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Chapter 1: What is the main topic discussed in this episode?
So of course we need to get the taxes right. Wealth tax, land tax, capital gains, corporate. But we should also make sure that when governments are speaking to businesses, they don't get kind of bullied. If you change the tax or intellectual property rights, then I'm leaving. As soon as you fail, you're in the front page of the paper.
Whereas venture capitalists and entrepreneurs love it when they fail because then they say, look, yeah, I had to fail 10 times to succeed. That's why I'm a risk taker. We don't allow that learning by doing. And that's why I've been helping countries think about gov labs.
Like how do you create a laboratory within a government, even a local government, that actually explicitly welcomes risk taking, experimentation and trial and error to learn how to do things better.
You know, you are broadly talking about the dismantling of the Western way of doing things.
So I'm glad you put it that way because
This episode is brought to you by Octopus Energy. Greg Jackson, the CEO, is with us now. So, Greg, I've got a question for you. Is it true that by 2040, in China, there will be no petrol stations because everyone will be driving electric cars?
Yeah, crazy as it seems, the Chinese state oil company, the one in charge of its petrol stations, is planning on having none by 2040. If you visit China today, what's really striking is the roads... quiet. I mean, all of the two-wheeled vehicles that used to pump out pollution and noise are now electric.
Pretty much all the taxis, buses, increasingly more than half the private cars that are sold are now electric. And even this year, so far, 25% of their trucks are electric. So that electrification means that they're going to be less affected by global oil shocks and they won't have any petrol stations.
Greg, thank you very much. Now on with today's episode.
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Chapter 2: How does Mariana Mazzucato propose to reshape the economy for the common good?
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Hello and welcome to The Rest Is Money with me, Robert Pest.
And me, Steph McGovern. And back with us today, Mariana Matsukatu, who is a professor in the economics of innovation and public value at UCL. And what she does is she advises policymakers around the world on growth.
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Chapter 3: What is the significance of pre-distribution versus re-distribution in economic theory?
And she argues this point for mission-orientated policies. You know, she talks about the public sector as a high-risk investor rather than just, you know, the government's trying to fix market failures. She's worked with everyone from Biden to Burnham. And yeah, She's really interested on her theories around all of this, Robert.
I mean, to be clear, she is an opponent of growth for growth's sake. Her idea is you have to remake markets... So that when we get economic growth, and plainly in a country like the UK, we haven't got enough, it benefits the vast majority rather than the spoils simply going to a very small number of people.
And we recently talked to Gabriel Zuckman about the proliferation of billionaires and how they don't pay their fair share. Her...
big idea is that you restructure markets so government isn't about fixing things when markets go wrong it is about making sure that markets deliver better more beneficial outcomes in the first place most economists do not get their hands dirty in the way that mariana does and that's why i think we have to take her seriously and here is our interview with her
Marianna, so good to have you back. I consider you a friend of the show. We always love hearing your theories on things. You've got a new book out, haven't you, which we've got here, The Common Good Economy, a new compass. So the theory around this is this idea of the common good and an economy that cares about outcomes. So can you just explain a bit about what you mean by that?
Sure. So the last time I was here, I think I was talking about my missions book, which was also about outcomes. I wrote this one because I realized there was lots of mission washing going on. So unless we care as much about the how that we reach mission accomplished as the what we're trying to reach, then a lot of things go wrong along the way. So the kind of relational value really matters.
And for that, I kind of dipped into political philosophy, which I'm embarrassed to say I hadn't read every philosophical tome. But Aristotle, Michael Sandel, you know, real kind of political philosophers, they've always thought about this. You have the telos, the goal, and the polis, not the police, but the community, right? So how do we build community?
How do public and private properly work well together from the beginning with well-designed contracts where the good is nested literally in how they relate one to another? Capital labor relations. state citizenry. So the idea of the book is to say, let's have a compass that holds us to account so we don't have good washing, right?
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Chapter 4: How do public and private sectors interact in Mariana's vision?
Because everyone talks about purpose and goals. Think of the SDGs, the sustainable development goals that we've had since 2015. We are not reaching them. We're going to move the date now even further after 2030. And the book argues that's by design, not by coincidence. Because at best, we think of the role of the state, which is, of course, important in democratically elected societies.
Fixing a market failure. So waiting for things to go wrong, then you come in and fix it afterwards, as opposed to shaping to deliver for people and planet. And the compass that I present, these five pillars that I'm sure we'll get to later, are meant to hold us to account when we talk about good. So I'm not saying what the common good is. whether it's health outcomes, climate outcomes.
We have enough people talking about what we should be doing. What I say is that it's impossible to do good if the theory of good is a correction and not an objective where the how matters as much as the what.
Probably the biggest theme in politics since the financial crisis is how the way that countries like the UK, economies operate in countries like the UK, operate for the benefit of a very small number of people. And one of the reasons we've seen the rise of particularly right-wing populist parties is this sense, particularly among those on lower incomes, that the economy doesn't work
So is this, in your view, a book that would help to correct that? There are many politicians who think that their only mission at the moment is to fight back against populism. Is that in your mind at all?
Yeah, so in the beginning, actually talk about why I wrote it. But just to say one thing quickly, I don't think it's true that all politicians are the same. I do think that, for example... I don't think I said that. Did I say that? No, no, no, you didn't say that. But no, no, absolutely not.
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Chapter 5: What are the five pillars of the common good economy?
But you did say, and I'm not disagreeing with it, I'm just saying what I think. I don't think it's that like the UK, say, working class has always suffered the same amount because the economy hasn't worked for them. I think there are certain periods in which things... go much worse, and we need to better understand why.
So for example, if you look at Tony Blair's long essay that he just wrote, I actually have a very different analysis of why I think the working class is not benefiting. It's not because we're not stimulating growth, because there's too much planning, too much regulation, too much red tape. For example, corporate governance is a huge problem in the UK. He doesn't mention it once.
And so the populism point, just to get to that, because that is one of the reasons I wrote it,
If you look at what happened with the US election, I think something very interesting happened, which not enough people, including myself, have thought enough about, which is that the IRA, the Inflation Reduction Act, this massive stimulus that Biden designed, actually had the biggest economic impact in red states, so in Trump voting states.
So the question is, how can it be that people who in theory were actually benefiting from the economic policy, so it's the economy, stupid, you know, was working, And yet they didn't feel valued. They didn't get their dignity back after feeling really left behind and being left behind.
So what is the message for how progressive economists and political economics has to think not only about wages, not only about a stimulus program, not only about really important economic issues, but how do we make people feel valued that have not been valued? Yeah. than feeling condescended upon.
And the compass, right, these five elements, the second element is about co-creation and participation.
How do you not just say the green economy is going to be good for you, how do you genuinely get participation at the local level, right, so it's not just about allowing everyone to do whatever they think, that can inform from the lived experience how we design better policies and also give a sense of ownership.
So can I ask on that example you've just given there about the red states and these are the areas that benefited from the Inflation Reduction Act?
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Chapter 6: How can local communities influence national economic policies?
Sounds a bit technical, but it's kind of obvious. Yeah. You should not just do a public policy without making sure, at least in capitalism, where firms matter, businesses matter, that they're not kind of doing their bit. And so one of the metrics was kind of net increase in investment in those states that was not happening. And that's why also there wasn't an expansion of productive capacity.
Factories were closing, so on and so forth. However, your point, which is a point I have written a lot about, is how do we then make sure that when that investment does happen- which was not happening in the red states, that the benefits are truly shared. So that's the fourth element of the compass that I talk about, reward sharing.
And what I try to do in the book, by the way, is not just kind of pull out some compass with five random elements, is to actually show Why those elements, directionality, co-creation, sharing rewards, sharing knowledge and transparency are critical and then having examples globally where it's happening, but just one element at a time. There's no sum bigger than the parts.
There's no transformation. There's no scale because we're kind of just winging it. So even though there's good examples that should give us hope, how do we transform that into the system, how the system actually works?
So can I just – I obviously don't want to dwell on the Inflation Reduction Act and Biden for the entire episode, but can I just ask you one question about the benefits that went to those states that then ultimately voted for Trump? Now, one of the most striking –
uh features of that election that trump won was there was a lot of data actually that living standards were improving in the us under biden but there was this so-called vibes thing where people didn't feel it and they didn't believe it right so can i just but can i just ask therefore on the reds on the on on the issue of the republic the states that voted republican was it a vibes problem that people didn't get that they were actually being helped or were they or was it actually steph's point
that in the end, although the investment happened, in fact, the living standards for the relevant people didn't rise.
I think it's a combination of both. So if you look at the macro data, which is the data that's actually available, we don't have really, really refined kind of state level and like quarterly data. And I do think it is also about quarters, like figures were starting to really kind of go up before the election and maybe people hadn't felt it yet. But there's also the question, would they ever have?
So most of the IRA was done through tax incentives. That's the other thing. In order to get it through Congress, to get the Republicans to vote for it, it was all about tax, right? Which ultimately is about reducing the costs of of companies so that they will invest.
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Chapter 7: What role does accountability play in governance according to the guest?
And on that, Biden was very courageous. This is what Trump then reversed, an act that gave a huge amount of subsidy to American semiconductor companies. on condition that they reinvest those profits instead of just share buybacks and dividend payouts, the kind of Thames Water, Carillion model here, that they improve working conditions and that they use energy-efficient supply chains.
So this was what Biden was trying to do. He was saying it's not just about recovery. It's not just about investment. It's how do we actually make sure that it improves the lives of working people. So caveats. Did it work perfectly? No. Was it a really important change? Yes. Do we do it here in the U.K. ?
So one of the most interesting things about the book and about your argument is that you talk about how process matters. And I don't mean process in a very boring sense. It is that, you know, if you have a mission... Who engages in delivery, what rewards they get, how they themselves feel as owners of the thing matters.
Actually, I think you say more than the conventional targets that governments have. Now, if you are, let's say, working in the British Civil Service, you'll read that and you'll probably have a panic attack because your whole mindset is we've got a target. That's how we deliver what we want.
Governments want the idea that you can sort of make the target softer, but make it much more about participation will terrify them. So what would you say to reassure those people that it's not all a bit just sort of fuzzy and...
So it's actually the opposite in terms of making it kind of fuzzier. So the targets need to be super concrete. Missions are about saying, let's stop blah, blah, blah about climate or health and well-being or digital divide. Turn it into something as inspirational and concrete so we can measure did you achieve it or not as going to the moon and back in a short amount of time.
As soon as you say that... You also need to make sure that it is intersectoral. In a country where we have so little business investment, we are 28th in the OECD.
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Chapter 8: How can countries collaborate on economic reform for sustainability?
Forget public investment. That's all people obsess about. Private investment. How do you use these concrete, not fuzzy targets in an intersectoral way? The point is not like, oh, ask everyone what they think, right? That's just chaos. Yeah.
There's different ways, and this is what I talk about in the book through examples, that if you are, for example, the work we did in Camden around the mission for adult social care across 10 housing estates, the point was use the lived experience, the people who have been, whether it's in the red states or adult social care in Camden, been left behind by a system that does not work.
They should inform how to do adult social care in Camden, who Who? The carers who've had the experience on the ground. The carees who have not been well looked after. Use their lived experience. This is why, by the way, even though I'm not very religious, I had this nice relationship with Pope Francis before he died. For five years, actually, we talked a lot about the common good.
And before he died, we organized a conference together on it. He talked about the principle of subsidiarity around the common good, meaning the most local level, the lived experience need to inform how we redo capitalism. In the Amazon forest, not the company, I'm currently working with the Secretary of Traditional Peoples, Edel Morais, who's absolutely inspirational.
Similarly to the Camden issue, she said, you know what? There's people in the forest. She, again, represents all the traditional peoples in the Amazon. She says, we have knowledge that you don't respect. We understand the hydrological cycle. We understand biodiversity. You don't value us.
So if you're going to set up an Amazon fund, which has been set up, it was celebrated at the COP conference, which happened in Belém this year, we should be governing it because we understand it. Don't just pay all these NGOs to come and do good for us. We want to be at the center of the governance.
So that plays to your point about co-creation by citizens, doesn't it? In the sense that you're doing this with the people who know the most about it.
They should inform policies that are supposed to be for them.
Is that devolution then, if that's here? Because how do you actually scale that? So you talk, for example, and it's a great example about going to the moon and back, but if you said to some of these tough areas, right, our mission is we're going to go to the moon and back, everyone will be like, oh, is that going to help me?
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