Mariana Mazzucato’s performance was, as her ‘discussant’, Benny Higgins, put it, a tour de force.
In about 25 minutes at the Edinburgh International Book Festival, promoting her book The Common Good Economy, she raced through the key elements of her ‘mission’ approach to economics. Near the end she admitted she could ‘talk for an hour’, and there was little doubt she could. Reviewed as a Fringe show, it would earn at least four stars. As a contribution to public debate on political economy, the question is less straightforward.
Such was the pace that I wondered if I was alone in finding parts hard to follow. It might have been my own Fringe fatigue. Earlier that day I had spent over an hour listening to another famed talker of Italian descent, Richard Demarco. Mazzucato and Demarco share more than heritage.
Passion keeps Demarco going at 96. It fuels Mazzucato’s prolific output of academic articles, books and reports. For Demarco, that passion comes from a belief that culture transformed his life, and he wants others to share in it. For Mazzucato, it is a conviction that today’s economic structure is deficient and can be changed, that there is, contra Thatcher, an alternative.
A more agile state
That alternative starts with the relationship between public and private sectors. Mazzucato argues against treating them as competing forces, seeing them instead as spheres that can work well together. The idea that the public sector limits economic dynamism is, in her view, badly mistaken. It overlooks the role public institutions played in the space race, the creation of the internet, and now artificial intelligence.
This is the argument behind her idea of the ‘entrepreneurial state’. Governments, she argues, are not simply there to correct the failures of markets. They can be pioneers themselves, making the long-term, high-risk investments that create the conditions for later private-sector innovation. The contribution of the public sector therefore needs to be recognised and sustained rather than simply handed over to private interests. Private actors, she argued, need to contribute more rather than remain ‘parasitic’ on that public investment.
The public sector is too easily dismissed as bureaucratic and inefficient. Mazzucato rejected that framing, pointing to how well the state performed under pressure during the pandemic. In calmer times it can become complacent and fail to innovate. The task, she said, is designing a better, more agile state. Examples exist across the world, though no single country offers an ideal model. For now it is a case of learning from what works. ‘All countries have good points,’ she said. What she wants, in the end, is a dynamic capitalism.
Her preferred mechanism for achieving it is what she calls ‘mission-oriented’ policy. Rather than leaving government to respond piecemeal to problems, major public goals such as climate change should shape investment and bring public and private institutions together around clearly defined objectives. It is a model she has promoted internationally, including through her work with European innovation policy.
Poorly run big businesses
Mazzucato was not offering the UK private sector as any kind of counterexample. Plenty of big businesses here are poorly run and have failed to innovate, she said, and a wider rethink is needed on that side too. At one point she called the Book Festival itself ‘wondrous’, a line clearly meant to please the audience.
Underlying this is another of her central arguments: the distinction between value creation and value extraction. Economic activity is not necessarily productive simply because it generates financial returns. Mazzucato has argued that economies need to ask who is actually creating value, who is extracting it, and where the rewards are going. The distinction matters because a system can generate considerable wealth on paper while directing too much of its gains towards activities that do little to expand productive capacity or serve the wider economy.
An era of mistrust
The audience question section was where the discussion got closer to political reality. Mazzucato argued that however coherent her vision, it needs organised groups behind it rather than individual voices. She pointed to how intellectuals and commentators such as the Mont Pelerin Society shaped and promoted neoliberal ideas. It took a movement of thinkers and think tanks, the IEA among them, to shift the political climate. She believes something similar is needed now, though she did not spell out what form it should take.
Her assessment of neoliberalism was blunt. It is a ‘deficient theory’ that has failed, she said, but no robust replacement has taken its place. ‘Progressives are bad at organising,’ as she put it. Into that gap has come populism, and she dismissed both its right-wing and left-wing forms as intellectually vapid, basically ‘crap’, with no answers to the problems we face. The ‘era of mistrust’, in her phrase, has helped populism take hold.
She acknowledged the room she was in. As she noted, she ‘mainly works with progressive politicians’, and the charge that such events sit inside a liberal bubble hangs over them. Most of the audience likely shared her general outlook, and she seemed aware of that limitation.
Rethinking capitalism, not replacing it
Her project is ‘rethinking capitalism’, not replacing it. There are several varieties of capitalism, she argued, and the neoliberal version is only one. Even some on the right, she noted, have moved away from it. Her own approach sits within the social democratic tradition, aiming at a fairer form of capitalism she believes is achievable.
That is also why her argument is less about abolishing markets than changing the relationship between markets, the state and society. Government should not simply create the conditions in which businesses can operate and then step aside. It should help shape the direction of economic activity, while ensuring that the value created through public investment is more widely shared.
The UK’s big problem
One assumption she wanted to challenge is that bond markets will always punish radical departures from the current model. What bond markets look for, in her account, is coherently run economies rather than any particular ideology. Governments confident in their approach need not fear them. The Truss government is one example. Its downfall, for Mazzucato, said more about a ‘crazy’ tax-cutting policy than about the raw power of bond markets.
The shrinking number of truly public spaces was, for her, a serious concern. The Book Festival’s own venue illustrated it. The Futures Institute, much of it open to the public, sits inside the wider Quartermile development, most of which is private flats and offices. That the building itself is a reuse of the old Royal Infirmary added to the point.
Growth as a starting goal, rather than an outcome, drew her criticism too, aimed at the Starmer government among others. ‘Growth is a function of investment,’ she said. It is not produced by simply declaring it a target. Investment, in both the public and private sectors, is ‘the UK’s big problem’, in her assessment.
Given the limited time, Higgins managed the pace of the discussion well, at one point reminding her that the UK and Scotland are not separate entities. Near the end Mazzucato said ‘we should have stopped earlier and had more questions’. The event ran five minutes over, and Higgins eventually closed it down, joking ‘I’ll get into trouble if we don’t bring things to a close’.
Questions at these events often drag things down, amounting to short speeches rather than actual questions. That was not the case here. The questions were sharp and drew interesting answers, generative, to use a word Mazzucato herself favoured.
That part of the evening could easily have run longer.
