Michael Roberts – The World’s Scariest Economist?

Michael Roberts on Mariana Mazzucato and her two most recent books. And what role for socialism?

Michael Roberts is an Economist in the City of London and prolific blogger

Cross-posted from Michael Roberts Blog

Mariana Mazzucato.jpg

Mariana Mazzucato is one of the world’s most influential economists, according to Quartz magazine.  She has won many awards for her work.  She is an adviser to the UK Labour Party on economic policy; she “has the ear” of radical Congress representative Alexandria Ocasio-Cortez, she advises Democratic presidential hopeful, Senator Elizabeth Warren and also Scottish Nationalist leader Nicola Sturgeon.  And she has written two key books: The Entrepreneurial State (2013) and the The Value of Everything (2018).

Mazzucato is considered radical, even ‘scary,’ by many mainstream economists and conservative politicians.  This is because she has highlighted the important role that the state and governments have played in delivering innovation in technology and in advancing productive investment.  The idea that the state can be a leading force in innovation and investment in useful activity is anathema to the right-wing neo-liberal ‘free market’ views of the majority of mainstream economists and politicians.

In earlier posts, I highlighted her important insights into how government investment and direction were essential to the development pf the new technologies of the internet, the worldwide web, microsoft, apple, the iphone etc.  The IPhone for example was developed using public funds and military procurement projects for microprocessors.  The innovators were publicly funded universities and research institutes, not clever entrepreneur capitalists.  Indeed, there is nothing new about government or state funding for the most important innovations in capitalist accumulation.  The technological advances made during the first and second world wars using government ‘defence’ funds were huge: jet aircraft, radar, telecomms, vehicle construction etc.

So it is no accident that the sharp fall in government investment to GDP in most advanced capitalist economies in the so-called neoloiberal period since the early 1980s has been accompanied by slowing productivity growth.

Capitalist sector investment has failed to deliver faster productivity per person since 1980s than in the period of higher government investment before.  Falling profitability in the 1970s in all the major economies led to cutting state sector investment in technology and ‘human capital’ in order to reduce taxes on capital and keep wages down.  Indeed, privatisation was the order of the day. That helped profitability in the capitalist sector a little (along with successive slumps), but at the expense of productivity growth.

As Mazzucato makes clear in her second book, The Value of Everything, government investment and production does create value ie things or services we need and is not just a (necessary) cost. But as I commented in a review of that book, in Marxist terms, Mazzucato conflates value with use-value.  Yes, government investment in schools, hospitals, transport, infrastructure and technology creates useful things, but under the capitalist mode of production for profit, it does not create value (surplus value or profit).  On the contrary, it can lower overall profitability for the capitalist sector. So there is an inherent contradiction in capitalism between more use-value and value.

Unfortunately, this is not recognised in Mazzucato’s work.  As a result, she sees her task as an economist to show how government can help to make capitalism work by getting governments to create more ‘value’.   For Mazzucato, governments can do more “than play a passive role in fixing market failures” (I doubt that it can even do that – MR) but instead “be allowed to embrace entrepreneurial spirit to steer the direction of innovation and economic growth”.  She wants governments to have missions “to get shit done”.  Now this sounds scary to the mainstream but they need not worry.  Mazzucato does not advocate replacing capitalism with socialism – as she says “I don’t think these words are helpful… there are all sorts of different ways to do capitalism.. that’s what I think needs completely rebooting rather than to start calling things socialism”. Here she echoes the approach of Elizabeth Warren.

Capitalism, socialism; what’s in a name?  Well, behind a name lies a categorisation of the structure of a mode of production and social relations.  Mazzucato wants capitalism to deliver more and better things and services for people, but without touching the private ownership of the means of production.  And talking about replacing capitalist companies with common ownership, planning and workers democracy would be a mistake. “If you start talking about socialism, it’s not going to make companies do anything different from what they’re doing now.”  But will suggesting that big business invest productively without taking into account “shareholder value” work either?

For Mazzucato, socialism is a nice idea but not practical.  “Regardless of what I would like to see in an ideal world, I think realistically we’ll have capitalism”. The problem I have with that conclusion is that being ‘realistic’ and accepting that capitalism will be here for the foreseeable future and so trying to make it work better is what is not realistic!  Under capitalism, can regular and recurring economic slumps be avoided that cost many millions their jobs, homes and livelihoods in every generation?  Can imperialist adventures and exploitations be avoided?  Can extreme inequality of wealth and income be reversed?  Can climate change and global warming be stopped?

Can any of these horrors realistically be removed by getting governments and multi-nationals to have ‘missions’ to ‘get shit done’ while still preserving the capitalist system of production and investment for private profit? That is what is unrealistic.  But it is safer to talk about saving capitalism from itself or making it work better with the help of government than replacing capitalism.  The latter would really be scary for the existing order.

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