Martin Wolf interviews Mariana Mazzucato: Can the state innovate?

Episode Summary

Executive Summary: Mariana Mazzucato argues that markets and innovation are not self-generating: the state has historically been essential in creating major technologies, from the internet to GPS, by taking risks, setting missions, and shaping markets. She urges governments to use mission-oriented policy for climate, health, and water, but warns that state capacity has been hollowed out by outsourcing and weak deal-making, leaving public risk socialized and private rewards privatized.

Main Topics: The entrepreneurial state and public innovation (Priority: 5/5): Mazzucato explains that modern innovation systems depend on an active state that funds, coordinates, and takes risks across the full innovation chain, not just basic research. Silicon Valley and the public roots of digital technology (Priority: 5/5): She argues that core digital technologies behind Apple and smartphones were publicly funded or government-enabled, undermining the myth of the lone entrepreneur. Mission-oriented policy and moonshot governance (Priority: 5/5): The discussion contrasts vague industrial policy with clear, time-bound missions modeled on Apollo, emphasizing direction-setting, cross-sector coordination, and measurable outcomes. Health, climate, and water as modern missions (Priority: 5/5): Mazzucato proposes applying moonshot-style state capacity to global challenges like pandemic preparedness, universal health access, net zero transitions, and the global water cycle. State capacity, outsourcing, and capture (Priority: 4/5): She warns that governments have lost expertise through outsourcing to consultancies, leaving them unable to negotiate effectively or evaluate private partners. Risk, rewards, and the politics of failure (Priority: 4/5): Using Solyndra and Tesla, she argues governments should structure public investment so that taxpayers share in upside gains when they bear downside risk. Global governance and geopolitical competition (Priority: 4/5): She says climate and health require international coordination so that national green industrial policies do not become harmful green nationalism or vaccine apartheid.

Key Arguments: The state is not merely a regulator or fixer of markets; it can be entrepreneurial by funding, coordinating, and creating new markets. Technologies credited to private firms often depend on long-term public investment, such as internet, GPS, touchscreen, and software ecosystems. Innovation succeeds when governments define clear missions, break them into subproblems, and use procurement and incentives to mobilize private actors. Public investment should come with fair reward-sharing; otherwise governments socialize risk and privatize profits. Austerity and hollowed-out public institutions weaken innovation capacity and make governments dependent on consultants and contractors. Climate, health, and water are collective-action problems that require cross-sector and cross-border missions, not fragmented ministry-by-ministry policy. Geopolitical rivalry may increase urgency, but global problems still require cooperation and shared technology frameworks.

Data Points: Kennedy moonshot speech date: 12 September 1962 - Introductory reference to JFK’s Apollo commitment. Apollo workforce estimate: about 400,000 people - Estimated number of people involved in getting humans to the moon and back. UK COVID test-and-trace consultancy cost: $1.5 million a day - Example of outsourcing public functions to Deloitte during COVID. UK airline bailout: about $600 million - Government support given to EasyJet during COVID without conditions. Solyndra loan: close to $500 million - U.S. guaranteed loan for a green tech company that later failed. Tesla loan: $465 million - Similar-sized public support that later generated major gains privately. NIH funding trend: every Republican and Democratic administration has increased funding - Mazzucato cites this as evidence of broad historical support for public health R&D, with Trump as a threatened exception. Patent duration: 17 to 20 years - Period during which the state grants monopoly rights in exchange for disclosure and diffusion over time. Excess deaths from climate change: 83 million by end of century - Projected deaths associated with rising temperatures and greenhouse gas emissions. People lacking essential health services: 4.5 billion - Global estimate used to argue for a health mission beyond pharmaceuticals. EU stimulus comparison: 800 billion fiscal stimulus - Referenced as part of the post-financial-crisis policy context contrasted with austerity.

Pivotal Quotes: "We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard." — John F. Kennedy: Opening framing for the idea that governments can mobilize around ambitious missions. "We socialize risks, but privatize the rewards." — Mariana Mazzucato: Core critique of how public investment in innovation is often structured. "If we continue to outsource our knowledge, we will get captured by brochurmanship." — Ernest Brackett, cited by Mariana Mazzucato: Used to warn that governments lose the ability to evaluate private partners when they hollow out internal capability.

Implications: Listeners are urged to see government as a creator of innovation, not just a fixer of failures. For future policy, the challenge is rebuilding state capacity, designing fair public-private deals, and using mission-driven coordination for climate, health, and other global problems.