The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

Third, this market story confuses policymakers. By and large, policymakers of all stripes want to help their communities and their country, and they think the way to do so is to put more trust in market mechanisms, with policy just a matter of tinkering at the edges. The crucial thing is to be seen as progressive while also ‘business-friendly’. But with a very limited understanding of where value comes from, politicians and all too many government employees are like putty in the hands of those who claim to be value creators. Regulators end up being lobbied by businesses and induced to endorse policies which make incumbents even richer–increasing profits but with little effect on investment. Examples include ways in which governments across much of the Western world have been persuaded to reduce capital gains tax, even though there is no reason to do so if the aim is to promote long-term investments rather than short-term ones. And lobbyists with their innovation stories have pushed through the Patent Box policy, which reduces tax on the profits generated from 20-year patent-based monopolies–even though the policy’s main impact has been merely to reduce government revenue, rather...

Fourth, and last, the confusion between profits and rents appears in the ways we measure growth itself: GDP. Indeed, it is here that the production boundary comes back to haunt us: if anything that fetches a price is value, then the way national accounting is done wont be able to distinguish value creation from value extraction and thus policies aimed at the former might simply lead to the latter. This is not only true for the environment where picking up the mess of pollution will definitely increase GDP (due to the cleaning services paid for) while a cleaner environment won’t necessarily (indeed if it leads to less ‘things’ produced it could decrease GDP), but also as we saw to the world of finance where the distinction between financial services that feed industry’s need for long-term credit versus those financial services that simply feed other parts of the ...

As Karl Polanyi wrote, markets are deeply embedded in social and political institutions.6 They are outcomes of complex processes, of interactions between different actors in the economy, including government. This is not a normative point but a structural one: how new socio-economic arrangements come about. The very fact that the market is co-shaped by different actors–including, crucially, policymakers–offers hope that a better future can be constructed. We can fashion markets in ways that produce desirable outcomes such as ‘green growth’ or a more ‘caring’ society with care influencing the type of social and physical infrastructure that is built. By the same token, we can allow speculative short-term finance to triumph over long-term investment. As we have already seen, even Adam Smith was of the opinion that markets needed to be shaped. Contrary to the modern interpretation of his work as ‘laissez-faire’ (leave the market alone), he believed that the right kind of freedom is not the absence of government policy, but freedom from rent extraction. Smith would have been baffled by the current understanding of economic freedom as a minimum of non-private activity. His Wealth of Nations is a huge book, largely because even in that simpler economic world there were so many varieties of rent-seeking to discuss. He devoted many pages to productive and unproductive activities, often simplistically putting some inside the production boundary and some outside. Karl Marx was subtle...

Polanyi helps us to go beyond both Smith and Marx. Rather than focusing on which activities are inside or outside the production boundary, today we can work to ensure that all activities–in both the real economy and in the financial sector–promote the outcomes that we want: if the quality and characteristics of an activity in question help deliver true value, then it should be rewarded for being inside the boundary. Policymakers must be emboldened to broker ‘deals’ that generate symbiotic public–private partnerships. In the case of finance, it would mean favouring long-term investment over short-term (through measures like a financial transaction tax), but, even more, founding new financial institutions (like mission-oriented state investment banks) that can provide the strategic, long-term finance crucial to the high risk investments required for exploration and research underlying value creation.

In general, government support should be made conditional on an increase in committed investment by business–reducing the trends of hoarding and financialization.

The digital revolution requires participatory democracy, keeping the citizen, not big business or big government, at the centre of technological change. Take smart meters, for example; Morozov argues that if they are closed boxes transferring information, ‘what we are doing is essentially introducing more and more closed systems which simply seek to capture rent from infrastructure that has been funded by us, without letting us the citizens take advantage of the same infrastructure for our own purposes and our own monitoring of the government, whether it is the city, or the national government’.

we can move beyond the idea of public goods as ‘corrections’, that is being limited to areas that need fixing (due to positive externalities that they generate), to being ‘objectives’. This requires a new understanding of policy as actively ‘shaping’ and ‘creating’ markets that achieve public value, benefitting society more widely.

After all, if we cannot dream of a better future and try to make it happen, there is no real reason why we should care about value.