$600 checks are a “crime,” says the pope’s favorite economist
A conversation with economist Mariana Mazzucato on the case against Scroogenomics
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I watched “The Muppet Christmas Carol” with my family last night, and whenever Michael Caine’s Ebenezer Scrooge character came onscreen, I couldn’t help but recognize him from somewhere. Oh, yes. He’s the United States government.
In the hardest year for millions of Americans in their lifetime, what passes for “relief” is not. First there was a deal for $600 checks. Now there is some talk of $2,000 checks.
But what a lot of Americans have already understood is that a great many of the people who govern them do not share their hurt and are incapable of solving their problems.
I sat down, virtually, with the brilliant economist Mariana Mazzucato to talk about the relief plan and the problem underlying it: a loss of faith in government action that becomes a self-fulfilling prophecy: People don’t believe in government action, so government isn’t empowered to act, so people believe less and less in government.
Mariana was recently name-checked by Pope Francis as his favorite economist (along with Kate Raworth). No big deal, right? Mariana teaches at University College London. She’s written important books like “The Entrepreneurial State” and “The Value of Everything,” making a case for rewriting some of the basic thinking of economics. And she is a rare instance of a scholar who follows her work out into the world, helping policymakers implement her theories. There is much to learn from her.
“It’s a crime”: a conversation with Mariana Mazzucato
ANAND: In the U.S. we just had a congressional deal on additional stimulus, with the figure of $600 checks to individuals who make less than $75,000 a year, and various other measures that fall far short of what many experts proposed. And now there is talk of possibly a larger figure.
As a well-known critic of austerity and half-measures, what do you make of the agreement, and what will be the social cost of such meager relief?
MARIANA: A one-time check of $600 is nowhere enough, for three reasons.
First, for the citizens in question, this amount will simply not be enough to allow people to access their basic human rights to food, shelter, and caring for their loved ones.
Second, the economy will not benefit by this meager relief. As Keynes taught us, boosting aggregate demand is critical for economic growth. Given the dire situation on disposable income, this relief will not help the economy get back on its feet.
Third, the money does exist: the government has simply decided to spend it elsewhere: for example, on corporate bailouts and defense spending.
It’s a crime and should be rectified as soon as possible. And if America truly wants to “lead” the world, then match the relief packages in other countries.
ANAND: I recently discovered that Pope Francis has a favorite economist — and it's you. What is it like being the pope's favorite economist [as he disclosed in his new book, “Let Us Dream”]?
MARIANA: As a very unreligious person, it feels great but uncomfortable. The funny thing is, he actually read my book a year ago and wrote an open letter in Argentina saying capitalism is screwed, but there's a book that tells us what to do. The Vatican, in some ways, has been talking about the common good for a long time. But there's no real equivalent for that concept in economics.
ANAND: It seems to me this pope has made economics a focus of his papacy and is trying to push new economic thinking in a way that feels surprising and strange and important.
MARIANA: Absolutely. And that is because he's serious. He realizes that, as nice as it would be to think that all the disciplines have equal power over global policymakers — anthropologists, sociologists, poets, etc. — unfortunately, it's the economists who inform so many of these bad policies.
John Maynard Keynes had a great quote about this. He said, “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” So whether or not they even know the theory or have ever studied economics, they're being informed by it.
What's great about the pope is that by tackling the bogus economic reasoning behind a lot of these problems we have, he's really going to the heart of the problem as opposed to dealing with the symptoms of that wrong thinking.
ANAND: The pope’s mention of your work in his book was both flattering and tricky. He argues that there's this new generation of women economists changing the field. And he says the reason that they — you — are changing it is because, according to his view, women have a different experience of the economy, whether by being mothers or doing caregiving, etc.
So it’s an old-fashioned way to make his point, but he is the pope. I wonder what you make of that interpretation.
MARIANA: There are different ways you could interpret that point. One is that women have often, probably more than men — not always, because not every woman decides to have kids, so we should respect any way of being a woman — but women have often been in the caring position, whether it's caring for their own kids or caring for the elderly or caring for the community.
Well, this is one of the biggest problems with how we measure the economy. We don't even know how to value care. Care is often given for free. It's an act of altruism. And if we confuse price with value, which is what I argue in my book, then we end up only valuing things that have prices.
So if you marry your babysitter, GDP will go down, right? Because an activity that was being done and paid for maybe now is still being done — whether it's a man or woman, it doesn't matter — but you're no longer paying for it. That will actually create a fall in GDP.
ANAND: Another good reason not to marry your babysitter.
MARIANA: Exactly. Another one. There are so many valid reasons. That's one.
Similarly, if you pollute, GDP will go up because you’ve got to pay someone to clean it up. So this whole question has been an issue that environmental economists and feminist economists have been talking about for decades. And I don't think it's right to single out women. It's basically people who care for planet, communities, etc., who have been saying, "Hey, we're not measuring the economy right. This whole concept of care is missing."
But in a sense, he's actually right, because that particular job has often been done by women. And today with Covid, everyone's clapping for care workers, essential workers, key workers, and yet we have no clue how to value that. That's actually an insult, just to be clapping one day and yet then continuing to underpay them and give them really crappy work conditions.
ANAND: Your work has highlighted the high-impact investments that governments make that in turn make a lot of entrepreneurship possible — investments in such things as the microchip or Siri or the iPhone screen or the internet.
But I wonder how you think about the even more humdrum, boring kinds of public investment that aren't as flashy, maybe not as high-return, but I would argue still provide more social good than much of what the private sector does. I'll give you one example.
The U.S federal courts cost us about $8 billion a year. I would imagine the amount of marginal economic activity protected and thus facilitated by that $8 billion is easily in the trillions of dollars a year. How do you think about an $8 billion investment like that in your discussion of “the entrepreneurial state” versus private entrepreneurship?
MARIANA: One of the problems is that people have made too much of a distinction between those types of examples.
That example you just gave was a typical example that Adam Smith wrote about in “The Wealth of Nations,” where it's like, you need all this private enterprise, you need self-interest, but then you'll also need the state to look after the courts, the policing, protection of private property, infrastructure, education, basic goods like public health.
There are very few people who would say the state isn't important in producing the high investment required to get the courts to work or the basic infrastructure to be there. What is missing is understanding what you said — what is the value of that? Who should be contributing to that?
The state actually has been massively essential for capitalism to work by investing in the physical infrastructure, the social infrastructure, the deep tech stuff that I talk about “The Entrepreneurial State.”
That's the myth about the free market. Without the state, we wouldn't have capitalism.
ANAND: So let's talk about capitalism. There's a raging debate right now. There are those who just want to double down on it — and others who are questioning it. On the left half of the equation, there’s a view that capitalism needs to be minorly tweaked and better harnessed for social good, which is the neoliberal view. Then there’s a reformist camp. And there's an outright abolition camp, arguing that capitalism needs to go. How do you weigh in on the debate?
MARIANA: I think the first thing that's important to ask the people who want to destroy capitalism is, How do they define capitalism? The risk is that people start using the word capitalism to mean things that are very different.
Is it that they want to abolish private property? Is it that they want to abolish certain items being sold on exchanges instead of just being given for free because we, as citizens, should be accessing all sorts of things as part of our human rights?
What's extraordinary is that there are so many different ways to do capitalism. Look at countries where workers are on the board of the company, where trade unions have their representatives on the board of the top companies, countries where healthcare is free, public education is free. I live in England, which is not exactly Scandinavia. But I've never paid a cent for health, and I have four children. My kids all go to state schools.
We can construct our capitalist system to be fundamentally different in terms of how we govern companies, in terms of how we govern that public-private relationship.
So I think I would put myself in the bucket of saying don't reduce it to this old-school reform-versus-revolution-versus-status quo. Get your hands dirty. Look globally at what works, what doesn't, and start scaling up the stuff that works and massively scaling down the stuff that doesn't work.
ANAND: You talk a lot about conditionalities. And it’s a technical term, but I almost think about it as the government behaving like a benign mobster when it comes to the private sector and saying, "Hey, you want help? You want bailouts? You want the Fed to pump more money into the system? Here's what we want on behalf of the public."
Whether it's the missed opportunity of 2008, whether it's right now with Covid relief, what are the kinds of things the public can demand as conditionalities when the corporate sector is receiving help from the government?
MARIANA: First of all, there are lots of different ways the corporate sector is helped constantly.
Some of it is what you were talking about before with the courts — the infrastructure. But we’re also talking about bailouts, subsidies, guarantees, investments, patents.
Patents, to stick with that for a moment, are something the government gives the private sector. It gives businesses years of monopoly power.
ANAND: And it’s not required by nature. It's a contrivance that we invented.
MARIANA: Exactly. In fact, the term “intellectual property rights” is a problem because that last word makes you think it's some sort of natural right. No, it's the government giving you 20 years of monopoly power. So, even there, you could begin answering the question: OK, the government gives you a 20-year monopoly. What do you give back? It's a deal. It's a contract.
More broadly, you can have conditionality on reinvesting your profits instead of doing dividend payouts and share buybacks. You can have conditionality on making sure that companies that are getting grants, loans, or bailouts are changing their corporate-governance structures if they have very problematic ones.
I'll give you an example. The German state development bank, KfW, was asked to help the country’s steel sector. The German government said, "Fine, we'll help you. But the condition is you lower the material content of your value chains." Which they did through new techniques. But they didn't do it because they went to Davos and talked about purpose. They did it because they had to do it to get a government loan.
The idea of conditionality is, "OK, we're going to help you because you're a sector in crisis. But we're not here just to bail you out. We want you to transform towards a form of production that is better for the planet."
ANAND: It seems like this basic notion could be taken so far in so many areas. Harvard University, a very wealthy university, receives a ton of federal government grants like every major university does. Do you think it would be appropriate to start conditioning those grants on saying, "You know what? We actually don't want such a huge percentage of your admits to be from the top 1 percent of families. If you're not interested in pursuing social mobility as part of your admissions policy, no more federal grants."
MARIANA: Absolutely. But if you think of it, this is minimal. It's a minimal request. It's just such an obvious request to make. A further request would be make sure that all the health research funding, for example, that goes to these universities is then not abused in causing things like an opioid crisis.
Even these nominally private universities are, to a large extent, public universities, in terms of where the money is coming from to do the research but also in terms of the tax evasion that occurs. Which I know with Princeton, because I grew up around there. There'd be buildings popping up every other year, massive buildings for these rich, well-to-do students. And it was often through alumni who then get massive tax deductions for this charitable giving.
If that's the case, don't call it a private university. Just admit that it's being financed by a massive subsidy.
ANAND: You've managed to straddle being a strident critic of the power establishment and somehow their inside advisor and consigliere. I wonder how you pull it off without succumbing to the temptation to mute your ideas and without getting disinvited.
MARIANA: First of all, all those consigliere positions I do, I basically do for free. So I'm currently a consultant for the Italian prime minister. I'm his special advisor. I said, "I don't want any money." Or with the South African president, I'm on the Presidential Economic Advisory Council. We don't earn money.
As an academic, I think the best thing you can do, or the most honorable thing you can do, is teach, do great research, but also make sure that your research actually has impact.
The traditional way that academics do this — I used to do it like this, too — is you write various research papers: Austerity sucks. Do this. And here are the policy implications.
That needs to be done, but the really radical stuff is when you get your hands dirty and say, "And I'm going to help you do that."
So I hire people, I call them practice-based theorizers. We theorize about how to make change, but then we actually get our hands dirty. And you bring the learning back to the theory.
My goal is to create change. But change doesn't happen if you're just campaigning for it or if, on the other side, you're just theorizing about it. And there are very few organizations, in my experience, that are places where you both have thought leadership, like real thought leadership — like changing how the textbooks are written — and have the patience and the humility and the empathy, because you need to know how to listen. You need to know how to actually work over a long, patient period to sit down and help change makers carry it out.
It's easy to preach. There are many preachers of what the good thing is to do. There are few who sit down and do it.
ANAND: You have a new book coming out next month, “Mission Economy: A Moonshot Guide to Changing Capitalism.”
You make a distinction between challenges, which we often talk about, and missions. Missions are, you say, exciting, thrilling, specific projects; they give people purpose. They're not just homework, unsolvable homework. Can you give people a sense of some of the most exciting moonshots that you think we could pursue that are maybe not even on their radar right now, through which we could solve a lot of what you call our most “wicked” problems?
MARIANA: First of all, challenges are important. We shouldn't get rid of challenges, but challenges are the big goals, right? Climate change is a challenge, and equality is a challenge. But if you just talk about it at that level, things don't get done. In the same way, had the moon landing stopped at just talking about the space race, they wouldn't have gone to the moon.
The main thing is, how do you, in a concrete way, bring all these different sectors together, whether it's real estate, energy, mobility, the social sector, food, environment, construction, materials, to solve these problems?
That's what the mission-oriented approach is. Which is, instead of just talking about purpose and stakeholder value, what does it mean to nest purpose in a system, not just in the corporations, but in a system to affect how public and private work together in new ways?
ANAND: Last thing, on a very important subject. In the early days of the pandemic, like lots of bored people, I took up sourdough baking. And you were one of my mentors and inspirations. So my question to you is, what can bread baking teach us about the economy and the common good?
MARIANA: I have to think about this.
First of all, it takes time. I don't know what recipe you're following, but with mine, first you need to make the madre, the mother…
ANAND: The starter.
MARIANA: Starter, yeah. In Italian, we call it madre. Then, for mine, you need to wait at least ten hours for the first step, and then another four hours, and another four hours, so it takes time.
But also: it's really fun to do with other people. So, with my kids, I’ve got four of them. I used to get bored, but you're supposed to play with your kids, right?
ANAND: That's what I hear, yeah.
MARIANA: Do you have kids?
ANAND: I do. A two-year-old and a five-year-old.
MARIANA: Oh, that's great. So, instead of just playing with play dough and stuff like that, which I do love — I love the smell of play dough — I just started getting them to cook when they were little. And it's amazing how much you can do while you're playing.
So it's a very collaborative process, but also it's quite scientific. I mean, if you look at the history of yeast and what it got us from beer to other things, there's also a lot of knowledge and science that's been passed down from generations.
It doesn't just come out of one person's great thinking — that misguided idea of innovation.
Plus, there’s a lot of history, culture, and differences in how you can make bread. In Italy, where I'm from, what's amazing is that there are these different regions — I'm from the Veneto region, and just within Veneto, the accents are different, the bread baking is different, the pasta is different within our region, let alone North versus South. And I think, coming back to varieties of capitalism, that variety of different ways to make sourdough actually is itself really interesting.
If we're going to make a better economy, we need to get that sense of learning different ways to do stuff, but also what works and what doesn't and not just getting too fixed in our ways.
Even though I must say that with my sourdough, I'm not going to change how I make it. It's really, really good. My crust is really nice and hard. And the inside has these big, nice bubbles. Is that how yours is?
ANAND: Mine is not there yet. And to be honest, I stopped. I got tired of it.
Mariana Mazzucato is professor in the economics of innovation and public value at University College London, where she is founding director of the Institute for Innovation and Public Purpose. She is the author of “The Entrepreneurial State” and “The Value of Everything.” You can pre-order her new book, “Mission Economy: A Moonshot Guide to Changing Capitalism,” now. This interview was edited and condensed for clarity.
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