Mariana Mazzucato is a Professor in the Economics of Innovation and Public Value at University College London. She is author of of three highly acclaimed books and one of the most influencial economists and thinkers today. This article is an extract of her intervention in the ESPON seminar "Stronger together: recovering through crises", that was organised 1-2 June 2022, in Lille in coooperation with the French Presidency of the European Council.
This war is not only a huge tragedy on human and geopolitical grounds but also on economic grounds in terms of how it risks really taking our eyes off the prize and completely redirecting the kind of growth we need.Growth is not the problem. It's the direction of growth where we have had an ultra-financialised kind of growth. A growth that has increased relative inequality and hence also increased polarisation in our communities and caused distrust: of our governments, of our businesses, but also -perhaps the worst a problem of all- of climate change.
The goal is not the vaccine, the goal is vaccinating everybody in the world, and we have globally failed to do that
I fear that the war has distracted us immensely from what we began to do in Europe and the world, which was to take the concept of a green deal seriously and that it has to be an inclusive deal, a just deal. Because I don't think we can have territorial cohesion without a just green transition, especially without capacity on the ground.If we just think just how incredibly unprepared we were to do pretty basic things during the Covid-19 pandemic, like delivering personal protection equipment to frontline workers - who we called essential, but didn't actually value their social infrastructure, their jobs, their working conditions.In many parts of the world - and definitely in Europe - we weren't prepared for the digital divide. With all the students across Europe and the world in lockdown, many stopped accessing their human right to education.
The war has distracted us immensely from what we began to do in Europe and the world, which was to take the concept of a green deal seriously
And of course, the test and trace system which failed miserably in many countries. And I should also say the vaccine has failed. Because the goal is not the vaccine, the goal is vaccinating everybody in the world, and we have globally failed to do that.Dr Tedros, the WHO Director-General, repeats a very stark word: we have vaccine apartheid today. We have very few countries hoarding a large portion of the vaccines, we have an intellectual property rights system which has prevented collective intelligence; we do not have collective intelligence in terms of sharing all the knowledge that we require to battle this pandemic.So we have messed up in all sorts of ways, and that's why we need pandemic preparedness to ensure that we are more prepared on every front for the next pandemic.It's not a coincidence we're so unprepared. We have forced ourselves by design to be reactive and not proactive. We have failed to construct a framing of the public sector as a co-creator, not just a fixer of markets. It needs to shape and co-create a very different type of future alongside the business sector, not just correct things along the way. And I do think that the NextGenEU program is not going to happen without public sector capacity that can actually implement it. Implementation and administration are the very bold and strategic policies that we have luckily started to have in Europe, which the NextGenEU, in many ways, represents.You will remember that after the financial crisis, we didn't have a bold, inspirational recovery of this sort. We had only a much lower recovery pot than the US. The US had an 800 billion stimulus program. But even worse - and this is my subjective opinion - we created conditionalities after the financial crisis, which actually reduced the public sector's capacity in some ways, because we just had these kinds of deterministic numbers that countries had to reduce their deficits to access loans and grants.This time around, the conditions are about climate and the digital divide and member states have to prove that they're serious about climate and the digital agenda to access these funds.But my experience is that, unfortunately, at the member state level, even though we're good at maybe talking about climate and digitalisation, there isn't the capacity on the ground. The new type of industrial strategy, the new type of procurement policy, the dynamic innovation systems that are required and literally the ability to think out of the box and take risks and experiment within our public institutions. This is critical to learn how to use these instruments in a more effective way that actually creates a multiplier effect across our economies.
We have failed to construct a framing of the public sector as a co-creator, not just a fixer of markets
The tools we need on the ground have to be about market-shaping, not market-fixing.A challenge-oriented and mission-oriented approach is more important than ever.What we often do during war is that we create money out of thin air. Unfortunately, we tend to create that money just when we have urgent moments, whether it's war or a pandemic, when millions of people are dying, where we have these recovery pots again coming out of thin air after being told there was no money.So it's more important than ever that when these funds are created, we design our systems to ensure that the funds have a catalytic effect across the whole economy. In this case, I believe this mission-oriented approach which focuses on the most significant problems we have.APOLLOIt's astounding that when humanity had such a hard thing to do, such as going to the moon and back in a short amount of time, due to the cold war, where the US wanted to beat the Russians, they didn't just create money, public-private partnerships and innovation systems and hope for the best.They designed into the system a very specific type of public sector capacity and especially a public-private partnership that at least attempted to be a mutualistic, symbiotic and purpose-oriented partnership.Kennedy's famous speech, "we're going to do it because it's hard, not because it's easy," used a different language from how we talk about policy in Europe and globally. We now talk about the need for one side, the public sector, to facilitate the other, to make things easier for them.The amazing thing about the moon landing was the recognition that it would be incredibly hard and that difficulty would be taken on together, welcoming the uncertainty of trial and error and experimentation.They realised they needed to change their organisational design, that the tools they had -like procurements- were not working. They had to change procurements to become outcomes-oriented instead of just looking at costs.And along the way, there were many errors, including a fire on Apollo 1, where one of the astronauts died. Gus Grissom, one of the austronauts that died on this accident, said, "how the hell are we going to get to the moon if we can't even talk between two or three buildings." On the back of that incident, NASA changed its organisational structure to be in constant communication between the departments with the project managers and their dynamic teams and a constant flow of knowledge between the departments.I think in Europe, in the European Commission, inside our member states, each department works in its own little space. If we want to be purpose-oriented and face the geopolitical and climate challenge, we need to learn from NASA. We can't just remain with our existing structures of public institutions. The dynamism, experimentation, and knowledge spillovers must be fostered within the organisational design.
One of the leaders in NASA warned if they continue to outsource their capacity, they will get captured by brochuremanship
It is also important that so many different innovations happened along the way, not because they were obsessed with the technology but as homework problems along the way to solve the bigger problem of getting to the moon and back. It required a massive amount of collaboration between many sectors and the government. It was not just aerospace; it was also nutrition materials, electronics, and more.What does it mean to have a very clear direction, problems that need to be solved along the way intersectoral approach and bottom-up experimentation? NASA realised that they needed to change their procurement to be more challenge-oriented. So they introduced a fixed price system with incentives for innovation and quality improvement because they realised that the cost-plus system wasn't working, and they built into the contracts no excess profit.
The dynamism, experimentation, and knowledge spillovers must be fostered within the organisational design
NASA also realised they were starting to outsource too much of their capacity to the private sector. They needed to work with the private sector, but if they didn't invest in their brains, if they outsourced it all then they wouldn't be able to partner in this dynamic way. One of the leaders in NASA warned if they continue to outsource their capacity, they will get captured by brochuremanship.Due to these economic spillovers across different sectors, huge amounts of value were created. And that is really the lesson. It's not about how much the whole program cost (which, in today's dollars, would be about 300 billion). What catalysed a cross-sectoral innovation was precisely that attention to organisational design, public-private partnership, and designing missions that can foster cross-sectoral collaboration and experimentation.Today these lessons are more important than ever and we're not going to be able to tackle the sustainable development goals unless we get serious as NASA was with the Apollo mission.Unfortunately, these goals are much harder than going to the moon. But they will not be solved without attention to organisational and tool design. I've worked closely with Europe around this approach to say that we have the SDGs; let's turn them into missions that are cross-sectoral, not siloed and think about what it means for innovation policy, industrial strategy, and procurement policy to foster that bottom-up experimentation. Whether it's clean oceans, climate change or healthy cities, this requires so many different sectors and the redesign of the tools; otherwise, they end up being just handouts subsidies, guarantees which justify inertia.I did a study looking with UNDP at the COVID pandemic and how some countries like India, Vietnam, and Rwanda in the developing world did better than some countries in the developed world. It is because they had invested in public capabilities on the back of previous crises, including, for example, how to govern data and digital platforms. But also how to harness citizens' initiatives and create trust between academia, business and government. These are all things that require in-house investment.An important thing during COVID 19 is the recognition that when all this money is created for recovery for the NextGenEU but also on the back of the COVID pandemic, it's not just about handing out money but also creating a new social contract a new type of way for the public and the private sector to relate to each otherBut it's striking how some countries did this and some didn't. In France, the COVID 19 recovery that went to Renault and to Air France was conditional on those companies reducing their carbon emissions.In the UK we didn't do it. We gave 600 million to EasyJet. No conditions attached. In some countries, there's been conditionality on stopping to evade tax or not using share buybacks with COVID 19 recovery funds. Which is obvious that it shouldn't just go out to shareholders but also be used collectively. Not just create value but distribute that value in such a way that represents that collective value creation.And this is perhaps one of the most valuable lessons: that we need to design the common good into the contracts themselves. Of course, I already mentioned the problems with intellectual property rights. Still, we won't be able to battle the problems we have today with our weak health systems unless we build that capacity globally to produce vaccines and deliver vaccines.For that reason, we also need very clear metrics around collective intelligence, which would help us design a less extractive intellectual property rights system. The problem is not patents but that they are often too wide, too strong to upstream.So what does it mean to walk the talk of stakeholder value, a word often used in the business community? It just came from Davos, where everyone talks about purpose and stakeholder value.If there's one thing this war has taught us in terms of the need for solidarity between countries, one thing this health pandemic has taught us in terms of the need to work together is that we need to design this notion of the common good, of purpose and stakeholder value into the way that we create value.Otherwise we will just continue to be using the old system, where at best, we fix markets and along the way we are not able to transform the kind of growth we have towards the objectives that Europe has now been talking about since the Lisbon agenda: inclusive, smart, sustainable growth.That kind of directed growth requires a lot of attention to capacity on the ground, public-private partnerships, organisational culture risk-taking but also sharing the rewards.