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February 10 - March 8, 2023
More discussion is needed on how to use mission-oriented innovation to battle societal and technological grand challenges–like climate change or social care.81 Just as the IT revolution was chosen and directed, we can choose and direct green and care as the new paths for innovation. This does not mean top-down dictation of what should be produced, and which actors are ‘productive’ and how each must behave. Rather, it requires new types of contracts between public and private actors
Patents themselves should not be seen as ‘rights’ (IPR), but rather as a tool with which to incentivize innovation in the sectors where they are relevant
A true sharing economy must by definition respect the hard-won gains of all workers, irrespective of race, gender or ability.
The debate about government, though, should not be about its size or its budget. The real question is what value government creates–because to ask about the role of government in the economy is inevitably to question its intrinsic value. Is it productive or unproductive? How do we measure the value of government activities?
You can impose austerity and hope the economy grows, even though such a policy deprives it of demand; or you can focus on investing in areas like health, training, education, research and infrastructure with the belief that these areas are critical for long-run growth in GDP.
What matters is not the deficit but what government is doing with its funds. As long as these funds are invested productively in sectors like healthcare, education, research and others that increase productivity, then the debt/GDP denominator will rise, keeping the ratio in check.
To the humble citizen, however, it might not be so obvious that government does not create value. We have already seen three ways in which it does so: bailing out the banks; investing in infrastructure, education and basic science; and funding radical, innovative technologies which are transforming our lives.
In Keynes’s macroeconomics, therefore, government creates value in that it allows the economy to produce more goods and services than it would without government involvement.
lower interest rates do not necessarily lead to more investment, since firms tend to be less sensitive to interest rates and more sensitive to expectations of where future growth opportunities lie.
to assume that the value of government output equals the value of input means that government activities cannot increase the economy’s productivity in any meaningful way: an increase in productivity, after all, is obtained by growth of output outpacing the growth of inputs.
Additional government demand creates several subsequent rounds of spending, multiplying the original amount spent.
Government spending in recession was seen as especially powerful in getting the economy back on track, since its effect on overall output was much greater than the actual amount invested.
Recent IMF studies have also suggested that government spending has a positive effect on output37 and that the value of the multiplier is greater than one–to be precise, 1.5.
Public Choice theory argues that government failure is caused by private interests ‘capturing’ policymakers through nepotism, cronyism, corruption or rent-seeking,39 misallocation of resources such as investing public money in unsuccessful new technologies (picking losers),40 or undue competition with private initiatives (‘crowding out’ what might otherwise be successful private investment).
Although reaching a more efficient provision of healthcare services for a lower cost has always been the stated purpose of outsourcing in the NHS, recent evidence seems to suggest that this might just be the second phase of what Noam Chomsky has called the ‘standard technique of privatization: ‘defund, make sure things don’t work, people get angry, you hand it over to private capital’.
The cost to the taxpayer of all the contract workers is double that of civil servants, not because contract workers are paid better–they often have to put up with low wages and poor conditions–but because the contractors’ fees, overheads and profit margins, and the ratio of the number of contract workers to the number of civil servants is sometimes as high as four, revealing how bloated and inefficient the outsourcing process can become.
Coño!!!!!
Rather than increase competition through more consumer choice, privatization has often resulted in less choice and less democracy–as is clearly evidenced by the above description of the outsourcing of many NHS services and the high cost of PFI contracts to build and maintain hospitals.
President John F. Kennedy, who hoped to send the first US astronaut to the moon, used bold language when talking about the need for government to be mission-oriented. In a 1962 speech to Rice University he said: We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.67 In other words, it is a
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Replacing these bold ambitions with financial cost-benefit analysis has dismissed the public value that governments can create. Civil servants are told to step back, minimize costs, think like the private sector and be fearful of making mistakes.
When government stops investing in its own capacity, it becomes more unsure of itself, less able, and the probability of failure increases.
This lack of belief in government thereby becomes a self-fulfilling prophecy: when we don’t believe in government’s ability to create value, it eventually cannot do so.
The marginal theory has fostered the idea that collectively produced value derives from individual contributions.
there is still debate as to whether the multiplier exists at all, and advocates of government economic stimulus are often on the defensive. Part of the problem is that the argument for fiscal spending continues to be tied mainly to taming the business cycle (through counter-cyclical measures), with too little creative thinking about how to direct the economy in the longer term.
Portraying government as a more active value creator–investing, not just spending, and entitled to earn a rate of return–can eventually modify how it is regarded and how it behaves.
‘Public values are those providing normative consensus about (1) the rights, benefits, and prerogatives to which citizens should (and should not) be entitled; (2) the obligations of citizens to society, the state, and one another; (3) and the principles on which governments and policies should be based.’73
Public institutions can reclaim their rightful role as servants of the common good. They must think big and play a full part in the great transformations to come, squaring up to the issues of climate change, ageing populations and the need for twenty-first-century infrastructure and innovation.
Instead of de-risking projects, there will be risk-sharing–and reward-sharing.
In sum, it is only by thinking big and differently that government can create value–and hope.
it is only by thinking big and differently that government can create value–and hope.
By losing our ability to recognize the difference between value creation and value extraction, we have made it easier for some to call themselves value creators and in the process extract value.
Price-equals-value thinking encourages companies to put financial markets and shareholders first, and to offer as little as possible to other stakeholders. This ignores the reality of value creation–as a collective process.
You leave the big ideas to the private sector which you are told to simply ‘facilitate’ and enable. And when Apple or whichever private company makes billions of dollars for shareholders and many millions for top executives, you probably won’t think that these gains actually come largely from leveraging the work done by others–whether these be government agencies, not-for-profit institutions, or achievements fought for by civil society organizations including trade unions that have been critical for fighting for workers’ training programmes.
Not having a clear view of the collective value creation process, the public sector is thus ‘captured’–entranced by stories about wealth creation
what kinds of private–public partnerships will provide society with its desired outcomes? To answer that question economists should abandon their desire to think like physicists and turn instead to biology, and consider how functional partnerships are those that emulate a mutualistic eco-system rather than a parasitic or predator–prey one.
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.
In the ICT and digital sectors, more thinking is required about the appropriate tax system for companies like Uber and Airbnb, which would never have existed without publicly funded technology such as GPS and the Internet and which exploited network effects to create their potentially highly profitable first-mover advantages. It should be clear that many people–not just company employees–have contributed to their competitive advantage. How we govern technology affects who shares in the benefits.
Rather than being mere ‘regulators’ of health care or the digital agenda, as co-creators of that care and digital transformation policymakers would have a more justifiable right to make sure that the benefits are accessible to all.
The concept of value must once again find its rightful place at the centre of economic thinking. More fulfilling jobs, less pollution, better care, more equal pay–what sort of economy do we want?
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. And this perhaps is the greatest lesson of all.
