Mariana Mazzucato, economist: “The State should not correct the markets, it should form them”

The Italian-American economist Mariana Mazzucato, one of the most influential of the moment and who is scheduled to meet with Colombian President Gustavo Petro this Monday, is forceful.

“Massive inflation in the world occurred when food and energy companies had enormous profits, and not because they had done anything for it but because of external factors,” he says in a colonial patio, during a break between two interventions at the Hay Festival. from Cartagena de Indias.

Moments earlier, in a talk with Zimbabwean Tsitsi Dengambarenga, American Rebecca Solnit and Colombian Mauricio García Villegas, she made clear her emphasis on solutions.

“I agree that capitalism is destructive, but we cannot stop at criticizing it.

How do we solve it?,” she said.

“I am progressive, of course, but solutions must be found.”

The professor of Innovation Economics and Public Value at University College London (UCL), who is starting a consultation with the Department of National Planning (DNP), proposes that the State recover the initiative in economic policy, promoting projects to solve specific problems, such as achieving zero-emission cities, eliminating digital inequality or achieving sustainable tourism.

The proposal, however, is not to contrast the public and private sectors, but to ensure that they complement each other with a leading, active State, as she explains in this interview with EL PAÍS.

Ask.

His proposal focuses on finding solutions to the problems that the current state of affairs has...

Answer.

Yes. I work with people in the States, on the ground, and I see that it is difficult.

They make mistakes, sure, but it's because they're trying to find ways out.

Saying that everything is bad, that politicians and businessmen are corrupt and that's it, does not reflect reality.

Sure, many are like that, but not all, and we have to focus on learning how to do better what mistakes are made in.

Mariana Mazzucato, January 27, 2024. Chelo Camacho

Q.

It is the idea that States must find goals to solve specific problems.

A.

Yes. That's why I wrote

Mission Economy: A Guide to Changing Capitalism.

It is asking why we know how to wage wars as missions, pouring all public and private resources into a goal, but we do not do so with social problems.

Achieving global vaccination in a pandemic requires a different type of collaboration than usual, a public-private alliance to solve a problem.

For this, a State is needed that works between sectors, with different Ministries, as the Department of National Planning can do in Colombia.

The Ministry of Health is not enough to solve health problems.

Our great challenges are climate, health, biodiversity, exclusion.

Q.

How to convert them into opportunities?

A.

We must seek investments and innovation, and not only think about public goods, but about the common good.

That means stopping thinking that the State should only intervene in the markets to correct their problems, so that it begins to create the markets that are needed to solve the problems.

Because they will never be solved if the State only corrects them.

This makes you arrive late, do little, be reactive and even a little sad.

Q.

Sad?

A.

Yes, because the officials feel that they are only there to correct.

They cannot innovate, propose.

Q.

What to do?

A.

We need States that form markets.

During the pandemic, we collaborated to produce eight vaccines, but we distributed them in the old style, with excessive privatization of knowledge, patents, and prices.

Thus, Africa could not produce or buy them and ended up depending on philanthropy.

Many people died in the global south because of it.

In my work on Latin America I have proposed an industrial strategy that does not start with subsidies for one or two sectors from which rents are extracted, but rather one that seeks to solve problems.

That requires great public investment, of course, but it is what literally took man to the Moon.

NASA, a state entity, hired private companies with strong conditions, tied to results, to solve a thousand problems related to achieving that objective.

It was possible, and innovations such as formula milk, phones with cameras or

software

were also achieved .

That is what needs to be done with the climate, to be able to extract lithium with less water, for example.

Q.

It is not about nationalizing resources...

A.

No, not at all, it is to create incentives and conditions so that companies that extract lithium can do so sustainably.

Demand results and reinvestment of profits in communities.

In fact, local communities must be seated at the table that defines these conditions, overcoming paternalism.

Q.

And the errors?

A.

For this, spaces need to be created in which officials can innovate.

In Chile there is already the Gov Lab, a space to experiment and study things like what the hell results-oriented public purchases are.

They can learn by trial and error, something that we allow and even encourage in the business community, in entrepreneurs, and not among officials.

But, to learn to ride a bike, we all fell.

No, if they try a solution and make a mistake, the next day they are on the front page of the media, in political debates...

P.

Aligned with that, they may end up being investigated.

A.

Yes, the fear of corruption (which is terrible, and is global... in the United Kingdom, in Italy there is corruption) cannot be the objective of public procurement policy.

In Italy, purchases are made by the anti-corruption agency, and that distances it from solving problems other than avoiding corruption.

This fight must occur in the processes, not as the final objective of purchases.

It should be hired with the goal of vaccinating the entire world or eliminating the digital divide, and creating among officials the desire to experiment, the acceptance of uncertainty, the desire to work as a team.

Q.

Is that enough?

A.

No, we also have to invest, invest and invest in the brain of the Government.

This is not done because of the massive

outsourcing

of ideas through consulting firms, which I criticize in my most recent book with cases such as Covid in the United Kingdom.

They paid Deliotte £1.5m a day to do testing and contact tracing, something they know nothing about.

They know about tax evasion, of course, but not about epidemiology or climate change, but Australia paid six million dollars to McKinsey to develop an environmental strategy when they had funded a think tank, the CIRSO.

Q.

Why do they do it?

A.

So that their policies have the seal of a consulting firm and thus evade political responsibility for their decisions.

And that ends up infantilizing the State, especially when officials lose the possibility of facing challenging problems, of proposing and experimenting with solutions.

There is a vicious circle: since the State only responds to market failures, it does not invest in anything more ambitious than a few bandages, and that creates a hemorrhage of talent, people leaving for a private sector.

Q.

You say that this sector should have profits, but not excessive ones.

How much is enough?

How much is too much?

A.

Excess is what we saw recently, a massive global inflation in which companies have enormous profits without having done anything for them.

They didn't invest in new technology, nothing.

There were only enormous changes in the amount of hydrocarbons produced or problems in the distribution chains due to the lockdowns.

They are external factors that gave enormous profits to food or energy companies.

That is excess, which can be defined in relation to what the company did to achieve profits.

Did you do something to deserve them, or is it something external?

If you ask the State for help to save you from bankruptcy due to external shocks, socializing the risks, it contributes much more when these shocks give you enormous profits, socializing again.

That would be coherent.

If we want a more innovative capitalist economy, as everyone says, then let's eliminate rents.

This is what the classics like Adam Smith or David Ricardo asked for.

They were markets free of rentiers, not the State.

We need reinvestment in the economy, profits that come from advances, not structures like the current one in the financial system of buying and selling assets that already exist in milliseconds.

To avoid that rent, we could have a 1% financial transactions tax, which would collect trillions of dollars that we could use to invest in achieving sustainable development goals.

We need a tax system that rewards good investment behavior.

Q.

And that they have taxes on extraordinary profits,

windfall taxes

...

A.

Sure, but also a capital gains tax, which in many countries is 0%.

Nobody pays taxes on corporate profits.

Large payments to company directors are made in shares that they then sell without tax.

Capital gains tax deductions should be conditional on investments over 10 or 15 years, the time needed for most innovations that matter to find solutions to climate, health, and issues such as water.

Companies should be rewarded in the long term, not for immediate profits.

It's obvious.

Q.

You talk about impatient youth.

Will that generation be the one to achieve the changes it proposes?

A. Yes. Young people are not greedy, nor is it true that they only think about their cell phones.

They use them a lot because it is current technology, it is normal.

But they are very concerned about the climate, injustice, what is happening in Israel and Gaza, regardless of which side they support.

They are young people who dream, who are angry, anxious and impatient because they see how the world works.

Q.

What to do?

A.

First, involve them.

I co-lead the Global Commission on the Water Economy, and we brought young voices to the table.

We must also ensure that when youth centers are created as part of a social policy, they remain at the heart of an innovation system.

Innovation systems are usually thought of with goals in science or industry and actors such as public banks, and on the other hand, social welfare with youth or community centers, and objectives such as care and equality.

We should associate the two things to really invest in collective intelligence.

It is known that more perspectives help to innovate more.

If we are the same old people saying the same old things, it is difficult to be creative.

Q.

Would it be a way to turn the Sustainable Development Goals (SDGs) into missions?

A. I

clarify that for me the SDGs are not missions, they are challenges.

The missions are at a lower level.

Today there are 17 SDGs and 169 goals.

Between the two should be missions that bring together different sectors to solve a problem.

Q.

It is an enormous challenge because, at least in Latin America, we have weak States.

A.

Yes, with one additional huge problem: all missions, in weather, health or anything, go through data.

Emissions figures, for example.

But if officials have no idea about technology, because these mega companies with excessive profits take away all the talent - as is happening with AI for the first time in history, before there were always great brains in the States -, we have a problem. additional that the States do not even understand what is happening.

Although I must say that I have seen more enthusiasm in the global south than in the old west.

For example, young officials, in their thirties, in the Brazilian Ministry of Finance, eager to create, to innovate.

They give hope.

Q.

You mention difficulties in what is usually called the West.

A.

I see a great loss of legitimacy due to the geopolitical situation in Gaza.

I will not say more... that is, what happened on October 7 is terrible, and those responsible must be judged.

What happened next is terrible, and those responsible must also be judged.

But young people, impatient with the climate and so on, look at how states interact and are losing faith.

And if they lose it, they don't vote.

And if people don't vote, who wins?

The Trumps, the Boris Johnsons.

You have to create trust in the processes, or at least interest in them.

Because if we lose all faith in politics and feel that everything is corrupt, we are lost.

Q.

And how to create or protect that trust?

A.

With actions.

The left has been very concerned about redistribution and yes, it is important, I care, but there has to be something to redistribute.

Create new things, innovate.

Without confusing the price with the value of things, we must redefine what has value to create it and be able to redistribute it.

As long as only the right talks about wealth and innovation, and only the left thinks about poverty, equality and redistribution, there is no way to win the elections and fulfill what was promised.

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