Mariana Mazzucato tells Chris Seekings why governments must take inspiration and courage from ‘moonshot’ projects when tackling the world’s greatest challenges
Award-winning economist Mariana Mazzucato is not one to shy away from controversy, with her numerous books and essays frequently challenging the global economic system on which powerful corporations depend. Her latest book, Mission Economy: A moonshot guide to changing capitalism, is also the source of much debate, arguing that we must rethink the role of governments within the economy and society if we are to tackle the greatest challenges of our time.
Taking inspiration from Apollo 11 and other ‘moonshot’ programmes, the book calls for the same level of boldness and experimentation to be applied to issues such as climate change, coordinating public and private sectors on a massive scale. Mazzucato’s proposals require a fundamentally different approach to the way governments operate and could be completely transformative, with even Pope Francis conceding that they “provoked a lot of reflection” within him.
In a nutshell, what is your moonshot guide to changing capitalism?
Moonshots are about transforming governments from within – strengthening existing systems while giving the economy a new direction. In other words, moonshot thinking means reviving ambition and vision in everyday policymaking. While the moon landing was technological in nature, today’s wicked problems are of course more complex and far-reaching. They require not just technological but social, organisational and political innovations. To fight climate change, for example, we need more collaboration and citizen engagement than we did with the Apollo programme.
Capable governments should work outside the usual silos, promoting purposeful collaborations across ministries, departments and local government bodies. The common belief that the smaller the government the better, has been a great barrier to governments adopting bold moonshots and further expanding the capabilities to do so successfully. The market-led approach is rooted in the belief that private institutions are more effective at allocating capital. However, the recent history of capitalism actually tells us a different story. Public institutions have often actively shaped markets and promoted innovation. In fact, the private sector often only comes in after governments have led with high-risk and capital-intensive investments. As a result, the public sector is the only actor capable of directing an inclusive and green transition. Markets will not find an ecological and socially equitable direction on their own.
At COP26, the dominant narrative that emerged was that private financial institutions can lead in funding the transition to net zero. The Glasgow Financial Alliance for Net Zero (GFANZ) – a group of then 450 financial institutions – claimed to have $130trn in funding ready to promote a green transition. This year, it became clear that the required investments do not yet satisfy the risk-return preferences of profit-maximising commercial investors. Numerous GFANZ members have now left the alliance over cost concerns. The message is clear – financially speaking, it still makes sense to invest in fossil fuels. To decarbonise the economy, we need a symbiotic partnership between the private and public sector. Too often, the benefits of successful projects have not been fairly distributed to the population.
Your latest book talks about recovering a sense of ‘public purpose’. How can we do that?
We need to adopt missions that matter to people. This means placing public purpose at the core of our relationships with the private and the public sector and taking the needs of all stakeholders – including the planet – into consideration. We are not at a point where this can be said about our current governance structures and institutions. Even though many businesses claim to be purpose-oriented, the private sector has largely focused on profit-maximising activities. In the US, oil companies have increased their share buybacks by 1,043% over the past four quarters (compared with a 64% increase for S&P 500 members).
Moreover, the financial sector continues to invest largely in finance, insurance and real estate, rather than in workforce training, infrastructure and innovation. A lot of the time, the rewards of investments are privatised, while the risks are socialised.
“A lot of the time, the rewards of investments are privatised, while the risks are socialised”
Some of the technology companies that have benefited most from public support, such as Apple and Google, have also been among those accused of using their international operations to avoid paying tax. In that sense, recovering a sense of public purpose means to create structures that share the rewards of collective value creation more equitably. Governments need to systematically direct finance towards purposeful outcomes, such as a green and just transition.
Is it realistic to expect a country like the US to embrace a restructured, equitable form of capitalism?
To embrace a more equitable form of US capitalism, radical change is needed. The systemic dysfunction is visible in many sectors. The US pharmaceutical industry is a good example. While the investments in drug innovation come from publicly funded research labs, philanthropies and, of course, businesses, the largest pharmaceutical companies are the ones that benefit the most financially. Ingenious financial structures benefit owners and shareholders more than the wider communities in which businesses operate.
To change, we need inclusive governance structures that promote mission-driven investments that are centred not around shareholder value but around a true common good. One way of doing so is through designing industrial strategies to promote a more just and green form of economic growth. Attaching conditions to loans and grants is an essential policy tool to direct finance towards equitable outcomes. The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act), for example, could make public funds conditional on climate-friendly investments and facilities, affordable access to goods and services, and worker training. Governments need to rethink their market fundamentalist approaches and adopt sustainable, welfare-oriented and innovation-led policies.
How much responsibility should the West take when reforming the global economic system, while also supporting developing nations in dealing with climate change impacts?
It is incredibly important that debtor countries in the Global North, which are responsible for the majority of historic carbon emissions, free up fiscal space for creditor countries in the Global South. The public’s support to push for further action is essential. I believe that there is an increasing understanding that countries that have not caused the crisis – largely in the Global South – are bearing the brunt of most climate disasters. You see it on the news constantly– the floods in Pakistan being one of the latest signs of climate injustice. Many countries, including those that are most exposed to accelerating climate breakdown, face significant debt overhangs – which has been exacerbated by an international trade and monetary system that is rigged against them. Freeing up fiscal space for countries in the Global South could include historic debt write-offs, debt restructuring, replacing climate loans with non-repayable grants, and paying compensation for loss and damages.
Together with the Scottish government, the UCL Institute for Innovation and Public Purpose hosted an all-female panel at COP27. The panellists reflected on a radical redesign of the global financial architecture. In the discussion – which I was honoured to moderate – Mia Mottley, the prime minister of Barbados, called for investments in green industrial strategies to build resilience against climate change in the Global South. The support for a loss and damage fund is a good and very important step in the right direction. However, it’s devastating that the final deal does not include commitments to phase out fuels more radically.
As previously mentioned, markets won’t find a sustainable direction on their own. A report by the International Institute for Sustainable Development published in October 2022 shows that redirecting the $570bn of annual planned new oil and gas investments could fully finance wind and solar expansion in line with the 1.50C target. COP27 presented a clear opportunity to establish a more suitable framework to achieve this goal, but it was missed. We need bold states to act as investors of first resort, directing finance towards critical climate commitments. The challenges are urgent.
Mariana Mazzucato is professor in the economics of innovation and public value at University College London and author of the highly-acclaimed Mission Economy: A moonshot guide to changing capitalism