What do the internet and COVID vaccines have in common? Neither would be possible without the work of DARPA, a mission-focused federal agency responsible for funding research and development. Professor Mariana Mazzucato is with us this week to argue that our economy will be better off if more government agencies adopt DARPA’s mission-oriented approach.
Mariana Mazzucato is a Professor in the Economics of Innovation and Public Value at University College London, where she is Founding Director of the UCL Institute for Innovation and Public Purpose. She is the author of three highly-acclaimed books: The Entrepreneurial State, The Value of Everything, and Mission Economy.
Twitter: @MazzucatoM
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Mission Economy: https://marianamazzucato.com/books/mission-economy
It’s 2023. Here’s how we fixed the global economy: https://time.com/collection/great-reset/5900739/fix-economy-by-2023/#new_tab
DARPA’s early investment in COVID-19 antibody identification producing timely results: https://www.darpa.mil/news-events/2020-11-10
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Nick Hanauer:
Mariana Mazzucato is the author of a new book called the Mission Economy: A Moonshot Guide to Changing Capitalism.
David Goldstein:
When you say moonshot, you don’t just mean something big. You mean a different theory and style of governance.
Mariana Mazzucato:
Absolutely. I literally mean the everyday stuff that government does. The book is really about rethinking the intra organizational governance of the state in order for it to be really ambitious.
Speaker 4:
From the home offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why?
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
Nick Hanauer:
Goldie, today we get to talk to one of my favorite people, Mariana Mazzucato, who’s a economics professor at University College London, and is the author of a new book, another book called the Mission Economy: A Moonshot Guide to Changing Capitalism. She is just brilliant. She lives in London and she’ll be with us from there today.
David Goldstein:
It is so great to read a book like hers and then get to talk to the author. One of the earlier books I read was her book, The Entrepreneurial State. Really influential in our thinking of the actual role of government in the economy. This new book, she breaks it down into some of the core principles where we’ve gone wrong in economic theory and where we need to go.
It’s very interesting, Nick, because in this book, I hear a lot of narrative that echoes themes which our listeners will be familiar with on the podcast. She talks about how bad theory leads to bad policy. That’s a theme we’ve been hitting since the very start. She talks about economics as being about who gets what and why.
David Goldstein:
She talks about focusing on outcomes as opposed to just output, which is another one of the themes we hit repeatedly.
Nick Hanauer:
Well, let’s talk to Mariana.
Mariana Mazzucato:
I’m Mariana Mazzucato. I’m an academic at University College London, where I have founded an Institute for Innovation and Public Purpose, which is all about rethinking the state, literally from scratch, in order to rethink capitalism. I’ve just written a book called Mission Economy. What is it called actually? Shit. I don’t remember the subtitle.
Nick Hanauer:
It’s called Mission Economy: A Moonshot Guide to Changing Capitalism.
Mariana Mazzucato:
Okay. Great.
Nick Hanauer:
Introduce the book, tell us why you wrote it.
Mariana Mazzucato:
For some years now, I’ve been working with policymakers globally, trying to convince them that we need to redesign policy away from fixing markets towards creating and shaping markets. The way I frame that was that things like industrial strategy say, shouldn’t just be a list of sectors that a government supports or provides subsidies and guarantees.
It should be a list of problems, big problems that we have, whether those problems be the future of mobility, whether they be about solving key issues around the digital divide, whether they be problems around global problems, like getting the plastic out of the ocean. Then designing the strategy so you get as many different sectors as possible to collaborate and to innovate together to solve that problem, and especially redesigning public policy.
Again, industrial strategy, innovation policy, procurement policy, right? Government as purchaser, grants and loans to galvanize as much bottom-up innovation and investment to actually solve problems. A problem-focused policy, an outcomes-oriented budget and what I’ve been calling mission-oriented policy. On the back of that, there’s been some changes which I helped implement.
For example, in the European Commission, they actually now have a missions instrument, which is part of the Horizon Innovation program, which has about €90 billion attached to it. I just felt like I needed to tell that story of why mission-oriented policy was important in a way that the lay reader could understand, especially in an era, modern day capitalism, where I think there’s so much distrust of government, of business.
There’s a lot of polarization in society, galvanizing a bit of inspiration of what we can do as humanity when we set our goals properly and have a real purpose-oriented public-private partnership, like by the way, the one that got us to the moon, not a moon, the moon, 51 years ago. You’ll remember that that project, the Apollo Program was not just NASA-driven. It wasn’t just about the state. It was very much about a new design of public-private partnership.
There was lots of investment by companies like Honeywell, Motorola, General Electric, but NASA really cared not only to get to the moon and back in one generation, but especially to design that partnership in such a way that was actually purpose-driven. That’s the story I tell in the book hoping that it gets governments to be more, not just proactive, but really focused on getting the dynamic capabilities within the public sector I think we’ve lost.
But also, bringing this notion of purpose that we often hear about in the corporate world, bringing it out of the silo of corporate governance gimmicks, but to the center of how business and government work together.
David Goldstein:
When you say moonshot, you don’t just mean something big like, “Oh, that’s huge and difficult.” You mean a different theory and style of governance.
Mariana Mazzucato:
Absolutely. I literally mean the everyday stuff that government does, everything, right?
David Goldstein:
Right.
Mariana Mazzucato:
From public education, public health, public transport, you can have a moonshot mission-oriented approach to it, or you can just be a bit bureaucratic and boring and inertial about it. Let me just give you an example. In Sweden, on the back actually of some work that my institute’s been doing with VINNOVA, which is the Swedish innovation agency, kind of like a DARPA in Sweden, but not exactly.
They have a really interesting mission for the government at a national level, which is a fossil-free welfare state. If you then land that in the public education system, and even more specifically on things like school meals, what does it look like to have a really specific target, like healthy, tasty, because if it’s not tasty no one will eat it, sustainable school meal production? What does it mean for the production, distribution and consumption patterns?
Also, what does it mean to bring school children and students to the process of co-designing that mission, but also being part of the process that monitors whether it’s going well or not? Because we shouldn’t forget that some of the most brilliant innovation agencies like DARPA that have been mission and moonshot-oriented, they were just as good as turning the tap off as they have been at turning it on. What does it mean to be both long-termist, but also knowing when to pivot to be agile and flexible?
Unfortunately, if you think about it, the word bureaucratic, why is that a negative word? We could have creative, dynamic, funky, sexy bureaucracies.
Nick Hanauer:
Yeah. For sure.
Mariana Mazzucato:
The book is really about rethinking the intraorganizational governance of the state in order for it to be really ambitious on both the big things out there in space, but especially the everyday. If you think about the 17 sustainable development goals that we have since 2015, every country has signed up to them, there is 169 targets beneath them. They could all become different types of moonshots.
Nick Hanauer:
Right. Mariana, I think that the way in which you laid out the five myths about government and markets was a nice way of explaining to people where we went wrong. We call that mythology neoliberalism, but people can call it all sorts of different things. Would you mind punching through those five myths quickly? Because I think they make it really obvious where the problems lie.
Mariana Mazzucato:
Sure. The reason I go through the five myths, by the way, is because I really believe that bad practice is often driven by bad theory and vice versa, and so I also end the book with a better way to think about our economy, which hopefully will also lead to better practices. The five myths have to do with how we think about value, how we think about markets, how we think about efficiency, how we think about capabilities and capacity within the state, and how we think directionality.
Without going on it too much, in terms of value, unfortunately, we often think that business creates value and at best what government can do is facilitate and enable that, but it’s not really a value creator itself. Hence, it’s not surprising then that you don’t actually have a curriculum for example, for civil servants that even frames the role of the civil servant as a wealth creator, as a value creator. It’s really, again, at best, fixing different types of problems along the way. Value’s created in the production function.
If we look at economic theory by capital and labor, and the role of the state is about redistributing value in terms of taxation or funding some very basic things in the background. We don’t think about value as collectively created by different types of organizations, public, private, third sector, trade unions. Do trade unions create value? Of course, they do. We wouldn’t have the weekend without trade unions. We wouldn’t have the eight-hour Workday. We’d still have children working in factories.
Markets. Markets often are confused with business in terms of just how we use the word. Instead, markets are outcomes of how we organize government, how we organize the private sector, how we organize different types of value-creating institutions, and especially their interrelationships. Seeing markets as outcomes is really important I think in terms of debunking some of the myths out there.
Again, if we think of markets as being separate to government and government just fixing market failures, it’s no surprise that we end up often with government policies that are too little too late. A third efficiency. This idea that at best what government can do is to fix markets is also related to the idea that governments need to be also run like businesses and strive for that kind of efficiency gain.
We haven’t really thought about the different forms of also dynamic, not just static efficiency that we need to be thinking about. I mean, again, think about, the moon landing. Most of the interesting things happened along the way as dynamic spillovers in that process. All sorts of innovations that we benefit from today from camera phones, athletic shoes, home installation, foil blankets, scratch-resistant lenses, I could go on and on, even the whole software industry came from that process.
What does it look like to also be able to valuate, even ex post, what I call public value that’s created when you are mission-oriented and all the serendipity and uncertainty that happens along the way, but actually designing that process to be a moonshot and mission-oriented, needs to be accompanied by an alternative way to think about things like cost-benefit analysis and net present value. We would have never gone to the moon with a cost-benefit analysis.
Capabilities. The fact that we have so much outsourcing of government capacity and the government brain to consulting companies today, PWC, Deloitte, KPMG, and so on, that’s again related to that first myth there about value and who creates it. The fact that then we don’t see the role of the public sectors creating value, means we haven’t invested in the dynamic capabilities and capacity of the public sector, which makes it all too easy then to rubbish the public sector by saying it doesn’t have those capabilities, but it’s a self-fulfilling prophecy.
Lastly, direction. Just think of the terminology when we talk about policy. It’s all about leveling the playing field. Well, none of the great things that we have in our iPhones today, like the internet, GPS, touchscreen, Siri, the voice-activated system, happened from just government leveling the playing field. There was very active investments that occurred and really fostering the IT revolution or also fostering what today is hopefully going to be the clean tech and the green revolution.
That required decisions to be made about directionality, that we actually want or don’t want a green transition. That directionality needs to be explicitly discussed and asked, what does that then mean for the design of both supply side and demand side policies. As long as we talk about the role of policy as leveling the playing field, as opposed to tilting the playing field in a direction, and then formulating portfolios that really help us get there, right?
Tilting the playing field, not in terms of picking one sector or one technology, one firm, but definitely making strategic decisions on the direction of growth that we want, because don’t forget growth has not just a rate, but a direction. If we want more inclusive and sustainable growth, that means something very, very specific in terms of the policy that’s going to get us there.
Nick Hanauer:
Yeah. Absolutely.
David Goldstein:
Yeah. When you talk about direction, it’s funny, I know in the book you talk about economics, both from an evolutionary perspective and complex adaptive systems. On the evolutionary side, they talk about the fitness landscape. It’s basically just the government changing the fitness landscape so that you’re evolving the solutions that you want. It’s a metaphor that I think fits very cleanly with your book.
Mariana Mazzucato:
Well, that’s a really good point because selection mechanisms, there’s nothing deterministic about them. We can reward certain types of behaviors. That’s why I’ve been more recently also with the COVID-19 recovery scheme saying that we need conditionalities attached to the recovery schemes, right? If you want to get a bailout or a subsidy or guarantee or a massive recovery, a piece of a big recovery fund like we currently have in the U.S. and Europe and other areas, then that should be conditional on actually changing behaviors.
It’s quite striking by the way that some countries have done this while others have completely not done it. In France, there were strong conditions attached to the funds given to both Renault, the car manufacturer, and Air France, the airline, that they had to commit to reducing their carbon emissions. That was not a choice. If you want some government money, you’ll have to do that.
Similarly, in Denmark and Austria, companies that had been using tax havens, the idea was, “Well, you’re going to have to change.” Even pre-COVID, I’ve often given this as an example of tilting the playing field. When the steel sector, which globally is asking for government help, came to the German government saying, “Help, help, we’re in trouble.” The KfW, their public bank made it a condition that steel commit to reducing their material content through the whole value chain in order to get a public loan.
They did it through repurpose, reuse, recycle technology, not because they went to Davos and talked about stakeholder value or purpose, but because they had to, in order to receive a public subsidy. Most businesses receive some form of public support, so putting those kinds of conditionalities at the center means, again, tilting the playing field in the direction of the growth we want, and that formulates the selection mechanism.
David Goldstein:
Let’s talk about an American example of your principles in action. You mentioned DARPA throughout the book. Explain the role of DARPA, how it operates and how it meets the guidelines of your mission approach and some of the areas where we’ve benefited from it.
Mariana Mazzucato:
I mean, first of all, DARPA is an innovation agency inside the U.S. Department of Defense. It was founded in the mid-1950s, this more or less the same time as NASA, the National Aeronautics Space Agency. What’s been so interesting, for me at least, about DARPA is that first of all, it has always been purpose-focus.
For example, DARPA basically invented and funded the internet, what we today call the internet, but not because they talked about the internet, no one in DARPA said, “Oh, we need the internet.” They had a problem to solve, which was getting the satellites to communicate and the internet was the solution to that. It’s always been focused on problems, including for example, driverless cars, not because they said, “Oh, wouldn’t driverless cars be cool?”
It was because it would solve a problem. You wouldn’t have soldiers dying inside tanks in the battlefield and driverless cars are a solution to that. Again, having a innovation agency inside the public sector that is focused on problems, and these that I just mentioned are wartime problems. The big question in the first instance is, what would it look like to have something like DARPA or an ARPA-E which we do have just with a tiny budget in the U.S. compared to DARPA.
DARPA is about 3 billion. ARPA-E I think now has about 300 million. Focus on big problems around the green transition, or an ARPA-H, something I’ve been arguing for now for quite a few years, that Biden has actually now, through the new innovation strategy, put on the table. ARPAs for social, societal problems. Here, we have to remember that societal problems are much harder than purely technological ones.
They often require, as we were just talking about, regulatory change, behavioral change, political change. An ARPA-H or an ARPA-E or ARPA-D, focused on the digital divide questions, which are huge issue. The main feature would be that you’re focused on a problem. You bring in people. DARPA brings in people on secondment, often from the scientific community, for a limited number of years, I think it’s about five years, and they are explicitly told to be risk-taking, to welcome the uncertainty.
These are civil servants. They enter the civil service when they become part of DARPA, and unlike most civil servants that as soon as they make a mistake or fail, they’re on the front page of … in the UK here it’s The Daily Mail. Every country has its equivalent newspaper where as soon as a government makes a mistake, we call it out as a government failure, the picking winners problem and so on. Actually, in DARPA, that process is welcomed.
I once spoke to Cheryl Martin, who was the second director of ARPA-E, and I asked her, “How do you actually organize your organization in order to take the risks that you know are just so hard to take when you’re in government?” She said, “Well, we actually evaluate our staff based on how much risk they were willing to take, but also how much economy-wide impact their successes have.”
That idea of having real impact so that your successes matter, but the admission that along the way you’re allowed to fail and that that process is about trial and error and error and error is fundamental. One of the things I mentioned in the book, which I think is really important, especially if we look at what I call the consultification of government today, is the head of procurement in NASA, his name was Ernest Brackett, at the time of Apollo.
He was very clear that if NASA itself wasn’t investing within its own brain, its own what I call dynamic capabilities within the public sector, they would actually get captured by brochuremanship. By sexy PowerPoints today. At the time these were brochures. I think something that DARPA has done very well, but so did NASA during Apollo, was by being ambitious and by investing within their own capabilities, their own R&D, their own knowledge-creating mechanisms, they also knew how to partner better with the private sector.
They drew up better terms of reference. NASA famously at least … Well, I didn’t even know this. I found out about it as I was doing research for the book, they had this no excess profits clause. In other words, as they were partnering with all these different companies like Honeywell and Motorola, the idea is we’re doing this together. This isn’t going to be just a gambling casino. It’s not about earning excess profits.
You get your fair share of profits, but they also then worried about, how do you design the procurement, which is the relationship, in this case between the public and private sector, so that that partnership is designed into the contract? The same people heading up the procurement policy immediately changed the way that contracts were designed from cost-plus contracts, which they thought could be easily gamed to fixed-price contracts with constant incentives for innovation.
That care to the detail of the contracts I think is something that we can learn about today in terms of rethinking the social contract between the public and private sector, in order to rethink capitalism, to be more purpose-oriented, whether it’s delivering a vaccine that is universally accessible or solving big issues, again, around digital divide or big problems we have like our oceans that are just absolutely filled with plastic.
David Goldstein:
Speaking of vaccines, you mentioned in the book that DARPA helped fund Moderna’s COVID vaccine. I think it was October of 2013, they gave a $25 million grant to Moderna to fund their mRNA vaccine research. Without that early-stage funding, we might not all be getting vaccinated today.
Mariana Mazzucato:
Well, absolutely. The total amount, by the way, is about $12 billion worth have gone into the different vaccines. I think it’s about 1.7 billion for the AstraZeneca one, 1.5 billion, the Johnson and Johnson one, 2.5 billion Pfizer, and so on. The really interesting thing is where that investment came. What I argued in one of my previous books, The Entrepreneurial State, the reason I called it The Entrepreneurial State was that entrepreneurship is about risk-taking and the role of the state as taking that early-stage high-risk investment.
Often when also the capital intensity is higher is something that goes completely missing when we just talk about the status fixing markets, or at best investing in some sort of background conditions. Often the kinds of investments that the state has provided both in terms of health innovation with the vaccine, but also again with the internet revolution, the energy revolution, has been the early-stage high-risk capital-intensive phase. That’s when the risk of failure is so much greater.
Another thing I argue, if that’s the case, if it’s especially the high-risk investments that we’re asking the state to make, what does it look like to actually formulate that as a portfolio where the state is not only funding the risk, but also sharing the rewards? I think there’s different ways to do that. One is to make sure we’re actually governing innovation with a public interest in mind. That means taking care that the patents aren’t abused, intellectual property rights, they are often abused.
They’re too wide. They’re too strong. They’re too upstream, way too long and constantly being renewed through some bogus new laws that come up. This is why the World Health Organization is also calling for a patent pool to really nurture what Dr. Tedros … Who I’m actually working with quite closely in a new counsel we’ve set up. Dr. Tedros is arguing for a patent pool in order to foster as much collective intelligence so we have as much knowledge sharing as possible, not just with the vaccine, but also the therapies.
We can also have more public reward by those kinds of conditionalities that I was talking about before. With public investment, there should be conditions. The profits, which are nurtured by that, or reinvested back into the system, instead of extracted out through practices like share buybacks. We can also have conditions on the direction broadly defined, not micromanaging, but the direction of investments, so in more energy saving and reduction of carbon emissions.
Also, there’s no reason that in some cases, for example, when companies themselves are receiving investments by the government, it’s not clear why we just end up bailing out the ones that don’t succeed and not getting a share of the successes. Yeah. I mean, look at Tesla. Tesla received more or less the same amount that Solyndra got. Solyndra got a 500 million guaranteed loan by the DOE. Tesla got, I think it was about 470 million. Obama strangely said to … I mean, it wasn’t him, but I mean the DOE.
The arrangement was that if Tesla didn’t pay back the loan, the government would get 3 million shares in the company. Of course, they did pay back the loan. They were successful. Had they had that arrangement if they did pay back the loan, the price per share went from nine to 90. That difference multiplied by 3 million would have more than paid back the Solyndra failure and then the next round of investment.
Instead, all we heard about was, “Solyndra failed. Government’s bad. Government shouldn’t make bets. Just go back to fixing markets.” There was no narrative about the success and there was no structure in the portfolio to make sure that we were socializing both risks and rewards.
Nick Hanauer:
Yeah. I just cannot understand why all of this bailout money wasn’t attached to preferred shares on behalf of the public like the 50 billion that went out to the airlines. It’s just nuts. There’s no reason why you couldn’t have taken preferred shares from all those companies and stuck them in an account for people’s social security or whatever it is, right? The public could have been shareholders in all those things.
Mariana Mazzucato:
We know how to do it.
Nick Hanauer:
I think one of the-
Mariana Mazzucato:
I mean, it’s not like it’s rocket science. We know-
Nick Hanauer:
That’s right. It’s not complicated. No.
Mariana Mazzucato:
Yeah. Where there’s a will there’s a way and where there’s no will?
Nick Hanauer:
That’s right. Exactly. In fact, there’re giant industries devoted to just these sorts of arrangements. I guess one of the really interesting things that strikes me about your work is that you’re battling this really pervasive idea that states and markets are basically in zero-sum relationship, that they’re in competition with one another effectively. It is certainly true that they compete for power, but they certainly don’t compete for value creation. They are inextricably intertwined it seems to me.
Mariana Mazzucato:
It depends. I mean, it depends on how we’re creating value. That’s the whole point, right? The first is to admit, as you just did, that they can co-create value and that requires, again, debunking that myth that value is only created in business. By the way, I was in an opening session of the World Economic Forum this year with the proponents of stakeholder value, no names. The first sentence was, “Business creates wealth and then we have to make sure that it’s also distributed to all the stakeholders.” I was like, “No way.”
Stakeholder value, if we’re going to talk about that, has to begin with the notion that value is actually created by different types of stakeholders. That’s the first thing, but unless we then move that forward and think about what does that actually mean for how we understand value in the economy? What does it mean for, again, the design of the tools on the ground, but literally the organizational culture we have in government? Then it’s just philosophy and abstract theory.
I mean, that’s, again, why I wrote the book, which is there’s this great idea out there that we have these big problems to solve together between business and the state. We have the SDGs, so we’ve actually signed up to that idea that we’re going to go after these big problems, but we don’t have the design of the tools, the kind of also ideology, because ideology is just a thing, right? These are ideas. The mindset of what it actually means to foster change.
We haven’t invested enough in the nitty-gritty of what does it mean to redo government, redo business, and especially redo their interrelationship in such a way that really is purpose-driven? The answer to your question is, yes, it definitely can be a win-win, but if we stick with the current ideology, we’re governing this process in a very problematic way and it’s not a win-win.
I mean, mega bucks are being made today, whether it’s in the space sector, whether it’s in the health industry, whether it’s in the digital sector in such a way that is definitely not purpose-oriented. I mean, just think of space. I talk about the moon landing, but space today’s full of rubbish, of garbage. The astronauts are like, “We can’t see anything.”
It’s an unregulated space where we’re just celebrating any initiative of anyone putting something up there. It’s not win-win. It’s a system. It’s an ecosystem and we have to foster a mutualistic symbiotic one.
David Goldstein:
We often hear that government spending and borrowing crowds out private investment, but you argue with examples like DARPA and NASA, that it actually crowds in investment. It’s the government spending that creates more investment.
Mariana Mazzucato:
Well, when it’s structured properly. I mean, that’s why I also just recently wrote a report on the BBC, the British public broadcaster. It’s really interesting how, because it’s driven by really bold goals and hasn’t accepted, as PBS actually has in the U.S., that at best it can fix the gap of what the private sector is not doing.
In the UK, the BBC is also doing soap operas and talk shows not just documentaries and high quality news, by being really ambitious, independent of the format and trying to produce what they call public value. They’ve ended up really being thought leaders and path breakers in different areas, which then form new markets, which create new areas and new opportunities for businesses to follow.
The irony is that when governments do buy into the narrative and the ideology that they’re not only at best market fixers, but a bit too big and just worried about crowding out, that’s when you actually end up crowding out, because you’re not doing your job. You’re just literally filling up space as opposed to … By space, I mean, area. As opposed to doing your thing of really transforming markets. Transforming markets in and of itself is not an objective.
The question is, what are you doing? The National Institutes of Health I think are really interesting because on the one hand they invest a lot of money in the U.S. in health innovation, over 40 billion a year. I’ve often argued that then they don’t go the whole way, as we just said, they don’t govern intellectual property rights necessarily properly. The prices of drugs don’t reflect that.
On top of that, coming to this discussion, the question is, why are public organizations like that investing so much just in drug research and not enough in really redefining what we even mean by health innovation to include things like lifestyle changes, right? One of the roles I think of a public institution is to redefine the market itself, really push that market beyond its current frontiers, and in that sense, it’s shaping and creating, not just fixing markets.
That is in fact what the BBC has done and that’s why it’s so successful and also has a very high market share. Precisely because it’s successful and has a high market share it then gets told it’s crowding out, but it’s actually not crowding out. It’s just very successful in what it does, and then the idea is, “Oh, but if you’re so successful in that area, that should be for business.”
Nick Hanauer:
I wonder if like us, you have been surprised on the upside by the ambition and execution of the Biden administration thus far. If so, how aligned does their program, not just what they have done, but what they seem to be intending to do, how aligned is that with your thinking?
Mariana Mazzucato:
First of all, I think it’s so refreshing that we’ve moved away from a mercantilistic policy, which is what we basically had with Trump. You know?
Nick Hanauer:
Yeah.
Mariana Mazzucato:
Forget other things we could say about what Trump was doing, but the idea that it was all about trade and exchange and walls, towards actually a policy that is very much based on investment and the renewal of industrial strategy, including by the way, things that were already in the pipeline before Biden came in, which was the Endless Frontier Act, pushed mainly through Chuck Schumer, but it’s also a bi-partisan policy, which is really to, again, revitalize science and innovation funding. All that is great.
Then I think on top of that, what we need to ask is, what does it mean to lay on top of that this Build Back Better umbrella, right? That, again, in terms of the direction of the funding, this isn’t just about throwing a lot of money at science and hoping for the best, but precisely to have the kind of DARPA mission-oriented. Also in terms of the public-private partnership. On this, I think that I’ve heard less, but I’m sure it’s … hopefully we’ll hear about it more, but coming back to that notion of conditionality.
It’s not just about COVID-19 recovery funds. It really is about if we are going to have 40 billion a year in NIH funding or different types of DARPA funding, SBIR funding, NSF funding, NSF funded Google’s algorithm, what does it mean to make sure that the results of that are good for people and planet?
Nick Hanauer:
Yeah. That’s right.
Mariana Mazzucato:
That doesn’t happen on its own. It’s not good enough to say, “Oh, we have the SDGs, oh, we have these great goals.” It does mean to really rethink the details of how we govern innovation and production. I think that really is the next phase. Moving from mercantilism to having an innovation, an industrial strategy, great. Governing that in the public interest requires a whole set of things that I think will have to be the next step in the plan if we are going to build back better.
Nick Hanauer:
Well, we’ll see. It’s definitely moving in the right direction. It looks like.
Mariana Mazzucato:
It definitely is. I think that the fact that we did have a financial crisis over 10 years ago and lots of money went into the system, but most of it ended up back in the financial sector, I think globally that is also recognized. That’s why in Europe, for example, this next generation EU funding, which is the … Well, it’s not the equivalent in terms of size, but it’s about 1 trillion in Euro funding for the European recovery.
Unlike in the financial crisis, this time there’s conditions attached, not just public-private, but public-public. The European funding to the member states is conditional on countries actually having a strategy around climate and digitalization. Separately there’s also pot for health. We haven’t seen that. You’ll remember the conditions attached after the financial crisis were on austerity. You had Portugal, Italy, Greece and Spain, the famous pigs that Goldman Sachs called them. I’m Italian so I’m allowed to say that.
The condition attached to the funding was they had to cut their deficits. Luckily, the talk now is not that. We’ll have to see though, because this is the biggest danger I see for the immediate future, is that lots of countries have put in a lot of money, whether it’s on furlough schemes, whether it’s on the immediate needs on health. Then we’re going to hear in a couple of years, “Oh dear, the deficit has ballooned. The debt has ballooned. Now we need to claw back.”
We need to really resist that because if one thing has been made really clear with the COVID-19 pandemic is our health systems and the welfare state was also really, really ill-prepared. We need to make sure the next decade strengthens that, and that’s not going to happen on a shoestring.
David Goldstein:
Nick, final question?
Nick Hanauer:
Absolutely. Mariana, we always ask our guests this one question, why do you do this work?
Mariana Mazzucato:
Because I truly believe that agency, so strategic decisions matter. There’s nothing inevitable. There’s nothing inevitable about how we’re stuck now with the problems we have around big tech or the climate crisis. They are outcomes of decisions we’ve made, so getting better decisions made driven by a different type of understanding of how the system works is what drives me to do it. Also, I just think it’s the only way. I mean, we can’t keep screwing this up if we want a planet to live on.
Nick Hanauer:
Well, Mariana, this was absolutely fantastic. Thank you so much for being with us and giving us some of your time.
Mariana Mazzucato:
Thank you so much.
David Goldstein:
When I was in college, back in the early 1980s, it wasn’t called the internet, it was called ARPANET.
Nick Hanauer:
Yes. Correct.
David Goldstein:
Because it was literally created by DARPA.
Nick Hanauer:
Yeah. Right.
David Goldstein:
They created the internet, and bringing it back to the current moment with COVID, it turns out, as we’ve learned, that DARPA also made a lot of the initial and long-term investments in many of the technologies that led to these vaccines being developed at an absolutely record pace. Never anything like this before in history have we developed a vaccine so quickly.
Nick Hanauer:
Yeah. One of my favorite parts of our interview with Mariana was when she was relating the anecdote about Davos and being on this panel about stakeholder capitalism and one of the co-panelists insisting, quite unconsciously, probably, that it’s business that creates wealth and government that redistributes it and just, I think her jumping on that person, quite rightly, because it’s just not true.
Business and markets and states are in relation to one another and desperately need one another. You can’t have really one without the other. I think it’s very, very true that government can create tremendous value, in fact does create tremendous value and prosperity and wealth in human societies.
David Goldstein:
Right. There is no market without a government.
Nick Hanauer:
Exactly.
David Goldstein:
In a democracy, we certainly have a right to shape the market to meet our needs as opposed to the other way around.
Nick Hanauer:
Yeah. Absolutely. Anyway, it’s just a really super interesting conversation. I do think that she’s very much on the right track about governments taking a bigger role, not just in investment in society, but in defining the kinds of outcomes that we want markets to focus on. Well, what a fascinating conversation.
David Goldstein:
Again, Mariana’s new book is Mission Economy: A Moonshot Guide to Changing Capitalism. There’s a link to it in the show notes. Highly recommend you buy it and read it.
Speaker 4:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.