Mission Economy: A Moonshot Guide to Changing Capitalism (2020) by Mariana Mazzucato

Mazzucato’s approachable Mission Economy attempts to rethink and reform capitalism, presenting an alternative to its current (perhaps on the sunset) neoliberal orientation. This new capitalism sees the public sector take back its role as a key partner and shaper of the economy.
 
Our current political-economic structures are unable to address the global problems facing the world today, most important of which are problems related to the environment. She identifies four sources of our dysfunctional capitalism.
 

1. The short-termism of the financial sector, which finances itself (e.g., stock buybacks, real estate, etc.) rather than financing productive sectors—in the U.S.A. and the U.K. “only about a fifth of finance goes into the productive economy” (p. 16). The system leads to debt-driven speculative bubbles, which the public has had to pay for when the bubble bursts.
2. The financialization of business, where business profits go to focusing on short-term imperatives of the financial sector rather than investments into workers, capital investments, research, etc. Cheap interest rates and debt is used to maximize short-term shareholder value, instead of investing into stakeholders and preparing for emergency situations like COVID: Boeing spent 74% of free cash flow on stock buybacks and ended up requiring government assistance when COVID-19 struck the U.S. economy.
3. The climate emergency and our fossil fuel-based economy.
4. The role of the government under the dominant economic framework, where the government is left to be a tinkerer rather than a shaper of the market. For Mazzucato, it is important to rethink the role of the government, as it is the only institution with enough capacity to spur on changes at the scale necessary to solve our current problems.

 
Given the responsibility of dominant economic frameworks on our troubled status quo, Mazzucato looks to dispel erroneous myths about the government, naming five myths in particular.
 

1. Businesses are value creators and risk takers, while the government should only facilitate and de-risk. Through investments in high-risk ventures, the government has funded numerous innovations that the private sector was too risk-averse to invest in (e.g., experimental drugs, renewable energy, and most recently, fusion technology). The private sector tends to socialize the risks while privatizing the gains
2. “The purpose of the government is to fix market failures”: in Market Failure Theory (MFT), markets fail due to information asymmetry, positive externalities, or negative externalities, and the government should only step in to fix inefficient allocation.
3. “Government needs to run like a business”: governments should reduce the scope of their activities and sell off public domain services and programs to the private sector by privatization or contracting these activities out.
4. “Outsourcing saves taxpayer money and lowers risk”: Outsourcing and privatization leads to gains in efficiency—better services at a lower cost; instead, costs have increased and the public has ended up private sector beneficiaries (e.g., consulting companies)
5. “Government shouldn’t pick winners”: “picking winners” refers to government shaping the economy through industrial policy, investments, etc., due to a supposed inability to pick winners wisely—historically, this is inaccurate (e.g., Ha-Joon Chang’s Kicking Away the Ladder).

 
In place of these myths, Mazzucato writes that value is the cumulative result of the public sector, private sector, and civil society. She asserts a new vision of the economy, one which confronts and addresses our contemporary grand challenges through collaboration and innovation—the mission-oriented approach.
 
Using the case study of the Apollo programme, which directly contradicts the aforementioned myths and put a man on the moon almost 60 years ago, Mazzucato extracts six key attributes: 1. Vision and leadership with a sense of purpose; 2. Innovation through risk-taking and experimentation; 3. Organizational agility and flexibility (as opposed to governmental siloes); 4. Unpredictable and serendipitous spillover effects (a whole host of innovations from portable computers, wireless headsets, baby formula, camera phones, and home insulation were enabled by the Apollo programme); 5. Budgets based on outcomes and not costs; and 6. Partnership between the business and the government. She then looks to apply these learnings to some of current grand challenges of today, elaborating at some length on the application of the approach on the Sustainable Development Goals, the digital divide, and health and wellbeing.
 
Mazzucato ends by proposing seven new principles to spur on the mission-oriented approach:

1. Value is something created collectively: Value is created collectively by various stakeholders in the public for the public interest, and are not the result of self-interested individuals trying to maximize utility; public goods are not corrections to market failures. Current frameworks only assign value to things with a price; in this new framework, we need to assign value to the production of public goods.
2. Governments shape markets and do not just fix markets: Contra MFT, governments should begin by asking “what sort of markets do we want? (p. 173) and design policy to shape such markets.
3. Organizations need to have dynamic capabilities: Organizations (particularly governments) should be dynamic, agile, and not be afraid of experimentation. Organizations should encourage development of internal human resources through a culture of learning.
4. Outcomes-based budgeting: Missions require a longer-term horizon; instead of budgeting based on costs, budgeting should be based on outcomes.
5. Distribution should share risks and rewards: Current approaches socialize risks and privatize rewards for the private sector; in Mazzucato’s framework, value is created collectively and should be distributed more equitably. Mazzucato calls for pre-distribution instead of re-distribution through taxes or benefits. This can be done with a public-wealth fund that distributes a citizen’s dividend, government equity in firms that benefited from public funding, conditions that come with government funding (e.g., training for employees), all which connects value creation with value distribution.
6. Partnerships benefit all stakeholders: The current focus is on maximizing shareholder value, but we need an approach that benefits all stakeholders and a new framework that benefits the common good; this is particularly important with the environmental challenges on the horizon.
7. Participation and open systems: Mission-oriented approaches require engagement with the wider public to have discussions about societal values and to get public buy-in for missions. They require active public engagement to co-create and imagine futures together. An open system needs to be in place to reflect external feedback.

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