The Biggest Lie about Capitalism | Mariana Mazzucato interview

**Joe** (0:00)
Am I tough enough? Strong and stable leadership.

**Joe** (0:02)
Total ruba.

**Mariana Mazzucato** (0:03)
Hell yes, I'm tough enough.

**Joe** (0:04)
Shut the fridge. Not another once.

**Joe** (0:07)
It's the PoliticsJOE podcast. Mariana Mazzucato is professor in the economics of innovation and public value at the University College London, and author of The Common Good Economy, A New Compass.

**Joe** (0:20)
By actually having goals, whether it's on health and well-being, climate, preserving water across all our sectors, that means the state has to be confident. Unless you have common good at the center, then the way we interact with steel, the way we interact with Palantir, the way we interacted with the so-called Nissan deal at the time, it by design becomes a problem. This idea that somehow regulation is bad for innovation is completely misplaced. And the fact that today in space, for example, many astronauts are complaining that they can't see anything, it's full of debris, it's become a playground for the rich. A state is often giving water rights to, whether it's Pepsi-Cola, Anheuser-Busch, right, drinks companies.
And if they don't put in the contract in order to get the concession from the state, that you're expecting something from the company, then of course you'll get a parasitic contract. If the state didn't actually create the right contract from the beginning, it's part of the problem. Unless you know what the state is for, to be driven by public purpose, public value, common good economics, of course we're going to get very problematic contracts. Unless we have a different story of where wealth comes from and that collective value creation, it's not surprising then that we get everything else wrong.

**Joe** (1:29)
Professor, can you talk to me about the common good? What do you mean by that?

**Joe** (1:33)
Sure. I mean that we have a lot of good washing because there's lots of goals that economies set themselves, whether it's around reducing inequality, achieving growth, combating the biggest problems of our time regarding water, biodiversity, climate change, and yet the underlying economic theory that we use to do good in the economy is not good.
It's very corrective. We even talk about public goods as corrections for something the private sector doesn't do. What I mean by it is going back to deep political philosophy in the times of Aristotle, where the common good was an objective, not a correction. He talked about the telos, the goal, but where the polis, not the police, but the polis, the community, matters as much as the goal, so the telos and the polis. And so I believe that within economic both theory and practice, what we're missing is precisely that. We don't have an objective outcomes-oriented economy. We're just correcting for market failures. And we don't spend enough time in designing contracts in a pre-distributive way. In other words, from the beginning, instead of waiting for redistribution, to get all the relationships right along the way, whether that's capital and labor, public and private, civil society organizations and the state, we'd have very messy contracts, we'd create problems and then we correct for market failures.

**Joe** (2:51)
Can you talk about that a bit more in depth actually? Because I know that you'll do this day in day out, but for some people, it would be the first time they're hearing this. So correcting market failures and the concept of public good, why is that different to searching for a common good?

**Joe** (3:05)
So in economics, we believe in markets. I think often it's actually confused. The word the private sector of business is often confused with markets, but we can get to that later.
The theory, which I come back to, says that markets work great until they don't. And when they don't, we have to correct them. Now, we might correct them due to what's called positive externalities. In other words, when there's something good that we want to be invested in, but the private sector doesn't invest in it because of, and I don't want to go into too much technical terms here, but due to the non-rival and non-excludable aspects of that good. In other words, you can't appropriate the profits from it because the spillovers are so great to get under investment, then we expect the public sector to invest in that thing, whether it's clean water, defense systems, basic research.
The opposite are negative externalities. When the private sector does too much of what's called a bad, let's think of pollution, not including the costs of pollution inside their kind of budgets, and so we tax them, say a carbon tax, that's again the state correcting for a problem in the economy, in how the market works. So whether you're correcting for positive externalities like public goods, or whether you're correcting for negative externalities through a carbon tax, my point is, you're always in correcting mode. It means you're always too little, too late. You're always ex post, not ex ante, and also a bit depressed, right? Because you're always thinking that something's going to not work. So I sometimes joke that I walk in to governments as an economist and I come out as a life coach, a therapist, because that kind of negative, right? That markets might fail and so we need government to correct for that. And what's striking is that the word public good, two words, one is good, is so corrective. And so it's not even a theory of the public or of the good. It's a theory of what the private sector is not doing that then creates a gap. That's why you might hear even in big global circles like the United Nations that we have a financial gap. So the current estimate is that there's about $7 trillion in gaps for the financing of the sustainable development goals that every country, including the UK, signed up to in 2015