For collective good: Toward a progressive economic agenda

Past policy failures and unmet populist promises represent an opportunity for progressive leaders. But to win power, they must articulate a coherent alternative economic-policy program, focusing not only on redistribution but also on wealth and value creation.
For collective good: Toward a progressive economic agenda

CHENNAI: 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 policymaking. That requires conveying a bold and coherent vision for how to achieve inclusive and sustainable growth.

At the UK Labour Party’s annual conference last week, party leader Keir Starmer spelled 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 channeling the kind of 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 that Prime Minister Liz Truss’s government has just announced. While the Conservative gamble with fiscal stability has now 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 like 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. Whenever low-income groups suffer, xenophobic parties will exploit their hardship, pinning the blame on others to distract from their own weak, incoherent, or nonexistent 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.

The transition to a net-zero economy, for example, must be led by ambitious industrial and innovation missions that 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.

Second, 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 access the basic ingredients for well-being and economic participation – including education, job security, and health. And without innovation, economic growth and solutions to pressing societal problems – be it 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. Third, we need a Green Deal that emphasises the “deal” as much as the “green.” This means a new social contract. Both the risks and 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 stock 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 $683 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 introduced some conditionality, and more can be done to ensure that the value created benefits people and the planet.

Fourth, new institutional structures are needed to make the most of collective wealth creation. Given the short-termism in modern finance, public and other public funding structures, including community wealth funds, should be leveraged to create a greater store of patient capital, with financing going toward businesses that are willing to invest and innovate.

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 US President Franklin Roosevelt’s Works Progress Administration. 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 policymaking 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.

Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College London, is Founding Director of the UCL Institute for Innovation and Public Purpose

Project Syndicate

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