Breakingviews – Review: A mission-capable economy may be Breakingviews

MILAN (Reuters Breakingviews) – In September 1962, then-President John F. Kennedy announced that the United States was launching an ambitious plan to land a man on the moon before end of that decade. The visionary, state-led mission – inspired by the Cold War competition – provided a technological leap that was going through the economy for decades to come. Governments, economist Mariana Mazzucato claims, should now restore the same spirit and recapture bold goals to improve the planet and society.

In “Mission Economy: Moonshot’s Guide to Change Capitalism” the founding director of the Institute of Innovation and Public Purpose at University College London argues that Western market-led capitalism has failed. Years of privatizing state-owned companies and extracting essential services, she says, have weakened governments without benefiting society or saving taxpayers money. In Britain, which accounted for 40% of funds privatized across the organization for Economic Co-operation and Development between 1980 and 1996, projects funded by the government’s Private Finance Initiative ended up spending 40% on average more than those funded through government borrowing, National Audit Office estimates show.

Mazzucato acknowledges that the private sector has a place. However, the state needs to take the driving seat and create “partnerships with a purpose” to direct energy and money towards higher goals, such as the fight against climate change. Governments need to evolve from setting markets to shaping them. “Today, there is a great need for a ‘mission-based’ approach – partnerships between the public and private sectors aimed at solving key social problems,” wrote the Italian-born economist, a consultant. special for Italian Prime Minister Giuseppe Conte and sitting on board the state-backed Enel facility.

The pandemic, and the widespread state support and assistance it has given, give Mazzucato fertile ground to cultivate his pro-government message. The plan was adopted by EU members to pledge 750 billion euros of long-term loans and grants to a recovery fund called Next Generation EU. The plan, described by European Commission President Ursula von der Leyen as “Europe’s man on the moon”, comes close to Mazzucato’s vision of boldness and long-term vision. Member states will direct the funds towards the common goals of making Europe greener and more digital, in order to build a more sustainable European economy.

However, it is here that the lunar symbolism breaks down. While Kennedy’s goal was specific and sharply defined, the EU’s stated objectives are so broad that they are in danger of being lost in a number of ineffective snippets. While EU money could allow governments to fund expensive research into processes such as making hydrogen from renewable energy, the money could run to politicians’ pet projects. It is also overridden by draft national plans. Italy, where one in four young people is unemployed, has earmarked just 3% of EU funding for youth and labor enterprises, compared to 6% in Spain and 12% in France, according to a study by the independent news channel Sky TG24 earlier in January.

The Mazzucato approach also calls for a belief that governments and public administrators have a better knowledge and vision than those working in the private sector, and that they will always be in the public interest. Again, the pandemic offers mixed results.

The race to find an effective vaccine for Covid-19 was a successful example of an ambitious global mission accomplished at a miraculous pace. Large-scale government support has helped accelerate the advancement of messenger RNA technology, developed by companies such as Moderna and BioNTech, which may provide benefits in addition to fighting the coronavirus. This success was possible because the aim was narrow and public and private interests were aligned from the outset.

But Covid-19 has also shown that some governments cannot even make basic choices to protect their citizens. In the United States, which lost more than 400,000 lives to the virus, former President Donald Trump’s administration downplayed the threat and opposed scientists ’calls for basic measures such as wearing masks. It could be said that British Prime Minister Boris Johnson was slow to introduce locksmiths even when he witnessed the epilepsy in other European countries. In Italy, the government chose to reopen shops rather than schools, leaving families struggling with months of substandard distance learning.

Mazzucato seems right that it is time for capitalism to go beyond the narrow goal of delivering results to shareholders. Free markets cannot make the world a better place. But inept political leaders cannot. Unless the goals are narrow, well-defined and subject to a high level of public scrutiny, state-led branches will continue to miss their target.