Mission economy may be mission impossible

In September 1962, then President John F. Kennedy announced that the United States was launching an ambitious plan to land a man on the moon before the end of that decade. The visionary, state-led mission – prompted by Cold War competition – triggered a technological leap that rippled through the economy for decades to come. Governments, economist Mariana Mazzucato contends, should now channel the same spirit and back bold goals to improve the planet and society.

In "Mission Economy: A Moonshot Guide to Changing Capitalism" the founding director of the Institute for Innovation and Public Purpose at University College London argues Western market-led capitalism has failed. Years of privatising state-owned companies and outsourcing essential services, she says, have left governments weakened without benefitting society or saving taxpayers' money. In Britain, which accounted for 40% of assets privatised across the Organisation for Economic Co-operation and Development between 1980 and 1996, projects funded by the government's Private Finance Initiative ended up costing on average 40% more than those financed through government borrowing, National Audit Office estimates show.

Mazzucato acknowledges there's a role for the private sector. However, the state must take the driving seat and form "partnerships with a purpose" to direct energy and funds towards higher goals, such as fighting climate change. Governments must evolve from fixing markets to shaping them. "Today, a 'mission oriented' approach – partnerships between the public and private sectors aimed at solving key societal problems – is desperately needed," writes the Italian-born economist, who is a special adviser to Italian Prime Minister Giuseppe Conte and sits on the board of the country's state-backed utility Enel.

The pandemic, and the widespread state support and bailouts it has prompted, provides fertile ground for Mazzucato to cultivate her pro-government message. Take the plan by European Union members to jointly commit 750 billion euros of long-term loans and grants to a recovery fund known as Next Generation EU. The plan, described by European Commission President Ursula von der Leyen as "Europe's man on the moon moment", comes close to Mazzucato's vision in terms of boldness and long-term vision. Member states will channel the funds towards the shared goals of making Europe greener and more digital, so as to build a more resilient European economy.

However, this is where the lunar analogy breaks down. While Kennedy's goal was specific and sharply defined, the EU's stated objectives are so broad that they risk being lost in multiple ineffective ripples. While EU money may allow governments to fund expensive research into processes such as producing hydrogen from renewable energy, the money may instead flow towards politicians' pet projects. Draft national plans also diverge. Italy, where one in four young people are unemployed, has earmarked just 3% of the EU funds for youth and labour initiatives, compared with 6% in Spain and 12% in France, according to an analysis by independent news channel Sky TG24 earlier in January.

Mazzucato's approach also requires faith that governments and public administrators have better expertise and vision than those operating in the private sector, and that they always act in the public interest. Again, the pandemic offers mixed results.

The race to find an effective vaccine for Covid-19 was a successful example of an ambitious global mission achieved at miraculous speed. Large-scale government support helped accelerate the advancement of messenger RNA technology, developed by firms like Moderna and BioNTech, which could deliver benefits beyond fighting the coronavirus. This success was possible because the objective was narrow and public and private interests clearly aligned from the start.

Yet Covid-19 has also shown that some governments are unable to make even basic choices to protect their citizens. In the United States, which has lost more than 400,000 lives to the virus, the administration of former President Donald Trump downplayed the risks and resisted scientists' calls for basic measures such as wearing masks. British Prime Minister Boris Johnson was arguably slow at introducing lockdowns even as he saw the epidemic rise in other European countries. In Italy, the government chose to reopen shops rather than schools, leaving families to grapple with months of sub-quality distance learning.

Mazzucato is probably right that it is time for capitalism to go beyond the narrow objective of delivering returns to shareholders. Free markets alone cannot make the world a better place. But neither can inept political leaders. Unless the goals are narrow, well defined and subject to a high degree of public scrutiny, state-led moonshots will continue to miss their target.