Jeremy Corbyn's Necessary Agenda
Total Page：16
File Type：pdf, Size：1020Kb
Jeremy Corbyn’s necessary agenda By Maria Mazzucato September 29, 2015 – Project Syndicate Seven economists (including Joseph Stiglitz, mutually beneficial public-private partnerships Thomas Piketty, and me) have agreed to to fuel decades of growth. become economic advisers to Jeremy Corbyn, For starters, we must invest in education, the new leader of the British Labour Party. Our human capital, technology, and research. goal is to help Labour shape an economic Massive technological and organizational policy that is investment-led, inclusive, and advances have raised productivity in many sustainable. We are convinced that such a sectors. Many (if not most) of these progressive agenda is what the United breakthroughs have their origins in publicly Kingdom – and the rest of the world – now funded research. Ensuring future advances will needs. require direct policy interventions and When the Labour Party lost the election last investments in innovation across the entire May, it received considerable criticism – even innovation chain: basic research, applied from its own frontbenchers – for failing to research, and early-stage company financing. embrace the business community as “wealth Moreover, we need more patient, long-term creators.” But while businesses clearly create finance. Most existing finance is too wealth, so do workers, public institutions, and speculative and too focused on short-term civil-society organizations, which, through outcomes. Exit-driven venture capital might be dynamic partnerships, drive long-term growth appropriate for gadgets; but technological and productivity. Indeed, a progressive revolutions have historically required patient, economic agenda must begin with the committed public financing. In some countries, recognition that wealth creation is a collective like Germany and China, public banks take on process and that market outcomes are the this role. In others, the job is done by strategic product of how these various “wealth creators” public agencies. interact. This also means de-financializing the real We must drop the false dichotomy of economy, which has been overly focused on governments versus markets and begin to think short-term concerns, so that profits are more clearly about the market outcomes we reinvested into production and research and want. There is plenty to learn from public development, rather than hoarded or spent on investments that were mission-oriented, instead share buybacks. Over the last decade, Fortune of focused on “facilitating” or “incentivizing” 500 companies in areas like information business. Policy should actively shape and technology, pharmaceuticals, and energy have create markets, not just fix them when they go spent more than $3 trillion buying back shares wrong. in order to boost stock prices, stock options, Indeed, policies traditionally considered and executive pay. Meanwhile, in the United “business friendly,” such as tax credits and States and Europe alone, companies have lower tax rates, can be bad for business in the hoarded nearly $4 trillion. Companies should long run if they limit governments’ future be rewarded for reinvesting their profits in ability to invest in areas that increase production, innovation, and human-capital innovation-led growth. Likewise, it is time to formation. move on from the debate over austerity to a new conversation about how to build smart, Next, we must increase wages and welfare. GDP ratios. As long as public investment Until the 1980s, productivity increases were increases long-term productivity, the ratio will accompanied by wage increases and rising remain in check. In the OECD, many of the living standards. This link was broken by a drop countries with the highest debt-to-GDP ratios – in labor’s negotiating power and companies’ including Italy, Portugal, and Spain– ran increased financial orientation. Unions are key relatively modest deficits, but failed to invest to effective corporate governance and hence effectively in education, research, training, or should be more involved in innovation policy, well-designed welfare programs that facilitate pressing for investments in education and economic adjustment. training – the long-run drivers of wages. Fiscal and monetary policy will be important, Public institutions must also be strengthened. but only if coupled with the creation of Bold policy choices require public agencies and opportunities in the real economy. Money institutions that are able to take risks and learn creation, through quantitative easing, will not from doing so. Outsourcing government fuel the real economy if the new money ends up services that lie within the government’s own in banks that do not lend. And when businesses competency hinders this process as it reduces do not see opportunities, interest rates stop the public sector’s “absorptive capacity.” affecting investment. Creating a network of well-funded, Finally, we must not shy away from guiding the decentralized agencies and institutions that direction of development toward a green work in partnership with business would make economy. Beyond “shovel-ready” government both more effective and more infrastructure projects, fiscal stimulus should strategically focused. support transformational projects, such as those The tax system must be made more progressive that led to advances in information and as well, with tax credits for businesses designed communication technology, biotech, and to encourage inclusive outcomes. We must end nanotech that were “chosen” by public policy the current practice of blindly lowering taxes, working alongside businesses. Green creating loopholes that allow legal tax development can be about much more than avoidance, and offering tax credits that have renewable energy; it can become a new little effect on investment and job creation. direction for the entire economy. When the public sector takes key risks along The British Labour Party, along with other the innovation chain – such as providing progressive parties around the world, has a guaranteed loans to companies like Tesla – we responsibility to change the discussion on should think more creatively about the kinds of economic policy. By doing so, it has the contracts that enable the public to share not opportunity to shape the future. only the risks, but also some of the rewards. Mariana Mazzucato, Professor of the Economics of We must also shape a new narrative on debt. Innovation at the Science Policy Research Unit of the University of Sussex, is the author of The Entrepreneurial Rather than focus on budget deficits, we should State: Debunking Public vs. Private Sector Myths. concentrate on the denominator of debt-to- .