Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Jeremy Corbyn’s Necessary Agenda

Mariana Mazzucato 1st October 2015

Mariana Mazzucato

Mariana Mazzucato

Seven economists (including Joseph Stiglitz, Thomas Piketty, and me) have agreed to become economic advisers to Jeremy Corbyn, the new leader of the British Labour Party. I hope we will have a shared goal to help Labour shape an economic policy that is investment-led, inclusive, and sustainable. We will bring different ideas to the table, but these are my thoughts on the kind of progressive agenda the United Kingdom – and the rest of the world – now needs.

When the Labour Party lost the election last May, it received considerable criticism – even from its own frontbenchers – for failing to embrace the business community as “wealth creators.” But while businesses clearly create wealth, so do workers, public institutions, and civil-society organizations, which, through dynamic partnerships, drive long-term growth and productivity. Indeed, a progressive economic agenda must begin with the recognition that wealth creation is a collective process and that market outcomes are the product of how these various “wealth creators” interact.

We must drop the false dichotomy of governments versus markets and begin to think more clearly about the market outcomes we want. There is plenty to learn from public investments that were mission-oriented, instead of focused on “facilitating” or “incentivizing” business. Policy should actively shape and create markets, not just fix them when they go wrong.

Indeed, policies traditionally considered “business friendly,” such as tax credits and lower tax rates, can be bad for business in the long run if they limit governments’ future ability to invest in areas that increase innovation-led growth. Likewise, it is time to move on from the debate over austerity to a new conversation about how to build smart, mutually beneficial public-private partnerships to fuel decades of growth.

For starters, we must invest in education, human capital, technology, and research. Massive technological and organizational advances have raised productivity in many sectors. Many (if not most) of these breakthroughs have their origins in publicly funded research. Ensuring future advances will require direct policy interventions and investments in innovation across the entire innovation chain: basic research, applied research, and early-stage company financing.

Moreover, we need more patient, long-term finance. Most existing finance is too speculative and too focused on short-term outcomes. Exit-driven venture capital might be appropriate for gadgets; but technological revolutions have historically required patient, committed public financing. In some countries, like Germany and China, public banks take on this role. In others, the job is done by strategic public agencies.

This also means de-financializing the real economy, which has been overly focused on short-term concerns, so that profits are reinvested into production and research and development, rather than hoarded or spent on share buybacks. Over the last decade, Fortune 500 companies in areas like information technology, pharmaceuticals, and energy have spent more than $3 trillion buying back shares in order to boost stock prices, stock options, and executive pay. Meanwhile, in the United States and Europe alone, companies have hoarded nearly $4 trillion. Companies should be rewarded for reinvesting their profits in production, innovation, and human-capital formation.

Next, we must increase wages and standards of living. Until the 1980s, productivity increases were accompanied by wage increases and rising living standards. This link was broken by a drop in labor’s negotiating power and companies’ increased financial orientation. Unions are key to effective corporate governance and hence should be more involved in innovation policy, pressing for investments in education and training – the long-run drivers of wages.

Public institutions must also be strengthened. Bold policy choices require public agencies and institutions that are able to take risks and learn from doing so. Outsourcing government services that lie within the government’s own competency hinders this process as it reduces the public sector’s “absorptive capacity.” Creating a network of well-funded, decentralized agencies and institutions that work in partnership with business would make government both more effective and more strategically focused.

The tax system must be made more progressive as well, with tax credits for businesses designed to encourage inclusive outcomes. We must end the current practice of blindly lowering taxes, creating loopholes that allow legal tax avoidance, and offering tax credits that have little effect on investment and job creation.

When the public sector takes key risks along the innovation chain – such as providing guaranteed loans to companies like Tesla – we should think more creatively about the kinds of contracts that enable the public to share not only the risks, but also some of the rewards.

We must also shape a new narrative on debt. Rather than focus on budget deficits, we should concentrate on the denominator of debt-to-GDP ratios. As long as public investment increases long-term productivity, the ratio will remain in check. In the OECD, many of the countries with the highest debt-to-GDP ratios – including Italy, Portugal, and Spain – ran relatively modest deficits, but failed to invest effectively in education, research, training, or well-designed welfare programs that facilitate economic adjustment.

Fiscal and monetary policy will be important, but only if coupled with the creation of opportunities in the real economy. Money creation, through quantitative easing, will not fuel the real economy if the new money ends up in banks that do not lend. And when businesses do not see opportunities, interest rates stop affecting investment.

Finally, we must not shy away from guiding the direction of development toward a green economy. Beyond “shovel-ready” infrastructure projects, fiscal stimulus should support transformational projects, such as those that led to advances in information and communication technology, biotech, and nanotech that were “chosen” by public policy working alongside businesses. Green development can be about much more than renewable energy; it can become a new direction for the entire economy.

The British Labour Party, along with other progressive parties around the world, has a responsibility to change the discussion on economic policy. By doing so, it has the opportunity to shape the future.

© Project Syndicate

Mariana Mazzucato
Mariana Mazzucato

Mariana Mazzucato is professor in the economics of innovation and public value at University College London, chair of the World Health Organization’s Council on the Economics of Health For All and author of The Value of Everything: Making and Taking in the Global Economy and Mission Economy: A Moonshot Guide to Changing Capitalism.

You are here: Home / Economy / Jeremy Corbyn’s Necessary Agenda

Most Popular Posts

Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic
Orbán,Hungary,Russia,Putin,sanctions,European Union,EU,European Parliament,commission,funds,funding Time to confront Europe’s rogue state—HungaryStephen Pogány

Most Recent Posts

reality check,EU foreign policy,Russia Russia’s invasion of Ukraine—a reality check for the EUHeidi Mauer, Richard Whitman and Nicholas Wright
permanent EU investment fund,Recovery and Resilience Facility,public investment,RRF Towards a permanent EU investment fundPhilipp Heimberger and Andreas Lichtenberger
sustainability,SDGs,Finland Embedding sustainability in a government programmeJohanna Juselius
social dialogue,social partners Social dialogue must be at the heart of Europe’s futureClaes-Mikael Ståhl
Jacinda Ardern,women,leadership,New Zealand What it means when Jacinda Ardern calls timePeter Davis

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The EU recovery strategy: a blueprint for a more Social Europe or a house of cards?

This new ETUI paper explores the European Union recovery strategy, with a focus on its potentially transformative aspects vis-à-vis European integration and its implications for the social dimension of the EU’s socio-economic governance. In particular, it reflects on whether the agreed measures provide sufficient safeguards against the spectre of austerity and whether these constitute steps away from treating social and labour policies as mere ‘variables’ of economic growth.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

The winter issue of the Progressive Post magazine from FEPS is out!

The sequence of recent catastrophes has thrust new words into our vocabulary—'polycrisis', for example, even 'permacrisis'. These challenges have multiple origins, reinforce each other and cannot be tackled individually. But could they also be opportunities for the EU?

This issue offers compelling analyses on the European health union, multilateralism and international co-operation, the state of the union, political alternatives to the narrative imposed by the right and much more!


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube