Government partnership with big business created the internet and cell phones — an economist says it can deliver a new generation of innovations, too
- Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In the latest episode, they spoke with economist Mariana Mazzucato on government’s role in the economy.
- Mazzucato says collaboration between government and corporations can boost economic “outcomes as opposed to just output.”
- See more stories on Insider’s business page.
When you trim away all the complications and high-minded theories, the single mission statement of an economy under capitalism is to grow. We say an economy is healthy when it’s adding jobs, productivity, and profits, and we say an economy is sick when it’s contracting, losing jobs, and failing to hit profitability markers.
But shouldn’t we expect more than aimless growth from an economy? Shouldn’t our economy reward growth in sectors that would benefit everyone — environmental science, say — and discourage growth in sectors that harm the public good, such as the privatization of our water supply?
How government influences the economy
Government is supposed to be a counterweight on the economy’s untapped growth. Regulations, tax credits, and other incentives are supposed to encourage beneficial growth and discourage the harm produced by unfettered capitalism. But over the last four decades, the government has largely abdicated itself from the regulatory role, giving companies free license to blindly pursue growth for growth’s sake.
In this week’s episode of “Pitchfork Economics,” economics professor Mariana Mazzucato discusses her new book “Mission Economy: A Moonshot Guide to Changing Capitalism.” Her goal with the book is, in the words of co-host David Goldstein, to encourage a new kind of economics that values “outcomes as opposed to just output.”
“For some years now, I’ve been working with policymakers globally, trying to convince them that we need to redesign policy away from fixing markets and towards creating and shaping markets,” Mazzucato said.
That would take the form, she explained, of governments creating “a list of big problems that we have” as a society, from “the future of mobility” to “solving key issues around the digital divide,” to “getting the plastic out of the ocean.” Lawmakers would then design a strategy to involve “as many different sectors as possible to collaborate and to innovate together to solve that problem.”
Government’s role, in this case, would be as a purchaser, as a backer of “grants and loans to galvanize as much bottom-up innovation and investment as possible to actually solve problems,” and as a director of “what I’ve been calling mission-oriented policy.”
It would direct and incentivize the best of corporate America to solve some of humanity’s biggest problems, putting the profit motive to work for the greater good.
The DARPA example
Mazzucato says in the United States we already have one perfect example of a government entity that encourages innovation in pursuit of a single goal: The Defense Advanced Research Projects Agency, or DARPA. Founded in the 1950s alongside NASA as during America’s race to the moon, she says, the government established in DARPA “a new design of public-private partnership.”
“There was lots of investment by companies like Honeywell, Motorola, and General Electric,” Mazzucato said, and in the quest to build spacefaring technologies, American companies built inventions that would eventually create the touchscreens, voice-activated artificial intelligence, camera phones, GPS, and driverless car tech. Basically, without the moonshot, we might still not have the necessary technologies to build smartphones today.
But those technologies were not the end goal for the “purpose-focused” organization. “For example, DARPA basically invented and funded what we today call the internet,” Mazzucato explained. “But no one in DARPA said, ‘Oh, we need the internet.’ They had a problem to solve, which was getting the satellites to communicate, and the internet was the solution to that.”
DARPA is singularly focused on defense issues, so Mazzucato is calling for an array of new ARPAs to address societal problems, which “are much harder than purely technological ones. They often require regulatory change, behavioral change, and political change,” she said.
When governments set these huge, seemingly impossible goals for industry, they empower our sharpest minds to broaden their thinking and elevate their game to work in concert with others. Part of the reason this framework has been far more successful than traditional corporate structures in terms of unleashing innovation, Mazzucato explains, is that the thinkers are “explicitly told to be risk-taking, to welcome the uncertainty.”
The path to the Moon was littered with waste, dead ends, and spectacular failures. That was all part of the plan. Putting government in charge of the direction establishes “the idea of having real impact so that your successes matter,” Mazzucato said, but it’s also clear about “the admission that along the way you’re allowed to fail,” in a “process of trial and error and error and error.”
Economic growth for growth’s sake is simply not enough of a mission statement for a society to thrive. Mazzucato believes that government has a necessary goal to direct that growth toward a common good, so that we all — corporations, humans, and the planet as a whole — can benefit from the journey.
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