Mariana Mazzucato on rethinking the state to improve partnerships

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Klaus Schwab, Founder and Executive Chairman, World Economic Forum & Thierry Malleret, Co-Founder, Monthly Barometer

• Mariana Mazzucato, Professor, University College London, has spent her career challenging policymakers to rethink how they partner with business leaders to cause meaningful change in their communities.
• In the below interview she says she’s optimistic that current social movements and the willingness from businesses and governments to act create a road ahead to address key issues facing the world.
• This interview is one of the inputs in The Great Narrative, the new book by Klaus Schwab and Thierry Malleret.

How can public institutions have better relationships with businesses? That’s been a key focus of the work of Mariana Mazzucato, Professor, University College London.

She argues that the public sector has a bigger role to play in working with the private sector to address many of the issues facing society.

The below interview withMazzucato served as one of 50 inputs from global thought leaders for The Great Narrative, the new book by Klaus Schwab and Thierry Malleret that describes how we can create a more resilient, inclusive and sustainable future post-COVID-19.

Is there anything you’d like to share about yourself that we won’t find on Google or LinkedIn?

Through the work I’ve been doing, including in my new book, Mission Economy: A Moonshot Guide to Changing Capitalism, I’ve been working globally and also at the very local level. One of the most exciting things that makes my heart speed up and makes me happier is the work I’ve been doing in London, in my own neighborhood of Camden. It’s a microcosm of the world. We have the best the world can offer but also extreme deprivation, knife-crime and poverty.

We’ve set up the Camden Renewal Commission, which tries to land the missions I’ve been working on globally in specific places, such as social housing. We’re able to do what we can’t do at the larger level, which is to bring citizens, people and different voices to the table. So, the Clean Growth Mission is housed in social housing, and we have the resident associations at the table from the start, debating what it means to live together in a more sustainable way.

That kind of citizen participation is incredibly interesting. We recently launched a council, housed by my institute and UN-Habitat, bringing mayors together precisely on these issues of why we need a new framing for bringing public and private sectors together, and what it means at the city level for all the different problems mayors face. So, the Sustainable Development Goals (SDGs) become part of the investment strategy instead of just a sideshow.

Rethinking the state

Over the past 10-15 years, you’ve been doing an immense range of things, and you are very influential among policymakers. But if you had to define or distil everything you’ve done so far into just three sentences, what would be your big, core idea?

Rethinking the state – period! Literally, three words. But the extra sentence is not because the state is better or is more important, but because we have under-theorized, under-imagined the role the state can play in collaborating with business. I really believe that, in the end, it’s all about partnership. But whereas we have a lot of thinking about the private sector – we have business schools, amazing courses, strategic management and decision sciences – for the state, we have at best thought about it as fixing markets. That’s the kind of state we get, which is too little, too late, always in fixing mode, out of breath!

It’s about public-private partnerships, but the partnership is being weakened by an ultra-financialized business sector and an under-theorized and constant-fixing-mode public sector. —Mariana Mazzucato, Professor, University College London

And so, how do you govern digital platforms for the common good? How do we have a proper green deal that includes both the supply and the demand sides, as well as procurement and a real framing and direction from the state? We don’t have public organizations that have been set up to do that. And again, it’s about public-private partnerships, but the partnership is being weakened by an ultra-financialized business sector and an under-theorized and constant-fixing-mode public sector. My real contribution has been on the state side – rethinking public institutions, public sector, public value, public purpose and notions of the entrepreneurial state – so that we can have more guidance but also better partnerships with business.

Do you think that, by now, your core idea of rethinking the state has been vindicated? It’s been getting a lot of traction over the past two to three years. Are people now conscious of what this means and are willing to put some of the policies you recommend into play?

I think so. The problem is that it’s more than just listening to a Ted Talk. It’s why I’ve set up a whole institution around this, a department at University College London called the Institute for Innovation and Public Purpose, because the training, the new curriculum required to do what I talked about, still needs to be invented, and we are kind of inventing it. We have a wonderful Masters of Public Administration, which is all about rethinking value, rethinking purpose, rethinking creative bureaucracies and using design thinking to transform our landscapes instead of just fixing bits inside.

Even though my message has been heard and the language is being changed because of it, it’s impossible to do just on the back of a static way to continue business as usual. That redesign of all the different levers that the state has – from procurement, grants, loans, bringing in conditionality to have a proper symbiotic social contract, and more – is much harder than just talking about it. The training and workshops required on the ground are very important.

And now, where we have the state back in terms of budgets, that’s not enough. You can’t just throw money at problems. The problem is also literally redesigning public funds to be less “handout machines”, to be less about guarantees and subsidies, and really have that kind of build-forward-better idea within them. That requires a very different type of public-private partnership, and the private sector is critical to that. You still get really regressivelobbying done by large pharmaceutical or tech companies, and somehow the state ends up giving in because the narrative about innovation and growth remains captured by a small set of value creators.

That, I think, is the hardest bit – creating a more confident set of civil servants. The energy in the room unfortunately continues to be more on the private side, and so the word “deal” is very important, as in the Green Deal. For the “green” bit, we know what to do – to be honest, it’s not rocket science – but the “deal” bit is extremely hard, and that means a new social contract. Exactly how to do that requires a lot more acceptance because it does mean that a lot of the current rents and incumbency, the excess profits out there, need to be reduced.

So, even the same companies that go to the World Economic Forum Annual Meeting in Davos and talk about stakeholder value and purpose – and then when it comes to sharing intellectual property rights during a health pandemic – aren’t accepting that. We have to walk the talk of stakeholder value, and using a new form of public-private partnership is key to that.

What do you think of the countries or regions that are the most sympathetic to your ideas, and those that are the most reluctant to them?

To be honest, my experience is not so much about countries. There are experiments or organizations, or what I call the sandboxes, happening in certain countries that are much more willing and able to implement some of the ideas. Even in the United Kingdom, at a national level, it’s hardly been an entrepreneurial state in recent years but actually some things it’s done have been incredibly inspiring. The Government Digital Service (GDS) set up a whole new web platform for the government, reframing that citizens are not customers or clients but are users with human rights. In addition, a citizen-focused website seeks to transform the relationship between people and the welfare state in terms of getting driver’s licenses and passports.

These examples have required a rethinking that hasn’t happened in some other departments. It’s also required a talent pool that they could bring in under the guidance of the people who set up BBC iPlayer, which was incredibly inspiring, going against the usual trend of outsourcing these kinds of things to the private sector. The BBC is an incredibly interesting organization that has been thinking about these issues of public value and public purpose.

What’s interesting globally are the new development banks being set up. The Asian Development Bank is quite interesting because from the conversations I’ve had with them, they recognize that this can’t just be about infrastructure. This does require a more challenge-oriented, mission-oriented framing for the Bank itself, where it’s not picking winners – a kind of static list of sectors or types of firms, such as small to medium-sized enterprises – but picking problems and then using patient, long-term finance to galvanize those who are willing and to provide that extra finance if you’re small (but it’s not because you’re small that you’re getting the money).

Similarly, there are public wealth funds, such as Yozma in Israel, a good example from the past. I’ve been working with cities and states, such as California, and setting up a new public wealth fund precisely because so much of the wealth created in California was an outcome of massive amounts of social investment, but then the rewards were privatized. How do you design such a wealth fund at the state and city levels? Singapore is quite interesting because it’s been able to make it sexy to be a civil servant. This is both in terms of the pay structures – going against the usual idea that you just have to pay civil servants nothing, so that it’s more attractive to go elsewhere – and of having explicit ideas about the entrepreneurial state, which I’ve engaged with it on. I think it’s been able to attract a different type of talent pool on the back of that.

The city level is very interesting. Yvonne Aki-Sawyerr, the amazing mayor of Freetown, Sierra Leone, is implementing a really important strategy for African cities that focuses on big problems concerning inequality and climate change, and to use all the levers the mayor has as well as to catalyse different forms of public-private partnerships and increase the trust that citizens have in the policy-making process. This is because there’s a problem of trust nowadays, as people have lost their hope in both politicians and business leaders, so working at the community level is very important. Rwanda, by the way, is also very interesting with its plastic-free mission, and we’re working in different cities in Latin America. The city of Medellín has had very bold targets, like Medellín la más educada, the most educated city they want to be. But that has required bringing together different actors to put lifelong education at the heart of the city strategy.

Vision for the future

In a few words, what’s your vision of tomorrow? How do you see the world evolving in the coming years?

The most important issue is the deal: a new deal that’s directed towards goals that are about a green deal, but also a healthy deal and a new way to govern digital platforms. We have very problematic partnerships and parasitic ecosystems. Look at what’s happening with the COVID-19 vaccine: billions have been put in by both the public and private sectors, with a lot of early-stage private money in the most high-risk stage of the vaccine development for all six vaccines and, yet, then we allow the ecosystem to remain its usual kind of parasitic self, which is on the back of huge amounts of public funding. We then allow these intellectual property rights and very high prices, which then the state has to subsidize over and over through different types of means. That’s a very inefficient way to drive a public-private partnership in the innovation ecosystem.

I believe that getting a more symbiotic deal; a more mutualistic deal; a functional, not a dysfunctional, public-private partnership; and to have metrics for the partnership, just like we have metrics for environmental, social and governance standards within companies – I think that’s extremely important. Also, the context is one where the labour share of global income is at the lowest it’s ever been, and the profit share is one of the highest it’s ever been, and a lot of those profits are rents.

And, it can’t just be increasing well-being indicators and GDP. We actually have to rid our measures of growth of all the rent seeking, and rents that are being accrued by different types of monopoly power. It’s very important and is part of the deal itself, but that requires a much more careful, granular understanding of what’s happening in the digital platform space, in the health innovation space, in the sustainable/energy revolution space. We need to get our hands dirty with the details.

We have to stop talking at this very waffly level (as my kids would say) and get very concrete. To do this, we need partnerships where we can test out a different relationship. Just like with the vaccine: if you look at the AstraZeneca partnership and the Pfizer partnership, the AstraZeneca one was much more ambitious in terms of working with Oxford University researchers who were public-sector paid, and so they put very strong conditions on the temperatures of the vaccine, on the cost and the prices on sharing the knowledge.

Differentiating one project from another and learning how to do things in this more functional, symbiotic way requires a level of granularity that must go beyond the usual siloed public-private thinking. It’s again very easy to talk about public-private partnerships; it’s much harder to design them so that they’re good partnerships.

What are you optimistic about for the future?

We’ve only had the SDGs for six years, so that itself is an optimistic setting (we’ve had 17 agreed goals since 2015). We also have the business sector at least talking about purpose and stakeholder value. And there’s my work, which is trying to convince governments to put public missions at the centre. So, what makes me optimistic is the possibility of uniting public missions and private purpose around the SDGs, and the urgency that’s currently required.

It’s being demanded by the youth – for example, with constant pressure through Fridays for Future and Black Lives Matter – to make this work for all, instead of it just being, at best, a Davos kind of discussion. That makes me optimistic. The combination of the three – the social movements behind the change, the apparent willingness for business to put purpose at the centre, and governments to put missions at the centre – makes me optimistic that there’s a road ahead.

This interview served as input for The Great Narrative, the new book by Klaus Schwab and Thierry Malleret that encapsulates the Davos Vision, and explores how we can shape a constructive, common narrative for the future.

The book is on sale now on Amazon. You can order a Kindle or paperback copy in Amazon.com, Amazon.fr, Amazon.de, Amazon.co.uk, Amazon.ca, Amazon.com.au and any Amazon store around the world. It is the second installment in The Great Reset series. You can download the book for free on Amazon Kindle until 10 January 2022.