Governments Must ‘Do Capitalism Differently’ Amid Crises, Economist Mazzucato Says

Mazzucato's interview _ Maria Martinez

Photographer: Kai Försterling 


VALENCIA, SPAIN–Deep change is needed in the capitalist system to address current challenges, according to Mariana Mazzucato, University College London professor and founding director of the Institute for Innovation and Public Purpose.

“Governments are stuck fixing,” Ms. Mazzucato told The Wall Street Journal this week at the Congress of the International Centre of Research and Information on the Public, Social and Cooperative Economy in Valencia, Spain.

The patches that governments use allow a system that needs reform to continue working, she says, but only reform will achieve the United Nations Sustainable Developments Goals in 2030.

Governments are designed to be reactive instead of proactive, Ms. Mazzucato said. In her view, a public sector that is by design reactive is destined to fail, because it will always be out of breath.

“We need to do capitalism differently,” she said.

With Russia’s war in Ukraine, the energy crisis, rising inflation and climate change, it may seem a difficult moment for the structural transformation she proposes, but Ms. Mazzucato said it is possible because all the crises are linked.

“The link between the health crisis and the climate crisis is huge. The head of the World Health Organization said that the Paris Agreement is ‘the most important public health agreement ever’,” she said, adding that because of the connection she expects new pandemics.

Regarding the Covid-19 pandemic, Ms. Mazzucato criticized that governments invested heavily in the development of vaccines, but private companies kept the profits.

“We have socialized the risks and privatized the rewards,” Ms. Mazzucato said.

The current system keeps creating money that ends back in the finance sector, and businesses are often too short-termist and extractive, according to the economist.

Ms. Mazzucato warns that business investment is falling, because profits aren’t reinvested, going instead to shareholders.

“We can organize the systems in a fundamentally different way,” there’s no reason that 80% of global profits should go back into the financial system, she said.

As opposed to maximizing shareholder value, she advocates for a new form of capitalism in which not only risks but also rewards are shared.

“If you are maximizing stakeholder value, by definition, you are collaborating with others in a really symbiotic way,” she said. To move further, she said we need to do production, distribution and consumption in a collaborative way with additional partners benefiting.

She also defends conditionality as a key feature in public and private sector partnerships, meaning that government funds should come with conditions.

“Governments should move beyond fixing markets and being reactive, they need to be proactive, putting missions at the center,” she said.

“Market-shaping, not market-fixing,” Ms. Mazzucato said.

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