‘We have to rethink the narrative’: Mariana Mazzucato on how Labour should address an era of crisis

The UK seems to have faced no end of crises over the past few years. With the UK dealing with sluggish growth, an ageing population, and looming environmental catastrophe, it seems there are more crises to come.

Still, Keir Starmer was elected on a platform of change and, as Milton Friedman once said, “only a crisis – actual or perceived – produces real change.” For Friedman, a government’s response depended on the ideas that are “lying around”.

So what’s lying around?

Starmer has jumped on the ideas of Mariana Mazzucato and the work done by the institute she set up, the Institute of Innovation and Public Purpose (IIPP).

The IIPP is trying to refashion the way policymakers think about economics to enable governments to meet these looming challenges. “We literally have to rethink the narrative,” Mazzucato told City A.M.

The institute, based in UCL, was set up by Mazzucato in 2017. By this point Mazzucato had already published a number of books, like ‘The Entrepreneurial State’, which attracted global attention.

“To put it bluntly, I was in demand,” she told City A.M.

The ambition of the IIPP is to help embed the principles Mazzucato explored in her books in the actual practice of governments around the world. In short, she wanted to rewrite the curriculum for future civil servants and world leaders.

“I got tired of just kind of showing up, giving an inspirational lecture, then leaving, and nothing changed,” she said.

“So I set up the institute basically to change mindsets, and not just policy. Politicians come and go around the world, but the Civil Service remains, and so I wanted to really nest this new way of re-imagining government,” she said.

On a broad level, the most important aspect of Mazzucato’s “new economic thinking” is a more ambitious role for the state, not just correcting market failures but actively shaping markets and helping them to deliver desired outcomes.

Part of this involves simply recognising the role that the state already plays in many markets – whether it be run-of-the-mill procurement or corporate bailouts – and reorienting government action towards a clear objective.

This is where the concept of a mission comes in. For Mazzucato, a mission is a clear but ambitious goal, set by the government without prior knowledge of how it will be achieved.

A mission statement must be cross-sectoral with the government providing catalytic investment to help spur innovation, a true public-private partnership.

“Once you have these clear mission statements, the question for the government is how do you do the status quo differently…. What does it mean for your public funds, for procurement, for grants, loans, for partnerships, to crowd in that bottom-up innovation where the sum is greater than the parts.”

She rejects the accusation that this gives the state too big of a role. “It’s not like you have to do it all top down, because that would stifle innovation,” she said. “But if you don’t have a direction, then it’s just going to be chaos”.

Camden Council

Mazzucato’s ideas have found favour all over the world, helping to frame the European Commission’s R&D policy and Biden’s Chips Act. But you can also find evidence for the impact of the institute’s thinking close to home.

In 2021, Mazzucato’s team worked on a mission-driven approach with Camden Council as life in the borough got back to normal after the pandemic.

Among other things, the council set targets for everyone to eat “nutritious, affordable and sustainable food” by 2030 and for the residential estates to be “healthy, sustainable and unlock creativity” in the same period.

This forced the council to incorporate these goals into its existing policies. For example, the council thought about how school meals could support certain goals.

“How do we make sure that it actually changes the food supply chains away from just the large incumbents who get away with just getting contracts without actually delivering on what’s good,” Mazzucato said.

Georgina Gould was then leader of the Camden Council. She was elected as an MP in the election and within days was brought into the Cabinet Office, the department responsible for implementing the Prime Minister’s agenda.

Starmer has wholeheartedly embraced the concept of missions. The Labour manifesto included five missions, including growing the economy and fixing the NHS, which will define Starmer’s tenure.

The new Prime Minister has even reshaped Whitehall in accordance with these wider goals, establishing mission boards, which he will chair himself.

There’s no doubting where he got the idea from. In a New Statesman article Starmer cited Mazzucato by name. Not long ago Starmer and Mazzucato spoke for two hours on the concept of mission-driven government.

But Mazzucato is concerned that Starmer is not fully embracing the implications of a mission-led government, even if he is “genuinely interested” in the idea.

“Growth is not a mission. The NHS is not a mission. Growth is the result. The NHS is a key institution that needs to be well funded for health-related missions,” she said.

“Growth is not a mission. The NHS is not a mission. Growth is the result. The NHS is a key institution that needs to be well funded for health-related missions.”

Mariana Mazzucato

“If a government just uses the word ‘mission’, there is a risk that it doesn’t get it right. It risks going back to an old industrial strategy that just focuses on sectors… as opposed to really thinking across the economy,” she said.

One of the big obstacles preventing Labour from fully embracing a mission-oriented approach is the current set of fiscal rules, she says. Chancellor Rachel Reeves has committed herself to “iron-clad” fiscal rules, which will prevent the government from making meaningful investments unless it also raises taxes.

Andy Haldane, formerly chief economist at the Bank of England, said that Labour’s current public spending plans amount to little more than “a weekend’s GDP“.

Mazzucato urged the government to confront its investment-phobia. “To get the economy growing, the government needs to see the role of public investment as investment and not a cost,” she said.

“I just worry that, if the narrative continues that ‘there’s no money, we have to wait for growth to occur’ they are forgetting that growth actually occurs through bold ambitious public investment, which catalyses private sector investment,” she said.