Mariana Mazzucato Quotes
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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.
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The globalized nature of production and innovation means that the benefits don't necessarily stay in the country where the investments are made.
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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.
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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.
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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.
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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.
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Markets are not static entities that are 'intervened' in (for good or bad) but are outcomes of public and private interactions.
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Unfortunately, simplistic framing of problems leads to simplistic answers.
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With a Trump administration we don't know enough yet to make predictions, but if past behavior is any indication, I am not encouraged.
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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.
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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.
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Most venture capital funds are too short-termist and exit-driven to deal with the highly uncertain and lengthy innovation process.
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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.
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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.
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Brexit and Trump's election are forcing countries to come up with new radical ideas.
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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.
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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.
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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.
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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.
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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.
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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.
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People work hard and companies make big profits, but employees don't see that they share in the wealth they help to create.
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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.
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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.
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I often use the iPhone as an example of how governments shape markets, because what makes the iPhone ‘smart’ and not stupid is what you can do with it. And yes, everything you can do with an iPhone was government-funded. From the Internet that allows you to surf the Web, to GPS that lets you use Google Maps, to touch screen display and even the SIRI voice activated system - all of these things were funded by Uncle Sam through the Defense Advanced Research Projects Agency (DARPA), NASA, the Navy, and even the CIA!
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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.
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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.
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We should be investing where the public returns are greatest - that is in innovation.
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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.
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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."
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