Influential economist Mariana Mazzucato will urge Australia’s leaders to implement “mission” policy that catalyses public-private partnerships to solve existential challenges like the climate crisis when she arrives in Australia on Monday.
Among her first meetings is a discussion with Treasurer Jim Chalmers, who referenced the University College London professor in the economics of innovation and public value while outlining his economic vision last year.
Professor Mazzucatto will also meet with other federal, state and industry leaders, together in command of tens of billions of dollars worth of public and private investment.
In his ‘Capitalism After the Crises’ essay, the Treasurer cited Professor Mazzucato’s work while arguing “markets built in partnership through the efforts of business, labour and government are still the best mechanism” for resource distribution.
But the mechanism hadn’t truly taken hold in Australia, Dr Chalmers argued. Neoliberal ideology drove austerity that damaged the public service and policy debate, showing little was learnt from the global financial crisis and Australia was ill prepared for the next crisis.
“When the second crisis came in the form of a pandemic, Australia’s governments did what was necessary to keep people attached to their employer,” Dr Chalmers wrote.
“But the promise we heard, of a return to ‘normal’, didn’t always make much sense. Not everybody wanted to go back to the drift and drag, the stagnation and wasted opportunities that defined the Australian economy for much of the 2010s.”
Professor Mazzucato does want to go back, but much farther.
“We would have never gotten to the moon 50 years ago had policymakers talked like they talk today, which is, at best, the public sector is de risking the private sector, at best, it’s fixing market failures,” she told told ABC Radio on Friday.
The space race exemplified a “mission” approach to a challenge that neither the state or private sector was going to solve alone, according to Professor Mazzucato, who kicks off an Australian speaking tour in Sydney this week.
Professor Mazzucato said American public space agency NASA had an ambitious but clearly defined challenge to get to the moon and back in a short time. The successful mission is credited with developing much of the technology used far more widely today.
“Along the way, so many different homework problems had to be solved by the private sector, with outcomes oriented policies, like outcomes oriented procurement. And that’s what got us camera phones, foil blankets, baby formula [and] software,” she said.
“There’s no reason that these challenges that we have — which are even harder than getting to the moon — global warming, sewage in our waterways, weak health systems can’t also be framed in a mission oriented way which require public and private investment.
“However, it doesn’t happen unless we change the narrative of what the state is for. As long as we continue to think it’s just tinkering and administering, regulating, fixing — this will never happen.”
It’s a challenge around the world after diminished public institutions and services have left the public policy toolbox bare.
But it’s especially difficult in Australia, where decades of outsourcing the public service and a “consultification” of government has enriched private firms while decimating internal capacity and capability.
“There has been almost a half century of outsourcing that public sector capabilities to consultants,” Professor Mazzucato said.
“You’ve had different scandals there with PwC and McKinsey. These don’t happen by chance. They happen by design when we stop investing within our civil service.
Moving to bold, mission oriented policies that leverage a strong Australian Public Service will require a fundamental reset that goes beyond ideology.
A case in point, she says, is governments’ obsession with reducing national debts by cutting or avoiding spending. The restraint is slowing action on decarbonisation and overlooks the other path to reducing deficits, according to Professor Mazzucato.
“By actually catalysing… private and public investment on massive challenges that we’re facing, that can, if structured well, lead to increases in productivity.
“Through the increases of investment in both human capital and physical capital which, by definition, mean that we’re expanding our productive capacity in the economy. And that’s the denominator of the famous ratio of debt to GDP.
“When governments — and especially labour and progressive governments — want to prove that they are ‘fiscally responsible’ the irony is that by focusing too much on the numerator — on the deficit, or the accumulated debt — and not on the composition of that public investment, on the long run drivers of economic growth, the irony is that you can end up having what we had in Southern Europe.”
In the wake of the 2008 financial crisis, the ‘PIGS’ nations of Southern Europe — Portugal, Italy, Greece and Spain – aggressively cut spending, including key long term economic drivers like public funding of research and development, Professor Mazzucato said.
“The irony was they reduced their deficits but because they cut all the wrong things, debt to GDP actually rose because the denominator, which is GDP, stopped growing.
“So the real conversation, and this is where Jim Chalmers is going in his speeches, is that we need to go beyond this public versus private divide and we need both public and private investment, [and] innovation for social, economic and technological challenges.
“And by definition that requires investment, which will expand productive capacity, and that means that these investments will pay for themselves.”
Mariana Mazzucato will deliver a keynote address and panel session to a business luncheon in Sydney on Tuesday March 12. You can book your seat this event here. Professor Mazzucato will deliver a keynote address to a Melbourne business dinner on Thursday March 14 – reserve your seat here.
Participants in the Professor Mazzucato’s public speaking events include federal minister for Industry and Science Ed Husic, NSW and Victorian Treasurers Daniel Mookhey and Tim Pallas, Australia’s chief scientist Cathy Foley and CSIRO chief executive Doug Hilton, as well as university, industry and investment leaders.
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