Latest / Trumponomics / Landing on the Moon Is a Great Lesson for Modern Miracles

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Landing on the Moon Is a Great Lesson for Modern Miracles · Trumponomics

0:09
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
0:17
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
0:27
Speaker 1: was with my friend Marianna Matsukata, professor in the economics
0:32
Speaker 1: of Innovation and Public Value at University College London. Her
0:35
Speaker 1: first book, The Entrepreneurial State, was very influential change the
0:40
Speaker 1: way we think about the role that the public sector
0:42
Speaker 1: has played in some of those great business success stories
0:46
Speaker 1: of our time. And another one, The Value of Everything,
0:49
Speaker 1: Making and Taking in the Global Economy, absolutely nailed the
0:53
Speaker 1: way that a particular narrow conception of value had permeated,
0:58
Speaker 1: indeed distorted the way we think about the economy and
1:01
Speaker 1: society over the last hundred years. And she's just produced
1:04
Speaker 1: a new book which also seems well timed for the
1:07
Speaker 1: position we find ourselves in right now. It's called The
1:10
Speaker 1: Mission Economy, A moon Shot Guide to Changing Capitalism. I
1:15
Speaker 1: started by asking her about some of the big ideas
1:18
Speaker 1: that had got her thinking about the moon shot as
1:20
Speaker 1: a guide to policy. This extraction of value which I
1:31
Speaker 1: talked about in the book The Value of Everything, the
1:33
Speaker 1: kind of record level share buy backs in the last
1:36
Speaker 1: ten years, for trillion dollars have gone to bind back
1:40
Speaker 1: shares by the Fortune five companies. This is not the
1:43
Speaker 1: way to run a society in terms of a corporate
1:48
Speaker 1: business model. So, whether it's Larry Fink or the Business
1:52
Speaker 1: Roundtable putting out the statement over a year ago about
1:56
Speaker 1: you know, we need to rethink that model in terms
1:58
Speaker 1: of reinvesting back into long run areas that help people, planet,
2:03
Speaker 1: working conditions, and so on. And this conversation is a
2:06
Speaker 1: very important one. We shouldn't dismiss it if we remind
2:09
Speaker 1: ourselves that markets are not the same thing as business.
2:13
Speaker 1: Markets are outcomes of how we govern business and how
2:17
Speaker 1: we govern other types of value creating institutions. We also,
2:20
Speaker 1: you know, present ourselves with the problem, which is how
2:23
Speaker 1: is government governed? How is the public sector government? And
2:26
Speaker 1: what I've been writing about now for some years is
2:28
Speaker 1: that we also have a problem there. It's not just
2:30
Speaker 1: corporate governance that needs to rethink itself. It's also kind
2:33
Speaker 1: of government governance. The fact that economic theory, and I
2:37
Speaker 1: don't want to blame economists, of which I'm one for everything,
2:40
Speaker 1: but the fact that economic theory itself has at best
2:43
Speaker 1: framed the role of the public sector, the state and
2:47
Speaker 1: policy as simply fixing market failures is part of the problem.
2:52
Speaker 1: We're not going to get there by simply putting different
2:54
Speaker 1: types of patches on the system and the market failure
2:56
Speaker 1: approach which forces government to always ask where is the
2:59
Speaker 1: market failure? How am I going to fix it? That's
3:02
Speaker 1: an important framework, but it's very hard to fix your
3:04
Speaker 1: way towards transformational growth. And by transformational growth, by the way,
3:08
Speaker 1: don't just mean these kind of big social objectives like
3:11
Speaker 1: health and and climate. I also mean literally in terms
3:14
Speaker 1: of the direction of growth. And in the UK we're
3:16
Speaker 1: on standing today the kind of growth we have continues
3:19
Speaker 1: to be consumption led growth, which has really led to
3:24
Speaker 1: a very high ratio, for example, of private debt to
3:28
Speaker 1: disposable income, not public debt, but private debt to disposable income.
3:31
Speaker 1: So shifting that growth model from consumption to investment led
3:36
Speaker 1: growth and innovation driven growth, and having that investment and
3:40
Speaker 1: innovation help us solve some really important problems like the
3:44
Speaker 1: ones around climate health and the sustainable development goals need
3:47
Speaker 1: a different approach to policy making, one that I call
3:51
Speaker 1: actively shaping and co creating markets alongside business, not just
3:55
Speaker 1: fixing markets. And one thing that I found very curious
3:58
Speaker 1: in the UK was is um you know, a lot
4:01
Speaker 1: of the data that's come out since Brexit and now
4:03
Speaker 1: with COVID has been showing just how much the government
4:06
Speaker 1: has been overly relying on consulting companies Deloitte that ended
4:10
Speaker 1: up being asked to roll out the test and trade
4:12
Speaker 1: system and didn't do too well. But also with Brexit,
4:16
Speaker 1: the KPMG, s Price Waterhouse Coopers and so on, which
4:20
Speaker 1: ended up almost managing project managing Brexit for the government.
4:24
Speaker 1: This over consultification of government. A Tory Lord Agnew said
4:29
Speaker 1: that this was leading to an infantilized public sector. And
4:33
Speaker 1: when you start outsourcing your brain, as I think the
4:36
Speaker 1: US government has done in the recent years, one could
4:39
Speaker 1: view the whole n Essay kind of Snowden scandal as
4:42
Speaker 1: an outcome of the government almost losing its capability to
4:45
Speaker 1: govern information computing in the technology revolution, that you have
4:50
Speaker 1: a problem. So this is the reason that in the
4:52
Speaker 1: recent book that I wrote, I asked, we'll hold on
4:55
Speaker 1: a second. You know, we could do better. And only
4:58
Speaker 1: fifty years ago, public and pri of its sectors worked
5:01
Speaker 1: together extremely ambitiously um to get to the moon and back.
5:05
Speaker 1: You know that that's a famous goal that Kennedy set
5:08
Speaker 1: back in nineteen sixty two. The problems we have today
5:12
Speaker 1: are much trickier. Actually, there's wicked problems. They require political, behavioral,
5:17
Speaker 1: regulatory change, not just technological change. But it was truly
5:21
Speaker 1: a partnership. There was both business and government doing incredibly
5:25
Speaker 1: difficult things. And what was especially interesting to me is
5:28
Speaker 1: how government, through NASA but also some other public institutions,
5:32
Speaker 1: paid a lot of attention to the how to partner
5:36
Speaker 1: with business, and they even looked at the contracts and
5:38
Speaker 1: undid the existing contracts. And will come to that in
5:41
Speaker 1: a minute. But the kind of leadership that was required
5:44
Speaker 1: by government to set the direction of change and then
5:46
Speaker 1: catalyze a lot of risk taking bottom up amongst different
5:49
Speaker 1: actors in society. So you know, Kennedy's speech was very clear,
5:53
Speaker 1: this is going to cost a huge amount of money,
5:55
Speaker 1: but it's going to be worth it. And focusing on
5:58
Speaker 1: the goal and then backtracking on the budget, all these
6:00
Speaker 1: are just really interesting lessons I think today as we
6:04
Speaker 1: need to build back better that famous slogan, but especially
6:08
Speaker 1: rethink the organizations that we have in both government and
6:10
Speaker 1: in business. And you know what's quite striking is that
6:13
Speaker 1: when Kennedy, you know, did his speech, they had no
6:16
Speaker 1: clue how to get to the moon. So literally the
6:19
Speaker 1: innovation and risk taking, the experimentation that was that was
6:23
Speaker 1: required was immense. Uh. They ended up you know, landing
6:26
Speaker 1: on this lunar or a bit rendezvous way, but they
6:29
Speaker 1: were really exploring all sorts of different techniques. And on
6:32
Speaker 1: the tragic day in which Apollo one the fire occurred,
6:36
Speaker 1: one of the astronauts said something that I think is
6:39
Speaker 1: just so important, which was we can't even talk to
6:42
Speaker 1: each other through different NASA kind of mission control rooms,
6:46
Speaker 1: how are we going to get to the moon. He
6:48
Speaker 1: was talking about the very siloed, linear, vertical bureaucratic form
6:53
Speaker 1: in which the state itself was structured, and he was
6:56
Speaker 1: basically saying, if we're gonna be purpose driven, using today's
6:59
Speaker 1: words and get to the moon and back in the generation,
7:01
Speaker 1: we're gonna have to rethink actually how we communicate within
7:05
Speaker 1: our own structures and that kind of attention to organizational
7:08
Speaker 1: change with something that NASA, through George Mueller's leadership, really
7:12
Speaker 1: embarked on. And this is important, right because if you
7:14
Speaker 1: are going to be purpose driven, what does it mean
7:16
Speaker 1: for your own organizational culture, not just in business, but
7:20
Speaker 1: also in government and the purpose This notion of a
7:23
Speaker 1: partnership with a common purpose is really what I think
7:26
Speaker 1: is so important in terms of allowing us to give
7:29
Speaker 1: more substance to this notion of stakeholder capitalism. It was
7:34
Speaker 1: so curious that they paid attention not only to the
7:36
Speaker 1: procurement contracts in terms of how to devise them so
7:40
Speaker 1: government wouldn't be, uh, just if you want, vulnerable to
7:43
Speaker 1: paying any costs that were presented to them through cost
7:47
Speaker 1: price contracts, which they changed to fixed price contracts with
7:51
Speaker 1: incentives for innovation. But they also paid attention to making
7:54
Speaker 1: sure that this enterprise that they were going to do together,
7:57
Speaker 1: this wonderful, difficult mission, was it just going to become
8:00
Speaker 1: a gambling casino. So they even had clauses like no
8:04
Speaker 1: excess profits clauses in the procurement contracts, and of course
8:08
Speaker 1: profits were earned, but there was also a real kind
8:10
Speaker 1: of risk sharing and reward sharing in the process and
8:13
Speaker 1: so sharing both risks and rewards I think is incredibly important.
8:17
Speaker 1: This idea that you know, mass itself required its own capabilities,
8:21
Speaker 1: investing within its own brain what I call the dynamic
8:24
Speaker 1: capabilities of the public sector in order even to know
8:27
Speaker 1: how to write the terms of reference with business to
8:30
Speaker 1: foster a symbiotic and mutualistic partnership. And what was so
8:35
Speaker 1: special about the moon landing was so much happened along
8:38
Speaker 1: the way, spillovers across many different sectors. It wasn't just aeronautics,
8:42
Speaker 1: it was nutrition, materials, electronics, the entire software industry in
8:46
Speaker 1: some ways was an outcome of that. And that really
8:48
Speaker 1: did happen because of a kind of top down, you know,
8:51
Speaker 1: mission setting, but lots of bottom up experimentation, and that
8:55
Speaker 1: kind of delicate balance between the two is really what
8:58
Speaker 1: I focus on in the book for allowing us to
9:03
Speaker 1: really create a concrete investment pathway in trajectory for the SDGs.
9:07
Speaker 1: The SDGs these are the earth shots. They're much harder
9:10
Speaker 1: actually than a purely technological missions. And what that really
9:14
Speaker 1: requires is again partnership with purpose, I guess, just to
9:24
Speaker 1: get one thing out of the way first, you know,
9:27
Speaker 1: there will be people listening, certainly people who have heard
9:30
Speaker 1: a lot about stakeholder capitalism before and indeed maybe sitting
9:34
Speaker 1: in businesses trying to make it work. Um, there will
9:36
Speaker 1: be others who are just used to managing people and
9:38
Speaker 1: getting things done, and they'll say it's not very complicated.
9:42
Speaker 1: If you actually want to make progress, you need to
9:44
Speaker 1: set a big target and then work as a team
9:47
Speaker 1: to meet it. Why do I need a whole book
9:49
Speaker 1: to tell me that? What? What is different about what
9:52
Speaker 1: you're actually what you're proposing? Because having a mission exactly
9:58
Speaker 1: so um for me at least, missions are about again,
10:03
Speaker 1: how do you partner in a different way? So let's
10:05
Speaker 1: even unpick for example, Um, you know any of the
10:08
Speaker 1: goals like you know STG fourteen around clean oceans, what
10:12
Speaker 1: does it mean actually to transform it into a very
10:14
Speaker 1: concrete goal like getting the plastic out of the ocean
10:19
Speaker 1: and make sure that the way that government interacts with business,
10:22
Speaker 1: which is constantly interact in terms of subsidies, guarantees, grants
10:26
Speaker 1: and loans becomes actually conditional on you know, business and
10:30
Speaker 1: different types of businesses which will actually require different types
10:33
Speaker 1: of support, uh, investing in that goal together. And even
10:37
Speaker 1: though that sounds really obvious. It simply doesn't happen. I mean,
10:40
Speaker 1: I've looked at so many different sectors, especially by the way,
10:43
Speaker 1: the pharmaceutical sector, which gets all sorts of benefits from
10:46
Speaker 1: government in the United States forty billion dollars a year
10:51
Speaker 1: goes towards drug innovation, and somehow then we don't get
10:53
Speaker 1: that kind of conditionality and partnership, right, So intellectual property
10:58
Speaker 1: rights in particular for that sector are often abused. They
11:01
Speaker 1: are to upstream, their too wide, used for strategic patenting,
11:05
Speaker 1: there too strong, so hard to license. The prices of
11:09
Speaker 1: the drugs don't actually reflect that collective value creation. And
11:14
Speaker 1: so you know, governing the partnership, governing innovation in such
11:19
Speaker 1: a way as serious as NASA was when it unpicked
11:21
Speaker 1: those procurement contracts and said, Nope, this isn't gonna be good.
11:24
Speaker 1: We're gonna be taken for a ride. And truly sharing
11:27
Speaker 1: both risks and rewards means doing things quite differently. And
11:31
Speaker 1: the vaccine, which is a great example actually today of
11:35
Speaker 1: you know, both the public and the private sector putting
11:37
Speaker 1: in a lot of money, but also you know it
11:39
Speaker 1: was based on a lot of previous funding. The Oxford
11:42
Speaker 1: vaccine from also the European Commission, as was by the way,
11:46
Speaker 1: the fives are vaccine, which got money from the European
11:48
Speaker 1: Commission and the German government. Um so these are all
11:51
Speaker 1: kind of ecosystems public and private investments that produce something
11:55
Speaker 1: like a vaccine. But then if you don't govern it
11:58
Speaker 1: right to meet let's call it the common good, then
12:02
Speaker 1: that's a problem in terms of the deal. So the
12:04
Speaker 1: idea of a patent pool for the vaccine, but also
12:07
Speaker 1: making sure the vaccine is universally accessible so we don't
12:11
Speaker 1: have what Dr Tedris called vaccine apartheid, so countries just
12:15
Speaker 1: hoarding it. That's all about kind of governing that process
12:18
Speaker 1: right in a particular way. And you could unpick the
12:21
Speaker 1: same thing with digital platforms. You know, everything that makes
12:24
Speaker 1: our smart products smart and not stupid was funded by government, Internet, GPS, touchscreen, serrie.
12:30
Speaker 1: And yet then if you don't govern that innovation for
12:33
Speaker 1: the public good, you end up with what I was
12:36
Speaker 1: arguing in the beginning, kind of too little, too late,
12:39
Speaker 1: worried about privacy taxation as kind of in the back
12:42
Speaker 1: saying oh wait, wait, wait, hold on, as opposed to
12:44
Speaker 1: making sure you have kind of you know what I
12:46
Speaker 1: called predistribution, which is a nice term also that others use,
12:50
Speaker 1: which is how do we get the conditions right ex
12:52
Speaker 1: anti so you don't have to pick the up the
12:55
Speaker 1: mess x post. And that to me is central to
12:58
Speaker 1: a mission oriented approach where purpose is at the center
13:01
Speaker 1: of the relationship, as opposed to just kind of a
13:04
Speaker 1: siloed notion of how governments can improve. So we're going
13:08
Speaker 1: to try and be kind of ruthlessly practical in this
13:10
Speaker 1: session and think about how it applies to the new administration,
13:14
Speaker 1: But any any government who's trying to think about how
13:16
Speaker 1: to change the way we do these things. You say
13:19
Speaker 1: yourself in the book that there are there are ways
13:22
Speaker 1: in which the moon landings are not a helpful guide
13:26
Speaker 1: for now and for the challenges we face now. One
13:28
Speaker 1: of one is that it was sort of chosen by
13:31
Speaker 1: a quite narrow part of society that we were going
13:34
Speaker 1: to go to boon, and maybe not everyone would have
13:36
Speaker 1: signed up for that um. But another is that it's
13:39
Speaker 1: it is quite a sort of clear technical challenge, enormously
13:42
Speaker 1: ambitious and difficult, but easily explained and with a quite
13:47
Speaker 1: clear process leading up to it. Where and I think
13:50
Speaker 1: you could say the vaccines are actually an even better
13:53
Speaker 1: example of that, you know, a very clearly defined target.
13:55
Speaker 1: Some of the sustainable development goals would have that characteristic,
13:59
Speaker 1: they're quite specific. But when you think about something that
14:03
Speaker 1: you're obviously very focused on and you have applied this too,
14:05
Speaker 1: I mean climate change, so many layers of that that
14:09
Speaker 1: are not just technical, they are also social. They're also
14:12
Speaker 1: about how we value you know, going back to your
14:14
Speaker 1: other book about how we value things. Um, So I
14:17
Speaker 1: just where do you get to the point where it's
14:20
Speaker 1: less helpful to have this kind of parallel Um, how
14:24
Speaker 1: can you use this approach for something which is more
14:27
Speaker 1: social and more multi layered. Thanks for that question. It's
14:32
Speaker 1: very important. So, um, you know what's interesting is, you
14:36
Speaker 1: know many people remember that that famous story that the
14:40
Speaker 1: janitor who worked and asked so when he was asked,
14:42
Speaker 1: what do you do? And he said, I'm helping to
14:44
Speaker 1: get a man on the moon. So in some sense,
14:46
Speaker 1: you know what also the moon landing did was really
14:49
Speaker 1: inspire so many different people, including lots of kids who
14:52
Speaker 1: ended up studying science, you know, because of the inspiration.
14:55
Speaker 1: But it wasn't you know, citizens weren't engaged in the design,
14:59
Speaker 1: you know, of the mission itself, you know, it really
15:02
Speaker 1: was top down. Some of the more interesting missions that
15:04
Speaker 1: we're working on in the institute that I run at
15:07
Speaker 1: University College London, which is called the Institute of Innovation
15:10
Speaker 1: and Public Purpose, you know, the whole notion of purpose
15:12
Speaker 1: at the center of political economy UM are on missions
15:17
Speaker 1: in countries like Sweden where the national mission is so interesting.
15:21
Speaker 1: It's about a fossil free welfare state. And then if
15:24
Speaker 1: you break down everything the state does and provides, from
15:27
Speaker 1: public transport, public education, public health, a lot of that
15:31
Speaker 1: is actually obviously in partnership with business UM. But what
15:34
Speaker 1: does it mean to land those those ambitions in concrete places.
15:39
Speaker 1: Take the the public education system. You know, if you
15:44
Speaker 1: have a carbon neutral agenda, a fossil free welfare state agenda,
15:49
Speaker 1: it can actually land in a place like school meals, right,
15:51
Speaker 1: so you can have the production, distribution and consumption of
15:54
Speaker 1: school meals driven by this carbon neutral agenda. But what
15:58
Speaker 1: would it look like to bring kids to the day,
16:00
Speaker 1: students in schools to the table to design that, but
16:03
Speaker 1: also to monitor it along the way. You know, if
16:05
Speaker 1: the food is sustainable but kind of sucks and it's
16:07
Speaker 1: not very tasty, that's not gonna work. Um, so that
16:10
Speaker 1: both the issue of code design but also monitoring along
16:13
Speaker 1: the way is an important point. And in Camden, the
16:16
Speaker 1: part of London where I live and I co chair
16:19
Speaker 1: the Camden Renewal Commission with Georgia Gould, the Leader of
16:22
Speaker 1: the Council, and one of the things we started doing
16:25
Speaker 1: is thinking about carbon neutrality with the place where it
16:28
Speaker 1: lands is the social housing estates what in the USA
16:32
Speaker 1: called housing projects and again, what does it mean to
16:34
Speaker 1: bring housing associations or citizen assemblies to the table to
16:38
Speaker 1: really talk and debate and contest about how do we
16:41
Speaker 1: want to live together in these places so that it
16:45
Speaker 1: is not just sustainable, but it's also an outcome of,
16:48
Speaker 1: you know, a discussion. You know, it's easy to pet
16:50
Speaker 1: Breta Tornberg on the head and say, oh, how cute.
16:53
Speaker 1: You know, sixteen or eighteen year old now cares about
16:55
Speaker 1: climate change. But what does it mean to listen to
16:58
Speaker 1: social movements? And that's really important, by the way, because
17:01
Speaker 1: it's not just you know, the green movement, it's also
17:03
Speaker 1: the labor movement. Labor at as a record labor is
17:07
Speaker 1: at a record low in terms of the labor share
17:09
Speaker 1: of GDP globally, the profit shares at a record high.
17:13
Speaker 1: Labor unions trade unions have historically been incredibly important for
17:18
Speaker 1: shaping markets to be more inclusive. We wouldn't have weekends,
17:22
Speaker 1: by the way, not bad as a social innovation. We
17:24
Speaker 1: wouldn't have the eight hour work day without trade unions.
17:27
Speaker 1: So you know, whether it's the labor movement, whether it's
17:30
Speaker 1: a green movement, whether it's Black Lives Matter, whether it's
17:34
Speaker 1: the care workers today and that movement, what does it
17:36
Speaker 1: mean for governments themselves to listen to actually allow that
17:40
Speaker 1: to be part of the process through which emissions are set.
17:44
Speaker 1: And in German, I think what's interesting is they've had
17:46
Speaker 1: one of the strongest green movements um across the globe,
17:51
Speaker 1: having risen slowly up to the to the very high
17:54
Speaker 1: level of government, and that ended up fostering a very
17:57
Speaker 1: different relationship between government and business. So couple of years ago,
18:00
Speaker 1: when the steel industry asked government for a loan and
18:03
Speaker 1: a bailout, as steel is more or less asking every
18:07
Speaker 1: government or bailout in Germany, they were confident enough to
18:11
Speaker 1: make that loan conditional on the steel sector reducing its
18:15
Speaker 1: material content, which it ended up doing. In its own way.
18:19
Speaker 1: Today the German steel sector is one of the most
18:21
Speaker 1: green and innovative in the world, not because you know,
18:24
Speaker 1: they went to the World Economic Forum and talked about purpose,
18:26
Speaker 1: but because they had to in order to access the
18:29
Speaker 1: public loan. And that's a really interesting thing that started
18:32
Speaker 1: to be applied with COVID nineteen recovery funds in some
18:36
Speaker 1: parts of the world, like in France, where both the
18:38
Speaker 1: airlines and automotive industries received their recovery bailout conditional on
18:44
Speaker 1: reducing or committing to reducing their carbon emissions, whereas in
18:47
Speaker 1: the UK we just gave a massive handout, you know,
18:49
Speaker 1: to easy Jet, no conditions attached. So that issue of conditionality,
18:53
Speaker 1: I think is a really interesting concrete example of how
18:58
Speaker 1: to foster this new partnership. And unfortunately the word conditionality
19:01
Speaker 1: sounds negative. So I do think we need to think
19:03
Speaker 1: the narrative as well around partnership, you know, purpose driven
19:07
Speaker 1: social contracts. Clearly, the really bigly tough challenge these days
19:15
Speaker 1: is the US, after decades of undermining the perceived value
19:23
Speaker 1: of government only little corners NASA and me. As Michael
19:25
Speaker 1: Lewis points out in his book It's NASA was sort
19:28
Speaker 1: of one of the few bits of government that was
19:30
Speaker 1: allowed to take credit as a public sector organization. If
19:33
Speaker 1: you're facing that which existed long before Donald Trump and
19:37
Speaker 1: but now coming in as the Biden administration with the
19:40
Speaker 1: particular record of the sort of acceleration of the undermining
19:43
Speaker 1: of government that's happened over the last few years, I
19:47
Speaker 1: guess there were there is. There is a sort of
19:49
Speaker 1: debate obviously ongoing within the administration in lots of areas
19:53
Speaker 1: about whether the best thing to do is to be
19:55
Speaker 1: quietly competent and just remind people that the government can
19:57
Speaker 1: be quietly competent and doesn't need to ruin your life
20:00
Speaker 1: um and is actually quite important, or does it need
20:04
Speaker 1: to be visionary. And of course a lot of people
20:06
Speaker 1: would say you have to be competent and visionary, but
20:08
Speaker 1: they might sense, in the kind of way that you
20:11
Speaker 1: talk about this a real risk for them that if
20:14
Speaker 1: they try, if they set those enormous targets and seem
20:17
Speaker 1: to signal that they're going to completely transform the way
20:20
Speaker 1: we think about government and have your kind of approach,
20:23
Speaker 1: they'll be setting themselves up for this failure, for a failure,
20:26
Speaker 1: an equally grand failure, which could undermine the battle kind
20:30
Speaker 1: of longer term. So I just wonder, when you think
20:31
Speaker 1: about the challenges that the administration faces and this trade
20:34
Speaker 1: off between being competent and being visionary, how would you
20:38
Speaker 1: apply your approach um great question, And you know, and
20:42
Speaker 1: first of all, we should remember that Trump was quite
20:45
Speaker 1: unique in case people didn't now. Trump was actually the
20:49
Speaker 1: first president that really attacked what I called the entrepreneurial state.
20:53
Speaker 1: But one of the things I've been arguing is that
20:55
Speaker 1: in the US especially but also globally, we need to
20:57
Speaker 1: bring together these concepts of the well first state in
21:00
Speaker 1: the innovation state that can actually work together, and the
21:03
Speaker 1: welfare state can also be a demand pull for what.
21:06
Speaker 1: Then the innovation state also feeds into the U S.
21:09
Speaker 1: It's very dysfunctional. You have again forty billion a year
21:12
Speaker 1: going in from the National Institutes of Health, and then
21:16
Speaker 1: at best you have Medicare and Medicaid on the sort
21:18
Speaker 1: of demand side, but they're not really aligned. And that's
21:20
Speaker 1: why we get this whole kind of hyper inflated system
21:23
Speaker 1: where the prices and the fees don't reflect at all
21:26
Speaker 1: that public sector is taking. Biden's bringing back the attention
21:29
Speaker 1: to an industrial strategy and innovation strategy and the investments
21:33
Speaker 1: that we require in both social physical infrastructure innovation. That's
21:38
Speaker 1: an important first step. What he needs to avoid is
21:41
Speaker 1: making this kind of an old style just list of sectors,
21:44
Speaker 1: you know, make America great again in X, Y, and
21:46
Speaker 1: Z areas with the mission oriented approach suggests is that
21:50
Speaker 1: we need to remember that some of the best innovations
21:53
Speaker 1: in the US, like all the ones that I mentioned before,
21:55
Speaker 1: making this thing smart and not stupid, Internet, GPS and
21:59
Speaker 1: so on, the where outcomes of the U. S Government
22:02
Speaker 1: trying to solve a problem. So the Internet was a
22:04
Speaker 1: solution to trying to get the satellites to communicate. GPS. Similarly,
22:08
Speaker 1: there was a problem, GPS was a solution. So the
22:11
Speaker 1: real question is how can the American kind of industrial
22:15
Speaker 1: innovation system which did make it great. You know, they
22:18
Speaker 1: really were the leaders around the computer, computer revolution, etcetera.
22:22
Speaker 1: What are the you know, what are today's problems and
22:25
Speaker 1: questions that can drive that real kind of dynamic innovation
22:28
Speaker 1: by both the public and the private sector. And lastly,
22:31
Speaker 1: you know, we need to remember when you talked about
22:34
Speaker 1: the US government perhaps getting blamed for any failures that
22:37
Speaker 1: happened along the way, that's normal. You know, it's impossible
22:41
Speaker 1: to innovate without screwing up. But the only difference is
22:43
Speaker 1: that the venture capital is brag about it rightly. So
22:46
Speaker 1: you can't have success without also admitting that you're going
22:49
Speaker 1: to fail. And what the venture capitalists do, however, is
22:52
Speaker 1: they make sure they're not just kind of you know,
22:54
Speaker 1: picking up the downside. They're obviously also getting an upside
22:57
Speaker 1: that gets reinvested back in. That's where the US government
23:00
Speaker 1: in the past kind of you know, didn't uh follow through.
23:05
Speaker 1: So even if you look at the recovery after the
23:07
Speaker 1: financial crisis, when Obama had an eight hundred billion stimulus program,
23:12
Speaker 1: much of which was initially green directed, that's when he
23:16
Speaker 1: brought in a Nobel Prize winner to direct the d
23:19
Speaker 1: Oe Steve cho who set up are pa E. They
23:22
Speaker 1: made all sorts of investments in different companies to foster
23:25
Speaker 1: a green transition. Some of those companies failed, like Cylindra,
23:30
Speaker 1: some succeeded like Tesla. Tesla and Slinder got the same
23:33
Speaker 1: almost the same amount of money um. And the strange
23:36
Speaker 1: thing is that even though Obama had all these golden
23:38
Speaker 1: Sax guys in government, he said something that was quite silly,
23:42
Speaker 1: he said to um Elon Musk. If you don't pay
23:45
Speaker 1: back the loan, we get three million shares in your company. Now,
23:48
Speaker 1: the loan was paid back in two thousand thirteen. It
23:50
Speaker 1: was taken out two thousand nine, and had the government said,
23:53
Speaker 1: what a venture capitalists would say is if you succeed,
23:56
Speaker 1: we get equity, we get three million schairs. The change
23:59
Speaker 1: in price per share was that multiplied by three million,
24:04
Speaker 1: would have more than paid back the cylinder loss in
24:06
Speaker 1: the next round. So the point here is that you
24:08
Speaker 1: don't want to just be choosing kind of siloed projects.
24:11
Speaker 1: You want to choose a direction. You want to pick
24:13
Speaker 1: the willing, not pick the winners, pick the willing along
24:16
Speaker 1: the way, but also structure it in an intelligent way
24:19
Speaker 1: so citizens aren't just kind of belling out the downside
24:22
Speaker 1: but also getting a share of the upside. Okay, one
24:25
Speaker 1: final question. There's lots of versions of this question which
24:28
Speaker 1: have come through, which is kind of it sounds like, uh,
24:32
Speaker 1: nothing's going to be fixed until everything is going to
24:34
Speaker 1: be fixed. You know, you have a wonderful or economist
24:36
Speaker 1: would put it. You know, you have a very general
24:37
Speaker 1: equilibrium way of looking at the world, which is very
24:41
Speaker 1: is immensely helpful in thinking about how one thing relates
24:44
Speaker 1: to another, and they need to be more holistic. But
24:46
Speaker 1: how should again, the Biden administration take on what you're
24:52
Speaker 1: saying whilst also allowing there to be sort of short
24:55
Speaker 1: term practical winds along the way. So I mean, I
24:59
Speaker 1: usually get accused of the opposite, that I'm too practical
25:01
Speaker 1: and concrete. Um, So you know, the big point, of
25:04
Speaker 1: course is that economic growth has not just a rate
25:06
Speaker 1: but a direction. That's what we're talking about. That's like
25:08
Speaker 1: the big broad point, which one could argue is kind
25:10
Speaker 1: of too generic. The concrete point point is, how do
25:13
Speaker 1: you render really explicit that directionality? What does it mean
25:17
Speaker 1: for the concrete ways that we design things like procurement
25:21
Speaker 1: and procurement, by the way, is a huge percentage of
25:24
Speaker 1: government budgets. In the UK where you and I live,
25:27
Speaker 1: the whole innovation budget of the country is ten billion.
25:30
Speaker 1: Just the procurement budget of the Ministry of Transport the
25:33
Speaker 1: Department of Transport is forty billion. And this is true
25:35
Speaker 1: almost you know, globally it's often almost half of the
25:39
Speaker 1: whole government budget. So what does it mean to unpick
25:42
Speaker 1: those contracts to make them really have purpose, you know,
25:46
Speaker 1: a green transport system, and designing that procurement in order
25:50
Speaker 1: that it really crowds in business investment because this isn't
25:53
Speaker 1: about the state kind of doing everything. It's about choosing
25:56
Speaker 1: and and really choosing very specific areas also, you know,
26:00
Speaker 1: whether it's health or digital platforms, the vaccine, where we
26:04
Speaker 1: can unpick where things go wrong and redesigned the contracts
26:07
Speaker 1: themselves to foster a purpose driven kind of orientation. But
26:11
Speaker 1: also the public investment side has to do much more
26:14
Speaker 1: than just incentivize. You know, this is why if we
26:17
Speaker 1: simply had R and D tax credits, we would not
26:19
Speaker 1: have had the Internet revolution. It required active public investment,
26:23
Speaker 1: and it was ambitious, it was bold, which then created
26:27
Speaker 1: a whole new kind of you know, market opportunity, which
26:30
Speaker 1: then raised business expectations of where future growth opportunities lie.
26:35
Speaker 1: And unfortunately, so much tax policy, and I often go
26:39
Speaker 1: very concrete on different types of tax policy, like capital
26:41
Speaker 1: gains tax policies simply increased profits, they don't actually create
26:45
Speaker 1: what economists called additionality, catalyzing investment to happen where it
26:49
Speaker 1: wouldn't have happened anyway. And having you know, proper metrics
26:54
Speaker 1: about additionality, but also the kind of partnerships that we
26:57
Speaker 1: are fostering, whether their predatory or symbiotic or mutualistic, that
27:01
Speaker 1: needs just as much attention as kind of E. S
27:04
Speaker 1: G types of targets. Marianna, we could talk a lot more.
27:09
Speaker 1: Thank you very much for joining us, and thank you
27:10
Speaker 1: for everyone for listening and for all your questions. Thank
27:14
Speaker 1: you thanks for listening to Stephanomics. We'll be back with
27:22
Speaker 1: more next week. In the meantime, you can always get
27:25
Speaker 1: more from Bloomberg Economics on the Bloomberg Terminal or Bloomberg
27:29
Speaker 1: News website. You can also follow at Economics on Twitter.
27:33
Speaker 1: This episode was produced by Mangus Hendrickson, with thanks to
27:36
Speaker 1: Marianna Matteo Carta and the Aspen Institute. Lucy Meekin is
27:40
Speaker 1: the executive producer of Stephanomics and the head of Bloomberg Podcasts.
27:44
Speaker 1: Frances Can Leave