Persistent Australian innovation problems like stagnant R&D and low economic complexity would be turned around with more ambitious and strategic “growth” policy, according to influential economist Mariana Mazzucato.
Professor Mazzucato on Monday launched a week-long Australian tour that includes meetings with top policy makers and sold-out public lectures.
She is arguing that Australia and other nations adopt mission-based policy, whereby the state matches grand challenges like solving the UN’s Sustainable Development Goals with well-defined missions.
Under the missions, governments leverage their procurement and incentives to form genuine partnerships with the private sector and other stakeholders that share risk and reward across many cross sector projects.
Achieving the missions comes with benefits of sustainable economic growth, new technologies and industries as byproducts, and a strong civil service, while encouraging longer term investment in economic drivers like R&D, according to Professor Mazzucato.
The approach, exemplified in the US space race and which Treasurer Jim Chalmers has acknowledged as way of revitalising capitalism today, requires moving past economic orthodoxies and political ideology.
But the rewards are massive, according to Professor Mazzucato, a University College London professor in the economics of innovation and public value who works with national governments around the world.
She says the ‘Mission Economy’ offers the best path to addressing global challenges like the climate crisis, weakening health systems and social divides.
“This is not about innovation,” she told a lecture at the University of Technology Sydney on Monday evening.
“It’s not about science. It’s not about entrepreneurship. It’s what do we actually need in order to build economies that actually can be governed in such a way that helps us reflect on what does it mean to build inclusive and sustainable growth into the everyday.”
This mission-orientation would reshape Australia’s current scattergun industrial and innovation policy, UTS emeritus professor Roy Green said.
The local innovation expert said Australia’s current approach can be seen in the dozens of federal budget line items supporting research and innovation.
“It’s now grown to 182 separate Budget line items, none of which, by the way, connect with each other over 14 portfolios of government,” Professor Green said.
“In a small to medium economy like this one that’s an incredible waste of resources for a start, but also produces incredible incoherence. There’s no sense of any collective intelligence in that context.”
Professor Mazzucato said an overarching government body to coordinate the programs and a growing number of government investment vehicles would be “critical” in Australia.
If part of a bigger move towards mission-oriented policy, it would also help turn around flatlining investment in R&D and dropping economic complexity, she said.
Australia’s overall R&D investment is now well below the OECD average while the country’s economic complexity – a popular measure of the complexity of exports – has tumbled to 93 of 133 countries.
The Albanese government has committed to improving both measures but has made no meaningful progress on either so far based on the rankings.
Professor Mazzucato said Australia is over reliant on indirect research and development subsidies and direct ones need a catalyst.
“R&D, just by talking about it, doesn’t happen,” she said.
“It happens when it actually is required. And it’s not just R&D. Human capital formation, training of the workforce is required if you’re actually trying to change stuff.
“So in the end, the common point here that we keep coming back to is a dynamic economy versus a static economy requires conditions attached to change – additionality — making sure that these policies are creating change that would not have happened otherwise.”
Professor Mazzucato will address a business luncheon event at the Hyatt Regency in Sydney on Tuesday and a business dinner at the Plaza Ballroom in Melbourne on Wednesday. You can book a table or individual seat here and here.
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