Government support is not only investing in upstream areas like basic research, but also in downstream areas like applied research and early-stage financing for the companies themselves. This means there are great risks.— Mariana Mazzucato
The most mind-blowing Mariana Mazzucato quotes that will activate your inner potential
If we want growth today to be more innovation-driven, more inclusive and more sustainable, then we need a more active state, not a less active one. Yet we still hear the dogma that we should just fix market failure by focusing on science and infrastructure, and to "level the playing field."
What is needed is both a New Deal in terms of mission-oriented investments but also a new deal in terms of a modern social compact - one that allows the state to socialize not only risks but also rewards. Maybe then innovation-led growth will also become growth that includes all of us.
It's important that public funds be spent in research directions that are pushing market frontiers rather than working in existing areas. This means funding research not only on drugs but also on areas like life-style changes, even if the profit potential is lower for Big Pharma as you cannot sell that change as you can sell a medicine.
In my view, the state should be active and work in cooperation with private businesses to spur growth that's sustainable and inclusive. The policy process is about co-creating and co-shaping of markets, creating new opportunities for business investment - and negotiating a better deal for the public too.
Fixing markets isn't enough. We have to actively shape and create them and tilt the playing field in the direction of the growth we want.
Our current model of capitalism and the dominant ideas in policy making have led to a failure of investment by both the public and the private sector in the things that drive productivity, and which affect its distribution.
Markets are not static entities that are 'intervened' in (for good or bad) but are outcomes of public and private interactions.
An interesting attribute of public banks is that they don't only de-risk the downside, but also get a share of the upside.
Most venture capital funds are too short-termist and exit-driven to deal with the highly uncertain and lengthy innovation process.
The actual division of labor must be reflected in the division of the rewards (and prices, which is the way the consumer gets rewarded).
As a businessman, Donald Trump has been associated with some of the worst excesses of a particular style of value-extracting and asset stripping capitalism: set up businesses, let them fail, avoid paying suppliers, use bankruptcy laws to avoid taxes for decades, then set up another business somewhere else. It is this model that is the cause of many problems we see today.
If we look at the complexity of the challenges facing western societies today, we see that the problems are not really about outsiders, but have their roots much closer to home.
Brexit and Trump have brought the problems of capitalism into sharp relief, but both are only making things worse. Take the investment challenge - businesses invest where there they see technological or market opportunity.
My specific concerns with Trump's plans are that they are likely to investments in infrastructure where the private returns are highest (for example toll roads and bridges) rather than where the public gains are greatest.
Companies prefer to put money in the pockets of shareholders or to hoard cash rather than to raise wages or invest.
The globalized nature of production and innovation means that the benefits don't necessarily stay in the country where the investments are made.
There is a lot of flesh to be put on the bones - but there is at least an opening for a more pragmatic, less ideological debate about how to build economies that work for people, within the limits of our planet.
While infrastructure is of course important, it must be part of a bigger vision.
The point is not to simply dig ditches but to steer those investments towards transformational growth.
If we look at Germany's infrastructure policy, it has been driven by its mission-oriented focus on green infrastructure. This affects both innovation and infrastructure, old industries and new. The German steel industry, for example, has adapted to the policy by lowering its material content through a 'repurpose, reuse and recycle' strategy.
Shareholder value theory - the destructive idea that companies should be run solely for the benefit of shareholders - has led to financialized businesses that do not invest in the areas that will lead to future growth or the invention of useful new products.
With a Trump administration we don't know enough yet to make predictions, but if past behavior is any indication, I am not encouraged.
People work hard and companies make big profits, but employees don't see that they share in the wealth they help to create.
Real median household incomes in the U.
S. were basically the same in 1989 as in 2014. But we are also seeing similar challenges in the U.K. in the stagnation of real wages.
Unfortunately, simplistic framing of problems leads to simplistic answers.
Growth in productivity has diverged from growth in the share that working people can expect right across advanced economies, but this trend started earlier and has been more pronounced in the U.S.
Brexit has shrunk the market opportunities.
Exiting trade deals will do the same for the U.S. Those deals must be actively shaped and governed to make growth more inclusive.
Once we admit that the public sector takes an immense amount of risk along the entire innovation chain, it becomes crucial to find ways to share both risks and rewards.
Germany is using its Energiewende policy as a way of envisioning a green transformation and innovation across many sectors.
Brexit and Trump's election are forcing countries to come up with new radical ideas.
Mainstream economic theories popular in the last several decades have tended to downplay the government's role in markets and to increase skepticism about even that more limited role. Austerity, particularly in Europe, has added to the problem. It has not worked, even on its own terms.
Rethinking capitalism means rethinking the role of the public sector, the role of the private sector, the role of finance, and the relationship between them all.
Too many politicians seem to reach for 'infrastructure' as the default answer to investment, as if roads and bridges were the answer to everything. Even the IMF and the World Bank seem to mainly offer infrastructure spending as an alternative to austerity, although they are right to focus on the need for investment.
We should be investing where the public returns are greatest - that is in innovation.
It would be a mistake to overstate the similarities between the Brexit vote and Trump's win - but there are common themes, not least in the rallying cries that the winning campaigns used. They focused on a supposed economic threat posed by outsiders, as immigrants or as trade partners. This fuelling of anxieties underpinned a narrative centered on the need to "regain control," whether of borders or of economic forces.
Another similarity of Brexit and Trump's campaigns was an attack on so-called elites. This is not so much a failure of capitalism as of its high priests in the economic profession, for which we must all take some responsibility.