Mission impossible

Italian-American economist, Mariana Mazzucato, who works and resides in London, has become a big name in what we might call ‘centre-left’ or even in mainstream economic and political circles.  She has a new book out, Mission Economy: a moonshot guide to changing capitalism.

Mazzucato was briefly an economic adviser to the UK Labour Party under Corbyn and McDonnell; she apparently “has the ear” of radical Congress representative Alexandria Ocasio-Cortez; she advised Democratic presidential hopeful, Senator Elizabeth Warren and also Scottish Nationalist leader Nicola Sturgeon.  She was even accorded the title of “the world’s scariest economist because her ideas were apparently really shaking up things among the great and good.  According to the London Times newspaper, “admired by Bill Gates, consulted by governments, Mariana Mazzucato is the expert others argue with at their peril”.

However, whereas she appeared to start out as adviser to the left of the political spectrum, more recently she has become available to all.  She quickly dropped her role as adviser to Corbyn.  According to one reviewer of her new book, “Mazzucato quickly recognised that there was no real role as a Corbyn adviser and resigned after two months.”  She said: “The actual people pulling the strings were Seumas Milne and others. I felt like well, if you want to do your own thing, do it. But don’t do it in my name,’ she told the Daily Mail. The Mail commented: “After this brief flirtation with the wrong sort of politician, she is keen to point out that she has worked closely with the Tories, advising Greg Clark, among others, on his industrial strategy when he occupied the constantly changing role of Business Secretary.”.

Mazzucato now advises governments and institutions internationally (Policy Papers : Mariana Mazzucato) and appears on various headline forums and seminars. The World Health Organization appointed her chief of its Council on the Economics of Health for All in 2020. Indeed, she recently praised the appointment of (unelected) former ECB chief and central banker, Mario Draghi, as Italy’s prime minister, presumably because he is going to save Italy’s economy.  Not so scary after all, then.

I have reviewed Mazzucato’s previous (much weightier) books, The Entrepreneurial State and the Value of Everything in other posts. In this latest book, she continues her main argument that she made in those other books that the public sector should lead the way in modern economies. “Instead of acting as investors of first resort, far too many governments have become passive lenders of last resort, addressing problems only after they arise. But as we should have learned during the post-2008 Great Recession, it costs far more to bail out national economies during a crisis than it does to maintain a proactive approach to public investment.”  Rightly, she points out that “the more we subscribe to the myth of private-sector superiority, the worse off we will be in the face of future crises.” The role of public funded innovation and publicly owned research and development has been deliberately downplayed by the mainstream. And yet it has been publicly funded research that has led to the speedy rollout of vaccines for the COVID pandemic and it’s been the publicly owned and run health services that have provided the best response in reducing deaths from the pandemic.

Mazzucato rightly wants to restore and proclaim the “narrative of government as a source of value creation.” (although as I argue in my review of her last book, government does not create value (as profit for capital), but use values (for society) – a distinction that Mazzucato does not recognise, but capitalists do). She notes, for example, that an Obama administration loan was crucial to the success of Tesla, and that a 1980s BBC computer literacy program led to the founding of a leading software development firm and the creation of a low-cost computer used in classrooms around the world.

But above all, in this book, she aims to promote the model of the Apollo space mission to the moon as the way forward to develop innovations and diffuse them across the economy; what she calls a ‘mission-oriented’ approach.

As she puts it: “The Apollo program demonstrated how a clearly defined outcome can drive organizational change at all levels, through multi-sector public-private collaboration, mission-oriented procurement contracts, and state-driven innovation and risk taking. Moreover, such ventures tend to create spillovers – software, camera phones, baby formula – that have far-reaching benefits.”  And what this model shows, she claims, is that “landing a man on the moon required both an extremely capable public sector and a purpose-driven partnership with the private sector.”

So what modern capitalism needs is a ‘purpose-driven’ partnership between the public and private sectors: “moonshots must be understood not as siloed big endeavours, perhaps the pet project of a minister, but rather as bold societal goals which can be achieved by collaboration on a large scale between public and private entities.”  Apparently, we need “a bold portfolio approach, a redesigning of tools like procurement and a proper economic theory to confront the directionality of growth head on” – whatever “confronting the directionality of growth” means.

Mazzucato recognises that so-called public-private partnerships in the past have often not turned out in the public interest. We must “not repeat the failures associated with today’s digital economy, which emerged in its current form after the state provided the technological foundation and then neglected to regulate what was built on it. As a result, a few dominant Big Tech firms have ushered in a new age of algorithmic value extraction, benefiting the few at the expense of the many.”  Instead, we must “capture a common vision across civil society, business, and public institutions.”

She argues that public–private partnerships have focused on de-risking investment through guarantees, subsidies and assistance. Instead, they should emphasize sharing both risks and rewards. So governments and capitalist companies are to share the risks and then share out the rewards.  That idea shows the difficulty inherent in the mission approach.  The mission for overcoming the COVID pandemic has already shown which sector has taken the risks and which will gain the rewards- as did the Apollo mission.

Mazzucato reckons that a fundamental reappraisal of the role of the public sector is required that goes beyond the traditional ‘market failure’ framework derived from neoclassical welfare economics to a ‘market co-creating’ and ‘market-shaping’ role. “It is not about fixing markets but creating markets”.

But should the mission of government be to ‘create markets’ or ‘shape markets’? Is it really possible that the public sector will be allowed to take the lead in investment for social purpose over investment for profit under capitalism?  Is it really possible that a ‘common vision’ can be ‘captured’ between big business in its drive for profits for its shareholders and governments which may have different objectives?  Can climate change and global warming be reversed while the fossil fuel industry remains untouched by governments?  Can rising inequality be reversed through some public-private ‘common vision’?  Can technological unemployment be avoided when the big tech companies apply robots and AI to replace human labour?  Can a mission ‘moonshot’ approach based on partnership with big business and ‘creating markets’ really succeed, given the social structure of modern capitalism?  When you pose these questions, I think the answer becomes clear.

Indeed, some of the mission-approach schemes that Mazzucato cites in her book have been just as unsuccessful as previous ‘public-private ‘partnerships.  She advised Germany’s Energiewende (energy transition to renewables), which has failed to deliver any better than others in reducing carbon emissions. She advised the Scottish Nationalists on launching its Scottish National Investment Bank.  Within two months, the SNP government cut its funding from £241m to £205m, a pathetic amount to start with.  When Labour under Corbyn first proposed such a SNIB, it was to be capitalised with £20bn!  And as for UK PM Johnson’s ‘Operation Moonshot’ for mass test and tracing, say no more.

And how are these missions to be democratically controlled to achieve ‘a common vision’?  Mazzucato says it will need “involving citizens in solving societal challenges and creating wide civic excitement about the power of collective innovation”.  Wading through this jargon, she seems to be saying that policy makers, researchers (like herself) and businesses will get together and listen to ‘citizens’ somehow and out of this will come a widely approved set of ‘missions’ for innovation.

Mazzucato sums it up: “Mission Economy offers a path to rejuvenate the state and thereby mend capitalism, rather than end it.”  In my view, that is a mission impossible.

12 thoughts on “Mission impossible

  1. Hi. This is Jonathan Neale. I don’t get a chance to say this much, but your blog is consistently useful, post after post, over the long haul. Really helps me think about economics. Keep up the good work. It’s a public service.

  2. I see something in common between Mazzucato’s proposals and the practice of state socialism: Both replace the capitalist manager class as the head of production with a state manager class.
    A state managerial class can perhaps alleviate or cure one or the other illness of capitalism, but it does nothing to change the external control of workers.
    An emancipated society has to get by without an established managerial class.
    An emancipated society has to appropriate the means of production itself and steer it in its own interest.

    Wal Buchenberger, Hannover

  3. Michael, it is kinda sad to see how conformist so-called “radical economists” like Mazzucato are nowadays. I have seen the same kind of ramble with SYRIZA back in the early 2010s (which I guess is the state of the anglosphere now). Lot’s of ambiguous, feel-good statements without much substance (because they deliberately avoid substance). Moreover, why do we let them have it when they talk about “Public-Private” collaboration in, say, the Apollo missions? The so-called “private” collaborators were Lockheed, Boeing and similar companies, which are privatized federal government contractors. Some of them, sure, are capitalist in the strict sense (General Electric for example).

  4. The most important point to make is not whether their policies are workable or not, it is the fact that we no longer live in a neo-liberal world defined as small government, deregulation and low taxes on the rich. Its not so much that the arguments used by economists such as Mariana Mazzucato have proven persuasive, it is because capitalism has reaped the whirlwind of neo-liberalism. Grenfell, the pandemic and other events have taught the capitalists a severe lesson about what happens when you cut corners and are driven by pure greed. If economists such as Mariana Mazzucato are being given a hearing it is because capitalism realizes it cannot go on in the old way.

  5. Hi Michael I like your blog and follow it on a regular basis. But i don’t understand your point. Is it not possible that governments collaborate with companies to support technology??? Are all prívate companies wrong???

    I like the book of Masukato because it explained how governments can invest heavily and improve people’s revenue in the long term. If a left-wing party took power, I think that it would have to forge relationships and and agreements with many private companies.

    So in this context that the working class is under unfavorable conditions and the big capital have designed the economic policy in most countries, what is your proposal??? Nationalize companies when the working class is desorganized and has been unable to influence the economic policy???

    1. Ulises, I would not be in favour of nationalising everything if we had a workers’ government in power. On the contrary, most companies would stay ‘private’, to begin with. But without owning and controlling (democratically) the major financial and corporate institutions (like the FAANGS, media, pharma, manufacturing etc), the government would be beholden still to the decisions and demands of the capitalist sector. That’s why Mazzucato’s public-private ‘partnerships’ would end up only happening if the ‘private’ sector was sure of avoiding risk and making the biggest gains, thus distorting the ‘missions’. That’s what has happened and would happen if the working class does not have a government that replaces capital rather than works for it.

      1. Thank you for replying Michael. Yes I completely agree with you on this issue. The problem that I see is that nobody is supporting this kind of policies including the nationalisation of important companies in major countries for example in the United States. So for me it’s difficult to have a position in this issue, because if a left-wing candidate proposed these policies in European countries or the United States, he would definetly lose the elections because of misleading propaganda supported by the media.

        So I don’t know how a candidate can deal with this contradiction. He has to propose credible measures but on the other hand he has to win the elections. It’s a very difficlut topic to understand.

      2. Yes. it’s difficult but the first task is to convince left activists of the right policies. If they are confused, then we cannot expect to convince the wider movement and resist the propaganda of the media.

  6. To be honest it was a very good text. But I guess more could have been said. Author of the book proposes public-private partnership for specific missions as a solution to problems of capitalism. In Turkey this is a widely adopted approach and it caused so much destruction. Government started to give all contracts to a small group of capitalists close to the ruling party. They paid unbelievable amounts of money for the simplest thing done. It is so that after the communist victory in elections, expenditure of the Tunceli municipality has fallen to 300 TLs from millions of TLs, they were able to close the 10 millions of TLs debt in just 2 years. But for other state institutions and enterprises, unfortunately this was not the case. The state filled every place with concrete in order to make the construction companies satisfied, public debt exploded to unseen highs .This happened so extremely that Turkey’s construction companies entered the world’s 10 most tender-winning firms. So her model is in application here, and the consequences have been a disaster both for the working class and nature. I should also mention her model paves the way for privatization as growing public debt gives a good excuse for the government to sell state enterprises. Now we have a tea company owned by the state here. They were doing very great until the company was transferred to Turkey Wealth Fund. New manager of the company was a former mayor from the Justice and Development Party. Company which was making 85 millions TL of profit in 2018, suddenly started to make huge losses in 2019. They looked at the balance sheet and saw that an immense amount of money was going to a private tea company owned by the former appointed manager for advertisement as a part of public-private partnership. Now as the company is “unproductive” (it has more than 50% market share) and making losses, they talk about privatizing it. If they do this, it will be a disaster for Turkish farmers as the private sector won’t be able to replace it.

    As a last thing to say, Turkey is preparing for a moonshot mission now 🙂 and yeah, same group of capitalists are in the business.

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