Mission Economy: Rethinking the role of the state

Sandy Plunkett

During a packed event a year ago hosted by Britain’s How To Academy, the celebrated economist Mariana Mazzucato, who is in Australia from March 11-14 on a speaking tour, half-jokingly quipped that she was plotting a Netflix series.

The fast-talking, supremely confident Professor of Economics at the University College London (UCL) is focused on innovation and public value. And she is not shy of the limelight, especially when it comes to jolting government leaders and academia into rethinking the role of the state in the turbulent 21st Century.

In the last decade, the Italian-born, half American and mostly EU-based Mazzucato has published six bestsellers, starting with The Entrepreneurial State in 2013.

The books that have followed are all extensions on a theme – hence the musing about a Netflix series – that governments should take a leading, mission-driven approach to solving 21st century societal, economic, health and environmental problems.

“Government should be about steering Moonshots around societal challenges and catalysing society-wide change,” Mazzucato says, citing global warming; pandemic response and health; education and the Digital Divide as top problem priorities.

Australian Treasurer Jim Chalmers is reportedly a fan and Mazzucato, who repeatedly referred to the treasurer as ‘Jim’ in an interview with Radio National Breakfast on Friday before her arrival in Australia, will no doubt be spending some of her time here in more private audiences with federal Labor and public service leaders.

You can already see more than a glimpse of the Mazzucato “mission-led government” movement in the rhetoric of Australia’s Net Zero-driven Green Energy Superpower ambition.

In a recent speech in Newcastle, a coal region in NSW, the Prime Minister signalled the forthcoming budget would add another multi-billion-dollar climate initiative to fuel the green energy and renewable industry push.

He stressed that “government must be a partner, not just an observer” to the green energy mission. The scheme is a combination of government subsidies and co-investment.

Mazzucato fully rejects the long dominant narrative that assumes governments can’t innovate – and are actually a threat to successful innovation outcomes.

She cites the NASA space program under President Kennedy, the UK’s National Health Service (NHS); the US defence innovation agency DARPA which ceded technology underpinning the Internet, GPS and the iphone as just a few examples of government-driven innovation for the public good.

She is undoubtedly a compelling writer and speaker. At the How-to Academy event she and her PhD student co-author, Rosie Collington were addressing a rapt audience about her latest confronting tome, The Big Con.

In it, Mazzucato and Collington excoriate the global consulting industry as one that presents itself as creating value but has for over 50 years merely been surfing (she pointedly says she won’t use the word leaching) on different dysfunctional economic trends in capitalism.

“Who’s being Conned? We’ve all been conned. Even the consulting companies … eventually,” she said, “because we have no future if we can’t actually work together across society on the biggest challenges of our time.”

“We don’t have that collective intelligence. What we have is an increasing hollowing out of one of the most important actors – government.

“We don’t say that because we think government is more important than any other actor. But it is the one that has been bashed so much that I often feel, when I give talks to governments, that I go into these things as an economist and come out as a life coach. Because there is real depression within the civil service. They’ve been told for decades that they can steer but not row.”

Among the most damning of the dysfunctional trends are the favourites of the neoliberal era: privatisation, outsourcing, and the corporate business obsession with shareholder value.

“John Maynard Keynes famously said, “Practitioners on the ground who think they are just getting the job done, are actually just slaves to some economic theory,” said Mazzucato.

She adds that the failure of these go-to ‘solutions’ were front and centre in the mixed – and often failed – responses to the Covid pandemic and manifest in all the talk about global warming “but not doing anything.”

While the elite consulting experts have been riding the neoliberal wave that emerged in the late 1970’s from the Chicago School of Economics and then enthusiastically adopted first by Margaret Thatcher and Ronald Reagan, they have infantilised government, hollowed-out its expertise and, rather than fixing problems, have often made them worse, she says.

In so many ways, the consulting industry is an easy mark. Covid brought to the attention of most everyone – including Australians – how much governments were using the consulting industry, often in ways that were disastrous.

“Civil servants aren’t allowed to experiment and fail. It’s been much easier to rubber stamp a McKinsey strategy,” she said.

When the Albanese government came to power in 2022, a part of its agenda was to scrutinise and slash outsized spending on consultants, contractors, and outside labour hire and especially the big so-called ‘strategic’ ones – McKinsey, Bain, Boston Consulting Group (BCG) as well as Deloitte, PWC and KPMG. Many of them with failed projects they have been paid handsomely for.

Before the 2023 budget, Finance minister Katy Gallagher published an audit of the workforce under the Morrison government. It found a staggering $20.8 billion was spent on external labour in the 2021-2 financial year and referred to a ‘ghost’ workforce of 54,000 roles.

Federal Labor immediately invested in 10,000 additional public service jobs and now has a new policy framework that requires over 100 agency heads to set targets to reduce their external spending.

That governments almost everywhere should re-invest in rebuilding their internal expertise is glaringly obvious to most within and outside government.

But critics of the Mazzucato state-led mission movement claim the passionate economist is too heavy on ‘central planning’ conventions that are reframed in more contemporary ‘New labour’ progressive theory and light on addressing the detail of complexity and implementation.

They point out that the neoliberal “the market fixes everything” mantra emerged after the central planning failures of the 1970’s in the UK and the US.

Another celebrated economist put it this way: “Mazzucato is fawned over by many in academia and the media, but largely ignored by people in business and politics who understand the realities of government intervention in the market economy.”

It’s true that Mazzucato’s fanbase comes from outside of the business sector. But in a post Covid world bent on Net-Zero driven reconstruction, there is no doubt that she has built a base of support in the green energy era globally.

Mazzucato counters criticism that she leans too much toward central planning solutions by stressing her approach is about governments needing to rebuild expertise and capability and to lead with the purpose of solving societal problems.

“It’s not about ideology. You need the private sector and diverse set of other actors. It’s a different choice to either nationalising everything or privatising or outsourcing everything. But if the government doesn’t know what its doing or why, it won’t, literally, be able to write the Terms of Service and its going to end up getting a really raw deal.”

Australia has lived that reality @scale in the last decade and more. One only has to look at the numerous failed IT transformation and digital services projects, Robodebt chief among them, that have done real harm to citizens.

“There are critical levers and tools that government can employ for better social outcomes. NASA (during the 1960’s original moonshot mission) had no excess profits clauses in its contracts. They said “we need to work with the private sector – but its not going to be turned into a gambling machine. We need to socialise the risks, but we will also socialise the benefits in such a way that is embedded into the contracts.”

“Excess profits is what everyone is talking about today in the energy sector, where we have cost of living crises and mega profits earned by the energy sector. Not because they innovated or did anything great, but because they were able to extract – today – huge amounts of profits which are being used for share-buybacks.”

Mazzucato is spot-on about this and perhaps strongest in her belief that government procurement is one of the strongest levers in the state’s toolbox to have the most positive impact for industry and society.

“I’m a complete nerd about procurement,” she has said often. “It is this missed opportunity to really redirect an economy in any country no matter how small.

“NASA head of procurement – the first thing he did was change the procurement strategy from cost-plus to fixed-price.

“It’s about building capability and capacity. Knowing how to properly structure procurement strategy that is outcomes oriented and is not just about giving any kind of contract requires intelligence.”

She adds that the least governments can do is to learn how to get good value for their taxpayer investments and is vocal that the US’s Chips Act, for example, should have more conditions in its loans and grants program.

“Giveaways are a bad use of public money,” she said. “The point of a mission economy is not to say: Vision; Mission; Plan.

“It is not just about giving subsidies and guarantees and creating a parasitic relationship between the public and private sectors but focusing on a problem and galvanising many different actors to solve that problem.”

And that brings me to my first question to Mazzucato:

In what you know of Australia’s mission to both meet its net zero 2030 and 2050 targets and to make the country a Green Energy Superpower, what is it about that mission – and the tools the Labor government intends to use to fuel private sector & industry activity – that makes it an exemplar of the new role of the State in the 21st Century?

Mariana Mazzucato will deliver a keynote address and panel session to a business luncheon in Sydney on Tuesday March 12. You can book your seat this event here. Professor Mazzucato will deliver a keynote address to a Melbourne business dinner on Thursday March 14 – reserve your seat here.

Do you know more? Contact James Riley via Email.

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