Economic policy

Economic policy with a mission

We thank all authors who responded to our essay. We are also pleased to see that the majority of respondents generally agree with the central concept of missions as a new framework for organizing industrial policy. Nevertheless, several important criticisms and concerns have been raised which merit discussion.

Much more needs to be done to advocate for a proactive and mission-driven industrial policy around the world.

A concern raised by several respondents – John Fitzgerald and Robert Kuttner, Nathan Lane and Erica RH Fuchs – is that our essay is written at too high a level of abstraction and that what matters are concrete policies for specific countries rather only general ideas. In our defense, if the Biden administration’s rejection of market fundamentalism would seem to suggest that the battle of (general) ideas is won in the United States, it is rather different across the Atlantic and elsewhere. In Europe and beyond, progressive and social democratic governments are thin on the ground, and there hasn’t been the same broad fiscal stimulus or targeted, coordinated investment in areas like semiconductors that Fitzgerald and Kuttner describe. In the United States, China may now be acting to draw policymakers’ attention to a much more proactive form of industrial policy, but we believe there is still more to be done to make the case for proactive industrial policy. and mission-oriented worldwide. .

For all these reasons, industrial policy – ​​and economic policy more broadly – ​​plays out very differently today in the United States than in other advanced economies. Our essay attempts to discuss these issues in a general, pan-national context. That said, we agree with these respondents that not discussing the specifics may underestimate the trade-offs involved in industrial policy. This leads to the broader concern raised by the majority of respondents – Suzanne Berger underscores this point most forcefully – that our essay overlooks the international political economy of industrial policy interventions.

In the case of the United States, the power of vested interests to dilute radical political interventions is of course a major impediment to the mission-oriented approach we advocate. We are in complete agreement on this point. Indeed, one of the main goals of the Institute for Innovation and Public Purpose – where we all work – is to find ways to translate new economic ideas into practice by working closely with policymakers and governments around the world. around the world to create new institutions like the Scottish National Investment Bank. who can see through the missions and resist the “political economic cycle”, as Nathan Lane puts it.

We would like to emphasize that our vision of missions is not a technocratic vision that neglects the role of work, communities, social movements and class struggle.

At the same time, we want to emphasize that our vision of missions is not a technocratic vision that neglects the role of work, communities, social movements and class struggle. Indeed, when we speak of bottom-up as well as top-down mission training, it should be interpreted as incorporating and, where appropriate, guided by the interests of these groups, without excluding them. We wholeheartedly agree with Teresa Ghilarducci and Rick McGahey, Ann Pettifor and Jake Werner that organized labor is key to creating the higher incomes that are essential to increase investment demand and help drive innovation. and that the state has a key role to play in increasing their strength as a “countervailing force” – in the words of John Kenneth Galbraith – against the business elites that have come to dominate advanced economies and overseen a chasm growing between productivity and wages.

Indeed, we are very sympathetic and have written elsewhere and at length on the problem of growing economic rents: that is, how modern capitalism is increasingly dominated by the generation of profits from ownership of limited amounts of assets (including intangibles like intellectual property) rather than investing in productive activities. We would argue that this phenomenon is yet another rationale for a mission-driven approach since, in part at least, it is the failure of government to create opportunities for profitable investments – including in environmentally sustainable innovations, as Pettifor reminds us – which led to the development and entrenchment of financialized business models and rent extraction.

Julius Kerin goes so far as to say that structural changes that have negatively affected business models mean that government is now the “sole source of venture capital”. We wouldn’t go that far. Instead, we would say that new forms of corporate governance and ownership are needed to stimulate more productive private investment. One obvious area where this approach should be urgently considered is the governance and ownership structures of Big Tech companies and platform-driven digital marketplaces – which, as Kerin points out, are increasingly risk averse and drifting towards socially and economically damaging modes of functioning.

While some authors find our conception of missions too general, others – Nemet, Fuchs and above all Werner – argue that it is not general enough, in the sense that it lacks an international dimension. We agree with the dangers of industrial policy nationalism, clearly evident (among other examples) in the United States’ reluctance to regulate or tax increasingly monopolistic Big Tech companies in the name of competition with the China. Our argument is that it is precisely because of the existence of existential challenges to public goods like biodiversity loss and climate change that we need to completely rethink economic policy and focus it on achieving missions. A transition to net zero and the shift to a “circular economy” is arguably the most important of these missions. Mission-driven innovation policy, as we see it, is precisely about not limiting government action on global challenges such as climate change to industrial policy, but about ensuring coordination across all areas of the local, national and international government to achieve this, from local procurement rules to the criteria used by central banks to determine their large-scale asset purchases. From our perspective, a major challenge for government is the siled nature of policy-making that impedes the achievement of missions.

Today’s challenges are what social scientists call “super villains”: we don’t have much time, there is no central authority, and those trying to solve the problem are also causing the problem.

Let’s make a final point on the story. Lane’s thoughtful response argues that our view of mission-driven industrial policy is not as novel as we portray it, pointing out that industrial policy in Western and Asian economies in the post-war era was characterized through very ambitious intersectoral investments with some examples of social missions. We agree (indeed, that was part of the point of our historical example of Cold War-era moonshots in the United States). But we would say that today’s problems are more difficult not only in degree but in kind. It is increasingly clear to many policy makers that today’s challenges are what social scientists call “super villains”: we don’t have a lot of time, there’s no central authority, and those who try to solve the problem are also causing the problem in the first place. In other words, challenges like the climate emergency require both a different kind of economic thinking and a different kind of governance to address them. As a result, governments are adopting mission-driven approaches both in a narrow sense of industrial and science and technology policies, but also increasingly in a broader sense of public sector reform. And while the narrower use of mission-driven innovation harks back to post-war successes and debates, as Lane argues, the broader practices are driven by fears that the governance and institutional solutions that prevailed in the 20th century are no longer sufficient or applicable today.

In this broader sense, missions are about much more than scientific and industrial development. They are ultimately about the creation of public value, more generally, and the central role of the public sector in achieving this goal. Mission-driven policies are a pathway to different ways of working in the public sector and creating better public value for citizens, and missions offer a way to reframe existing siled policy practices and introduce new methods and policy-making tools. Our essay is an attempt to show how economics can and should engage in such fundamental changes in governance and help address grand challenges.