To win power, progressive leaders must articulate a coherent economic policy, focusing not only on redistribution but also value creation.
With much of the world facing unavoidable health, energy, cost-of-living and climate challenges, progressive political leaders have an opportunity to articulate a meaningful alternative to traditional economic policy-making. That requires conveying a bold and coherent vision of how to achieve inclusive and sustainable growth.
At the British Labour Party’s annual conference last month, its leader, Keir Starmer, spelt out his own ambitions to turn Britain into a ‘green growth superpower’ capable of creating new jobs, industries and technologies. Having spoken with the Labour Party about putting green concerns at the heart of the United Kingdom’s industrial transformation, I am delighted to see Starmer channelling the ambition that is needed. Progressive leaders around the world should take note.
Labour’s vision stands in stark contrast to the hackneyed, 1980s-style package of disastrous ‘trickle-down’ tax cuts, policies to reduce worker power (even more!) and enterprise zones which Liz Truss’ government has announced. While the Conservative gamble with fiscal stability has forced the government to execute a major U-turn on the proposed tax cuts for the highest income earners, little is being said about the public investments—in areas such as infrastructure, innovation and education—needed to drive economic growth. On the contrary, the tax cuts will increase public debt, causing the government to cut the much-needed investment.
Unfortunately, the absence of bold, clear progressive policies has allowed the far right to gain traction across Europe, not least in Italy, which is poised to be governed by Giorgia Meloni’s post-fascist alliance. Whenever low-income groups suffer—as they do now and will continue to do this winter—xenophobic parties will exploit their hardship, pinning the blame on others (as did the former United States president, Donald Trump) to distract from their own weak, incoherent or non-existent policy proposals.
Past policy failures and unmet populist promises represent an opportunity for progressive leaders. But to navigate so many economic and political headwinds, they will need to think about not only redistribution but also wealth and value creation. The goal cannot be just to mitigate the damage from today’s shocks. Progressive arguments against austerity need to move beyond the traditional appeal for ‘shovel-ready’ projects and promote comprehensive economic strategies to deliver a strong, sustainable and inclusive recovery.
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The transition to a net-zero economy, for example, must be led by ambitious industrial and innovation missions which transform the entire economy—from how we build to what we eat and how we get around. This would generate sustainable growth, with governments setting the direction and crowding in investment, rather than cleaning up the messes left by bad policies and harmful business practices.
There are five key dimensions to a winning progressive economic-policy agenda. First, it must offer a new narrative about how value is created, to replace the old, entrenched narrative in which only the private sector plays the leading role and the state merely fixes market failures along the way. What is needed is a clear notion of collective investment for the common good, with the public sector as investor of first resort—not just lender of last resort.
Secondly, a progressive agenda must deliver both a well-resourced welfare state and a dynamic innovation state, because the two go hand in hand. Without social services, too many people will remain vulnerable and unable to gain access to the basic ingredients of wellbeing and economic participation, including education, job security and health. And without innovation, economic growth and solutions to pressing societal problems—whether a pandemic, climate change or the digital divide—will remain out of reach.
To that end, progressives must use current social challenges as focal points for industrial strategy—from making school meals healthier, tastier and more sustainably sourced to accelerating the pace of innovation in our mobility systems. Outcomes-based procurement can be used to drive innovation in all types of public activities, from schools to health and transport. And the energy crisis must become an opportunity to reorient growth so that it is both inclusive and sustainable, led by green innovation in all industrial sectors, including steel and cement.
New social contract
Thirdly, we need a Green Deal that emphasises the ‘deal’ as much as the ‘green’. This means a new social contract. Both the risks and the rewards associated with public investments in the green transition should be socialised. It is no accident that profits are growing while investment is not. That is simply a reflection of increasing financialisation across the Fortune 500: more than $5 trillion has gone toward share buybacks over the past decade and the majority of private funds go back into finance, insurance or real estate.
Governments have many tools—dynamic procurement methods, grants, loans and regulations—to drive investment aligned with strategically important goals and to ensure that business profits are reinvested in socially and environmentally beneficial ways. For example, while the UK government mindlessly lent £600 million to EasyJet with no strings attached, France made its pandemic-era loans to Air France and Renault conditional on emissions-reduction commitments. In the US, the new CHIPS and Science Act, which consists of $52 billion in subsidies for domestic semiconductor manufacturers, has reassuringly introduced some conditionality, and more can be done to ensure that the value created benefits people and the planet.
Fourthly, new institutional structures are needed to make the most of collective wealth creation. Given the short-termism that is so prevalent in modern finance, public banks and other public funding structures, including community wealth funds, should be leveraged to create a greater store of patient capital, with financing going toward those businesses that are willing to invest and innovate.
Progressives should also push for a data commons, so that this critical 21st-century resource is owned and governed not only by Big Tech but also by citizens. The mayor of Barcelona, Ada Colau, has set an inspiring example by bringing hackers into city government to help improve data governance for the public good. Progressive governments must invest in their own organisational capabilities and reverse the trend toward ever-more outsourcing—a practice which even some on the right think has gone too far.
Lastly, a progressive economic agenda needs to be inspirational. Progressive economic policies must be accompanied by citizen engagement to forge a clear link with improvements in people’s lives. Imagine, for example, if the arts were leveraged today as they were in the Works Progress Administration of Franklin Roosevelt’s US presidency.
Unless progressive leaders promote a positive and inclusive narrative about the future, they won’t win elections. But to formulate a winning strategy, they first must break clearly with the thinking that has shaped economic policy-making for too long.
Starmer’s plan is a welcome step in this direction. But such bold commitments will need to be incorporated into a comprehensive, inclusive and sustainable economic agenda. As the Italian left has just learned, if progressives fight more among themselves than with their opponents, they can hardly complain about the result.
Republication forbidden—copyright Project Syndicate 2022, ‘Toward a progressive economic agenda’
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 a co-chair of the Global Commission on the Economics of Water.