A New Economic Compass for Labour
When Keir Starmer won a landslide Labour majority promising to pursue five governing missions, the high-profile leftwing economist Mariana Mazzucato was credited as an inspiration. Two years on, her bracing new book helps shed light on why Labour in power has struggled to project the sense of direction that mission-led government, as Mazzucato calls it, requires. Synthesising and extending her earlier work, here she proposes a new economics of collective action around the common good.
From this perspective, the economy is not a concatenation of rapacious independent forces, to be contained and offset by public policy, but a project, or rather a series of projects, with direction and purpose. Finance should be turned to the benefit of these collective goals instead of chasing short-term returns, she argues, and the creativity of corporations channelled to the public good.
As she puts it, a common good framework for the economy is about aligning goals, incentivising collaboration, fostering collective intelligence, and ensuring that all participants share knowledge, risks and rewards. That also means ditching what Mazzucato calls the false narrative, popular in parts of the environmental movement, that economic growth is antithetical to tackling the climate crisis.
The Five-Point Compass
The compass in the title is really a set of five principles, all of which Mazzucato says such an economy should have: purpose and directionality; co-creation by citizens; collective learning; reward sharing; and accountability. Hikers might well balk at the idea of a five-point compass, and would certainly be well advised not to try to follow all of its directions at once.
Each of these principles is set out in detail. Co-creation implies grassroots participation in designing and redesigning government programmes, for example, because, when people help define a problem and develop and implement solutions, they see them as theirs rather than something imposed on them.
Reward sharing means ensuring the creators or rightful owners of economic value stand to benefit: from Indigenous people whose homes lie near raw material deposits, to social media users whose data fuels Big Tech's profits.
That implies radical tax reform, including greater use of wealth taxes, and the robust use of conditions in public contracts, to make sure workers and taxpayers get their fair share: an approach she calls predistribution. For example, companies benefiting from publicly funded health research should be forced to keep prices low and not create patents that are too wide and strong, leaving them hard to license.
Rejecting Market Failure Thinking
Aspects of the argument, including a positive role for the state as an enabler of innovation, are familiar from Mazzucato's previous work, including her 2013 book, The Entrepreneurial State. But in this more comprehensive treatment she urges us to reject altogether the idea of patching up market failures, or treating social and economic problems as nasty but inevitable side-effects of economic growth, to be tackled with the odd taxpayer-funded side project, what she calls a gap filling mode of thinking.
According to Mazzucato's definition, Labour's attempt at mission-led government badly missed the mark. Its first and overriding goal, kickstart economic growth, cannot be a mission at all, because it lacks the necessary purpose. What, in other words, is that economic growth meant to be for?
At times, her exposition can be cumbersome. She takes us on a lengthy tour through economic history, from Aristotle via Adam Smith to Amartya Sen, slashing away at both mainstream theory and various past attempts at accommodating ideas of the collective good. The book's own theories might be tempting to dismiss as utopian, too far away from the political economy we are stuck with, had she not scattered myriad practical examples throughout, though many are on a small scale.
The seeds of transformation are everywhere, she says, citing inspiring projects that range from delivering healthy and sustainable school meals in Sweden to the EU's mission to support cities to become climate-neutral, to the international Nagoya Protocol on sharing the benefits of genetic resources and traditional knowledge.
Echoes of Mazzucato's mindset are detectable in some Labour policies, from using the threat of legislation to cajole pension funds to invest more in UK assets, to writing conditions on youth training into clean energy contracts. But while her scope in this ambitious book is global, the analysis also dismantles Starmer's claim to be pursuing national missions, by setting out just how radical, and radically different, that would look in practice.
Economies work best, she believes, when they pursue grand collective goals, developing and distributing a vaccine for a pandemic, or confronting the climate emergency, or, though she doesn't lean on the example here, tooling up for a new and more frightening geopolitical era. We should ask, she says, not which market failure do we want to be fixed, but what direction do we want the economy to sail in.
The Common Good Economy: A New Compass by Mariana Mazzucato is published by Allen Lane (£25).
