Mission Economy

Mariana Mazzucato

• Publisher: Harper Business
• Year: 2021
• ISBN:
  9780063046269
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Longlisted for the 2021 Porchlight Business Book Awards, Big Ideas & New Perspectives

"She offers something both broad and scarce: a compelling new story about how to create a desirable future."— New York Times

An award-winning author and leading international economist delivers a hard-hitting and much needed critique of modern capitalism in which she argues that, to solve the massive crises facing us, we must be innovative—we must use collaborative, mission-oriented thinking while also bringing a stakeholder view of public private partnerships which means not only taking risks together but also sharing the rewards.

Capitalism is in crisis. The rich have gotten richer—the 1 percent, those with more than $1 million, own 44 percent of the world's wealth—while climate change is transforming—and in some cases wiping out—life on the planet. We are plagued by crises threatening our lives, and this situation is unsustainable. But how do we fix these problems decades in the making?

Mission Economy looks at the grand challenges facing us in a radically new way. Global warming, pollution, dementia, obesity, gun violence, mobility—these environmental, health, and social dilemmas are huge, complex, and have no simple solutions. Mariana Mazzucato argues we need to think bigger and mobilize our resources in a way that is as bold as inspirational as the moon landing—this time to the most 'wicked' social problems of our time.. We can only begin to find answers if we fundamentally restructure capitalism to make it inclusive, sustainable, and driven by innovation that tackles concrete problems from the digital divide, to health pandemics, to our polluted cities. That means changing government tools and culture, creating new markers of corporate governance, and ensuring that corporations, society, and the government coalesce to share a common goal.

We did it to go to the moon. We can do it again to fix our problems and improve the lives of every one of us. We simply can no longer afford not to.

Part I: A Mission Grounded

What stands in the way of the next moonshot

1: The Mission and Purpose

In September 1962 in a famous speech at Rice University, President John F. Kennedy announced that the US government would set out on ‘the most hazardous and dangerous and greatest adventure on which man has ever embarked’: landing a man on the moon and bringing him back safely. He declared the ambition to do it ‘before this decade is out’.¹ The USA landed two men (yes, in the beginning it was just men) on the moon seven years later, on 20 July 1969.

When Kennedy spoke, the USA still lagged behind the USSR in space technology. In 1957, the USSR had stunned the world by launching Sputnik, the first artificial satellite to orbit the earth. As recently as April 1961, Yuri Gagarin had become the first human to orbit the earth in his capsule, Vostok 1. The Cold War was intense and there was deep concern that the Soviet Union had stolen a threatening technological and military march on the USA and the West. Kennedy had claimed in his 1960 election campaign that there was a ‘missile gap’ between the USA and the Soviet Union.² The claim was based on CIA and Pentagon estimates that the Soviet Union had more intercontinental ballistic missiles than the USA, but after Kennedy became president, it emerged that in fact the USA had more. The urge to beat the Russians, therefore, galvanized one of the most innovative feats in human history.

What became known as the Apollo programme cost the US government $28 billion, or $283 billion in 2020 dollars.³ It took up 4 per cent of the US budget and involved over 400,000 workers in the National Aeronautics and Space Administration (NASA), universities and contractors. But cost was not the issue: the point was to get the job done. Indeed, Kennedy was not shy about talking about the expense, explicitly saying in his speech, ‘all this costs us all a good deal of money.’ Indeed, the space budget, he argued, was getting higher every year and stood in 1962 at about $5.4 billion a year: ‘a staggering sum, though somewhat less than we pay for cigarettes and cigars every year’. And would it necessarily bring success? No, he was clear that the value for money was completely uncertain: ‘I realize that this is in some measure an act of faith and vision, for we do not now know what benefits await us.’

What a contrast with how, today, we hear about costs of our public services – and the implication on annual deficits and debt – not the ambition or the grand outcomes they are trying to achieve. The assumption is that if we spend more in one area, we have to spend less in another. This could not be further from the approach to space exploration, when everyone’s energy and attention was dedicated to the outcome – a successful moon landing – and the investment and innovation it demanded.

Kennedy foresaw the way in which the ambitious mission would result in ‘spillovers’ affecting life on earth – technological and organizational innovations that could never have been predicted at the beginning. Indeed, the technology needed to process data in real time and house that processing inside the lunar module’s small computer is what stimulated much of the innovation behind what we today call software.⁴ And new management methods emerged, too, that broke down large, complex problems into smaller packages. Later, Boeing copied this model to build the 747, the world’s first jumbo jet.

This book encourages us to apply the same level of boldness and experimentation to the biggest problems of our time – from health challenges such as pandemics, to environmental challenges such as global warming, to educational challenges such as the divide in opportunity and achievement between students partly caused by unequal access to digital technology. These ‘wicked’ problems require not just technological, but also social, organizational and political innovations. They are huge, complex and resistant to simple solutions. We must solve them – not merely accommodate them – by focusing policymaking on outcomes. And this means getting the public and private sectors to truly collaborate on investing in solutions, having a long-run view, and governing the process to make sure it is done in the public interest.

The moon landing was a massive exercise in problem-solving, with the public sector in the driving seat and working closely with companies – small, medium and large – on hundreds of individual problems. It required collaboration between government and many different sectors, from computing and electrical equipment to nutrition and materials. Government used its purchasing power to develop procurement contracts that were short, clear and massively ambitious. When the private sector sometimes failed to deliver, NASA threw back the challenge and did not pay until the solution was right. If successful, companies could grow through serving the new markets that government purchases opened up and scale up through a purpose-driven strategy.

What integrated all these efforts and gave them direction was that they were part of a mission – a mission led by government and achieved by many. Today, a ‘mission-oriented’ approach – partnerships between the public and private sectors aimed at solving key societal problems – is desperately needed. Imagine, for example, using public-sector procurement policy to stimulate as much innovation as possible – social, organizational and technological – to solve problems as diverse as knife crime in cities or loneliness of the elderly at home.

Of course, lessons from the moon landing cannot just be cut and pasted onto any challenge. But they do highlight the need to resurrect ambition and vision in our everyday policymaking. This cannot just be about bold statements. We have to believe in the public sector and invest in its core capabilities, including the ability to interact with other value creators in society, and design contracts that work in the public interest. We must create more effective interfaces with innovations across the whole of society; rethink how policies are designed; change how intellectual property regimes are governed; and use R&D to distribute intelligence across academia, government, business and civil society. This means restoring public purpose in policies so that they are aimed at creating tangible benefits for citizens and setting goals that matter to people – driven by public-interest considerations rather than profit.⁵ It also means placing purpose at the core of corporate governance and considering the needs of all stakeholders, including workers and community institutions, as opposed to just shareholders (owners of stock in a company).

In this context, ‘moonshot’ thinking is about setting targets that are ambitious but also inspirational, able to catalyse innovation across multiple sectors and actors in the economy. It is about imagining a better future and organizing public and private investments to achieve that future. This, in the end, is what got a man on the moon and back.

But there is a catch.

Conventional wisdom continues to portray government as a clunky bureaucratic machine that cannot innovate: at best, its role is to fix, regulate, redistribute; it corrects markets when they go wrong. According to this view, civil servants are not as creative and risk-taking as the entrepreneurs of Silicon Valley, and government should simply level the playing field and then get out of the way – so the risk-takers in private business can play the game.

This book’s thesis is that we cannot move on from the key problems facing our economies until we abandon this narrow view. Mission thinking of the kind I outline here can help us restructure contemporary capitalism. The scale of the reinvention calls for a new narrative and new vocabulary for our political economy, using the idea of public purpose to guide policy and business activity.⁶ This requires ambition – making sure that the contracts, relationships and messaging result in a more sustainable and just society. And it requires a process that is as inclusive as possible, involving many value creators. Public purpose must lie at the centre of how wealth is created collectively to bring stronger alignment between value creation and value distribution. And the latter should not only be about redistribution (ex post) but also predistribution ex ante: a more symbiotic way for economic actors to relate, collaborate and share.

It is essential to link the micro properties of the system – such as how organizations are governed – to the macro patterns of the type of growth desired. By rethinking how the relationships between the public sector and private sector can be better governed around public purpose, we can create growth that is better balanced and resilient, with new capabilities and opportunities spread across the economy. But this means, at the start, replacing the fashionable, bland terminology of ‘partnership’ with clearer metrics as to what a symbiotic and mutualistic ecosystem looks like; that is, one in which risks and rewards are more equally shared. In our era, unfortunately, the relationship is often parasitic: public-health funding is structured so that publicly financed drugs are too expensive for citizens to buy.

I call this different way of doing things a mission-oriented approach. It means choosing directions for the economy and then putting the problems that need solving to get there at the centre of how we design our economic system. It means designing policies that catalyse investment, innovation and collaboration across a wide variety of actors in the economy, engaging both business and citizens. It means asking what kind of markets we want, rather than what problem in the market needs to be fixed. It means using instruments such as loans, grants and procurement to drive the most innovative solutions to tackle specific problems, whether those be getting plastic out of the ocean or narrowing the digital divide. The wrong question is: how much money is there and what can we do with it? The right question is: what needs doing and how can we structure budgets to meet those goals?

This is a huge task. We live in an era in which capitalism is in crisis and a flawed ideology about the role of government has infiltrated our expectations of what it can do – and thus what other actors can do in partnership with government. But a time of crisis is exactly the moment to reimagine what type of society we want to build, and the capabilities and capacities we need to get us there.

Is this book about rethinking government or rethinking capitalism? The answer is, both. Changing capitalism means changing both how government is structured and how business is run – and how public and private organizations interrelate. Driving governance structures of organizations, and relationships between organizations, through a notion of ‘purpose’ is the key to a mission-oriented approach.

Indeed, for many years there have been calls for corporate governance modes to be more ‘purposeful’ and move away from shareholder capitalism to stakeholder capitalism. In January 2018 Larry Fink, the CEO of BlackRock, wrote a letter to 500 CEOs called ‘A Sense of Purpose’. In it he argued: ‘Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.’⁷ A year and a half later, in August 2019, the same message was echoed by the Business Roundtable, a club of 180 powerful CEOs including those of Apple, Accenture and JPMorgan Chase. In a statement, its members argued that to foster a more functional form of capitalism, profits had to be more widely distributed to all stakeholders, including workers and communities – the key stakeholders.⁸

The problem is that, notwithstanding these calls for change, not much is changing. This is not only because the change needed must go to the very core of business models and value chains, instead of being treated as an afterthought; it is also because a renewed sense of purpose must go to the centre of the relationship between organizations in the economy, not just inside business. Change comes from reimagining how different organizations and actors in the economy co-create value. Yes, this book does focus on much-needed changes in our public institutions. But because government activity – direct investments, indirect subsidies, tax and regulations – lies at the centre of nearly all relationships, rethinking government means rethinking capitalism.

While this book is intended for both theorists and practitioners, it is meant especially as a guide to how we can ‘do’ capitalism differently. It argues that we should change organizations, governance structures and the design of the practical levers of economic policy – the tools we need to build a purpose-oriented economy.

2: Capitalism in Crisis

Even before the COVID-19 pandemic hit in 2020, capitalism was stuck. It had – and has – no answers to a host of problems, perhaps most crucially the environmental crisis. From global heating to biodiversity loss, human activity is eroding the conditions necessary for social and environmental stability.¹ Under current mitigation policy commitments, global surface temperatures are on track to increase by over 3°C relative to pre-industrial times – a magnitude that is widely accepted to have catastrophic outcomes.² Species extinction has increased 100 to 1,000 times the background extinction rate, leading some scientists to announce that we are witnessing the sixth mass-extinction event.³

Rather than having a sustainable growth path, capitalism has built economies that inflated speculative bubbles, enriched the already immensely wealthy 1 per cent and were destroying the planet. In many Western and Western-style capitalist economies, real earnings for all but a few have barely risen in more than a decade – in some cases, such as the USA, in several decades – exacerbating inequalities between groups and regions despite high levels of employment.⁴ The dynamics of inequality explain why the profits-to-wages ratio has reached record highs. Between 1995 and 2013, real median wages in Organization for Economic Co-operation and Development (OECD) countries grew at an annual average rate of 0.8 per cent versus 1.5 per cent growth in labour productivity.⁵ In the period 1979–2018, real wages for the 50th and 10th percentiles of the wage distribution stagnated: there was 6.1 per cent cumulative real wage change over the whole period for the 50th percentile, 1.6 per cent for 10th percentile – versus 37.6 per cent for 90th percentile. In rich countries, private wealth-to-income ratios increased from 200–300 per cent in 1970 to 400–600 per cent in 2010.⁶

These economies were also, after 2008, hooked on the drug of quantitative easing – central banks injecting massive amounts of liquidity into the system – although economic growth and productivity improvement remained weak.⁷ Personal debt was back to levels last seen in the early years of this century. By 2018, private debt to GDP reached 150 per cent in the USA, 170 per cent in the UK, 200 per cent in France and 207 per cent in China – all substantially higher than levels at the turn of the century.⁸

And much of...