A Moonshot Guide to Changing Capitalism

if we went to the moon and back 50 years ago directed by the state and fostering an immense amount of partnership with business what would it look like if we did that with the sustainable development goals these social problems that are much more wicked and difficult in some ways than going to the moon but that require that equal amount of urgency of seriousness of collaboration of catalyzing you know bottom-up innovation this is rob johnson president institute for new economic thinking i'm here today with my friend mariano matsukado she is the co-founder and director of an institute at the university college london on the questions of innovation and public purpose she's a frequent author her books include the entrepreneurial state the value of everything and her newest book that we'll talk about in some detail today the mission economy mariana thanks for joining me hi rob thanks so much it's wonderful to see you you too so here we are in this turbulent prolonged time of pandemic climate change on the horizon social sustainability just whether it's in north south or what i call the first and third worlds inside of each advanced country there are a whole lot of things that need to be addressed and i believe which you might say the pandemic is awful but there might be a silver lining and that it was the catalyst it was an awakening it was an unmasking what are you seeing that you like what are you seeing as opportunity what are you seeing you don't like and what do you wish you were seeing so you could like it more wow great set of questions i wish every conversation would begin like this so i mean i guess what i like is that there is a real realization that this time it's different you know if you think back to what happened with the financial crisis we just flooded the system with liquidity and you know hoped for the best this time what's really interesting globally is we have recovery packages that are not only very large but they are increasingly structured so in europe where i'm sitting i'm sitting well i'm in the uk brexit but yes we're still in europe the eu recovery fund is actually conditional on governments that receive the funding to invest and to innovate around two big challenges that we have globally which is climate change and digitalization we didn't have that before that's new that's like a directed marshall plan now whether it actually leads to what we hope it leads to we can talk about later but at least you know it's there and we didn't have that you know with the financial crisis most of the money that in the date of the system actually ended up back in the financial sector i think another thing that i find inspiring is that there is a realization that we're all only as healthy as our neighbor is on our street in our city in our nation and globally had this crisis begun for example in an african country with a much weaker health system than the chinese health system we would all globally be worse off so you know this this um realization that actually what we really need are stronger global health systems could potentially this is the opportunity i'm not saying it's a reality wake us up to the fact that we need to revitalize and reimagine really a global welfare state um and i guess what i'm not seeing is both of those things necessarily leading to the kind of actions and the speed that we really require them to in order to make those a reality you know we already see now with the vaccine for example what dr tedros the head of the world health organization calls a vaccine apartheid so you know hoarding of vaccines and rich countries um we also don't necessarily have solidarity in terms of how we govern vaccine production in terms of really fostering again what the who calls collective intelligence you know through a patent pool to make sure that all the knowledge really is shared globally so you know the same things that are an amazing opportunity that we have the seed for uh are also the challenge if we don't get the concrete action then actually you know the fact that we're talking about solidarity and then don't govern it in a concrete way becomes actually part of the problem when you talk about the who i always think of pete townsend and the song for today is we won't get fooled again so uh i think uh these these questions of i mean muhammad ellarian just wrote a project syndicate piece where he said none of us are safe until everyone's safe and i and i just see this rising consciousness of the collective responsibility i used to worry in the united states we had this horrible episode of shooting in sandy hook schools and i always said freedom isn't the freedom to carry a gun it's also the freedom from being shot by others why aren't these freedom to and freedom from imbalance and the health crisis brings that on a much larger scale and international scale back into focus by the way another sorry just one other thing that's inspired me actually because it's good to to also say more good things given that we're living through so many tragedies right now something that's inspired me has been seeing how some countries that are still really developing have actually done incredibly well in terms of how they've governed the crisis and that has been related to investments that they've been making historically within their own public administrations and i'm thinking of places like vietnam or the region of kerala in india um and you know have actually done better than the uk in many respects where we actually outsource so much of our public competence to consulting company something that a recently a tory lord called lord agnew called the infantilization of governments quite interesting but anyway you know seeing this very different and heterogeneous experience globally i think always reminds us that decisions matter strategy matters policy matters both in government but also in the business sector i've always said this in business as have many of your grantees i'm sure you know the fact that you have different you know business practices but that these also then determine different levels of growth different types of working conditions different types of innovative performance in the business literature is about strategy mattering but we sometimes forget about that also within the policy space and we end up thinking that you know politics or yet policies are all sort of top down and we'll see if they work or not but the fact that really concrete ability to govern such an immense crisis has had differing you know performance achievements if you want depending on what actually happened how we govern relationships between the state academia business civil society organizations there's so many lessons there that we can learn from yeah my former uh partner in the documentary film business alex gibney has made a film called totally under control which is a mockery of the relationship between the trump administration's response and south korea's response to the kovic crisis and he released that 10 days before the presidential election to uh right actually tried to nudge things along at the time we were all headed to the voting booths but these uh how did i say these differences in governance there's a book right now a very controversial america called capitalism on a ventilator which is comparing the us and the asian responses to kovid and saying what is it that makes you think the world's going to want to emulate the united states of america after our performance since last march obviously we have a new administration in power now it's a chance to change our mode of behavior but uh that wasn't that was not a particularly uh strong demonstration of the greatness of the united states of america yeah and you know things change yeah i mean things change right so the us if if you think about how it reacted in terms of transforming and transitioning its productive structure to produce kind of wartime needs in world war ii you know the defense production procurement act for example where they were able to do that also required a lot of interaction for example with trade unions without the trade unions that quick transformation wouldn't have been possible and i think looking at the varieties of capitalism both globally but also within any one country how its way of doing capitalism changes over time it's quite again interesting and seeing how that then determines the transformative capacity the structural capacity on the ground to produce things you know to produce personal protection equipment to produce a functioning test and trace system but again you know during world war ii it wouldn't have happened without a very specific form of both you know a government but also it's interrelationship with civil society organizations like trade unions and that brings us i guess to your book mission economy which i've had the good fortune of looking at advanced copy it at least visually the united states it's an advanced copy and uh and i look forward to everybody being able to uh find it read it and so forth but let's talk about first what inspired you to write that book now you've written the value of everything the entrepreneurial state you're very involved at high levels of policy all over the world what did you want to say in this particular book i think um i mean the reason i wrote it is on the back of the entrepreneurial state which i wrote um back actually in 2011 as a pamphlet which then got circulated to policymakers worldwide it then became a full-fledged book with extra chapters in 2013. that really appealed to a lot of policymakers you know it really was about um similarly actually before bill january's book about very much those issues about you know that innovation-led growth in places like silicon valley but also if you look at what's happening in china today if you look at what's happening in denmark today which by the way is the number one provider of high-tech green digital services to china's green economy in china spending 1.7 trillion on greening its economy you couldn't explain that success without looking not only at the role of the state on kind of that early stage that you were talking about but also on the demand side also really helping those you know companies that want to innovate to actually scale up so not just startups but scaling up and that kind of thirst to know more about that story changing the narrative of the state going beyond just market fixing to what i call co-creating and co-shaping markets led me actually to work with many different policy makers globally and more recently the way i was working especially in the european commission and with different countries industrial strategies was this idea that we could do better than just make a list of kind of great sectors to to finance it really needed to learn the lessons from the internet where the internet was a solution to a problem right so it wasn't just that darpa financed it darpa was trying to solve a problem which was getting the satellites to communicate so this idea of putting you know on the front end of policymakers minds what are the problems you're trying to solve and how can you then use a problem-based a purpose-driven what i call a mission-driven approach to get as many different sectors in your economy to innovate to collaborate to invest and literally put that into the design of procurement grants loans and industrial strategy to crowd in kind of that bottom-up experimentation so my experience in actually working with the european commission or with you know ministers of uh state like greg clark who's the minister of business here in the uk but also the south african government and brazil and so on just led me to believe kind of two things one this is much harder to do than to just talk about and i wanted to write a book about the nitty-gritty that i was learning along the way but also just what an inspiring kind of you know a set of points it is when you change how you think about policy instead of thinking of it as a top-down process right you go lecture everyone that they should be you know fostering a carbon-neutral city what does it actually mean to bring different actors to the table to actually in some ways co-design the process you know you need that kind of top-down idea of what it is we want to do but the how to really catalyze as much innovation investment and collaboration you really need what is often talked about as stakeholder capitalism but i think it's really just talked about in terms of corporate governance right so bringing this notion of stakeholder value to the design process of how business government civil society organizations coming back to our point before work together at the local level to produce change that requires rethinking not only the role of the state but literally what policy is for and how to design it so i wanted to write a book which kind of gave that sense of hope that we can do so much better and also some of the how and the reason i kind of focused on the moon landing was i don't think people realize just how much collaboration uh you know went on it wasn't just nasa there was lots of investment from companies like general motors honeywell motorola but also many others and the collaboration really was purposeful you know nasa actually cared about things like how to design the procurement to also get a good deal for nasa they even had a no excess profits clause which is quite interesting and really believed that in order to even know how to write the terms of reference of a partnership with business they required themselves dynamic capabilities what through my institute we call the dynamic capabilities of the public sector and so because there's so much kind of government bashing out there saying oh yeah mariana you talk about the entrepreneurial state but actually look at you know what kind of states we have this that the other that's a self-fulfilling prophecy right you know the more you think at best the state is therefore at best to fix market failures um you know the less you actually have an incentive to invest within state institutions and all those things they need to do much more than that so to be collective kind of value creators coming into the language of my other book on value any business that wants to create value will think about really intricate questions around you know organizational behavior decisions sciences strategic management all these great things that people study in masters in business administration and yet public choice theory and new public management which has really trickled down from chicago type economics has basically convinced so many civil servants that not only the best they can do is to fix markets but even worse you know government failure is even worse than market failures so occupy as little space as possible and then get out of the way um and that that has reduced our our competence the capabilities within state institutions and i guess the real reason i wrote the book was to revitalize our belief that you know if we went to the moon and back 50 years ago directed by the state and fostering an immense amount of partnership with business what would it look like if we did that with the sustainable development goals these social problems that are much more wicked and difficult in some ways than going to the moon but that require that equal amount of urgency of seriousness of collaboration of catalyzing you know bottom-up innovation but also really getting good deals you know to make sure we don't get what we ended up with in silicon valley which was a huge amount of state investment socialization of risk and then privatization of rewards and we've seen that a bit in the pharmaceutical world as well where the taxpayer is putting up a lot of the basic research has published research on that in recent months and and the uh and then it's how they say the product is privatized in this and the state doesn't own an equity holding in the successful pharmaceutical products that are created but also govern the patent system right i mean even with the vaccine right now unless we have you know the patent pool that you know dr tedros has been arguing for we're going to have again a system where you have huge amounts of public and private but a lot of public money going in and then the patent system is misgoverned what william balamal used to call unproductive entrepreneurship you know this kind of people seeking through the patents i brought a quote from reading of your work that i wanted to uh how did i say put on the table you said these myths have been accepted as truth by so many but none of them are inevitable by rejecting these myths we can rethink what the role of government should be in society the problem is not big government small government the problem is the type of government and what it does and how it should set off a catalytic reaction in society what i guess i'm saying is we got to get over those stale myths yeah and now there's a void and you're trying to fill the void with a constructive vision of what to do and boy that's a lot better than despair in my book so what what what kind of myths do you think get in the way of the things that a government in collaboration with deciding what values are that are worth purpose what gets in the way what are the myths that are the resistance that you experience as you're working so there's a lot of them i mean the first of course is that as soon as you start talking about the need for smarter government more capable government and the investments that are required you get seen as someone who's just thinks the state does everything and you need a bigger state and you know and it's amazing how many intelligent people even some of your friends rob uh will go down that route and don't kind of get the point that actually this is all about partnership it's all about collaboration but if you don't have a bold ambitious government that really gets what its role is then business also loses out right so it's not about saying government is more important it's that it's impossible to also get the kind of public-private partnerships that we need if we've reduced our understanding and our thinking about the state to again be at best an enabler of business even you know people who really believe in stakeholder value i was on on a davos session at the opening of the world economic forum a couple weeks ago and one of the you know biggest proponents of stakeholder value actually said uh you know uh business is the prime wealth creator in society and what we need is to make sure that wealth is you know shared and that was the concept of stakeholder value that was being propagated i said no hold on a second sake of stakeholder value must begin with the real conviction if we believe in stakeholder value that value is collectively created it's not just created in business of course business creates value but so does government and so do increasingly by the way nonprofit organizations in some sectors like in health um and so what do we know about their ability to do so what are the structures that are required what's the culture what's the you know um a type of um thinking in terms of kind of portfolio thinking that we were just talking about before in terms of the kind of investments that are required if you're if you don't admit that you're also a value creator you don't even ask those questions so i think that's the biggest myth that you know well two i guess i just unpacked two myths one is that as soon as you talk about the need for a smarter strategic and my words mission-oriented state you're all just about the state as opposed to you know what is actually at the core of the point which is that we need that in order actually to work together with other actors better and two another big myth is again that about value which is you know okay fine we can have a state you know a bold state doing innovation but it's really just enabling facilitating de-risking this word i can't stand de-risking the risk-taking within business so this myth about who's actually a risk-taker uh is another issue because if you if you admit that you're a risk-taker of course it's also going to be accepted that you'll make mistakes and so a big problem in bottleneck the third one here is that you know as soon as a civil servant or public servant makes a mistake they're in the front page of the daily mail right so there's plenty of people that as soon as you do talk about the state as as being you know possibly much bolder will start you know listing all sorts of mistakes that states have made whether it's concord you know that isn't flying or in the uk you know british leyland that received backing or solyndra in the u.s and so that's again a myth that comes from another myth which is if you don't admit that your value creating and you know you don't actually then think about things like trial and error right if you're really there just to enable business then you shouldn't be making any kind of bold investments um and and because actually taking risks not just de-risking will require making some mistakes if we don't have a framing that understands you know a risk-taking state that is doing so in order to foster for example a green transition then just because it makes a mistake like solyndra bang front page right and so one of the things with this i already started doing in you know the entrepreneurial state which is to say hold on what if you actually looked at all the different investments literally through a portfolio approach you'd realize that when solyndra happened you know tesla also happened the two companies actually received almost the same amount of money during a period where obama was actually trying to foster a directed recovery after the financial crisis that then sort of failed in terms of all the political infighting with the tea party but a portfolio approach would allow you to say yeah of course we're going to make some mistakes just speak to bill janeway or any venture capitalist you know for every success you will have many failures but how do you make sure you're not just bailing out the failures but also getting some of the upside and even though i've spoken about that in you know in the entrepreneurial state what i did in in this book based on the kind of concrete work i've been doing with governments worldwide is to say okay look it's not enough to say we need more purpose-driven policy we need to look at the tools right you know what does it actually mean to have a portfolio approach so you're not picking winners again another myth that it's all about picking winners you're not picking winners but picking the willing right that what you're doing is you're fostering a transition you're making choices of course you're picking directions but then you don't just hand out money to you know types of companies like small medium enterprises or types of sectors a list of your top sectors or types of technologies like quantum computing but you really focus on problems and make sure that all your different sectors really are collaborating and investing towards that goal and look at the policy redesign that's required to foster that intersectoral and bottom-up experimentation but also you know lastly i just want to say something about the narrative you know given what i just mentioned that as soon as you make a mistake here in the front page of the paper uh what does it mean to create a different narrative and literally story of of how wealth is created and the capabilities that are required and all different types of you know organizations but also this idea that you're not really there to level the playing field you know a mythological way to talk about what government's for but tilting the playing field uh you know again taking risks and admitting that the economy has not just a rate but a direction and that we need a lot of debate and you know we need a national debate about which direction do we actually want to go um and and talking about directionality of growth not just the rate of growth already starts to pose so many different questions for policy makers and and requires a different language again not leveling but tilting you know not de-risking but taking risks not fixing markets but co-shaping and co-creating markets and all these different words actually amount to a different story because it is a different story it's a different feeling of what it is that we're actually talking about in terms of policy and again collaborations between public and private it's not simple and i and you acknowledge that very humbly in your book you acknowledge it over and over and over again but we can't not pursue this agenda yeah i have a chapter where i just talk about those myths and i also try to de-mythologize some of the words that actually that that we use so the five myths that i talk about are value markets efficiency capabilities and direction but just the markets one for a minute you know even some heterodox economists sometimes get sloppy including myself with how we use the word the market the market is not the same thing as business right so when we say you know the market versus say the state it's really what we're talking about is business in the state but markets are the outcomes markets are the outcomes of how we govern business how we govern government there's different ways to govern we know this business stakeholder shareholder value there's different ways to govern public organizations right whether they're just market fixing or actually explicitly about co-creating and co-shaping markets and that's where that bbc example comes in that i just wrote a report on the bbc as an organization has actually explicitly within tried to achieve public value this really interesting word that they've used to also monitor their own uh uh um remit really and and what they do and the success of what they do but markets are an outcome of these governance decisions and into relationships right so then how government and business work together how they relate what is the deal literally within the contracts they always come back to the issue of contracts everything in the end is almost a contract patents or contracts procurement or contracts and procurement is a huge portion of government budgets we can design these in different ways and they do matter coming back to our first point about also with kova just seeing you know the real differences and how governments have performed depending on kind of that capacity um and you know the miss around efficiency have really led to a lot of this outsourcing of the government brain to the private sector there's no problem with some outsourcing but it depends what you're outsourcing i would argue that the whole nsa scandal um and you know the snowden affair in some ways is an outcome of the us government having outsourced its i.t kind of system and management and understanding of information technology and digital uh capabilities so you know this is precisely what uh this lord um in the uk government lord agnew called the infantilization of government which is when you're overly consultifying your your your structures and this is what nasa in the story that i tell about the moon landing was actually very aware of there was this wonderful quote by ernest brackett the head of procurement in nasa who said we have to be aware of brochuremanship you know today this would be the powerpoints of you know the deloitte the pwc's at the time it must have been you know private sector companies coming in and said yes pay us this because we're so good at this that and the other and they did collaborate a lot with business but they did it from uh from from you know a perspective also of their own expertise and understanding of the world around them and as soon as you start stop investing within your own dynamic capability within the public sector you can't be you know you won't know how to write those terms of reference and you won't be a good partner and you will get captured and that's the irony of it all those same people who worry so much about government capture and corruption it's actually that mentality in some ways that leads to capture because by not believing in what government can do if we structured it properly then you end up with pretty lame and inefficient and easily captured government institutions you look at singapore they pay and train their civil servants so they don't have to be part of the revolving door when their kids go to college they pay them they give them pensions they give them budgets they give them training so they can be excellent and they can do it for a career there's a lot of work to do so that the experience of the public sector that we have in the aftermath of the kind of wreckage that began with the reagan years can validate your vision we we gotta we gotta bring the things that make people higher quality and more confident and more courageous to the table so that the population can then look at it and say wow those guys are good they did good they weren't corrupt and they didn't spin off and how they say collect a salary from my tax money for a decade and then spin out to the people they were actually working for yeah you're absolutely right and it's both pay and working conditions and um but als it's also the remit right so that's right just just think of you know someone like steve chu who was a nobel prize winner in physics in the us a chinese american he accepted to go be a civil servant to you know run the department of energy under obama not because obama said oh come in and help design at best a carbon tax so we can you know de-risk business or you know fix a market failure what obama invited him to do is direct an agency which you know obama really wanted to help again direct the 800 billion stimulus program because he wanted this green recovery after the financial crisis and you know i'm sure well i can't say i'm sure no one can be sure but i i really don't think steve chu would have accepted that job had you know it not have you know been as ambitious the task which was come in you know direct this agency set up an arpa-e which is what he then did um he brought in um arun majumdar to uh direct arpa-e itself he then ended up being the head of energy for google arum mushroom dar so the kind of you know that that uh uh revolving door was more based on actually capability you know you were coming into a department of energy which was seen seeing itself actually as an investor of first resort not just the lender of last resort hence that portfolio perspective we were talking about before tesla and solyndra and so on and it's an honor to work for such an agency so you know you can also do it through pay and you know singapore does pay up to i think a million dollars to the heads of their departments but also all civil servants get very good pays and pensions but it's also about what what you know how you're described what is your role what is the remit of the place where you're working are you actively co-creating value or just fixing the mistakes that happen along the way with business you're leading by example you're practicing what you preach thank you i really wish you the best and hope to be supportive of you convincing people because there is a cynicism that those of us who think that government can play a different role are just romantically foolish yeah just like the market fundamentalists were romantically foolish and it's incumbent upon us to persevere with the courage to bring this new design to sing this new song and uh thanks i i'm very grateful that you came and talked about it with me today thank you so much and i'm very grateful that i've taken extra time

Channel: New Economic Thinking

Views: 15,936

Keywords: mariana mazzucato, innovation, mission driven state, inet, new economic thinking, mission driven state, technology, business, socap, social capital markets, social entrepreneurship, sustainable development goals, social entrepreneurship ideas

Id: HWtNmAry2pM

Length: 32min 0sec (1920 seconds)

Published: Thu Mar 11 2021