How Capitalism WASTES Billions: Mariana Mazzucato's Tour De Force

Introduction

In this section, the host introduces Professor Mariana Mazzucato and her book "The Value of Everything". The book is about how modern capitalism works, how the economy has evolved and changed its relationship with government, the state, and the market.

Importance of the Book

In this section, the host talks about why he thinks Professor Mazzucato's book is important. He believes that it explains how modern capitalism works and provides context to issues such as public waste.

What are Consultants?

In this section, Professor Mazzucato defines what consultants are. She distinguishes between different types of consultants such as head teachers or doctors who consult based on their expertise in an area. However, she focuses on large consulting firms like Deloitte or McKinsey that consult on areas where they may not have any expertise.

• There are six to ten very large consulting companies.

• Large consulting firms consult on areas where they may not have any expertise.

• The business model of large consulting firms is not based on expertise but rather helping risk-averse governments make decisions.

• Businesses often prefer for difficult decisions to be rubber-stamped by a consulting company.

Blaming Governments and Businesses

In this section, Professor Mazzucato clarifies that her book does not blame consultants but rather governments and businesses that have stopped owning their own decisions and capacity. She highlights that we need collaboration between public and private actors to address problems like climate change or pandemics.

• We should blame governments and businesses for outsourcing their decision-making capacity.

• Collaboration between public and private actors is necessary to address problems like climate change or pandemics.

• Governments have stopped investing in their own brains, which has benefited the consulting industry.

Capacity of Consulting Industry

In this section, Professor Mazzucato talks about the expansion of the consulting industry over the last few decades. She highlights that large consulting firms like Deloitte or McKinsey are benefiting from governments outsourcing their decision-making capacity.

• The whole sector is currently expanding due to governments outsourcing their decision-making capacity.

Increase in Consulting Services Spending

The increase in spending on consulting services under Thatcher and New Labour governments is discussed, as well as the reasons behind it.

Reasons for Increase in Consulting Services Spending

• Governments that do not believe in the state tend to decrease government size and remit, leading to an increase in consulting services spending.

• New Labour government believed in the state but did not have a clear view of public purpose, leading to an expansion of government without a clear mission or vision.

• Private sector opening up opportunities for consultants to bring metrics around cost-benefit analysis and present value calculations.

• Government expanding without a view of what it's for and being asked to work around things like private finance initiatives opened the way for more consultants to enter government.

Infantilization of Government

The impact of outsourcing capacity from government to consultants is discussed, including how it can lead to infantilization of government.

Impact of Outsourcing Capacity from Government

• Outsourcing capacity from government to consultants can weaken businesses and warp economies.

• Continuation of outsourcing capacity from government will end up infantilizing Whitehall, making government babies.

• If government is no longer doing things and just outsourcing them, it won't be learning by doing. It literally won't learn or grow up; it'll remain a toddler.

The Role of Consultants in Government

In this section, the speaker discusses the role of consultants in government and how it affects democracy.

Successful Vaccine Rollout

• The vaccine rollout was successful and implemented by the NHS through a decentralized network of GP practices.

Outsourcing Test and Trace System

• Outsourcing the test and trace system to Deloitte, a consulting company that had never worked with test and trace, was not a good idea.

• The House of Commons investigated the outsourcing and found that it did not achieve its main objective.

• Despite this failure, there has been an increase in the amount of money being used on consultants.

Lack of Accountability

• The use of consultants is not accountable, which is not good for democracy.

• There is risk averseness within government due to fear of failure.

• Trial and error is necessary to tackle challenges but civil servants are afraid to make mistakes due to lack of accountability.

Little Value Added by Consulting Industry

• Globally, there have been scandals involving consulting companies providing little value added.

• McKinsey was hired by Australia for their climate strategy despite having conflicts of interest with polluters. Their model overestimated costs for sustainable transition.

• Brain drain from top graduates contributes to this problem.

Overall, the speaker argues that using consultants in government lacks accountability and adds little value. This leads to risk averseness within government and prevents trial-and-error approaches needed to tackle challenges.

The Problematic Model of the Consulting Industry

In this section, the speaker discusses the problematic model of the consulting industry and its conflict of interest with government.

Consulting Industry Model

• The consulting industry model is problematic because it feeds off a weak state without any interest in strengthening it.

• There is very little development of expertise, and there's lots of copy-pasting and trendy PowerPoint presentations.

• Lack of transparency in consulting agreements can lead to conflicts of interest with government contracts.

Role of State

• Thatcherism established an economic settlement that demonized the role of the state.

• New Labour tried to alter this fact but still worked within its parameters.

• The ideology that private sector always knows best helps prop up the whole industry.

Value Creation in Business and Role of Government

In this section, the speaker talks about value creation in business and how governments have a role to play in de-risking private sector investments.

Role of Government

• There is a myth that value is created only in business, but governments have a role to play in de-risking private sector investments.

• Governments need to facilitate, enable, fix market failures, redistribute income (if on left side), etc.

• We haven't had a progressive center-left theory for what the state is beyond being a counter-cyclical investor (Keynesian view).

Investments by Government

• Every technology invested in by government has led to high-risk capital-intensive investments without which we wouldn't have GPS or touch screen.

• The government invested in the internet because it wanted satellites to communicate, and the internet was a solution to that.

The Importance of a Mission-Oriented Government

In this section, Mariana Mazzucato discusses the importance of having a mission-oriented government that can catalyze bottom-up solutions across society to help achieve moon shots in various areas such as health, climate, and digital. She emphasizes the need for civil servants to work with the private sector while also holding themselves accountable.

The Role of Government in Value Creation

• Governments must have an understanding of what it means to have a mission-oriented government that is trying to catalyze bottom-up solutions across society.

• The view of the state should be co-creating markets and value rather than just fixing them.

• Civil servants need a new education and curriculum focused on value creation, purpose, creative bureaucracies, and new metrics that hold the state accountable.

• Developing metrics around public value and public purpose is essential for proving that governments are truly progressive.

Accountability within Public Organizations

• Few public organizations or departments have anything like the BBC's public interest test or public value metric.

• Progressive parties should develop rigorous accountability metrics within their governments to ensure investments are made within the public sector.

Rebuilding Capacity within Governments

• Successive governments have hollowed out capacity within governments by removing experience, knowledge, memory, and institutions.

• To rebuild capacity requires making investments in-house so that governments do not become addicted to others coming in and helping them out.

The Importance of Missions

In this section, Mariana Mazzucato discusses the importance of missions and how they can be used to address challenges such as climate change and inequality. She emphasizes the need for governments to set ambitious goals and work with various stakeholders to achieve them.

The Role of Missions in Addressing Challenges

• Missions begin with a challenge, such as climate change or inequality.

• The main thing is to get lots of different stakeholders involved in achieving these missions.

• Governments must set ambitious goals that are not just about fixing markets but also about co-creating value.

• To achieve these missions, governments must work with various stakeholders, including civil society organizations, businesses, and citizens.

Examples of Successful Mission-Oriented Policies

• The Green New Deal is an example of a successful mission-oriented policy that has been implemented in some countries.

• Other examples include the Human Genome Project and the Apollo program.

Conclusion

• Governments must have a clear vision for what they want to achieve and set ambitious goals that involve working with various stakeholders.

Procurement Grants Loans Bailouts

In this section, Mariana Mazzucato talks about how governments can use procurement grants, loans, and bailouts to encourage collaboration between different sectors towards a common goal.

Moon Shot Mission

• The Moon Shot mission required different sectors such as nutrition, materials, electronics, and software to work together towards a common goal.

• Government directed the mission but required 400,000 people from various sectors to work together.

• Contracts were reflective of where the government wanted to go with outcomes-oriented procurement.

Mission-Oriented Thinking

• Mission-oriented thinking requires a new social contract between public and private sectors working symbiotically towards a common goal.

• To solve problems at local, regional and national levels requires government ownership of shaping an economy that is more inclusive and sustainable.

• Redesigning policies is necessary for creating intersectoral collaboration through bottom-up experimentation.

Government Capacity

• Government needs capacity and knowledge in different areas to catalyze the multiplier effect that Keynes talked about.

• Outsourcing has led to losing this capacity.

Overall, Mariana Mazzucato discusses how governments can use procurement grants, loans and bailouts instead of just subsidies to encourage collaboration between different sectors towards a common goal. She emphasizes the need for mission-oriented thinking which requires a new social contract between public and private sectors working symbiotically towards a common goal. She also highlights the importance of government ownership in shaping an economy that is more inclusive and sustainable by redesigning policies for creating intersectoral collaboration through bottom-up experimentation.