The 2008 global financial crisis shook the foundation of economies around the world. Nine years later, the aftershocks are still being felt. As governments worry about secular stagnation, instability and inequality the old approaches to economic policy-making seem inadequate to the task.
How can governments get economies growing again, and in ways that serve society? What can they do to get firms investing again? What can they do about big societal problems, from managing chronic health conditions to tackling climate change? With renewed interest in the role of government in stimulating private sector growth, what should modern industrial strategy look like in this this context?
Professor Mazzucato’s work on mission-oriented innovation offers a fresh approach to questions like these. It focuses on the potential of mission-oriented, strategic public sector investment to catalyse economic activity, spark innovation, solve public problems, and lay the foundations for future economic growth.
Professor Mazzucato has now joined UCL where she is establishing a new Institute for Innovation and Public Purpose, building on her work on the Entrepreneurial State and on Mission-Oriented Innovation. It will explore how public policy can be used to give direction to economic growth and innovation in order to tackle societal and technological challenges. From battling climate change to health innovation, IIPP will help develop an understanding of how the interaction between different socio-economic actors affect both the rate and the ‘direction’ of innovation and economic growth. IIPP will also establish a new partnership with the Royal Society for the Arts, Manufactures and Commerce (RSA) (see below).
Rather than focusing on particular sectors – as in traditional industrial policy – mission-oriented policy focuses on problem-specific societal challenges, which many different sectors interact to solve. The focus on problems, and new types of collaborations between public and private actors to solve them, creates the potential for greater spillovers than a sectoral approach. It was this approach that put a man on the moon, and lay behind the creation of the Internet and entire new sectors like biotechnology, nanotechnology, and the emerging green technology revolution. It is not enough to fix market and system failures: policy-makers need to be more future focused, creating and shaping new markets.
The new framework seeks to better envision, justify, measure and assess public investments, working within an eco-system of public, private and third sector actors across the innovation chain. It focuses on the role of the state as shaping and creating markets, not only fixing them – and enables the development of economic policy to be informed by a broader theoretical underpinning. It addresses four key questions which we define as the essential pillars.
- First, how to overcome the fear of ‘picking winners’, focusing the question not on whether to ‘pick’ but on how to make strategic choices around societal and technological missions, which can ‘tilt’ the playing field around transformative change across many sectors. This pillar is about 'directionality'.
- Second, how to build the type of public sector institutions that welcome the fundamental uncertainty—and hence risk-taking—inherent in the innovation process—becoming learning institutions. This pillar is about viewing ‘policy as process’ and building learning organizations to engage in that process.
- Third, how to develop new tools to measure and assess the dynamic impact of different types of public policies that aim to create markets not only fix them. This pillar is about building a dynamic approach to the assessment of policies to replace, or at times complement, the more static cost-benefit approaches.
- Fourth, how to develop mechanisms so that the public and private sectors share the risks and also the rewards. This pillar is about thinking of ways to allow smart, innovation-led growth to also be inclusive growth.