203. How To Beat Farage And The Populists

0:00As soon as we say that growth is the mission, we kind of show that we don't know what we're talking about because growth is the result. You know, who doesn't want to grow? I don't know any country that would say, oh, we don't have a growth mission, literally. So you have to start with the investment, get it right with the right conditionality. And if it works, you're going to increase public and private investment, which are the key foundations of growth. Hello and welcome to The Rest is Money with me, Robert Peston. And me, Steph McGovern. And also with us today, a podcast friend of ours, Mariana Mazzucato, who, as you know, is brilliant on all things economics.

0:33She's a Professor in the Economics of Innovation and Public Value at University College London. She's author of Mission Economy, A Moonshot Guide to Changing Capitalism, and she advised the Labour government on their mission-led approach. So a person we love talking to and we always have loads to talk to about, don't we, Robert? We do. And as you say, I think what she's most famous for is this concept of missions, how you drive economies by setting goals in certain ways. And she actually said on this podcast before that although Keir Starmer, no less, the prime minister, bigged up her mission approach, she thinks he doesn't really get it and hasn't really implemented it properly.

1:15Anyway, she always has absolutely compelling things to say, actually, about economies of almost any country you can think of, because she spends quite a lot of her time advising world leaders. Yes. So today we're going to talk to her about the challenge set to all of us by Trump and the specific problems being faced by all of us in this country. So here's our chat with Mariana Machucatu. Mariana, there's always way too much to talk to you about. I thought I'd actually kick off with a piece that you wrote a little earlier this year where you talked about how to challenge populism. And this is obviously very topical at the moment, given that Nigel Farage appears to be making the running in this country, particularly when it comes to immigration and how to approach the problem of large numbers of people endangering their lives by coming across the channel in small boats.

2:16And I just wondered, having thought about this, if you were advising whether it was Starmer or even perhaps Kemi Baden-Ottt, or rather the leaders of what people call the mainstream parties, how would you recommend that they confront a Farage challenge on this very resonant issue? Right. Well, big question to open up with. On a very broad point, I'd say that somehow the right globally, the extreme right, in fact, the kind of xenophobic side of the conservative right has been very good at very simplistic messages that are put out there in moments where people are feeling a lot of pain. And it's not that people are stupid that they believe simplistic messages, but if on the other side we have complex messages or no messages or no vision or no story, then it becomes very hard to combat that level of populism.

3:13And I think what progressives should learn to do is to have simple but not simplistic messages. I don't think we have good, strong, simple messages based on, you know, I could use the word truth, but, you know, what is the truth? But, you know, evidence of what is actually causing the harm, the pain that people feel in terms of the economy. I mean, the fact that, for example, in the UK, there's so much talk about the public sector, the public debt, and all this talk about the fiscal rules, so on and so forth, when the actual problem is the private sector. Like just that very simple message that we have an economy that has allowed the private sector to earn profits, which are not then invested into the economy, that are basically given out to shareholders.

3:58Just look at the Thames water problem or the Carillion kind of model of corporate governance. That's a simple message that I have not heard, for example, from Keir Starmer or the progressives. And that's something that then is not about us versus them. I'm not one to like us versus them. It's not about the state versus the private sector, you know, national citizens versus immigrants. It's always about a view, a lens that turns into a story that's simple and understandable of what we think is actually causing, for example, the lack of investment, the lack of wages rising with productivity in the last 30 years.

4:35The fact that we have, you know, capital is very well organized. Labor is increasingly not organized. We have big ownership structures. You know, it's really funny to hear UK leaders on both the left and the right talk about Singapore when 80 percent of the land in Singapore is owned by the state. And so just think of the financial crisis having been caused basically by a real estate boom and the fact that in this country, another part of the simple story should be 80 percent of our finance goes back to finance. It doesn't even hit the real economy. You know, the fact that we use images of Singapore, but then have such a different economy from there is because we have financialized our economy, both in the sense that I mentioned before of corporate governance, but also the financial sector.

5:20The financial sector puts most of its money in finance, insurance and real estate. And that's what leads to housing bubbles and what leads to financial bubbles. And we don't hear that simple story that allows people to feel the strength to understand the economy and not just have fear of immigrants and so on. I think about this a lot, Marianna, because of where I am from and where I grew up is often the place where this popularism takes hold. You know, it's, you know, with Brexit and things in the northeast of England. That's where the turn came, you know, the Tories taking the Red Wall and things like that.

5:58And there is a, you know, there's a working class disenchantment here. But I often think about whether a government can ever really change that and make working class people feel better off. because that's essentially what's needed in order to make them feel like they're not being left behind. Because when policies are made, it often leads to the wealth staying amongst the few. Political decisions are often skewed towards the people most likely to vote for a party or the ones with the most power in terms of their impact on things in the economy. And that's not often the poorest people or the working class.

6:33So things then don't get better for them. So the kind of short-termism in politics means that they're you know they even if this popularism takes hold and if reform get in in the next election it's based on the fact that working class people are feeling like things aren't any better but reform as things stand they're not economically credible so things are unlikely to improve again for the working class because it stays the money stays amongst the few and the rich and the powerful so then it'll just flip again and it's like it doesn't ever feel like it's getting better for people. And that's part of the problem here.

7:08It's that short termism, isn't it? So I think what you raise is really important, because there's kind of two or three different issues there. One is, and this is really relevant for what we saw in the US, that even when the reforms do benefit working people, if we don't have, again, a narrative, but even an attempt to speak directly to people, the humbleness, even just to listen and instead of just telling everyone, hey, this fiscal stimulus, say the IRA in the US, Inflation Reduction Act has had a great effect on jobs, wages and investment, which by the way, it did. You don't just tell people that, you make them feel part of a movement, a reform, a period.

7:51And what happened in the US is there was very little, this is why I mentioned, I started off with the whole thing about being simple and not simplistic. There was very little speaking with people or making them feel part of something that might take time, because sometimes these figures, like the time it takes for an investment stimulus to actually hit and to land with new jobs and higher wages, it may take time. And during that time, you want to be explaining to people why you've done what you've done, and maybe even how long it will take to make their own communities feel better. But beyond that, you also have to make them feel part of it.

8:24Like, what is it for? What kind of society do we want? And obviously, Trump won for all sorts of different reasons. But I do think that's one of the reasons. And I remember before he won, even when the data was looking quite good, actually, for the Biden economy, there was interviews asking people why they were going to vote for Trump. And a couple of them just really struck me. It was like people in the bar saying, well, you know, if I sat down with Trump today, he would understand me, he would listen to me. And we know that's not true. You know, Trump is very good at, you know, portraying himself like that, the people's man when actually everything is done is what you talked about, you know, making the rich rich or reducing tax, financializing the economy and so on, making it easier for people just to start up companies just to get benefits and then you purposefully make it go bankrupt and start another one, so on and so forth.

9:13But he did have a story that made people feel that they were listened to. And we need to, again, go beyond the stories. We need proper economic policy. We need messaging around that. But if we don't even have, you know, if we just have big intellectual debates on, on, you know, the news or in academia and the so-called elite, you know, which itself is a problem in terms of how we talk about it. But anyway, and don't have a movement, you know, it can't just be a political party. It can't just be a progressive agenda. Ultimately, it has to be a movement. If you look at Roosevelt, I think it's so interesting during the economic recovery after the Great Crash.

9:47I mean, he really created a movement, even bringing artists, designers, poets into the recovery. That was about culture. And ultimately, culture is about messaging. It's about the story. What kind of society do we want to live in? What's it all for? You know, he set up a whole national park program, not just, you know, save the planet. It was national parks are good for people. People, all sorts of people of different classes deserve to have lots of green space around them and to enter those places served by public purpose. What is the equivalent of that today? What is the equivalent of the weekend?

10:17You know, the labor movement fought for a weekend. Saturdays and Sundays were fought for. People died to give us all, weekends, holidays, and so on. What's the equivalent of that today in the labor movement? So I do think there's some big stuff that we're not talking about. And when, again, the so-called working class, I don't want to put everyone in a bucket just calling them working class, but the people that you're talking about who haven't seen the real wages rise have seen a lot of the ghost town problem that the specials talked about back then, which is still a problem in terms of certain places completely being left behind, when that's all they're experiencing and then the aggregate figures look like, you know, wages might be going up, jobs are going up and so on, but their own lives don't feel much better and they don't feel valued.

11:08Literally, they don't have the dignity. They don't feel valued by the intelligentsia themselves, let alone others. Then I think we have a huge problem. I mean, to your point about the importance of the message, And, you know, to an extent, Trump has a sort of genius in terms of saying things that tap into the concerns of people who've been left behind. So at odds, the reality of what he's actually done. I mean, there's a paper out just now by, you know, Saiz, Jägen, Zuckman and Volkir looking at the tax paid by billionaires in America. And as a result of Trump's tax policies, first time round that are being sustained, the tax rate paid by billionaires in America fell from 30 % to 24 % and is significantly below the tax paid by most working people in America.

12:04So there he is, rewarding, to an astonishing extent, billionaires. And yet the message that members of what in this country would be called the working class in America would be called the middle class, the message they hear is that he's on their side. And then he does do sort of gestural politics that looks to an extent like he's on their side. So take the recent whatever it was, nine, 10 billion grant under actually a Biden program to the chipmaker Intel. it would have been a pure grant under Biden. Trump has insisted that the state gets a 10 % stake in return for that money, which is something that Biden himself was plainly too frightened to do because he didn't want to look like a socialist.

12:54And so he does have this sort of genius for tapping into or just being pragmatic in a way that makes it look, even if he's not, as though he's on the side of everybody. Yeah, it's a really good point. You know, I mean, it's that joke that when someone just talks a lot statistically, there's going to be a higher chance that something is right. I mean, I actually don't think that applies to him. But, you know, he has said some interesting things also completely off topics like that Amazon, the delivery part of Amazon is abusing the national post office. So just coming back to your specific point, which is interesting, by the way, because I worked on the CHIPS Act with Gina Raimondo, the secretary of commerce, and we made sure that that act actually had really good progressive conditions.

13:37that the companies benefiting from this massive grant were held accountable and were improving working conditions, were limiting share buybacks. In fact, it was no share buybacks. So if you're getting money from the government and making profits from that, you have to reinvest that profit back into productive capacity, not just giving it out to shareholders and the use of energy efficient supply chains and so on. He's taken all that away. So he's taking away that progressive conditionality. But as you say, then comes up with this great idea, which I actually wrote about this back in 2011 and 2013 under the entrepreneurial state, what it means for the state to take equity.

14:13In fact, I've gotten about 30 messages in the last month about, hey, what do you think about Trump's plan? It depends. I mean, everything depends how you do it. If it's just taking 10 % and then managing that really poorly, I would argue that many state-owned enterprises, even today, that are almost all state-owned or partly state-owned, look at Enel in my own country in Italy. It's something like 23 % owned by the government, but the government doesn't do anything with it. There's no vision of why you would need an energy company in Italy in terms of the transformative capacity that they used to have back in the day in the 1930s, when the company, unfortunately, was under Mussolini.

14:51Not a great day in Italy's history, but still, they had a vision of using that stake to industrialize Italy. In fact, Eric Hobsbawm in A Great History of the world basically talks about China and Italy as the two countries that most quickly went from an agricultural society to an industrial society because of this kind of vision, plan, development policy and using their state-owned enterprises. For example, in Italy, they constructed the motorway called La Autostrada del Sole, the motorway of the sun, from the north of the boot to the south of the boot in just four years. It's a huge feat, right?

15:26So having equity stakes in a company like that, an energy company, the infrastructure company, in that case, it was an infrastructure company called EDI, to help development transformative capacity in the country. That's one thing. If it's just equity stakes that Trump gets, puts it in the Treasury, and then uses that to give out money in a dysfunctional way to companies, that's not necessarily progressive. However, as you say, the gimmick, the idea about using it and having a narrative, coming back to my first point, just very simplistic stories that people like, oh, yeah, that's such a good idea.

15:57He's very good at that. And what he's also good at, ironically, is what a lot of comedians are good at. And think of Zelensky, you know, he was a comedian, or Beppe Grillo, he was a comedian. In Italy, he set up the Five Star Movement. They rose up in both those countries, very different histories. In Italy, Beppe Grillo and the Five Star Movement rose up just slinging mud, just saying how bad everything was, you know, the swamp kind of rhetoric that Trump had with Hillary Clinton and so on. That's what he's really good at. So he's good at just kind of blaming, saying everything is terrible. And then, you know, here's my solution.

16:31And when coming back to the discussion before, when people are feeling so much pain, they do think everything's terrible. And then if the solutions, though, are just gimmicks, right, some really problematic, and that's like the like, like the tax policies, which then he spins in a different way, but also these ideas of, you know, equity stake, or, you know we're going to build up the working class again by forcing companies to go to Detroit instead of leaving Detroit you know that's not going to happen. It's interesting you say that point though about slinging mud because it feels like we're really good at that here like you know you're constantly hearing Labour slagging off the Tories for the inheritance and everything else but what we don't do here which I think Trump does well is talk about the positive and actually you know and sometimes it's obviously not in truth because he's saying we're doing brilliant and we're going to do all these amazing things and the reality and the economics don't stand up to that but it makes people feel like they are part of a movement that is positive and you know it's that best guess it's like the blagging it isn't it it's so you know blag it until you feel it and we're not very good at that we don't do the building is up and telling us things are great exactly but also um i don't think actually labor has done a good job in slinging proper mud in other words if you look I mean, well, what they should have done, I think, is, you know, said it once, basically.

17:50I mean, not actually once, but, you know, a certain amount of time and then stopped talking about it, but said it well. So the effect of austerity and the effect of Brexit have both been disastrous for this country. And we don't have to repeat the stats here, but, you know, there are very good figures showing how terrible both those things were. 14 years of austerity and then the Brexit, you know, I think your colleague on the rest is politics calls it NASH, the National Act of Self-Harm. Anyway, massive self-harm done to this country. We don't have to go down that discussion. But definitely those two things should have and could every now and then at the right moment, not in a dispersed constant moaning, but in the right moments, just remind everyone just how terrible their policies were.

18:32And then what we don't hear is how good or how inspirational or, you know, what great opportunities there are right now for the next five years, 10 years in this country, if we get the solutions right. And that positive story that requires a national vision around, you know, health, around digital and AI, but not AI, just superpower, but what it's actually going to mean for people's lives. So reducing also the digital divide, but also making sure that, you know, we reduce the massive divide in terms of educational attainments in this country and the role of AI in helping that instead of hurting that if it's governed properly.

19:07And definitely net zero, you know, what it means for creating new jobs, new skills and making, again, people feel part of that. I think I mentioned before in your podcast that the only place I really have sensed that positivity was in my work for two years with Camden Council when Georgia Gould was the leader of Camden Council. We worked very closely on kind of Camden-specific missions, including a net zero one that was done with people in, you know, the halls, resident halls. It was about transforming food banks to food cooperatives, green food cooperatives. And, you know, you can understand how someone walking into a food bank will, for certain reasons, not feel that great about themselves walking into a food cooperative when they are part of that.

19:50You know, they own it. They have the dignity. They feel valued. Same amount of food given to them. Right. So same end result. But they're part of the second, not part of the first. They feel a bit like, you know, things are done sort of at them and they're not part of it. So coming back to that point before they made about Biden, where even though when things are somehow working, but people don't feel part of it, that kind of really matters. And I think we haven't had a vision, a strategic vision in terms of increasing investment. We continue to have lower public investment than the rest of the G7.

20:21Had we invested half of what the G7 invested in the last decades, it would have been like something like 500 billion more over the last decade. We haven't caught up to that lack of investment. If anything, we're, again, posing another kind of self-harm, not the Brexit one, but the very problematic fiscal rules that this country has set itself. So the actual lack of a strategy right now means that they go back to having to attract capital. So by that, I mean business, global business, with very problematic kind of, again, gimmicks, whether it's around just talking about getting rid of some planning measures, specific tax policies, but especially with, say, the Palantir and the attempt to attract AI companies to this country without actually governing that relationship in a way that promises to be good.

21:10for, you know, not just the economy, but literally for people's privacy and so on. It's a huge issue. So what you want to do is to attract capital, attract business to the UK, because they're going to feel like this is the coolest place to be to develop new skills, to work with government, to work with other companies, small, medium and large around achieving certain goals. And if we look at why that's important, most countries, even small ones like Denmark, have actually developed really competitive sectors through actually having a vision by helping small companies scale. It's not about, you know, romanticizing small companies.

21:47You want startups to scale up, not just start. Otherwise, what's the point? And in Denmark, they are today the number one providers to China of high-tech green digital services, which were developed by Copenhagen wanting to be the greenest city in the world. And then the city ended up using or, you know, if you want, working with those startups that had begun in the usual way that startups like to be in dynamic cities like London and Copenhagen. But in some they grow, some they don't. And they grew through the demand side tools that the city had, but also by working in a functional way with their national champion in the wind sector, which is called Vestas.

22:22And we don't have that same kind of industrial strategy that looks at, you know, here's our goals, whether it's net zero or health and well-being. Here's how we're going to use that strategy to develop both supply side and demand side tools like public sector procurement, which is 30 % often of government budgets, which can be used like the U.S. government has always used it in the defense sector. So the chip makers were scaled up through the U.S. government purchasing a massive amount of semiconductor chips almost half a century ago. That's why we ended up with Moore's Law, this massive reduction in the cost of chip making.

22:59And so using all the different levers government have from public loans to procurement, even to bailouts during COVID to help steer an economy in a direction. And as soon as we say that growth is that direction, growth is the mission, we kind of show that we don't know what we're talking about because growth is the result. Like in the case of Denmark, they will grow if they are able to actually achieve those contracts, say, with the Chinese government. They will grow if they are able to scale their small companies. They will grow if the procurement contracts for sustainable mobility across their whole infrastructure program is able to foster new innovation, new training, new investment.

23:39So you have to start with the investment, get it right with the right conditionality, like Biden tried to do with the CHIPS Act. And if it works, you're going to increase public and private investment, which are the key foundations of growth. You don't grow with that investment. But starting always with the growth narrative, you know, who doesn't want to grow? I don't know any country that would say, oh, we don't have a growth mission, literally. And in fact, if that's all you talk about, you probably won't grow because it shows you don't really know what drives growth, which is the kind of dynamics I just mentioned.

24:06I think this is probably a moment when we need to go to a quick break, but let's pick up on those themes in just a minute.

24:17welcome back to the rest is money we're mid chat with mariana and one of the things you said before the break that really stands out to me and everything you talk about you know the mission driven way we should look at life is you need collaboration and you've obviously given great examples of where that's worked you know like for example in camden and things like that but i just don't think we're very good at collaboration i think we pay a lot of lip service to it but when it comes down to it inevitably people do what's either what's best for them and whether they that's best for them personally or best for them in their you know their company or their department if it's a government department whatever and if you're a politician you're towing the party line so you might have like really great ideas that have come from your local community about how to drive change.

25:05But in order to get higher up in the political party, you've got to toe the line, and that might mean giving up on some things you care about. So it's not coming from a place of selfishness. It's more that I think when it comes down to it, the measurements we have in life that tell us whether we're good or successful, or whether we keep our job, or whether we get to the next level in education, standardise us and just make us all the same rather than different. Even when you have the right intentions, and most of the people I've met globally who are in government actually have good intentions and they've gone there, notwithstanding the lower pay, notwithstanding the constant attacks.

25:42Yes, there's corruption, but I'm talking about the people, whether it's Georgia Gould and Camden, whether it's President Lula, whether it's Mia Motley, the head of the Barbados government, and the people that work for her that I've met and worked very closely to. I've only seen people who, notwithstanding our social problems, are trying their hardest to make it good for society. However, then exactly what you said happens, which is unless that vision, that mission, that public purpose, you know, set up a whole institute called the Institute for Innovation and Public Purpose, unless that's matched with a change in the system, a change in the metrics, literally how the treasury, for example, evaluates public investment in a green book, then you're not going to be able to fulfill your promise.

26:25So I wrote about this in my book, Mission Economy, which, as you know, I think we talked about in our last time together on the podcast, Keir Starmer kindly cites, but we also talked about whether missions are actually rigorously being used in this country. What I wrote about there was that with defense-related missions, because we take them seriously, right? No one says, oh, let's go to war. Okay, let's win in 30 years. Let's give it a long time. Here's a bit of money. Go play and come back and give us your KPIs. You want to win the war, right? So all the things we did in COVID, like advanced purchase agreements, very clear missions in terms of timelines for when we want the vaccine out, conditionality like we had with AstraZeneca and the Oxford University researchers, which wasn't just, oh, go and collaborate.