Thanks for the namecheck, David. But a comprehensive strategy for smarter, fairer growth will require Theresa May to upend many more failed orthodoxies.by Mariana Mazzucato / September 15, 2016 / Leave a comment
Published in October 2016 issue of Prospect Magazine
In arguing for a more active industrial strategy, David Willetts is right to highlight the progress he and Vince Cable made when in government. Much of this was lost when the last Business Secretary, Sajid Javid, fell back on the old mantra that government had to get out of the way. If Theresa May is serious about industrial strategy, she must begin a fundamental shift in how economic growth is understood, and fostered. Growth has a direction as well as a rate, and the aim of industrial-innovation policy must be to set that direction. Willetts gives 10 practical tests for policies, but I’d like to add eight more ideas that Whitehall must embrace if it is to give a radical lead.
1. Understand that value is collectively produced
May’s call for “an economy for all” requires a drastic change in how politicians view wealth creation. New Labour and Conservative figures alike both hail “wealth creators,” but this is usually code for business leaders and entrepreneurs. In truth, workers, public institutions and civil society organisations are also essential to wealth creation. Markets embody the interactions between all of these actors, and so they should be structured to produce fairer growth which taps and reflects the contribution of all the stakeholders.
2. It’s growth, not the deficit, stupid
It was private debt not public debt that caused the crisis. Reducing private debt requires investing in long-run growth areas that raise real incomes, and reduce reliance on speculative credit. Public investment in education, research and technology expands productive capacity. It will boost productivity and growth, and—in the long-term—keep Britain’s debt to GDP ratio manageable. Across Europe, many countries have relatively low deficits but high debt to GDP ratios precisely because they are not investing in growth.