Mariana Mazzucato: It is necessary to reinvent capitalism – 10/01/2023 – Market

Mariana Mazzucato, 55, is not surprised to see the return of austerity policies after the Covid pandemic or the increase in popularity of new leaders around the world who classify the State as the source of all problems.

For the Italian economist, before criticizing voters who choose politicians committed to destroying the State, public institutions need to assume a new role in the 21st century, providing direction and demanding that all sectors of the economy innovate.

To adapt to current demands, it is necessary to reinvent capitalism, says the professor, who was in Brazil on Wednesday (27), to participate in the 10th International Industry Innovation Congress, held by the CNI (National Confederation of Industry) and o Sebrae (Brazilian Support Service for Micro and Small Businesses).

Mazzucato has been getting closer to Brazil. One of the references for PT economists, especially managers at BNDES (National Bank for Economic and Social Development) —such as Aloizio Mercadante and Nelson Barbosa—, she participated in the institution’s seminar in March.

In July, the Ministry of Management and Enap (National School of Public Administration) signed an agreement with the Institute of Innovation and Public Purpose at University College London (IIPP/UCL), founded by it. The objective is to train civil servants, in addition to innovation in public administration.

This proximity has reinforced his vision that the country can be a prominent actor.

President Lula has defended Brazil’s role abroad as a protagonist of a future of sustainable development. How to put your words into action?
The reason people are listening to what Lula has to say is that there are not enough leaders in the world today who take sustainability seriously — there is a lot of talk, but very little is done.

Since the first day, when he started the new government, the issue of sustainability and the Amazon have been at the center, and the fact that the Brazilian ecological transition plan includes the Ministry of Finance is something radical.

Generally, what happens is the old way of thinking, in which the Ministry of the Environment makes sustainability policy and the Ministry of Health is concerned with well-being.

Should the whole government be focused on a big green economy plan?
The key is how the different areas work together, because each ministry has its own environmental goals.

Having a public bank, like BNDES, is also very important for financing, but it is necessary to impose innovation conditions for financing.

The big bottleneck in countries like Brazil is that companies are strong, but many of them are not innovating, there is inertia.

Even a consolidated sector, such as the steel industry, needs to innovate and transform. Germany today has the greenest steel in the world, not because it decided it would be that way, but because it needs to be green to get money from the government, it is a symbiotic partnership instead of a parasitic partnership.

Could Brazil, in fact, lead an innovation process?
Imagine taking the purchasing budget of each ministry —Health, Transport, Defense, Energy— and transforming it into an innovation budget, oriented towards sustainable mobility programs, which try to solve congestion in large cities. I think Brazil can really lead a movement in this direction, especially because the Ministry of Finance is part of this.

It’s about reinventing capitalism, doing everything differently, structuring public organizations and letting private organizations also be encouraged to work together.

To reach the moon, back then, people from different sectors were mobilized — from nutrition professionals to the electronics and aeronautics sector — and this work together solved many other challenges along the way.

Today we have cameras, cell phones, baby food and software that are the result of these large mobilizations of resources. The same should happen with Brazil’s sustainability agenda, you divide it into different fronts and the solutions to the problems that arise along the way can foster a lot of innovation, that’s where growth comes from.

Is ceasing to be an exporter mainly of commodities still a distant ambition?
In the case of South America, we need to be very careful, because new resources are very attractive, such as lithium for electric batteries.

It also brings many problems, one of which is that extracting lithium creates huge amounts of polluted water, for example, so you need to be sure that the solution in one place doesn’t cause a problem in another.

I have learned a lot from Denmark, which is today a large provider of high-tech digital green services, having created an innovation ecosystem. It’s not up to me to tell Brazil what to do, but the point is that you don’t want to fall into the commodities trap again.

The lack of resources is always a problem, especially in countries with problems in different areas. How to get around the ever-increasing Budget limitations?
All countries complain about lack of resources. The mistake is to think that the restriction is due to the deficit, the real restriction is the debt in relation to GDP [Produto Interno Bruto]. Without investing intelligently, in the private and public sectors, productivity does not increase and it is the main driver.

I’m Italian, and after the financial crisis, all southern European countries [Portugal, Itália, Grécia e Espanha] were forced to reduce their deficits, what happened was that the debt to GDP ratio increased.

What really matters is not having a big or small State, what makes a difference is an intelligent, strategic and targeted public investment, which catalyzes private investment, but for this it is necessary to know what direction is being taken in relation to the well-being and sustainability, and then redesign loans, grants and subsidies. It is not enough to distribute money to companies.

And it is clear that public money should only be used by those who cannot obtain private money, we need to help promote an innovative competitive ecosystem, in which small and medium-sized companies are willing to work around topics such as health, climate , digitalization and the preservation of the Amazon.

Finding a way to build a symbiotic public and private ecosystem is very important for any progressive government, like Brazil’s.

Doesn’t the popularity of extremist politicians around the world, as in the case of Argentina, where Javier Milei preaches the destruction of institutions, indicate that part of the population no longer believes in the State?
Absolutely, and unfortunately, the wave of populism is happening everywhere.

Spain may have narrowly escaped it, but we see phenomena like this in Italy and with Brexit in the United Kingdom.

We shouldn’t be condescending and say that people are stupid for voting for these people with crazy ideologies. They have lost trust in government and business, so it is no coincidence that many of these populist parties present themselves as anarchists.

But the reality is that their ideas are very old, it is an old ideology and, in some cases, even feudal, so it is very important to remove the mask of novelty that these “outsider” politicians wear.

They present simplistic solutions that look at the symptom, saying that more people need to be put in prison or that immigrants are the source of the problems.

The liberal theory, with less State, has also gained strength in recent years. We had an example of this in Brazil, during the previous government, in which the Minister of Economy was proud to defend the ideas of the Chicago School.
As it is an academic center, one would expect that the Chicago School would care about the evidence, and the evidence tells us that austerity does not work for the planet or for people, by increasing poverty.

The ‘Chicago Boys’ ideology is stupid economics and they know it, so to be honest, I’ve come to the conclusion that they just don’t care. Why else would anyone cut school meals or funding for youth centers and public libraries?

The pandemic changed people’s relationship with the State, but was this change temporary?
Suddenly, the State was remembered as the agent that provided vaccination, but this phase lasted very little, many countries are already going through new waves of austerity and say that a lot was spent [durante a pandemia].

Governments gave resources to families who were not working during the quarantine and now they say “we need to cut social programs”, but the consequences of these cuts end up costing more.

The dispute between countries over the acquisition of vaccines should teach us that we all have different and conflicting interests.

I’m writing a new book on this topic — for example, water is a huge global problem and the global cycle unites us all, deforestation in the Amazon causes a drought on the other side of the world, so in theory we could think that the The whole world is concerned about water together, but this is not happening.

Is saving the planet the greatest challenge for the State in the 21st century?
The State has to provide direction and demand that all sectors of the economy innovate, thinking that the biggest objective, of course, is sustainability, but also health and well-being. We need to be prepared for the next pandemic.

My most recent book [“The Big Con”] It’s about how governments need to invest in the capacity to implement actions, without investing in the public service, you won’t know how to act and will then be hostage to consultancies, as happened in the Covid crisis.

The book reinforces how the consulting industry has infantilized governments.

---

X-RAY
Mariana Mazzucato, 55
She is a professor of innovation economics at UCL (University College London), where she is the founding director of the UCL Institute for Innovation and Public Purpose. She is the author of four books, including “O Estado Empreendedor” and “Missão Economy”