Economics - Innovation - Inclusive Growth

This is my blog - debunking myths and challenging received wisdom in economics with new ideas, conversations and thoughts from my travels.

The Brexit-Trump Syndrome: it’s the economics, stupid

The election of Donald Trump, and the Brexit vote in the UK, have both been widely interpreted as a revolt of the economically ‘left behind’: a protest by working class voters at the impact of globalisation on their jobs and living standards. In neither case is this the whole explanation: in both the UK and US, plenty of people on higher incomes and in wealthy areas voted for the insurgent movement. But there can be little doubt that in Michigan and Merthr Tydfil, South Carolina and Sunderland, the disaffection of people on below-average incomes drove the outcome. more


In 2008, Queen Elizabeth II went to the London School of Economics to open a new academic building. The British Monarch has made it a life’s work to avoid saying anything contentious in public, but this time she had a question for the economists: Why had they not seen the financial crash coming?
Her question went to the heart of two huge failures of modern economics: the near collapse of some of the world’s major economies; and the faith in an orthodox economic framework that offered no explanation for what was happening. The thesis of my new book Rethinking Capitalism: Economics and Policy for Inclusive and more

Five Key Points for Italy’s Banking Woes

There is serious concern about Italy’s banks and whether the bad debt they are carrying signals trouble for the Eurozone. In facing up to its troubled financial system Italy’s political leaders could also benefit from a moment of reflection on what the role of finance could, and should, be in a dynamic and functioning economic system. As finance is central to the capitalist system, the lessons for Italy’s financial system are broader than the role of its banks. I will concentrate on 5 key points.
First, money is not just a medium of exchange, replacing barter and then gold. Money lies at the centre of the economic system which is, as understood especially by the great economist Hyman Minsky more

Creating a more symbiotic medical innovation eco-system

In recent days, my name has been mentioned by John McDonnell in relation to policies he and Jeremy Corbyn have been floating relating to the patent box policy and funding of medical innovation in the UK. I should say first off that I was once a member of Labour’s Economic Advisory Committee (EAC) performing a similar role to that which I have for Nicola Sturgeon in her Council of Economic Advisors (CEA) and, in various ways, with other policy makers worldwide. And although Labour’s EAC is not currently operating, I actually never discussed pharmaceutcal more

Talk of ‘globalisation’ will not help us understand the difficult choices ahead

What role did a mysterious force called ‘globalisation’ play in the UK’s vote to leave the EU? And what now for globalisation? Those were the questions I was asked to discuss on BBC Radio 4’s Today programme on Monday with Editor of the Economist, Zanny Minton Beddoes.

Even amidst the current political turmoil, there are the beginnings of a much needed, more serious, search for answers as to why so many people, not only in the UK, feel that the global economy does not work for them. Even regions of the UK that are the largest beneficiaries of EU structural funds – worth €150 more


The debate about the relative roles of the state and the market in capitalist economies tends to swing from side to side in the hearts and minds of public opinion: periods when the state is defended for its role in economic development are always superseded by an attack on its intervention into ‘well functioning’ markets. It has been like this throughout the twentieth century. And it is what has happened since the most recent global financial crisis and economic recession: a brief period right after its outbreak, when there was consensus that the state had a key role to play in both saving the banks and using fiscal policy to promote growth, was quickly apprehended more

What we need to get a real green revolution

All eyes are on the negotiations at COP21, the United Nations Conference on Climate Change, in Paris. President Obama’s opening remarks and the recent announcement by Bill Gates and other private investors of a new fund for new green technology could be seen as encouraging signs. But do policy-makers now have the courage to realise that to truly transform economies in a green direction the state must actively tilt the playing field?
We cannot rely on the private sector to bring about the kind of radical reshaping of the economy that is required. As Bill Gates recently acknowledged, only the state can provide the kind of patient finance required to make a decisive shift. In this, the hoped for green revolution must learn the lessons of the IT revolution: it will require not only massive more

The real questions Canada should be asking in the run up to the election

Post election update. The Liberal Party has won the Canandian election on a platform which promised investment, not more budget cuts. The new Prime Minister Justin Trudeau now needs to ask the right questions about how to steer and direct this spending, not only on shovel-ready projects, but with vision. He would do well to listen to Liberal Premier of Ontario, Kathleen Wynne, who recently cited my work in her speech to the Waterloo Innovation Summit on 17 September 2015, saying:

“One of Mariana’s central observations is that, in our post-recession world, the state has been cast as the villain — a hapless, cumbersome meddler that has always done a poor job of mimicking the private sector, so should get out of the way — just focus more

The Future of the BBC: the BBC as Market Shaper and Creator

At the heart of the government’s green paper on the future of the BBC is an implicit accusation that the broadcaster is ‘crowding out’ the market through the scale and quality of its services. The BBC is accused of (potentially) ‘stealing’ audience from private broadcasters, diminishing potential income from advertising (or subscription) and, consequently, private investments. If the BBC is to be blamed for ‘crowding more

A progressive economic agenda

I’ve agreed to join a new Economic Advisory Committee being set up by the UK Labour party, announced this week by new Shadow Chancellor John McDonnell. I’ll be working alongside some other great economists including Nobel laureate Joseph Stiglitz, Thomas Piketty, David Blanchflower and Simon Wren-Lewis (whose take on joining the committee you can read here). more

the real questions for China

Should we worry about China? Is growth in the key ‘emerging economy’ over, with dangerous reverberations across the globe, or are the latest changes to both its growth and its exchange rate just ripples not to worry about? All this depends on what the causes of such changes are. And traditional analysis seems to be looking in the wrong place, confusing causes with symptoms.
With much of the world economy still sick from more


At the end of July I was invited to be a panelist for the latest Forum of the Middle Class Prosperity Project in the US Senate in Washington DC, convened by Senator Elizabeth Warren and Congressman Elijah Cummings. The project was set up to examine some of the key challenges facing middle-class America and this particular Forum’s focus was on “Building the Economy of the Future: Why more

Greece and the EU: a macro and micro mess up

Economists are divided into macro and micro economists. The former focus on aggregates, like inflation, employment, and GDP growth. The latter worry about decision-making at the individual level—whether a consumer, worker or firm. The crisis in Greece poses both a macro and a micro problem—yet the cut and paste ‘austerity’ solutions proposed by the creditors have not tackled the enormity of either problem. more

A new (wealth creating) agenda for the Labour Party

A consensus is developing about why the Labour party lost – and lost big time -in the UK election. But the consensus is wrong. To those relying on the polls for prediction, the result came as a surprise. But for those who have followed Labour in the last years, indeed tried to influence their policies, and have been frustrated by the lack of a seriously different story –on what caused the crisis, what to do during it, and how to get more

Greece: the useless compromise

The arm wrestling between Athens and its international creditors seems likely to lead to yet another compromise. While some see this optimistically, it is time to shout loud and clear that this is an agreement that is unlikely to solve anything. Particularly not Greece’s real, underlying problems, which are huge and have to do with solvency, not liquidity. To tackle Greece’s real problem we need to address the real issue: the lack of a plan for investments that more

Today’s New Deal should be a Real Deal – a partnership of equals between public and private actors in the innovation economy.

When you argue that the role of the state in the economy is more than a ‘facilitator’, a ‘de-risker’, a regulator, a spender or an administrator–you will get a big reaction. After all, these assumptions have been at the heart of economic policy in countries around the world for the last half-century or more. We like to pretend that the state is at best useful for fixing different types of more

Where Are the European Googles?

A big question for the past 20 years has been: Where are the European Googles? Why are all the funky, creative, dynamic, innovative companies like Apple, Amazon, Google and Facebook coming out of the United States and not out of Europe?

The three-part answer you will often hear is: Europe has lots of culture, good food and fashion, but it is not “entrepreneurial enough.” There are not enough “garage tinkerers.” Not enough high risk venture more

Europe should do what Germany does, not what it says it does!

We often hear that the problem in Europe is that there is a monetary union with no fiscal union and that this cannot work, has not worked and is the origin of the current fiscal crisis in the Eurozone. What is usually meant by this is that some countries were allowed to spend too much (i.e. were fiscally irresponsible), which got them into trouble with high debt/GDP ratios, while others were more ‘prudent’ (i.e. fiscally responsible), more


“The important thing for Government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.” John M. Keynes, The End of Laissez Faire, 1926 (p. 44)

If there are two words we’re guaranteed to hear a lot of as the economic debate gets heated in the run up to the UK elections it’s “debt” and “deficit”. more

Norway after oil

In the last 6 months, I’ve made quite a few visits to Scandinavian countries, talking about the innovation and growth challenges they face. This week I returned to Oslo, to speak at the annual conference of Manifest Center for Social Analysis, a progressive think tank. During my previous visit in May 2014, I spoke at a conference on Energiforskningskonferansen (Norway After Oil) organized by the Department for Energy Research at the Research Council of Norway. more

Challenging perceptions about public investment in Canada

Recently I’ve been on a bit of a world tour (Norway, Sweden, Denmark, Canada, Holland, Italy, Dubai, Brazil, the USA and more) talking to policy makers, business leaders, and trade unions about how to achieve economic growth that is both ‘smart’ (innovation led) and ‘inclusive’. I’ve decided to start documenting some of these encounters. This first blog in the series is on Canada.

My first ‘innovation’ meeting in Canada was back more

New Years Resolution: battle against inequality and financialization.

The global financial crisis that began in 2008, and whose remnants are still felt strongly in countries facing full blown economic crises, was caused by two key factors. First: rising inequality, especially in the US, which caused those people with falling living standards to take out massive levels of debt, beyond what their income levels could later repay. Second: by a de-regulated financial sector which outstripped industrial more

The Innovative State: Governments should make markets, not just fix them

This article is published in the January / February issue of Foreign Affairs on Schumpeter’s heirs, “Here come the Disrupters” (pp 61 – 68).

The conventional view of what the state should do to foster innovation is simple: it just needs to get out of the way. At best, governments merely facilitate the economic dynamism of the private sector; at worst, their lumbering, heavy-handed, and more

Juncker’s investment plan: how to radically transform it

Mariana Mazzucato and Caetano Penna*

Today the European Commission’s president Jean-Claude Juncker announced a €315bn investment plan for Europe, that will leverage funding from the European Investment Bank (EIB) through a new financial entity: the European Fund for Strategic Investments.

Oh, but wait. It’s not actually a €315 billion investment plan. On closer scrutiny the EU is only more

Winner of the New Statesman SPERI prize for political economy

I am delighted to have won the inaugural New Statesman / SPERI prize for political economy—announced today!

The prize is “awarded biennially to the scholar who has succeeded most effectively over in disseminating original and critical ideas in political economy to a wider public audience in the preceding two or three years” and the shortlist featured some very high-calibre economists whose work I greatly more

The real lesson Renzi should have learned in Silicon Valley. Public investments needed for ‘smart’ jobs not tax cuts around Jobs Act

When Renzi visited Silicon Valley last month he did so in the name of bringing innovation, competition and dynamism to Italy. He is right to make this a key concern given that this country has had little dynamism for the last 20 years due to stagnant productivity and hence stagnant growth. Yet unfortunately rather than learning what really happened in Silicon Valley he seems to have more

The Eurozone needs less voodoo economics: more vision and more strategy

Why should the deficit be under 3%? Why not 1%, 2%, 4% or even 10%? Is this number perhaps just … taken out of thin air? Italy had a low deficit before the crisis but its debt/gdp ratio continued to grow. That should have made us realize that the deficit in and of itself is not the problem. Yet today all the attention is on that magic—voodoo like—number.

This week Mario Draghi came close to more

With the wrong diagnosis, and wrong medicine, the patient is getting sicker. Change course now.

The Eurozone economy is back on the front pages: 0% growth compared with the first quarter. Italy back in recession (did it ever leave?), and French and German output less than expected. While the German authorities are blaming the weather, for sure the biggest problem is the lack of equal competitiveness across Europe, which means falling demand (and even war) in some countries, affecting sales in others. more

Dear PRIME MINISTER, this is what the state can do

Professor Mazzucato’s open letter to Italian Prime Minister Matteo Renzi, published on the front page of La Repubblica, after he was reported to have bought a copy of her book, “Lo Stato Inovatore”. more

De-financialising the real economy

FT Alphaville are continuing their Mission Finance series on the Mission-Oriented Finance for Innovation this week. Here is my second blog on why we can’t just focus on finance: we need to de-financialise the real economy.
Today our mission-oriented finance for innovation conference begins at the Houses of Parliament. Vince Cable, UK secretary of state for business, innovation and skills will be kicking off this evening arguing more

Mission Finance: starting to think big again

Modern capitalism faces a number of societal challenges, including climate change, youth unemployment, obesity, ageing, and rising inequality.
To meet them requires a new agenda for innovation and growth policy. We need policymakers to ‘think big’ about what kind of technologies and socio-economic policies can fulfil visionary ambitions to make growth more smart, inclusive and sustainable.
But how can Governments think big about the more

Is inequality an inevitable result of technological change?

This is the question I was debating this week with Erik Brynjolfsson (appearing via robot) and Michael Osborne at the Financial Times’ great Camp Alphaville.

Erik’s work on this topic was highlighted in a great TED talk where he argued that whilst there are naturally growing pains as we radically reorganize our economies, big innovations are ahead of us.

His view is in direct contrast to the view of more