Mariana Mazzucato wants economists to rethink everything

0:00This message is brought to you by Coligard. If you recorded songs off the radio for a mixtape, it might be time to screen for colon cancer. The Coligard test is non-invasive, requires no special prep or time off, and you start screening right from your home. It's just three simple steps. Set up, sample, and ship. If you're 45 or older and at average risk, ask your doctor about the Coligard test. Available by prescription only. Learn more or request a prescription at coligard.com slash podcast.

0:33The New Statesman

0:37Ciao Mariana, it's Oli Dugmore from The New Statesman. Obviously we're going to talk about the common good, how we achieve the things that we've decided we want to achieve as a society, whether it's decarbonisation, reducing inequalities, technological sovereignty. Take your pick, like how do we actually achieve the things that we want to achieve? Can we all sit around scratching our heads wondering why we haven't achieved what we think is good if we don't actually have an idea of what good looks like? That's one thing. I also think there's, you know, a degree of conversation that needs to be had about this meme that, you know, the left has run out of ideas.

1:16To what extent has the left actually run out of ideas? You seem to have quite a few of them. And maybe we'll talk about pedicures as well. Hey, Oli. So first of all, let's start with the most important thing. My nails are red. We won the league. Thank you very much. I do not care about the Champions League. We won the Premier League. Tottenham, eat your bleep bleep hearts out. Mariano Matsukato is one of the most influential economists of modern times. An avowed progressive, her ideas impact the lives of millions of people. from the United States to sub-Saharan Africa. She was directly consulted in the creation of Biden's CHIPS Act, worth$280 billion, the World Bank's Mission 300.

2:05It is straight out of her book, Mission Economy. I've spent the last few months, when I haven't been looking after my new baby, interviewing Mariana, her friends and colleagues, for a piece in the magazine, which you can read this week. Second point. So, what can I say? it was this book for me is meant to be a very uncomfortable book and I don't I hope that the rosy rosy title the common good doesn't make people think this is about we're all in it together because of course we're not there's so many different types of individuals and organizations that are profiting from an economy that's not the common good economy so this is not about win-win arsenal one but yeah for that it's one but for the rest it is about completely changing the narrative, the structure in order for economies to be driven by what matters the most for people and planet.

2:55But that needs to be about change. And I hope that the compass, as we said, helps to navigate the waters, the water is big waves. But I'm hopeful. And I'm especially hopeful because I wrote it while actually working around the world. And the examples, especially in the middle section are from around the world of people who give me lots of hope. This is a conversation about politics, about the rising tide of populism, about how progressives answer that challenge. And it's a conversation about hope. I'm Olly Dougmore. You're listening to The Exchange from The New Statesman. Enjoy the interview.

3:31Speaking at the Hay Festival this past weekend, you said you want your new book to be, quote, a provocation. What's provocative about it? Right. So first, I guess it's who am I provoking? and for sure economists who love to talk about good. For example, we talk about public goods, two words, one is good, and I don't think it's very good. Why is it not good? Because it's a correction. It's not even a theory of the public. It's a theory of the private sector, which when they don't do something, when we have non-excludable, non-rival characteristics, I won't go into that because it's boring, then we expect the public sector to fill the gap, whether it's clean water, but even defense systems, so public goods theory.

4:09And so the book is provocative in the sense of saying, hey, I'm not going to tell you to talk about good. But if you are going to talk about good, make sure it's good. In other words, let's talk about the common good as an objective and not a correction. And it's also a provocation for young people who I think have given up in many cases, whether they're not voting or whether they go in different parts of the world, vote for a party that's seen as an outsider because they've seen so much lack of ambition and action on doing good. And so it's to say, don't lose hope. And actually, economics really matters.

4:46We can't just say, oh, economists are so boring and let's go talk to sociologists and poets, as important as they are. I think we should speak more to poets, by the way. I think economic theory could be really radical. In other words, going to the radice. So I know you like Italian. So to the root of the problem instead of always being reactive, right? So how do you have an objective-oriented, proactive way of doing good where the how we all relate to each other matters as much as the what we're trying to do? That's what the book's about. And so it's trying to provoke economists to rethink their own understanding of good, young people to not give up, and definitely politicians who I have had the honor to work with.

5:27I'm actually one of the few people in the world that loves working with policymakers It actually makes me happy. Like, I'm not joking. I don't like talking to certain people, which let's not go into that. But I actually enjoy. I do love it. It makes me feel alive to talk to civil servants. Most civil servants around the world and countries where I've worked are really trying to do good. Maybe there's some that are corrupt. Maybe some are just thinking about their career. 90 % of those that I've met really care about solving problems. So it's a provocation to them to say, hey, great, you're trying to do good stuff on the ground.

6:04But unless you think the underlying economics and even get a bit more trained in it, then it's going to be really hard to do good. And that's, of course, Keynes' very important quote, which is practitioners on the ground trying to do good, whether it's in business or in the policy space or often, he said, slaves of defunct economic theory. So the book is about really rethinking the economic theory of what it looks like to do good. Yeah, I mean, that answer actually is a really nice kind of, it starts off the themes that I think we're going to talk about over the course of the hour, not least value, happiness, whether or not we have the right ways of thinking and measuring what a successful society looks like.

6:41I would challenge anyone, some people may think that economists are boring, we'll see if they still have that view by the end of this hour, Mariana, because I think it's going to be a lively conversation. But I just want to pick you up on your point about correction, because, you know, you've written previously, you have this assertion, right, that it's the government's responsibility to shape markets, not just go in and fix them afterwards. But, you know, industrial policy has become a word now that actually, yes, Starmer, Biden, also a little bit Trump, you know, the EU. And I just sort of invite your comment about, I don't know, do you feel vindicated when your ideas start to gain, moving beyond kind of the background, the civil servant, the academic conference and frontline politicians start using your language, start maybe taking not all of your ideas, but little bits of them.

7:26is that vindication or is it perhaps frustrating if there's a degree of misunderstanding there um so i don't like the word vindication because then it seems like it's about me right so then i mean if i was a novelist maybe that you know i'd say yes i wrote this great novel and you know fairy tale and now everyone's been reading about the fairy tale and now they're all dreaming what i want to dream so it's not about me um and so i don't like i get the question but i don't like to think of it that way also because and you actually just said it implied it, I think, that some of the stuff, so put it this way, definitely the ideas of the entrepreneurial state of proactive industrial policy instead of reactive industrial policy, these are definitely taking hold due to, I think, both what I've written and others I've written.

8:07So again, even there, it's not just about me. The key point there, as you said, is that if we keep just fixing market failures, that's what I meant before when I said reactive. So the market is an outcome. So business and the market, first of all, are not the same thing. Most people, when they say the market versus as a state, I'm like, oh, whoa, whoa, whoa. Let's start with vocabulary 101, right? The market is an outcome of how we govern business, different types of corporate governance, how we govern public institutions, different types of ways to literally structure our public entities, but especially their interrelationship.

8:40So I think we get the wrong market outcomes when we have, for example, a purely market-fixing public entity, a business sector that's just maximizing shareholder value and when their interrelationship is parasitic and not symbiotic based on reciprocity. And I'm sure we'll come back to that. We will. So that's the deep point, right? Then the more superficial point is like the state. So there I'm like, hold on a second. The state has always been there. It's not like it's back. Many of The Economist covers in the last 10 years actually have been the state is back. I'm like, it never left. You know, and even it's not about big state, small state.

9:13People who tend to think about lots of public spending or little public spending are missing the point. You can have like a pretty nimble, strategic, mission-oriented entrepreneurial state and a very large, boring, inertial state and vice versa. So it's not about size. It is about structure. And on that, I'm not sure if I'm vindicated. So we have seen more money being pumped into the system, whether it's during COVID, whether it was after the financial crisis with Mario Draghi saying, you know, whatever it takes, even though we didn't do it. Actually, We did it a bit with the central banks, not with proper fiscal stimulus in Europe.

9:48The UK completely went down the austerity route, which even the World Bank and the IMF were like, wrong. It didn't work. Anyway, so if you look, for example, at the huge amount of fiscal stimulus that we saw both after the financial crisis in the US, 800 billion stimulus program under Obama, under the IRA, trillions, under the next gen EU. also a big stimulus program in Europe, more recently alongside the IRA, that's just money, right? So how do you make sure that money is actually spent well catalyzes one of the key problems in most capitalist countries, which is business investment. Let's stop talking about public debt, right?

10:32Business investment is the problem, like in the UK, where we have high profits below investment. Profits are not getting reinvested back in. That requires very strategic relationships between public and private so that when you do have a fiscal stimulus or a bailout or a tax incentive or a guarantee or subsidy, it's conditional, right? Not with a stick, but again, coming back to reciprocity, that the business sector does its job. In the first instance, even just reinvest your profits. Second, make it in such a way that drives productive capacity with a direction, a more inclusive economy, a more sustainable economy, one driven by innovation.

11:10I don't see much of that. That's why I've written recently a whole paper about how do you embed reciprocity within public-private contracts. And I've written that because even now, with these massive stimulus programs, we still end up with the wrong relationship, just money being provided to a sector. And Trump, of course, did one of the things I argued for in the entrepreneurial state, which is don't just socialize risks, socialize rewards. And I talked about equity stakes in companies that receive the public subsidy, but he's doing it kind of randomly. He's getting equity stakes also in companies that he had nothing to do with the actual driving of the initial risk taking.

11:47And there the point is, there's so many different tools that governments have from procurement, which is a demand side instrument, to public loans, to supply side, different types of tax incentives or guarantees. How do you make sure that you structure it from the beginning in a pre-distributive way? The book talks a lot about pre-distribution. So you get the right relationship, so you don't have to pick up the mess afterwards. On that front, I still think we're making huge mistakes. And the UK being one of the prime, I think, places where this problematic public-private relationship, even though we are talking about industrial strategy, continues to be there.

12:25We'll come to that. And you're referencing as well, the federal government becoming one of the largest shareholders in Intel, I think. But my next question was going to be about power and we will get there in a second. But I just want to really dial in something that you said in the course of your answer there because you said that public debt actually is a bit of a misdirect that people are obsessed about. And I just really want to talk about that because if you consume British political media, if you listen to the way particularly politicians, Conservative Party politicians talk about, you would think that public debt was like a panacea for the ills of Britain.

12:59And I would just, you're saying that's not the case at all. I think what you're saying is financialization, share buybacks, you're pointing to a share buybacks, things like that. Yeah, well, okay. So maybe just to backtrack what I meant on that, we'll come back to, because you're asking now a separate question, which is super important. So what I meant before when I said that the problem is business investment is that even companies that have very large profits, whether it's Pfizer, Exxon, Shell, many UK companies that have also received huge amounts of subsidies, Thameswater, Carillion, what we see is that the profits they're making are not reinvested back in.

13:35We see them given out as both dividend payouts, but also share buybacks, which means that you're buying back your shares to boost stock prices, stock options, surprise, surprise, executive pay. There's a very strong link between that. And there's no problem doing some share buybacks, by the way, especially when there's no opportunity for other types of kind of investments. The largest share buybacks are in the life sciences sector and energy, huge opportunities, right? So these are decisions that are being made within the corporate sector. And it's a lack of reinvestment. And the total sum in the last 10 years by the largest corporates globally has been$7 trillion in share buybacks.

14:10That's a lot. That's an excessive use. This is what the physiocrats, who I wrote about in the Value of Everything book, talked about as creating a sterile economy. They use biological metaphors, not physics ones. So they were worried that the landlords were just extracting value out, not reinvesting back into better farming techniques. And they looked at the problem of the sterile class, which, you know, today is also the financial sector, where in the UK, for example, 80 % of finance goes back to finance, finance, insurance, and real estate, but also the business sector, which to a large extent, if you look just globally in terms of the global investment share of GDP, has been falling.

14:49But your really important point, sorry, about public debt, my dream, by the way, is to go on Newsnight with a little chalkboard hidden in my shirt. I know this would look weird. Go on. Very weird. What does it say on it? I shouldn't have said it now publicly because then they're going to catch me. They're probably going to start patting me down. Searching you, yeah. Feels too flat here. She's got the blackboard, yeah. Well, I would just whip it out and say, what's X over zero? And I'd quickly catch people for forgetting their GCSE math. It's infinity, right? It is. Do you remember that? Do you remember that?

15:21No, I don't. I haven't done math for more than 15 years. X over zero is infinity. So what does that mean? During the financial crisis, first of all, caused by what? Private debt, not public debt. That's the first point. Hello, history. Let's remember. It was private debt that created the financial crisis. And yet we then obsessed about reducing public debt. Second point, what then happened? We had in Europe and here this obsession about reducing deficits, right? So by reducing the numerator of what ultimately becomes debt to GDP, by cutting all sorts of areas, which are long run drivers of the denominator, again, basic math, numerator, number on top, denominator, number on the bottom, then you can actually end up with a low numerator.

16:05You know, we reduce our deficit to 3%, 2%, 1%, a surplus, zero, right? But the denominator is suffering, then that ratio can rise. And that's actually what we saw in Southern Europe in the famous pigs. I'm allowed to say it because I'm Italian. A German cannot say this. Portugal, Italy, Greece, and Spain. Terrible acronym by Goldman Sachs. Thank you very much. So Southern European countries were called the pigs. Anyway, that tells you everything. Their problem, Goldman Sachs and others thought, after the financial crisis, was that they had gotten themselves into a mess because they'd spent too much.

16:36When actually, had you really looked at the differences between Northern Europe and Southern Europe, it was actually a structural difference. In Italy, yes, we have a public bank. So does Germany have one. But in Germany, it's always been much more strategic and had strong conditionalities linked to the loans, making sure that the business sector that was receiving the loans was actually part of the solution and not part of the problem. Whereas both here in the UK and in Italy, for example, we have lots of bailouts, you know, to the steel sector or whatever sector without strong, again, reciprocity.

17:08That's a difference. Second, very weak vocational training in some parts of southern Europe compared to northern Europe. lack of proper science industry linkages, like the Fraunhofer Institutes, which in the UK, we tried to copy then forgot to spend on them and also structure them, I think, problematically, the catapult centers. So had we actually said, okay, what actually drives competitiveness, innovation, these structural differences between countries that have strong vocational training, apprenticeships, science industry linkages, strategic public banks, and let's learn what works, what doesn't, as opposed to cut, cut, cut, right?

17:42So that was the austerity years. And it created huge damage, especially to people's lives. Just think of the UK, you know, mental health, youth centers, community centers, public libraries, health systems, they were cut. Austerity did not work. It simply created cuts, which did not then drive a more competitive economy. It just really created lots of misery on the ground. And we saw it with people's, you know, health, mental health, you know, community cohesion, really suffering because we forgot that the cost of inaction is greater than the cost of action. You remind me, I interviewed Bernie Sanders a couple of years ago, and he said to me, the point he made was that we have, we know what it is when someone robs a bank, walks in with a gun and walks out with all the money.

18:26We know what it is when a gang member kills another gang member. We have the language for that. We'll call it murder. And he just said to me, what do you call it when a pharmaceutical executive increases the price of insulin by 50 %? Exactly. it's like you know do what do you what do you call that thing and and i think that's sort of the morality of it and this is where i'm going with this is that one way of thinking about your work is about economics but i think another way of thinking about it is it's about power yeah you know it's about who gets the reward who who who defines what value is who shares in the benefits of what we're doing now and i think that to your point earlier about whether or not economics is boring sometimes i think it's just a question of framing because really the things you are talking about yeah they are about the way in which some of the most disadvantaged the people who are suffering in our society the way that their lives can be made better absolutely and by the way it's interesting you said that because i used to tell my husband if i don't come home at night it was pfizer and then i wrote the big con i was like actually that's mackenzie so you know watch it but anyway but but coming back to the public debt problem because it's again in the front you know pages in terms of a new labor leader are they going to understand how bond markets work and i always say, hold on a second, name one country in the global north.

19:39It's very different in the global south. They get penalized for all sorts of things that make no sense. But in the global north, I cannot think of an example where a country that had a smart, strategic industrial strategy, which would increase public debt in the short run, but drive the future of long-term growth, a more innovative economy, an economy where public and private are working together to solve health issues, climate issues, inequality issues, they have never been penalized by the bond markets. The bond markets penalize Liss Trust for a very not intelligent tax policy. It will obviously also react to all sorts of external issues around war, energy prices, and so on.

20:21But if you have a leader coming in, regardless of the party, that says, okay, we're actually going to start putting in some serious public money in order to drive a huge wave of innovation, to reduce the digital divide, to improve health systems and work really well with also digital service companies in order to improve our health system. So it's going to be not just about medical interventions, but actually a more dynamic hub of innovation around what it means to have well-being and a flourishing population at the center. And having a vision for that, thinking about in terms of industrial and innovation strategy and creating the finance to do that.

20:59I literally cannot think of a country in the global north that's been penalized for that. Okay, well, let's just talk about this specifically, Mariana, because I think you may be referencing Andy Burnham in the Labour Party who gave - Also Rachel Reeves for the last six months. Well, yeah, quite. And, you know, Burnham gave an interview to our editor, Tom McTague, during which he said the words like, our country should not be in hock to the bond markets. It was over-interpreted, over-analyzed to the point now where you've got people like live tweeting what's happening with guilt yields whilst like the make-a-fill by-election is happening.

21:30But what he meant when he said that, what he meant when he said that was that essentially the political and economic settlement was so fractious, so destabilizing that I think anyway, the downstream of that is that you get this instability. And actually, if you come in and say, no, this is our program, here's how it's going to work. And actually, we're going to do this for the next five years. Well, what is the reason then that you would, why would the bond markets penalize you for doing that? And also explain it well. Yeah. I mean, you know, Claudia Scheinbaum, she's a president of Mexico. Every single morning at 730, she goes on to talk to all the press, also the ones that don't like her.

22:04So it's not some sort of staged event to talk about her policies. And she starts for about 15 minutes and then she brings the different ministers. You know, imagine if Keir Starmer had done that here with really important policies they did, by the way, but didn't really talk about, you know, including the nursery school, you know, places and so on. So I do think that what he means or what he should mean, Andy Burnham, and by the way, we just met in Madrid. There was a very wonderful event bringing together mayors from all over the world through Bloomberg Philanthropies, who we work with on the public sector capability index that we do with mayors around the world.

22:41And we met and were reflecting on the work that we had done together with Manchester and my Institute for Innovation and Public Purpose on missions in Manchester. And, you know, the conversation was all about what's to be done and what does it mean to have a sustainable mobility system? What does it mean to think about housing, not just build, build, build and, you know, cement and steal from the past, but actually do it with sustainability, inclusion, community creation at the center. So if you do that and if you talk about it and if you talk about also the public investment that will be needed, but to crowd in business investment and to work together with people and planet at the center, I know that's a very quick sentence there, but still we know what that means, then he's right.

23:20Bond markets won't penalize you. But he's saying something on top of that. He's saying, let's not worry about the bond markets. Let's do really smart things and then talk to the market, to businesses, to the financial community about that. And you're right. It was misunderstood. And, you know, all these things just become, you know, quick lines. They become names, don't they? Yeah. They've taken a meaning of their own. Which doesn't mean it's easy, by the way. What we shouldn't pretend, and this really is part of the problem, too. too. It's not like public money in, great result out. It requires, again, public sector capacity.

23:55That's why I wrote the big con with Rosie Collington. We have not been investing in our administrative implementation capacity. And that's why it's wrong to think just about financial gaps for our problems. Because even when the finance is there, sometimes you lack that administrative capacity. I've seen that in South Africa. I've seen that in Italy. I've seen that here. And that's really why I set up this Institute for Innovation and Public Purpose, which is in a university, because I believe in education. It's actually a department. So we had to rewrite the whole curriculum of what does it mean for thinking about value differently, collective value creation, purpose-oriented policies, a creative bureaucracy.

24:30We need bureaucracies. We just have the wrong bureaucracies. So what's the underlying training, the curriculum that needs to underpin this good stuff that we're talking about? It's not easy. You need to invest in it. And that's why the outsourcing we've seen, the kind of deloitification, I could say it differently, but I won't, of our civil service is a huge problem. So that requires commitment. So any politician who's going to come in and just say, oh, this is easy and don't worry about the bond markets, of course is wrong. But I don't think that's what Mandy Burnham was saying. No, it wasn't.

25:01Was that a nod to Cory Doctorow, the deloitification? Is that kind of where? Oh, the shitification. No, I was just going to replace the I with a U. Yeah, yeah, yeah. Very good, yeah. Also works. Okay, look, I do want to talk about state capacity and it's so hard to talk about a book like this in the space of an hour. There's a lot there, But in your answer, right, OK, this might be just a problem that we're encountering because of the nature of the Labour Party's leadership at the moment. And it's something unique. But what you're saying there is that actually there's a communications point there.

25:29That it's particularly shy about. Not just that, because they didn't do enough. And we will get to that. But I'd just like to invite your remarks. One of the criticisms that will get leveled at this government is that it's basically accused of being ideologically exhausted. That it doesn't have ideas. You can't begin exhausted. Jesus Christ. I mean, come on, man. Wake up in the morning, get some energy, be exhausted at night. You can't begin. exhausted. That's what I think happened. They begun exhausted. They begun by complaining, as we all did, by the way. So they were right to complain. But then, hey, you've done it.

25:54Okay, now move on. 14 years of austerity, it was terrible. It created huge damage. Brexit created huge damage. They didn't, I think, actually say that one enough. But anyway, okay, you said that. Now what's your plan? And how are you going to make it super ambitious, interesting, increase the expectations in business of where future opportunities lie? Because that's the key driver of good business investment opportunities that they see, not just a tax incentive here and there. So because it also began on a negative ground of the winter fuel tax, the disability allowance, that's a negative thing.

26:29That's like taking away. Even if that was the right thing to do, and I think that was the wrong thing to do, even if it had been the right thing to do, you don't begin with that. It's kind of obvious. I mean, I don't know who was running comms, but whatever heads should roll so you don't begin with that and second and second they adopted and I was very happy initially the missions approach right I had just written yeah yeah mission economy I had also met with Keir Starmer um the Christmas before they won the election he came into the institute and I really have a lot of time for him not just because he's an Arsenal supporter can we at least talk a bit about Arsenal at some point yeah we'll give you five minutes at the end No, five minutes.

27:03That's a lot. Oh, wow. Okay. Thank you. Anyway, I don't think, like, I think, how can I say? I think he is trying. I think they failed because they began with the negative. They didn't create a real vision and the missions, they just kind of got it wrong. And by the way, in the New Statesman, I wrote about this, right? I said, growth. Of course you want growth. Who doesn't want growth? Find me one country that's not interested in growth. So just park that. How do you achieve growth? You don't achieve growth by making growth the mission. Growth is a function of investment. In a country where the public sector has not invested, literally 500 billion is what we would have invested more had we invested the average of the G7.

27:46So we have this massive hole in the public pot. And the private sector, as I've already said, in this country, we are 27th or something in the OECD in terms of business investment. So we need investment. What are the problems that require that investment? That's why I wrote the moon landing. The moon landing happened through huge amounts of investment in the private sector. Hundreds of thousands of people in the private sector helped us get to the moon and back, but with strong public leadership, redesigning procurement to solve the problems. What would the astronauts wear? How would they go to the bathroom?

28:16This became also a problem recently with the Artemis. The toilet is often the problem. We think the moon, aerospace, it's the toilet. Don't forget the toilet. Food and so on. So we ended up with camera phones, foil blankets, home insulation, software as solutions to problems the astronauts had. Think of climate change. What will we wear? The materials. How will we build? Cement and steel. Are they green or not? How will we grow our food? Most carbon emissions come from agriculture. Will we have sustainable mobility? These are all problems that require business investment. And if you do that, you achieve growth.

28:49You don't achieve growth by talking about growth. You achieve it by solving problems through public and private investment. They didn't have very clear missions that would drive that, except I would say the net zero one, which I think has been progressing much more than the other ones, which to be honest, have been left behind. Opportunity, safer streets. These are really important ones, especially safer streets, which for me is very important because I've seen what happened with austerity in the streets of Camden, where my kids went to state school. Many, many of their friends fell through the cracks because of what happened in our community.

29:19And that should have become a social and economic determinants of crime, social and economic determinants of health mission. And to think about it between government ministries, just like the school meal work that I've done, again, Marcus Rashford, not an Arsenal player, was Man United, now is in Barca. He did us all a great service to remind us that school meals, he would not have been a footballer without free school lunch and breakfast, but that itself can become the pillar of cross-ministerial thinking, healthy, tasty, sustainable lunch. That's what we worked on in Brazil. What does that mean for putting it at the center of an industrial strategy, working with local manufacturing, supply chains for food that allow you to deliver that moonshot, but especially Department of Agriculture, Health, Education, Finance, working together with outcomes-oriented budgets, just like we got to the moon, normalize the moonshot in the cafeteria.

30:15So also that talking about it that way, that you care about kids, you want to feed the kids. You know, we have starvation in this country. It's crazy. That is a crime. It is a crime. We cannot have the levels of child poverty. I actually get really upset when I think about this. We cannot have... You should get upset about it. I know. It's disgusting. Yeah. I mean, I literally... Anyway. Well, yeah, we can move things on a little bit then. So I guess there's a... that relies on an an unkind way to say that there's an assumption in there, but you could say that it relies on the state being capable, right?

30:47Whether it's, you know, building infrastructure, retaining expertise in order to... Caring. Yeah. And caring. Yeah. Because that means listening. It means listening. So everything we just talked about requires talking with communities, not talking at them, working with people who've really been left behind, helping them design the better policies. So this is what we did in Camden, right? Adult social care and across these 10 housing estates where we were working with this mission-oriented approach, we brought the people providing the care to the table to design a better care system because they had the experience.

31:21They knew where it failed. The carees, people who had received bad care. So that's what it requires to do missions, the lived experience. so are you even training the civil service to listen and have empathy not sympathy there was that nice rsa video i don't know if you saw it of sympathy versus empathy anyways like sympathy is someone who when you're having troubles just gives you a quick answer gives you a sandwich whereas empathy you know they're actually listening to you and say you know and helping yeah and getting back in touch i guess that is a capability to listen yeah i mean how many good listeners do you know not many yeah not many stay with us we'll be right back after this this.

32:03This message is brought to you by Cologuard. If you recorded songs off the radio for a mixtape, it might be time to screen for colon cancer. The Cologuard test is non-invasive, requires no special prep or time off, and you start screening right from your home. It's just three simple steps, set up, sample, and ship. If you're 45 or older and at average risk, ask your doctor about the Cologuard test available by prescription only. Learn more or request a prescription at colaguard.com slash podcast. Car crashes injure over a million of us every year because we're human. For over a decade, Waymo's been building a driver that's safer.

32:49Statistically, 10 times safer in the cities we serve. Not because humans aren't enough, but because they're everything. Based on over a 94 % reduction in serious injury or worse crash rates. Learn more at Waymo.com.

33:09Okay, let's test this a little bit. One of the criticisms that I found, you know, reading around your work, reading the critics of your work, etc., that you will hear is, look, it's fine in theory, but governments pick losers all the time. And actually, how do you account for them? Losers pick government. That's what I say. Okay. So go on. Tell me that. So how do you answer that? Well, if you don't have a strategic entrepreneurial government, it's not about picking winners. The losers will pick you. They will start asking you for all sorts of favors. And that's why I say don't pick winners, pick the willing.

33:39So once you have your very clear missions, whether it's to go the moon and back, whether it's to provide healthy, tasty, sustainable lunch to every child in a country, you're going to have to work with those businesses that are willing to work with you to achieve that goal. Now, if you're going to micromanage them, you will kill innovation and entrepreneurship. So had NASA told the whole business community exactly what to do, we would not have gotten to the moon and back. They made very clear goals, sub-goals. That's why they needed to change the procurement law from the beginning away from cost plus to challenge-oriented procurement.

34:13They had no excess profits, so no rents in the contracts. That shows courage. You know the value of what you're providing to the table. You don't want to turn going to the moon and back into a gambling machine, which is, by the way, what I think has happened now to space. A lot of the astronauts are complaining because they can't see anything. It's just full of debris, literally. The way that Elon Musk is working now in space, it's not clear what the mission is. And it's just basically become commercialization of space with very little regulation. And that's what's happened to so many of our sectors, health and so on.

34:45So anyone who thinks that what I'm talking about is like glorifying government has not read my work. My work, coming back to your first question, it's the main provocation is to government, hold it accountable. Forget dictatorships and democratic countries where you were there to serve the people. What are you actually doing for the people? And what metrics do you have? This is why I worked with the BBC on a very long report that we published, God, in 2018 or 19 on how do you measure public value? It sounds great, beautiful word, public value. What is it? Right? So we did a lot of work on public value, public purpose, the whole point of the book.

35:21Are we going to talk about it sometime? The point of the book. Sorry, sorry, sorry. Yeah, this is all I guess about the book. But, you know, the whole notion of the common good for me was let's get real. There's too many words out there that sound good, public good, public interest, and so on. What does it actually mean. So how do we hold government accountable, right? So as we also said before, it's not just about more state or less state. It's about making sure, you know, in the US, I joke that they talked Jefferson, but acted Hamilton. And only once the musical came out, people knew what I was talking about.

35:52But, you know, Hamiltonian industrial strategy should be much more explicit and not done beneath the radar precisely so we can also hold it accountable. Are you just giving out subsidies to sectors, then those critics are right. How does government know which sectors are going to be the top ones in the future? Whereas if government is thinking of problems and not sectors, which is my point, which doesn't mean we shouldn't care about sectors. That's another misunderstanding. Oh, she just cares about problems. She doesn't understand sectors. I'm like, do you think we went to the moon without sectors that were like really ambitious?

36:24The point is you don't just give a subsidy to the sector. You do what Germany did, for example, with the energy vende where they said, okay, steel, you're in trouble. Guess what? Here's some money, but conditional that you reduce the material content of production. And they used, in their own way, they weren't micromanaged by government. They used repurpose or use recycled technology through the whole supply chain to have a more innovative steel sector. We haven't done that here. So the real critique, I'm the one actually doing the critique, thank you very much, which is to say this isn't just about industrial strategy.

36:55It's not about sectors and giving them more bailouts during COVID, more subsidies, more tax incentives, which historically have just increased profits and not investment, right? A tax incentive that doesn't work well, doesn't create additionality, doesn't make investment happen that otherwise would not have. Many R &D tax credits that are not well designed do that. They reduce costs, so increase profits, but don't actually catalyze investment that otherwise would not have happened. So all my work from the entrepreneurial state onwards has been actually about holding government accountable to be smarter, more strategic, and not heavy-handed.

37:31Otherwise, again, that will hurt the kind of Schumpeterian creative distraction. Another critique, who are these critics? Another critique that, no, because it's good to be critiqued, by the way. That's how one, especially if you're an academic, your work becomes stronger. Of course, we should have critiques, but some are just ideological. And especially when people don't read the work, they just read the title, and maybe the table of contents and a couple of words in the beginning, then you would think, for example, the entrepreneurial state was me saying states are entrepreneurial. It's the opposite of what the book said.

38:00The book said, why are we only entrepreneurial when it's about the space race? And why are we so stupid, literally stupid around health, around all sorts of things that matter on Earth? Imagine, I wrote, if we used moonshot thinking in missions as ambitious as the ones that got us to the moon, but on earthly problems. And we would use what we ended up using too little too late in COVID, things like advanced purchasing agreements. It's not surprising, by the way, that in different parts of the world, especially the US, they took wartime tools like the Defense Production Procurement Act from the Korean War to be used during COVID because thousands of people are dying.

38:37You better wake up and you can't have your 2030 agenda. You got to do it now. So similarly with war, people want to win the war. I don't like war, but hey, we're back to a huge geopolitical tension situation in the world. It's interesting that with war, no one says, oh, yeah, in 10 years, we'll achieve. No, they want to do it quickly. So what do they do? They think in an outcomes-oriented way, outcomes-oriented budgeting, smart procurement, relationships with the private sector that usually have better contracts than what we see in non-war time periods. And that's a choice. And that's also why, I don't know why I'm asking myself the questions, but sometimes people ask me, are you optimistic or pessimistic?

39:15I always say optimistic because all our problems are due to choices we have made. None of them are due to deterministic, like boogeyman financial markets. So we need to better understand why those choices were the wrong ones and how we can drive a better economy by making different choices. It's interesting to sit that optimism within what you said earlier about young people having given up. But I've just, there's so much in your answer, right? You were saying people criticizing you without having read you. but I read there's some American libertarian think tank whose name escapes me now. They'd written something about your book before you even published it.

39:47And it's about me. It's not even about the ideas. It's like about Mariana. I'll ask you a question specifically about the book then. So you mentioned all of your previous work and this for me is more expressly political than what you've written before. Particularly what you write in the compass about co-creation, et cetera. I don't want to say it's clearly not just a direct response to populism, But nevertheless, when we're talking about whether government functions, whether state functions, and when we say function for the people that exist within that society, could you sit those sort of the, I don't want to say wave march because, you know, we just, Orbán's just lost in Hungary, right?

40:28But nevertheless, France, Germany here, far right populist parties are gaining traction. Trump has won America. Trump has won election in America. And a lot of the assumptions, but the sort of perceived knowledge, the position that most people have is, oh, well, these people have lost out economically. And therefore, you know, they're abandoned. And as a result, they're turning to these extremist parties for their solutions. Your book makes a slightly different argument about that, which I thought was interesting. What is it? Well, in my understanding, I don't want to misunderstand it, but you're essentially saying that if there is no sort of relation between the people that are governed and the people that govern them, it's essentially meaningless.

41:12Yeah, I think. Yes. And I truly believe that. I mean, that's why it's sometimes difficult to talk about stuff, because I truly believe that not only people have been left behind economically, but also in terms of their dignity, self-worth. And so the book, the reason coming back to the beginning of our conversation, why the common good is different from the public good is that it's about setting objectives. So we have obviously an objective oriented economy instead of what just kind of, you know, spreading support here and there and talking about good on the margins reactively. but where the how we relate to each other, public, private, capital labor, state and citizens, matters as much as what we're trying to do.

41:54So going back to political philosophy, in fact, there's a whole chapter which forced me to finally read really, really good philosophical writings. But if you think of both Aristotle, but also Michael Sandel today, Aristotle talked about the telos, the gol, and the polis, not the polis, P-O-L-I-S, so the community, right? So how we actually form community matters. Michael Sandel's critique to John Rawls's work is very similar to that, that community relationships matter, the relational value. And a lot of the work that I'm currently doing both in Brazil, and by the way, I should say learning from Brazilians, for example, the Secretary for Traditional Peoples, Edel Moraes, but also the work we did in Camden that I mentioned when Georgia Gould was leader, is about learning from the community, listening to the community, and then working with them to design better policies.

42:45So Edel Moraes, who comes from the Amazon, a village in the Amazon, she says, what we need is not just these redistributive policies. And I'm kind of using my words. That's why we're working together, kind of framing and her experience and her really smart thinking. She says, we don't just need the Bolsa Familia, right, which in Brazil was very important policy that reduced poverty by giving direct finance to families through mothers conditional that they sent their kids to school. She said, that's fine. And that's very important. But we want the bolsa verde, right? The green. And she says, what that should be is paying directly the indigenous communities who live in the forest.

43:25She has a wonderful slogan, I kind of made that more Italian. So there's people in the forest who have knowledge for 500 years. They understand the hydrological cycle and why it's at risk. They understand how to preserve biodiversity. So when you create an Amazon fund, thank you very much, Finance Ministry, don't govern it for us, govern it with us. We need to have deliberation. We know what is required in the Amazon. And by the way, this also, it's very interesting when I hear her talk, she says, there's too many NGOs. That's where the money's going. So these intermediators, it's not just the consultants, it's not just the McKinsey's, the PWC's and the Deloitte's.

44:01There's lots of other, sometimes shady organizations, and I'm not against NGOs, but they're very different, one from the other. And sometimes they play too much of this intermediating role. And she says, pay the people in the forest, the indigenous communities for what they know. That means all of a sudden, even mentally valuing them, right? So coming back to many people feeling condescended upon in many communities, whether it's in Trump voting states or in the Amazon or in Camden, where you have these elites coming in and saying, we need to retrofit everything and the green revolution, this, that, the other, but not actually then working with you.

44:34So in Camden, we transformed food banks into food cooperatives, green food cooperatives. And I can tell you, the women, and we spoke a lot to very specific women also running the food cooperative, the women, when they were coming into the food bank, literally, their facial expression, how they stood was very different from when they are in power. That's what power is, you know, governance, like you have a voice, you are in charge of a really important policy that you will benefit from, your community will, but you've been given ownership, right? So issues of ownership are really important. That's why I also look at the history of, you know, areas like the Wandsworth Commons in the UK and other parts in the world where that's not just about doing good, it's about who is at the table, whose voice is at the table.

45:19And so I do think, you know, these aren't just academic points. This is about life. This is about dignity. It's what makes people feel valued. And we've talked before about knife crime in London, like I think a lot of issues around crime, both in London, but also in other parts of the world, many politicians, I think, especially on the left, haven't thought enough about what a progressive narrative is on crime. And if you think about it also, not only because it's very complicated, the crime issue, but amongst at least teenage crime, a lot of it does have to do with self-hate. If your own body has no value, your body has no value.

45:55So how do you make someone, a young person, a 13, a 14, a 15-year-old person in London or in Rio de Janeiro in a favela feel good about their body? That requires huge amounts of investment, whether it's in sports facilities, community centers, youth centers, but also designing those youth centers through them. Young people know what they want to happen in a youth center or in a public library. You don't design it for them. So it's all these issues about bringing in a non-tokenistic way. And that's really important because there's lots of tokenistic ways to consult people. What do you think about this?

46:28But in a non-tokenistic, genuine way, bring the people who've most least been served by the way we do capitalism to the table to design a better capitalism. This connects right to the metaphor you use and the point you make, which is that economists have spent a lot of time. if they're boring from the sciences it'd be ideas of like newtonian equilibrium that are most relevant right it's a physicist's perception rather than a biologist's one yes right yeah which thinks about relationships are they extractive are they parasitic yeah exactly that's why um that's why economists have to do lots of math um and why i often tell the rethinking economics students don't say there's too much math it makes it sound like you don't know math say there's the wrong math, right?

47:13So Newtonian physics is all about center of gravity, equilibria, you know, average representative agents, you know, as opposed to what, you know, multiple equilibria, replicator dynamics, which means distance from mean dynamics, where if we all look like the average, it'd be hard to even talk about growth. So, you know, even how Schumpeter's big contribution, by the way, which I wrote about in my PhD thesis, was understanding why traditional neoclassical competition theory didn't understand innovation. To talk about innovation in traditional economics, you have to talk about imperfect competition.

47:46Because as soon as you have free information and so on, why would anyone innovate? So even to talk about a patent, intellectual property rights, you need to introduce imperfect competition theory. So in biology, if we, again, go back to the physiocrats who saw it as an economy that needed to become more sustainable and could reproduce itself. That's why they used the word sterility. If you have the landlords taking all the money out, the system won't reproduce itself. It'll just become very extractive. It's just interesting then, I mean, again, in my PhD, I used mathematics from biology, like replicator equations.

48:22But I often joke that economists are just very lazy with their words, right? If they talk about an ecosystem, like an innovation ecosystem, which happens to be my area, economics, innovation, economics, they don't specify as an economist would what kind of ecosystem. Is it predatory? Literally. Predator-prey models in biology have a whole set of equations. Is it symbiotic? Is it parasitic? Is it mutualistic? What does that look like, even in the math, let alone in reality and how do we drive a public-private partnership with good conditionality at the center to create this more reciprocal system?

48:58And the book, what it does, The reason I call it a new compass is I take these five elements to help navigate this difficult world, which I do think we can navigate if we care. And the five areas are purpose and directionality. That's where the missions come back. Second is co-creation and participation. So it doesn't really matter if it's just five guys or five women in a room deciding how we get to the moon. It does matter when we're talking about what's happening in our communities and at the national, regional, local level. So co-creation, participation to create those goals together. Third is sharing knowledge and learning.

49:33What's the point of talking about collective intelligence and the knowledge economy if we keep privatizing the knowledge? Literally, the way we've allowed patents to be governed is way too wide, too strong and too upstream. We saw it also with COVID, back to Pfizer, and how they actually took advantage of COVID to actually make huge amounts of profits and didn't do what AstraZeneca did, which they did only because the state-funded Oxford University researchers put it as a condition to their collaboration to share the knowledge because the goal in COVID was not vaccines. it was to allow the world to be vaccinated.

50:09And that's very hard to do if the vaccine can't be produced in Africa. Fourth, sharing rewards. What's the point of even doing the first three, you know, missions? Great. Co-creation? Great. Sharing knowledge? Great. If all the money then keeps going to the 1%, right? So how do we actually share both risks and rewards? And I look at different examples around the world. And the fifth is transparency and accountability. If we don't understand what the hell is happening, there's no point to talk about good because so much will be untransparent. And we see this, of course, with how data and even how digital public infrastructure is structured.

50:41And the reason I call it also a compass is that we have to do all five. Like there's no point in just picking and choosing, as we were saying before, even with the entrepreneurial state, someone just taking one little bit. Unless you do the whole thing, you can't call it common good. And so it was a compass to make sure that we're not common good washing. It's so easy to talk about public interest, public value, common good without having real pillars. And that's why actually I befriended and became actually, it was a really nice relationship with Pope Francis before he passed away. We even did an event together on the common good because when I heard him speak, and I say this as a non-religious person, spiritual but not religious, he always had pillars.

51:23He said, common good, that means we need the principle, he talked about principles, of subsidiarity. In other words, the most local, you know, we need to govern the problems at the most local level and listen to local realities and the lived experience. Principle of the preferential option for the poor. Again, I would have framed it differently, but what he meant was anything we do, let's look first before we do it, how it will affect the most vulnerable members of society. So that really inspired me to say, okay, we need principles. And I called it elements due to the compass. and these five ones, we need to also realize that there are seeds of that happening around the world.

52:00So the second part of the book was all about looking at examples of these seeds, of these elements. But unless they all happen at the same time, then the sum is not bigger than the parts, and it doesn't scale, it doesn't transform, it doesn't cause structural change. And the first part was theory, second part was policy around these elements, and the third part was places. If we don't build places, coming back to community centers, youth centers, but also places where global south and global north meet with respect, instead of what the global south countries say, they've been disrespected, then we can't build community.

52:30We can't do good together unless we build that relationship with true dignity and worth, you know, that we value each other along the way. We're getting towards the end of our time together. And there's just so much that I want to talk to you about. And I would like to talk about you a little bit as a person as well. I mean what do you think people most misunderstand either about you or your work ideally about you but I mean oh god about me well I can tell you one thing and it's not just about me it's about women men get criticized women get insulted someone once told me that and then I was like oh my god totally look at women journalists how they get insulted men get critiqued and I think that's one thing if you are a woman you're progressive you're out there so actually talking about your work and governments listen, oh, that's going to be a great punching bag.

53:25But I don't really care about that. I mean, also, first of all, I see this happening to so many women. So that's one thing, just to nest it within. I'm a progressive, meaning I believe in progress, not regression. I am a woman and I do have, and I'm very, how do you say, honored, an effect on what governments around the world are trying to do, not on what they actually do, right? This is all about trying, experimenting. This is why I believe in GovLabs, where we admit that we have to experiment trial and error. But people are not attacked when they don't have effects, right? That's why, you know, many kind of super radical people let them speak, because no one's listening anyway.

54:03That's one thing. Second, I think people misunderstand, as we already spoke, that I'm somehow defending the state. No, I'm really pissed off with most state structures, both in terms of literally how undynamic they are. That's why we have this really great new project, as I mentioned, called the Dynamic Capabilities of the Public Sector. We need to build those capabilities. They are not there, and we differentiate it from capacity. And most of my work has been trying to hold government accountable. So that's the other big misunderstanding. I don't know what else people misunderstand. I sometimes do silly tweets about Arsenal, I guess.

54:38We will talk about Arsenal winning. I'll give you a bit of Arsenal. No, I just, on your point about being a woman in the public eye, well, I was off on paternity leave. I wasn't on Twitter much, but I did go on there at one point and see your book announcement like exploding. Me too. My kids were like, what have you done? I'll sort of, I'll explain for listeners who aren't familiar. I was hoping people would forget that. It's died down. Why are you bringing it back up? Sorry, I'll bring it back up again. That's okay. But now I have red, red, red, red. Lovely nail polish. Yeah, right. So you took your picture.

55:14It's your book cover as over your shoulder there. It's a lovely shade of blue. Exactly. And it matched your nail polish. Yeah. You took a picture. Yeah. You posted it. Amazing. And I think it's got like a million views or something. I love it. Actually, I don't. I mean, that's so much of that is like being online. I actually, I interviewed Rosie. I was talking to Rosie Collington the other day. And I was asking her about like being a woman who thinks publicly and what that means. And she was saying like a piece of advice that you gave to her was like, don't be that online. Like keep parts of your life sacred and away from that space.

55:50Because at the end of the day, a lot of it is not, it doesn't have your best interests at heart, right? It is just a thing that gets thrown at you because you are, I think, a woman in a public space. And quite often the first thing people will turn to is just misogyny, right? I mean, the really funny thing is that I was so naive. and I don't care. Like, I really think there's bigger problems in life than this. I mean, my reaction was like laughing and my kids were like, don't do that again. Anyway, actually, one of my kids was like, oh my God, you're such an icon. I'm like, what? Your brother just told me that was like the stupidest thing I've ever done.

56:23Anyway, no, it's really funny, actually. That itself is funny, but that requires a whole other conversation. We are going to do a part two, I guess. No, literally, that's a really cool blue, right? Yeah, I like it. It's a special blue. It's like a kobold. My nails were like exactly that blue. and unfortunately i also took the picture three weeks after the pedicure so if i was going to take the picture should have been when they were perfect but anyway so i was just naive and also it was interesting that anyway we don't have to go into it the point is whatever it was a silly tweet which i guess any any but i think what do they say any media is good media i don't well well i think it's good to promote a book but i think it is emblematic of the problem that you were talking about which is that yeah yeah but also i do think i mean And luckily, I don't know if I've been like this from day one.

57:07I think I sort of have. I see. Anyway, I just don't actually care about that stuff because, and I'm not saying I'm Mother Teresa in any way because I'm not. But because what actually drives me, and I say this super genuinely, is the work and making sure it's good and making sure we slowly but surely make life better for as many people as we can. Then who gives a shit about my nails? and the only reason I did it is I have no idea it was a Saturday morning I was exhausted I was like oh my god look at that my nails are the exact same color color as the cover of my book and I had just received the books it literally was kind of me by myself joyful my husband was away at a film festival kids were out of the house there I am like looking at my nails like oh my god it's the same color and then take a picture tweet it and then a million people yeah yeah and also apparently there is a whole fetish thing which I knew nothing about so that's because I'm 58 years old you know menopausal mother of four when am I supposed to know thank you very much have some pity but literally I couldn't care less I think your answer is a perfect place to end it right because yeah what about joy yeah and what about being exhausted after having done exactly quite a lot of work yeah I had four kids in five years do not try this at home no but can I just say one quick thing about joy yeah I'll stop on that please alegría right that's how they also say it in Portuguese.

58:31And the coolest project I'm currently doing is on, and I know you're going to think of doing this just because I want to have fun, but it's on how do you measure the value of carnival? And we have the most exciting project looking at Notting Hill Carnival and the Brazilian Carnival across different cities, Recife, Salvador, and Rio. And if you look at Carnival, and we could have this whole exact conversation back just on Carnival, it's a microcosm of this incredibly kind of joyful work that's done on the ground because it takes a year, right? The costumes, the steel bands, the trio eléctrico, the floats, the, you know, just think of Notting Hill Carnival, absolutely incredible.

59:11And yet how it's talked about is like a crime scene, right? It's not invested in. The value that is created is hardly ever reinvested back in, whether it's the samba schools in Rio or the local, again, communities in Notting Hill that create that. So even how do you govern, you know, alegría, so that's inclusive, it's innovative. We look at the public investment not as a cost, but as a long run driver of mental health, social cohesion, community creation, that itself requires a common good framing. Mariana, we've got to leave it there because we've run out of time. But I've really enjoyed our conversation.

59:48Thank you. Me too. Thank you. Thank you for listening to The Exchange from the New Statesman. I'm Oli Dugmore. That was Mariana Matsukato. We'll see you next week.

1:00:04This message is brought to you by Cologuard. If you recorded songs off the radio for a mixtape, it might be time to scream for colon cancer. The Cologuard test is non-invasive, requires no special prep or time off, and you start screening right from your home. It's just three simple steps. Set up, sample, and ship. If you're 45 or older and at average risk, ask your doctor about the Cologuard test. Available by prescription only. Learn more or request a prescription at colaguard.com slash podcast.