exactions I may wish to satiate with your body”….”To any reasonable being, both the maxim and the consent assumed to be given it are at best an instance of black humor”

    Yet the capitalist insists upon this over, and over again without having to face any threat to his survival, but rather precisely at the point at which the productivity of labor and mechanized means of production deliver them from need. This, clearly, disrupts some of the understanding, and means of measurement they have at their disposal, the may obtain about the situation at hand. We could say, and to some extent along with Lacan, that unlike Sade the capitalists insists upon “being fooled by the logic of their fantasy” and continue to insist to submit everyone to the maxim mentioned above, because no reason for its justification may be found.

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