Mazzucato teaches a state to dream

On September 25 the Central pavilion of VDNKh hosted a lecture by Mariana Mazzucato — the professor of economics at University of Sussex, who stands for rethinking role of the state so that it begins to implement global projects. Ilya Budraytskis and Marina Simakova share their thoughts about this appearance.

Ilya Budraytskis: "Mariana Mazzucato, who yesterday delivered a public lecture within the framework of the 6th Moscow Biennale, is considered an extravagant economist. Contrary to political and academical mainstream, she questions the usual opposition of the unwieldly bureaucratic state and the free market that is open to changes and creative breakthroughs. The ultimate message of Mazzucato is that majority of innovations owe their existence not to private investors, but to public institutions. Secret services, NASA and defence and health care agencies actually create a decentralized network that provides government funds for supporting innovations. The most successful of them become a source of incredible revenue for private corporations like Apple, for instance. And unsuccessful ones just remain another cost item for taxpayers. Therefore, the logic of this non-transparent state-private partnership is extremely unjust: the business is not ready to share the burden of risks, but it remains the main and the only beneficiary.

Contrary to political and academical mainstream, she questions the usual opposition of the unwieldly bureaucratic state and the free market that is open to changes and creative breakthroughs

However, alternative proposals offered by Mazzucato seem to be more than moderate — the business and the state just have to fairly understand and acknowledge each other, slightly fixing the rules of the game. For example, the business, after getting actual monopoly on one successful innovation, should invest in further developments. And when the private sector turns out to be inefficient and ineffective, the state can intervene (for example, it can take control of British Rail the privatisation of which reputedly resulted in its degradation.)

What’s interesting is that Mazzucato’s modest defence of state participation, suggested by Mazzucato, looks almost like a challenge to the neoliberal consensus. Active role of a state that represents public interest, was of higher priority than free enterprise, was perceived as a commonplace, while neoliberalism, on the contrary, looked like a radical challenge to the European social model. Mazzucato’s current position is not conceptually new but it enables us to see again the extent of the changes of our ideas.”

Marina Simakova: “Mariana Mazzucato started by saying that even though the need for economic growth is becoming more and more crucial, today’s rates of growth are clearly not enough. Said growth needs to be not only obvious, but also innovative, sustainable and inclusive (the last quality is impossible to ignore after Piketty’s breakthrough book on XXI century capitalism). This is exactly what Ms. Mazzucato does — consulting representatives of big corporations and state institutions on how to manage their financial and social capital. According to Mazzucato, responsible investments have a more predictable social value than economic one (meaning symbolic and financial dividends from investing into innovations) can really change the world for the better. Mazzucato’s optimism is rooted in the neo-institutional theory which assumes the opposition of free market and state is false and counterproductive, while their mutual constitution and cooperation is treated not only as an urgent necessity but also as a fact. The laissez-faire principle has to be forgotten as well as direct and aggressive attacks on such principle. At the level of everyday consciousness this opposition looks like a popular image of a startupper versus a boring and obsolete image of a bureaucrat (quite a smart slide shows a picture of smiling Zuckerberg versus miserable Kafka pictured in black and white). For Mazzucato, state that doesn’t have a choice but to intervene in market in case of emergency, has to cease seeing itself as an all-powerful savior or an ambulance service. Instead of fixing problems that arise on the market (or happen to market) it should act proactively and create “missions”. This is already happening: an enormous number of innovations actively used in consumerist sector were produced as a result of research studies conducted by NASA, DARPA and the others. At the same time corporations (working not only in technology but also, say, in finance) are also channeling more and more financial resources into venture projects. The advantage of such a situation and such an approach in general is not the amount of funding, but different channels of its distribution: multiple streams of financial investments are creating a decentralized system, which by definition works better than centralized one.

A shrewdness of a classical economic subject with all his opportunism, vehemence and ability to focus on his individual interests.

However, this idea of happy and productive cooperation has several problems. Mazzucato argues that the concept of welfare state itself is in threat precisely because of this general tendency to oppose the market to government intervention. Nevertheless, the strong partnership of the state and the market provides additional features not only for cooperation for the benefit of society, but also to corruption. For example, Mazzucato recalls that during Eisenhower’s presidency the progressive tax had 92% top rate. And that’s under a republican president! It is worth recalling that during this particular period many American top-managers had so-called 1$ salary. Eagerness to risk in order to get benefits in future, which is essential for any kind of investor, is not just the courage engendered by one’s ability to see wins/losses of all economic actors as common ones. It is a shrewdness of a classical economic subject with all his opportunism, vehemence and ability to focus on his individual interests”.