THE MISSION ECONOMY: TAKE OFF OR FAILURE TO LAUNCH? PART 2: AUSTRALIA AND THE MISSION ECONOMY
A leading group of western thinkers believe that free-market capitalism is in crisis. Influential economist Marianna Mazzucato’s answer is for governments to think big and act big, by setting ‘moon-shot’ missions and shaping markets towards achieving them.
Part 1 explored the case for change. It found growing evidence of a dark side to ‘pure’ free-market capitalism. The question was less whether a case exists for change, but how much change and what an obtainable better model might be.
Obtainability and improvement are both important. Change which replaces one set of problems with another shifts the deck chairs, but rarely delivers promised value. Change which is great in theory, but cannot be operationalised in practice, rarely leaves us better off.
Advocates for change are generally better at describing a direction of travel (what should change) than a destination (what will it ultimately deliver, with what trade-offs) or how achievable change might be. Another economist, Richard Nelson, advises analysts to have “a little less self confidence” and do “a little less overselling”. It is a wise caution.
The mission economy
Mazzucato uses the successful Apollo moon-landing project of the 1960s as inspiration for proposing a “new political economy”. Apollo involved an audacious government goal, backed by seemingly unlimited resources and a new way of working between government and business. Along the way, it delivered spin-off benefits for US (and, arguably, global) society.
For Mazzucato, the big lesson from Apollo was the potential for government to create public value by focussing societal resources on solving a specific agreed problem (the mission). Mission selection is clearly critical. Mazzucato’s own view is that the UN’s Sustainable Development Goals, a mix of 17 primarily social and environmental goals, provides a good starting point for choosing missions.
The criteria proposed by Mazzucato are simple. Missions must: be bold and inspirational; have wide societal relevance; improve people’s daily lives; be measurable and time bound; and be realistic and achievable. Community engagement, while not a criteria, is key to selecting and pursuing missions.
Notably, the Apollo project itself does not meet many of Mazzucato’s criteria. The project was certainly bold and inspirational, but it was effectively a ‘captain’s pick’ by US President John F Kennedy. Its value was abstract – a strategic advantage over the USSR – rather than being connected to people’s daily lives. The choice of priority was also controversial, both at the time and later. Nelson asks for example “If we can land a man on the moon, why can’t we solve the problems of the ghetto?”.
Apollo was also largely a technical challenge. Complicated as it was, landing a ‘man’ on the moon does not involve managing the conflicting values, dynamics and distributional trade-offs inherent in social and (many) environment problems. It is a point Mazzucato accepts, but believes needs to be overcome.
The heart of Mazzucato’s model lies in how it defines public interest and value. For Mazzucato, public value creation starts with building “open-systems to co-design our future”. Defining and pursuing public value requires deep citizen engagement, real debate and the bringing of different voices to the table.
The process for achieving an (enduring) agreement on public interest is less clear. What is clear, however, is a view that the traditional processes of parliamentary democracy and executive decision-making are not sufficient.
To support missions, government needs to move beyond fixing markets (by addressing market failures) to shaping them. Mazzucato suggests that a ‘whatever it takes’ attitude should be taken by government in pursuing public value missions. This includes by proactively creating market incentives that align business behaviour and mission objectives.
Policy also needs to shift from the redistribution focus of welfarist thinking to a focus on “pre” distribution. Profit opportunities should be closely aligned to the delivery of public value, and benefits should flow through business more directly to stakeholders. Government should become “an investor of first resort” and be more willing to to take equity stakes in businesses which benefit from market shaping. The intention is to ensure risk and benefits are better shared across government, business and the community.
Like government, business needs to change. Rather than a sole focus on shareholder value (via maximising profits), business needs to create value for all stakeholders – shareholders, workers, communities and the environment. Competitive advantage needs to derive more from the way a business works, rather than its positioning in the market. The intention is to drive business flexibility and innovation, and create a basis for stronger collaboration between government and business.
Finance, including government finance, needs to be remade. Short-termism needs to be replaced by long-term, patient, financing focussed on creating public value. Mazzucato argues that governments should use their ability to borrow and print money more aggressively – with avoiding inflation being the only real limiter. The first question government should ask is “what do we really want”, not “can we afford it”.
Missions, missions everywhere
Mazzucato paints a bold alternative to the free-market approach which has dominated western economic thinking for some time. But our lived reality might be closer to her model than we think. Survey the Australian policy landscape using Mazzucato’s criteria and mission-like statements and activities appear everywhere.
Most famous, perhaps, was Bob Hawke’s commitment to no child living in poverty by 1990. Another was Kevin Rudd’s commitment to halving the rate of homelessness by 2020. Closing the Gap commitments are yet another. Possibly most significant of all are Anthony Albanese’s commitments to reducing greenhouse emissions by 43 per cent by 2030 and achieving net zero emissions by 2050.
The list goes on. Creation of the National Disability Insurance Scheme represents exactly the type of think big, act big approach advocated by Mazzucato. Malcom Turnbull’s commitment to place Australia at the forefront of non-nuclear submarine production also fits the broad definition of mission. More recently, development of COVID vaccines could reasonably be described as the result of a multi-nation mission approach.
Mission language abounds in today’s policy structures. CSIRO, for example, has a growing program of national missions. Mission language can also be found, albeit loosely, in Scott Morrison era policies on modern manufacturing and university research commercialisation.
Market shaping also abounds. Operation of housing and health markets are both shaped by government in ways that go beyond well beyond a traditional conception of market fixing. The child care market is shaped to achieve a clear societal objective (increasing economic participation). Energy markets are increasingly being shaped by governments to achieve environmental objectives. Reasonable arguments exist around the quality (and coherence) of these market shaping activities, but the fact of them is clear.
Business, too, is shifting. This is not to suggest that business has forsaken shareholder value. But there is a move away from seeing profit as the only appropriate motive for business, and from seeing societal problems as something for others to solve. The adoption by business of a broader conception of value maybe uneven, and in some cases may not withstand much scrutiny, but it is there.
Australia as a mission economy
The operation of the Australian economy today bears little resemblance to the caricatured version of free-market capitalism some argue is in crisis. In both structure and approach, Australia’s economy already has ‘mission’ like elements. It begs a question – is Australia already a mission economy?
Mazzucato would quickly, and rightly, answer no. For one thing, the above (and other) examples represent a series of ad-hoc efforts rather than a coherent “better political economy”. They are also missing the sharpness of objective, degree of community engagement, systemic remaking of business and of finance markets, and the aggressive resourcing and market-shaping her model demands.
Should Australia take the leap and become a mission economy? It is at this point Nelson’s cautionary advice becomes relevant. Would the mission economy deliver an achievable better future, or is it oversell? What might we lose along the way? These questions, and the practical challenge of bringing the mission economy into reality, will be explored in Part 3.