It depends on the concrete structures, capacity and types of partnerships between the public and private sectors. It also requires the vision to imagine a different world. It is a vision for what kind of growth we want, plus the corresponding tools to get us that – that will create a new direction for the economy. And it is a new direction that is needed.
Vietnam’s successful response to Covid-19 provides an interesting example. Although the country is still ‘emerging’ in terms of its developmental process, its government was able very quickly to spur the development of low-cost test kits.
This was possible because it had the capability to mobilise different parts of society (academia, the army, the private sector, civil society) around a common goal and strategically use health research and development (R&D) procurement to ‘crowd in’ innovative solutions – that is, to use government spending to increase private sector investment.
An effective public-private collaboration allowed for rapid commercialisation of the kits, which were then exported to Europe and beyond, as well as deployed throughout Vietnam itself. The government was also able to galvanise poster artists, creatively harness social media and even produce stamps to promote behavioural change.
Vietnam’s successful response to Covid-19 provides an interesting example. Although the country is still ‘emerging’ in terms of its developmental process, its government was able very quickly to spur the development of low-cost test kits
But in many parts of the world the picture has been much less rosy. As my book goes to press, the problems being faced by both the USA and the UK are the result of 40 years of weakening ability to govern and manage – fuelled by the ideology that government needs to take a back seat and only come in to fix problems when they arise.
A public management creed that belittles the ability of government to act effectively and promotes privatisation has fostered much outsourcing of government capacity to the private sector and a relentless but misguided focus on static measures of efficiency, leaving governments with fewer options and even latching on to unrealistic technology panaceas such as artificial intelligence or ‘smart cities’.
It has also led to lower investment in public capabilities, the loss of institutional memory and increased dependence on consulting companies, which have benefited from billions in government contracts.
Outsourcing in itself is not a problem as long as governments remain capable, risk-prepared and have foresight; and as long as the underlying ‘partnerships’ with the private sector are truly designed in the public interest. The irony is that so much outsourcing has damaged governments’ abilities to structure contracts.
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A key lesson is that, in crises, government intervention is only effective if the state has the corresponding capability to act.
Far from retrenching to the role of being at best fixers of market failure and at worst outsourcers, governments should invest in building their muscle in critical areas such as productive capacity, procurement capabilities, public-private collaborations that genuinely serve the public interest, and digital and data expertise (while safeguarding privacy and security).
Without this, they cannot even devise robust terms of reference for the companies they bring in, which can then easily capture the agenda. [See Alfred Schick for a review of how New Zealand has changed its approach to outsourcing due to lessons learned.]
We cannot keep making the same mistakes. The world is facing an abundance of different challenges – from those related to health to those related to the climate crisis to those related to governing digital technology to protect privacy.
Indeed, in 2015 193 countries signed a commitment to tackle 17 ambitious UN Sustainable Development Goals (SDGs) by 2030 – covering problems ranging from poverty to polluted oceans.
To address them, we need a very different approach to public-private partnerships from the one we have now. This requires a massive rethink of what government is for and the types of capability and capacity it needs.
But, more importantly, it depends on what sort of capitalism we want to build, how to govern the relationships between the public and private sectors and how to structure rules, relationships and investments so that all people can flourish and planetary boundaries are respected. It is, as will be argued, about creating a solutions-based economy, focused on the most ambitious goals – the ones that really matter to people and to the planet.
This is not about invoking the concept of a ‘moonshot’ as a siloed pet project. It is about transforming government from within and strengthening its systems – those for health, education, transport or the environment – while giving the economy a new direction.
To get back on to the right path we need to ask ourselves again what sort of role government should play in the economy, and consequentially the instruments, structures and capabilities it requires – both within public organisations but also to foster collaborations between public and private organisations that work together symbiotically – sharing both risks and rewards – to solve the most pressing problems of our time. In this sense it is about rethinking capitalism.
The challenges are urgent. The lives of people, and the health of the planet, depend on meeting them.
Mariana Mazzucato is Professor in the Economics of Innovation and Public Value at University College London. This is an extract from Mission Economy: A Moonshot Guide to Changing Capitalism, which is out on January 28 (Allen Lane, £20)