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We can produce a different type of capitalist market if we want to. This isn’t about communism. There are choices.

Words Alex Marshall Illustrations James Taylor

Mariana Mazzucato has a strong claim to be one of the most creative thinkers on economic theory working today. Her new book, The Value of Everything: Makers and Takers in the Global Economy, published this spring, promises to re-evaluate the debate about the kind of world we want to live in, looking at who really creates wealth in our world and the way we decide the value of what they do. And in the meantime, governments around the world want to hear how she thinks they should turn into ‘entrepreneurial states’ – the day we meet, she is just back from Austria where she spoke to the country’s president and prime minister.

Oh, and then there’s the small matter of why we are meeting: her founding and directorship of UCL’s new Institute for Innovation and Public Purpose. For a new body it does not lack ambition. Mazzucato wants it to help change how the world’s public bodies operate – and she would quite like it to change capitalism in the process.

“One of our goals is to redefine the public sector,” she says. “If we just pretend it’s there to fix markets, that’s all we’ll get. But the public sector can create and shape markets as well, and we need it to if we’re going to address the challenges we face, such as climate change.

“[Apple founder] Steve Jobs’ whole thing of [telling businesses to] ‘Be hungry, be foolish’. Why can’t the public sector be hungry and foolish too? Why does it have to be boring? If you tell it to be boring, it will be, and all the good people will want to work in the private sector.”

Challenge seems to be Mazzucato’s fuel, and her work takes her into all corners of the economic world.

But it could have been different. The daughter of a nuclear physicist and an Italian literature teacher, Mazzucato studied history at Tufts University, just outside Boston in the US. However, while there, she got “this itch that this city was kind of screwed up. There was such high inequality. All the black people lived in just two neighbourhoods.” She started working with trade unions to try to work out what was going on. “That completely changed how I understood America; how I understood the problems of capitalism,” she says. It also prompted her decision to study economics.

Mazzucato quickly rose through the subject’s academic ranks, making her name in 2013 with the publication of The Entrepreneurial State: Debunking Public vs. Private Sector Myths, a book that takes aim at anyone who thinks government’s role is simply to cut taxes, slash regulations, then get out of the way.

In it, for instance, she points out that “the development of the features that make the iPhone a smartphone rather than a stupid phone was publicly funded” (that includes GPS, touch screens and voice recognition software). Some 74 per cent of new drugs in the US trace their origins to publicly funded research, she adds. Elon Musk’s much-heralded businesses, such as the Tesla electronic car company and SpaceX, are all similarly “surfing a new wave of [government-funded] technology” and benefiting from government support.

The world needs “more state, not less,” Mazzucato concludes, and governments should be looking to create new markets by setting missions on things such as combating climate change, then building dynamic new partnerships with businesses to meet them. “In 1961, an American president set out a bold, ambitious and risky vision to send a man to the moon; it was hard, expensive and could have failed, but was well worth the risk. Who will have the courage to set out a new vision today?”

The book was heaped with praise – the Financial Times named it one of its books of the year. A few critics said it sounded like Mazzucato was in love with government, but she easily put them in their place: “I’m from Italy. Believe me, I don’t romanticise the state.”

“They can only justify acting if they see a market failing; that’s very different from being able to say, ‘Let’s go to the moon, baby!’”

Ever since, Mazzucato has been giving talks advising public bodies on how they can become more entrepreneurial. But as she travelled, she realised few had the tools to do so. It was that realisation that is behind the Institute’s founding. “One goal is to actually put in place a toolkit for public bodies,” she says. “At the moment, they can only justify acting if they see a market failure. That’s very different from being able to say, ‘Let’s go to the moon, baby!’ So we want to give them the tools to know when they can act [to create a new market] and also to understand that they’re allowed to fail along the way – just like venture capitalists do, understanding that failure is part of the innovation process.”

The Institute’s work will be practical, she adds. Its staff are already meeting public bodies – everyone from NASA to the EU – to discuss areas in which they can act. Mazzucato is especially keen to get involved with the healthcare sector. Governments often fund medical research and yet are then made to pay extortionate prices for the drugs that emerge. “What would things look like if the health sector acted like the military does?” she says. “The military funds a whole load of stuff, and when it comes out – the tanks or bombs or whatnot – the prices aren’t crazy.”

Mazzucato’s workload and ambition make her stand out from most economists. But there is one other thing too: her optimism, although it isn’t always immediately apparent. She talks openly, for example, about how our current system of capitalism isn’t working, how it is driving inequality. She also remarks that the UK seems destined for another financial crisis along the lines of 2008’s Great Recession. “Everyone talks about public debt, and needing to maintain austerity, but it’s private debt that’s the problem. It caused the financial crisis and it’s back to record levels.”

It is a dark picture, but unlike most economists, Mazzucato smiles as she talks about it. Why isn’t she holding her head in her hands in despair? “Because we can change things,’ she says. “The markets are created, so we just have to work out what markets we want.”

Mazzucato traces a lot of today’s problems back to the low levels of investment in the economy, with businesses using profits to pay dividends or fund share buyback schemes, rather than investing in R&D. It would be easy to curb such a problem, she says. “Those big share buyback schemes used to be illegal. There used to be conditions set by governments requiring firms that received public benefits to reinvest profits back into the economy. Bell Labs [the company that invented the laser] actually came out of the government telling AT&T they have to reinvest the profits in order to maintain their monopoly status. That’s a symbiotic ecosystem!

“When I talk to companies, they say, ‘We know it sucks, but there’s pressure from the market to do this.’ Well, wait a second, the market’s an outcome – what happens if you behaved differently?”

Mazzucato starts talking about the firms who do already act a little differently, such as Huawei, the world’s largest telecoms company, which happens to be a cooperative, and Ericsson, the Swedish technology firm that is much less financialised than competitors such as Cisco so it can reinvest most of its profits in research. Rules could be put in place to ensure more companies acted like these, she says. They don’t have to be outliers. “We could produce a different type of capitalist market if we wanted to. This isn’t about communism. There are choices.”

Choices aren’t something Mazzucato is short of. With a book to finish editing and a president to meet, it’s time that’s the issue. And her plans to change the world through the Institute for Innovation and Public Purpose mean things aren’t going to get any quieter any time soon. Which, you feel, is just the way she likes it.

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  • We Want to Hear From You...We Want to Hear From You...
  • UCL Leads on DementiaUCL Leads on Dementia
  • Free RadicalFree Radical
  • Festival A HitFestival A Hit
  • Jeremy Bentham SpeaksJeremy Bentham Speaks
  • Extra CurricularExtra Curricular
  • Experts And FactsExperts And Facts
  • For Facts’ SakeFor Facts’ Sake
  • A Different Type of Capitalist MarketA Different Type of Capitalist Market
  • The Big CThe Big C
  • Trump In The Age Of Captain AmericaTrump In The Age Of Captain America
  • The Front Line Of JusticeThe Front Line Of Justice
  • Calling All UCL GraduatesCalling All UCL Graduates
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  • The Strong RoomThe Strong Room
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  • London  vs  WorldLondon vs World
Portico Issue 4. 2017/18