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Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the

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Speaker 1: global economating you, and we have a special episode this

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Speaker 1: week featuring a conversation I had a few weeks ago

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Speaker 1: for RESET, a special two day conference on the future

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Speaker 1: of the US economy that Bloomberg Economics co produced with

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Speaker 1: the Aspen Institute. This exchange I wanted to play you

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Speaker 1: was with my friend Marianna Matsukata, professor in the economics

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Speaker 1: of Innovation and Public Value at University College London. Her

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Speaker 1: first book, The Entrepreneurial State, was very influential change the

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Speaker 1: way we think about the role that the public sector

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Speaker 1: has played in some of those great business success stories

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Speaker 1: of our time. And another one, The Value of Everything,

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Speaker 1: Making and Taking in the Global Economy, absolutely nailed the

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Speaker 1: way that a particular narrow conception of value had permeated,

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Speaker 1: indeed distorted the way we think about the economy and

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Speaker 1: society over the last hundred years. And she's just produced

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Speaker 1: a new book which also seems well timed for the

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Speaker 1: position we find ourselves in right now. It's called The

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Speaker 1: Mission Economy, A moon Shot Guide to Changing Capitalism. I

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Speaker 1: started by asking her about some of the big ideas

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Speaker 1: that had got her thinking about the moon shot as

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Speaker 1: a guide to policy. This extraction of value which I

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Speaker 1: talked about in the book The Value of Everything, the

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Speaker 1: kind of record level share buy backs in the last

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Speaker 1: ten years, for trillion dollars have gone to bind back

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Speaker 1: shares by the Fortune five companies. This is not the

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Speaker 1: way to run a society in terms of a corporate

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Speaker 1: business model. So, whether it's Larry Fink or the Business

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Speaker 1: Roundtable putting out the statement over a year ago about

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Speaker 1: you know, we need to rethink that model in terms

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Speaker 1: of reinvesting back into long run areas that help people, planet,

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Speaker 1: working conditions, and so on. And this conversation is a

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Speaker 1: very important one. We shouldn't dismiss it if we remind

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Speaker 1: ourselves that markets are not the same thing as business.

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Speaker 1: Markets are outcomes of how we govern business and how

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Speaker 1: we govern other types of value creating institutions. We also,

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Speaker 1: you know, present ourselves with the problem, which is how

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Speaker 1: is government governed? How is the public sector government? And

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Speaker 1: what I've been writing about now for some years is

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Speaker 1: that we also have a problem there. It's not just

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Speaker 1: corporate governance that needs to rethink itself. It's also kind

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Speaker 1: of government governance. The fact that economic theory, and I

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Speaker 1: don't want to blame economists, of which I'm one for everything,

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Speaker 1: but the fact that economic theory itself has at best

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Speaker 1: framed the role of the public sector, the state and

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Speaker 1: policy as simply fixing market failures is part of the problem.

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Speaker 1: We're not going to get there by simply putting different

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Speaker 1: types of patches on the system and the market failure

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Speaker 1: approach which forces government to always ask where is the

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Speaker 1: market failure? How am I going to fix it? That's

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Speaker 1: an important framework, but it's very hard to fix your

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Speaker 1: way towards transformational growth. And by transformational growth, by the way,

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Speaker 1: don't just mean these kind of big social objectives like

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Speaker 1: health and and climate. I also mean literally in terms

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Speaker 1: of the direction of growth. And in the UK we're

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Speaker 1: on standing today the kind of growth we have continues

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Speaker 1: to be consumption led growth, which has really led to

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Speaker 1: a very high ratio, for example, of private debt to

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Speaker 1: disposable income, not public debt, but private debt to disposable income.

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Speaker 1: So shifting that growth model from consumption to investment led

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Speaker 1: growth and innovation driven growth, and having that investment and

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Speaker 1: innovation help us solve some really important problems like the

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Speaker 1: ones around climate health and the sustainable development goals need

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Speaker 1: a different approach to policy making, one that I call

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Speaker 1: actively shaping and co creating markets alongside business, not just

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Speaker 1: fixing markets. And one thing that I found very curious

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Speaker 1: in the UK was is um you know, a lot

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Speaker 1: of the data that's come out since Brexit and now

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Speaker 1: with COVID has been showing just how much the government

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Speaker 1: has been overly relying on consulting companies Deloitte that ended

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Speaker 1: up being asked to roll out the test and trade

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Speaker 1: system and didn't do too well. But also with Brexit,

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Speaker 1: the KPMG, s Price Waterhouse Coopers and so on, which

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Speaker 1: ended up almost managing project managing Brexit for the government.

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Speaker 1: This over consultification of government. A Tory Lord Agnew said

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Speaker 1: that this was leading to an infantilized public sector. And

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Speaker 1: when you start outsourcing your brain, as I think the

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Speaker 1: US government has done in the recent years, one could

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Speaker 1: view the whole n Essay kind of Snowden scandal as

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Speaker 1: an outcome of the government almost losing its capability to

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Speaker 1: govern information computing in the technology revolution, that you have

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Speaker 1: a problem. So this is the reason that in the

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Speaker 1: recent book that I wrote, I asked, we'll hold on

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Speaker 1: a second. You know, we could do better. And only

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Speaker 1: fifty years ago, public and pri of its sectors worked

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Speaker 1: together extremely ambitiously um to get to the moon and back.

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Speaker 1: You know that that's a famous goal that Kennedy set

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Speaker 1: back in nineteen sixty two. The problems we have today

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Speaker 1: are much trickier. Actually, there's wicked problems. They require political, behavioral,

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Speaker 1: regulatory change, not just technological change. But it was truly

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Speaker 1: a partnership. There was both business and government doing incredibly

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Speaker 1: difficult things. And what was especially interesting to me is

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Speaker 1: how government, through NASA but also some other public institutions,

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Speaker 1: paid a lot of attention to the how to partner

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Speaker 1: with business, and they even looked at the contracts and

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Speaker 1: undid the existing contracts. And will come to that in

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Speaker 1: a minute. But the kind of leadership that was required

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Speaker 1: by government to set the direction of change and then

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Speaker 1: catalyze a lot of risk taking bottom up amongst different

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Speaker 1: actors in society. So you know, Kennedy's speech was very clear,

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Speaker 1: this is going to cost a huge amount of money,

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Speaker 1: but it's going to be worth it. And focusing on

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Speaker 1: the goal and then backtracking on the budget, all these

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Speaker 1: are just really interesting lessons I think today as we

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Speaker 1: need to build back better that famous slogan, but especially

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Speaker 1: rethink the organizations that we have in both government and

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Speaker 1: in business. And you know what's quite striking is that

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Speaker 1: when Kennedy, you know, did his speech, they had no

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Speaker 1: clue how to get to the moon. So literally the

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Speaker 1: innovation and risk taking, the experimentation that was that was

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Speaker 1: required was immense. Uh. They ended up you know, landing

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Speaker 1: on this lunar or a bit rendezvous way, but they

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Speaker 1: were really exploring all sorts of different techniques. And on

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Speaker 1: the tragic day in which Apollo one the fire occurred,

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Speaker 1: one of the astronauts said something that I think is

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Speaker 1: just so important, which was we can't even talk to

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Speaker 1: each other through different NASA kind of mission control rooms,

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Speaker 1: how are we going to get to the moon. He

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Speaker 1: was talking about the very siloed, linear, vertical bureaucratic form

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Speaker 1: in which the state itself was structured, and he was

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Speaker 1: basically saying, if we're gonna be purpose driven, using today's

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Speaker 1: words and get to the moon and back in the generation,

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Speaker 1: we're gonna have to rethink actually how we communicate within

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Speaker 1: our own structures and that kind of attention to organizational

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Speaker 1: change with something that NASA, through George Mueller's leadership, really

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Speaker 1: embarked on. And this is important, right because if you

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Speaker 1: are going to be purpose driven, what does it mean

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Speaker 1: for your own organizational culture, not just in business, but

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Speaker 1: also in government and the purpose This notion of a

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Speaker 1: partnership with a common purpose is really what I think

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Speaker 1: is so important in terms of allowing us to give

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Speaker 1: more substance to this notion of stakeholder capitalism. It was

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Speaker 1: so curious that they paid attention not only to the

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Speaker 1: procurement contracts in terms of how to devise them so

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Speaker 1: government wouldn't be, uh, just if you want, vulnerable to

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Speaker 1: paying any costs that were presented to them through cost

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Speaker 1: price contracts, which they changed to fixed price contracts with

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Speaker 1: incentives for innovation. But they also paid attention to making

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Speaker 1: sure that this enterprise that they were going to do together,

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Speaker 1: this wonderful, difficult mission, was it just going to become

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Speaker 1: a gambling casino. So they even had clauses like no

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Speaker 1: excess profits clauses in the procurement contracts, and of course

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Speaker 1: profits were earned, but there was also a real kind

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Speaker 1: of risk sharing and reward sharing in the process and

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Speaker 1: so sharing both risks and rewards I think is incredibly important.

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Speaker 1: This idea that you know, mass itself required its own capabilities,

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Speaker 1: investing within its own brain what I call the dynamic

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Speaker 1: capabilities of the public sector in order even to know

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Speaker 1: how to write the terms of reference with business to

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Speaker 1: foster a symbiotic and mutualistic partnership. And what was so

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Speaker 1: special about the moon landing was so much happened along

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Speaker 1: the way, spillovers across many different sectors. It wasn't just aeronautics,

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Speaker 1: it was nutrition, materials, electronics, the entire software industry in

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Speaker 1: some ways was an outcome of that. And that really

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Speaker 1: did happen because of a kind of top down, you know,

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Speaker 1: mission setting, but lots of bottom up experimentation, and that

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Speaker 1: kind of delicate balance between the two is really what

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Speaker 1: I focus on in the book for allowing us to

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Speaker 1: really create a concrete investment pathway in trajectory for the SDGs.

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Speaker 1: The SDGs these are the earth shots. They're much harder

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Speaker 1: actually than a purely technological missions. And what that really

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Speaker 1: requires is again partnership with purpose, I guess, just to

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Speaker 1: get one thing out of the way first, you know,

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Speaker 1: there will be people listening, certainly people who have heard

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Speaker 1: a lot about stakeholder capitalism before and indeed maybe sitting

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Speaker 1: in businesses trying to make it work. Um, there will

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Speaker 1: be others who are just used to managing people and

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Speaker 1: getting things done, and they'll say it's not very complicated.

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Speaker 1: If you actually want to make progress, you need to

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Speaker 1: set a big target and then work as a team

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Speaker 1: to meet it. Why do I need a whole book

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Speaker 1: to tell me that? What? What is different about what

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Speaker 1: you're actually what you're proposing? Because having a mission exactly

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Speaker 1: so um for me at least, missions are about again,

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Speaker 1: how do you partner in a different way? So let's

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Speaker 1: even unpick for example, Um, you know any of the

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Speaker 1: goals like you know STG fourteen around clean oceans, what

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Speaker 1: does it mean actually to transform it into a very

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Speaker 1: concrete goal like getting the plastic out of the ocean

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Speaker 1: and make sure that the way that government interacts with business,

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Speaker 1: which is constantly interact in terms of subsidies, guarantees, grants

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Speaker 1: and loans becomes actually conditional on you know, business and

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Speaker 1: different types of businesses which will actually require different types

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Speaker 1: of support, uh, investing in that goal together. And even

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Speaker 1: though that sounds really obvious. It simply doesn't happen. I mean,

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Speaker 1: I've looked at so many different sectors, especially by the way,

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Speaker 1: the pharmaceutical sector, which gets all sorts of benefits from

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Speaker 1: government in the United States forty billion dollars a year

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Speaker 1: goes towards drug innovation, and somehow then we don't get

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Speaker 1: that kind of conditionality and partnership, right, So intellectual property

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Speaker 1: rights in particular for that sector are often abused. They

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Speaker 1: are to upstream, their too wide, used for strategic patenting,

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Speaker 1: there too strong, so hard to license. The prices of

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Speaker 1: the drugs don't actually reflect that collective value creation. And

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Speaker 1: so you know, governing the partnership, governing innovation in such

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Speaker 1: a way as serious as NASA was when it unpicked

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Speaker 1: those procurement contracts and said, Nope, this isn't gonna be good.

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Speaker 1: We're gonna be taken for a ride. And truly sharing

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Speaker 1: both risks and rewards means doing things quite differently. And

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Speaker 1: the vaccine, which is a great example actually today of

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Speaker 1: you know, both the public and the private sector putting

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Speaker 1: in a lot of money, but also you know it

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Speaker 1: was based on a lot of previous funding. The Oxford

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Speaker 1: vaccine from also the European Commission, as was by the way,

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Speaker 1: the fives are vaccine, which got money from the European

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Speaker 1: Commission and the German government. Um so these are all

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Speaker 1: kind of ecosystems public and private investments that produce something

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Speaker 1: like a vaccine. But then if you don't govern it

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Speaker 1: right to meet let's call it the common good, then

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Speaker 1: that's a problem in terms of the deal. So the

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Speaker 1: idea of a patent pool for the vaccine, but also

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Speaker 1: making sure the vaccine is universally accessible so we don't

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Speaker 1: have what Dr Tedris called vaccine apartheid, so countries just

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Speaker 1: hoarding it. That's all about kind of governing that process

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Speaker 1: right in a particular way. And you could unpick the

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Speaker 1: same thing with digital platforms. You know, everything that makes

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Speaker 1: our smart products smart and not stupid was funded by government, Internet, GPS, touchscreen, serrie.

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Speaker 1: And yet then if you don't govern that innovation for

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Speaker 1: the public good, you end up with what I was

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Speaker 1: arguing in the beginning, kind of too little, too late,

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Speaker 1: saying oh wait, wait, wait, hold on, as opposed to

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Speaker 1: making sure you have kind of you know what I

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Speaker 1: called predistribution, which is a nice term also that others use,

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Speaker 1: which is how do we get the conditions right ex

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Speaker 1: anti so you don't have to pick the up the

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Speaker 1: mess x post. And that to me is central to

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Speaker 1: a mission oriented approach where purpose is at the center

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Speaker 1: of the relationship, as opposed to just kind of a

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Speaker 1: siloed notion of how governments can improve. So we're going

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Speaker 1: to try and be kind of ruthlessly practical in this

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Speaker 1: session and think about how it applies to the new administration,

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Speaker 1: But any any government who's trying to think about how

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Speaker 1: to change the way we do these things. You say

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Speaker 1: yourself in the book that there are there are ways

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Speaker 1: in which the moon landings are not a helpful guide

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Speaker 1: for now and for the challenges we face now. One

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Speaker 1: of one is that it was sort of chosen by

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Speaker 1: a quite narrow part of society that we were going

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Speaker 1: to go to boon, and maybe not everyone would have

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Speaker 1: signed up for that um. But another is that it's

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Speaker 1: it is quite a sort of clear technical challenge, enormously

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Speaker 1: ambitious and difficult, but easily explained and with a quite

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Speaker 1: clear process leading up to it. Where and I think

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Speaker 1: you could say the vaccines are actually an even better

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Speaker 1: example of that, you know, a very clearly defined target.

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Speaker 1: Some of the sustainable development goals would have that characteristic,

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Speaker 1: they're quite specific. But when you think about something that

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Speaker 1: you're obviously very focused on and you have applied this too,

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Speaker 1: I mean climate change, so many layers of that that

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Speaker 1: are not just technical, they are also social. They're also

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Speaker 1: about how we value you know, going back to your

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Speaker 1: other book about how we value things. Um, So I

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Speaker 1: just where do you get to the point where it's

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Speaker 1: less helpful to have this kind of parallel Um, how

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Speaker 1: can you use this approach for something which is more

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Speaker 1: social and more multi layered. Thanks for that question. It's

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Speaker 1: very important. So, um, you know what's interesting is, you

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Speaker 1: know many people remember that that famous story that the

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Speaker 1: janitor who worked and asked so when he was asked,

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Speaker 1: what do you do? And he said, I'm helping to

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Speaker 1: get a man on the moon. So in some sense,

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Speaker 1: you know what also the moon landing did was really

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Speaker 1: inspire so many different people, including lots of kids who

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Speaker 1: ended up studying science, you know, because of the inspiration.

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Speaker 1: But it wasn't you know, citizens weren't engaged in the design,

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Speaker 1: you know, of the mission itself, you know, it really

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Speaker 1: was top down. Some of the more interesting missions that

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Speaker 1: we're working on in the institute that I run at

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Speaker 1: University College London, which is called the Institute of Innovation

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Speaker 1: and Public Purpose, you know, the whole notion of purpose

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Speaker 1: at the center of political economy UM are on missions

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Speaker 1: in countries like Sweden where the national mission is so interesting.

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Speaker 1: It's about a fossil free welfare state. And then if

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Speaker 1: you break down everything the state does and provides, from

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Speaker 1: public transport, public education, public health, a lot of that

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Speaker 1: is actually obviously in partnership with business UM. But what

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Speaker 1: does it mean to land those those ambitions in concrete places.

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Speaker 1: Take the the public education system. You know, if you

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Speaker 1: have a carbon neutral agenda, a fossil free welfare state agenda,

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Speaker 1: it can actually land in a place like school meals, right,

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Speaker 1: so you can have the production, distribution and consumption of

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Speaker 1: school meals driven by this carbon neutral agenda. But what

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Speaker 1: would it look like to bring kids to the day,

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Speaker 1: students in schools to the table to design that, but

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Speaker 1: also to monitor it along the way. You know, if

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Speaker 1: the food is sustainable but kind of sucks and it's

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Speaker 1: not very tasty, that's not gonna work. Um, so that

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Speaker 1: both the issue of code design but also monitoring along

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Speaker 1: the way is an important point. And in Camden, the

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Speaker 1: part of London where I live and I co chair

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Speaker 1: the Camden Renewal Commission with Georgia Gould, the Leader of

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Speaker 1: the Council, and one of the things we started doing

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Speaker 1: is thinking about carbon neutrality with the place where it

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Speaker 1: lands is the social housing estates what in the USA

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Speaker 1: called housing projects and again, what does it mean to

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Speaker 1: bring housing associations or citizen assemblies to the table to

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Speaker 1: really talk and debate and contest about how do we

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Speaker 1: want to live together in these places so that it

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Speaker 1: is not just sustainable, but it's also an outcome of,

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Speaker 1: you know, a discussion. You know, it's easy to pet

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Speaker 1: Breta Tornberg on the head and say, oh, how cute.

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Speaker 1: You know, sixteen or eighteen year old now cares about

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Speaker 1: climate change. But what does it mean to listen to

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Speaker 1: social movements? And that's really important, by the way, because

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Speaker 1: it's not just you know, the green movement, it's also

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Speaker 1: the labor movement. Labor at as a record labor is

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Speaker 1: at a record low in terms of the labor share

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Speaker 1: of GDP globally, the profit shares at a record high.

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Speaker 1: Labor unions trade unions have historically been incredibly important for

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Speaker 1: shaping markets to be more inclusive. We wouldn't have weekends,

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Speaker 1: by the way, not bad as a social innovation. We

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Speaker 1: wouldn't have the eight hour work day without trade unions.

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Speaker 1: So you know, whether it's the labor movement, whether it's

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Speaker 1: a green movement, whether it's Black Lives Matter, whether it's

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Speaker 1: the care workers today and that movement, what does it

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Speaker 1: mean for governments themselves to listen to actually allow that

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Speaker 1: to be part of the process through which emissions are set.

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Speaker 1: And in German, I think what's interesting is they've had

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Speaker 1: one of the strongest green movements um across the globe,

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Speaker 1: having risen slowly up to the to the very high

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Speaker 1: level of government, and that ended up fostering a very

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Speaker 1: different relationship between government and business. So couple of years ago,

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Speaker 1: when the steel industry asked government for a loan and

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Speaker 1: a bailout, as steel is more or less asking every

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Speaker 1: government or bailout in Germany, they were confident enough to

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Speaker 1: make that loan conditional on the steel sector reducing its

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Speaker 1: material content, which it ended up doing. In its own way.

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Speaker 1: Today the German steel sector is one of the most

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Speaker 1: green and innovative in the world, not because you know,

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Speaker 1: they went to the World Economic Forum and talked about purpose,

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Speaker 1: but because they had to in order to access the

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Speaker 1: public loan. And that's a really interesting thing that started

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Speaker 1: to be applied with COVID nineteen recovery funds in some

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Speaker 1: parts of the world, like in France, where both the

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Speaker 1: airlines and automotive industries received their recovery bailout conditional on

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Speaker 1: reducing or committing to reducing their carbon emissions, whereas in

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Speaker 1: the UK we just gave a massive handout, you know,

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Speaker 1: to easy Jet, no conditions attached. So that issue of conditionality,

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Speaker 1: I think is a really interesting concrete example of how

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Speaker 1: to foster this new partnership. And unfortunately the word conditionality

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Speaker 1: sounds negative. So I do think we need to think

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Speaker 1: the narrative as well around partnership, you know, purpose driven

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Speaker 1: social contracts. Clearly, the really bigly tough challenge these days

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Speaker 1: is the US, after decades of undermining the perceived value

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Speaker 1: of government only little corners NASA and me. As Michael

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Speaker 1: Lewis points out in his book It's NASA was sort

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Speaker 1: of one of the few bits of government that was

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Speaker 1: allowed to take credit as a public sector organization. If

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Speaker 1: you're facing that which existed long before Donald Trump and

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Speaker 1: but now coming in as the Biden administration with the

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Speaker 1: particular record of the sort of acceleration of the undermining

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Speaker 1: of government that's happened over the last few years, I

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Speaker 1: guess there were there is. There is a sort of

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Speaker 1: debate obviously ongoing within the administration in lots of areas

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Speaker 1: about whether the best thing to do is to be

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Speaker 1: quietly competent and just remind people that the government can

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Speaker 1: be quietly competent and doesn't need to ruin your life

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Speaker 1: um and is actually quite important, or does it need

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Speaker 1: to be visionary. And of course a lot of people

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Speaker 1: would say you have to be competent and visionary, but

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Speaker 1: they might sense, in the kind of way that you

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Speaker 1: talk about this a real risk for them that if

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Speaker 1: they try, if they set those enormous targets and seem

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Speaker 1: to signal that they're going to completely transform the way

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Speaker 1: we think about government and have your kind of approach,

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Speaker 1: they'll be setting themselves up for this failure, for a failure,

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Speaker 1: an equally grand failure, which could undermine the battle kind

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Speaker 1: of longer term. So I just wonder, when you think

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Speaker 1: about the challenges that the administration faces and this trade

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Speaker 1: off between being competent and being visionary, how would you

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Speaker 1: apply your approach um great question, And you know, and

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Speaker 1: first of all, we should remember that Trump was quite

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Speaker 1: unique in case people didn't now. Trump was actually the

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Speaker 1: first president that really attacked what I called the entrepreneurial state.

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Speaker 1: But one of the things I've been arguing is that

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Speaker 1: in the US especially but also globally, we need to

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Speaker 1: bring together these concepts of the well first state in

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Speaker 1: the innovation state that can actually work together, and the

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Speaker 1: welfare state can also be a demand pull for what.

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Speaker 1: Then the innovation state also feeds into the U S.

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Speaker 1: It's very dysfunctional. You have again forty billion a year

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Speaker 1: going in from the National Institutes of Health, and then

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Speaker 1: at best you have Medicare and Medicaid on the sort

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Speaker 1: of demand side, but they're not really aligned. And that's

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Speaker 1: why we get this whole kind of hyper inflated system

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Speaker 1: where the prices and the fees don't reflect at all

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Speaker 1: that public sector is taking. Biden's bringing back the attention

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Speaker 1: to an industrial strategy and innovation strategy and the investments

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Speaker 1: that we require in both social physical infrastructure innovation. That's

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Speaker 1: an important first step. What he needs to avoid is

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Speaker 1: making this kind of an old style just list of sectors,

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Speaker 1: you know, make America great again in X, Y, and

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Speaker 1: Z areas with the mission oriented approach suggests is that

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Speaker 1: we need to remember that some of the best innovations

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Speaker 1: in the US, like all the ones that I mentioned before,

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Speaker 1: making this thing smart and not stupid, Internet, GPS and

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Speaker 1: so on, the where outcomes of the U. S Government

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Speaker 1: trying to solve a problem. So the Internet was a

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Speaker 1: solution to trying to get the satellites to communicate. GPS. Similarly,

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Speaker 1: there was a problem, GPS was a solution. So the

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Speaker 1: real question is how can the American kind of industrial

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Speaker 1: innovation system which did make it great. You know, they

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Speaker 1: really were the leaders around the computer, computer revolution, etcetera.

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Speaker 1: What are the you know, what are today's problems and

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Speaker 1: questions that can drive that real kind of dynamic innovation

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Speaker 1: by both the public and the private sector. And lastly,

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Speaker 1: you know, we need to remember when you talked about

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Speaker 1: the US government perhaps getting blamed for any failures that

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Speaker 1: happened along the way, that's normal. You know, it's impossible

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Speaker 1: to innovate without screwing up. But the only difference is

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Speaker 1: that the venture capital is brag about it rightly. So

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Speaker 1: you can't have success without also admitting that you're going

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Speaker 1: to fail. And what the venture capitalists do, however, is

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Speaker 1: they make sure they're not just kind of you know,

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Speaker 1: picking up the downside. They're obviously also getting an upside

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Speaker 1: that gets reinvested back in. That's where the US government

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Speaker 1: in the past kind of you know, didn't uh follow through.

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Speaker 1: So even if you look at the recovery after the

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Speaker 1: financial crisis, when Obama had an eight hundred billion stimulus program,

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Speaker 1: much of which was initially green directed, that's when he

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Speaker 1: brought in a Nobel Prize winner to direct the d

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Speaker 1: Oe Steve cho who set up are pa E. They

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Speaker 1: made all sorts of investments in different companies to foster

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Speaker 1: a green transition. Some of those companies failed, like Cylindra,

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Speaker 1: some succeeded like Tesla. Tesla and Slinder got the same

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Speaker 1: almost the same amount of money um. And the strange

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Speaker 1: thing is that even though Obama had all these golden

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Speaker 1: Sax guys in government, he said something that was quite silly,

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Speaker 1: he said to um Elon Musk. If you don't pay

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Speaker 1: back the loan, we get three million shares in your company. Now,

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Speaker 1: the loan was paid back in two thousand thirteen. It

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Speaker 1: was taken out two thousand nine, and had the government said,

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Speaker 1: what a venture capitalists would say is if you succeed,

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Speaker 1: we get equity, we get three million schairs. The change

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Speaker 1: in price per share was that multiplied by three million,

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Speaker 1: would have more than paid back the cylinder loss in

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Speaker 1: the next round. So the point here is that you

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Speaker 1: don't want to just be choosing kind of siloed projects.

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Speaker 1: You want to choose a direction. You want to pick

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Speaker 1: the willing, not pick the winners, pick the willing along

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Speaker 1: the way, but also structure it in an intelligent way

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Speaker 1: so citizens aren't just kind of belling out the downside

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Speaker 1: but also getting a share of the upside. Okay, one

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Speaker 1: final question. There's lots of versions of this question which

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Speaker 1: have come through, which is kind of it sounds like, uh,

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Speaker 1: nothing's going to be fixed until everything is going to

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Speaker 1: be fixed. You know, you have a wonderful or economist

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Speaker 1: would put it. You know, you have a very general

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Speaker 1: equilibrium way of looking at the world, which is very

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Speaker 1: is immensely helpful in thinking about how one thing relates

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Speaker 1: to another, and they need to be more holistic. But

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Speaker 1: how should again, the Biden administration take on what you're

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Speaker 1: saying whilst also allowing there to be sort of short

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Speaker 1: term practical winds along the way. So I mean, I

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Speaker 1: usually get accused of the opposite, that I'm too practical

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Speaker 1: and concrete. Um, So you know, the big point, of

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Speaker 1: course is that economic growth has not just a rate

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Speaker 1: but a direction. That's what we're talking about. That's like

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Speaker 1: the big broad point, which one could argue is kind

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Speaker 1: of too generic. The concrete point point is, how do

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Speaker 1: you render really explicit that directionality? What does it mean

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Speaker 1: for the concrete ways that we design things like procurement

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Speaker 1: and procurement, by the way, is a huge percentage of

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Speaker 1: government budgets. In the UK where you and I live,

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Speaker 1: the whole innovation budget of the country is ten billion.

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Speaker 1: Just the procurement budget of the Ministry of Transport the

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Speaker 1: Department of Transport is forty billion. And this is true

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Speaker 1: almost you know, globally it's often almost half of the

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Speaker 1: whole government budget. So what does it mean to unpick

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Speaker 1: those contracts to make them really have purpose, you know,

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Speaker 1: a green transport system, and designing that procurement in order

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Speaker 1: that it really crowds in business investment because this isn't

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Speaker 1: about the state kind of doing everything. It's about choosing

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Speaker 1: and and really choosing very specific areas also, you know,

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Speaker 1: whether it's health or digital platforms, the vaccine, where we

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Speaker 1: can unpick where things go wrong and redesigned the contracts

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Speaker 1: themselves to foster a purpose driven kind of orientation. But

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Speaker 1: also the public investment side has to do much more

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Speaker 1: than just incentivize. You know, this is why if we

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Speaker 1: simply had R and D tax credits, we would not

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Speaker 1: have had the Internet revolution. It required active public investment,

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Speaker 1: and it was ambitious, it was bold, which then created

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Speaker 1: a whole new kind of you know, market opportunity, which

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Speaker 1: then raised business expectations of where future growth opportunities lie.

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Speaker 1: And unfortunately, so much tax policy, and I often go

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Speaker 1: very concrete on different types of tax policy, like capital

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Speaker 1: gains tax policies simply increased profits, they don't actually create

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Speaker 1: what economists called additionality, catalyzing investment to happen where it

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Speaker 1: wouldn't have happened anyway. And having you know, proper metrics

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Speaker 1: about additionality, but also the kind of partnerships that we

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Speaker 1: are fostering, whether their predatory or symbiotic or mutualistic, that

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Speaker 1: needs just as much attention as kind of E. S

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Speaker 1: G types of targets. Marianna, we could talk a lot more.

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Speaker 1: Thank you very much for joining us, and thank you

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Speaker 1: for everyone for listening and for all your questions. Thank

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Speaker 1: you thanks for listening to Stephanomics. We'll be back with

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Speaker 1: more next week. In the meantime, you can always get

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Speaker 1: more from Bloomberg Economics on the Bloomberg Terminal or Bloomberg

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00:27:29,119 --> 00:27:32,800
Speaker 1: News website. You can also follow at Economics on Twitter.

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Speaker 1: This episode was produced by Mangus Hendrickson, with thanks to

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Speaker 1: Marianna Matteo Carta and the Aspen Institute. Lucy Meekin is

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Speaker 1: the executive producer of Stephanomics and the head of Bloomberg Podcasts.

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Speaker 1: Frances Can Leave