Final Word: Mariana Mazzucato

  • By EuroWeek Editor 1
  • 20 Oct 2019
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In August 2019 corporate bosses including Jeff Bezos, Jamie Dimon and Tim Cook used their Business Roundtable platform to declare that the purpose of business had to change in ways that moved attention away from shareholder value to a more purposeful approach that improved our society. This followed Larry Fink who, in January 2018, wrote a letter to 500 CEOs asking them to rethink their sense of purpose. “To prosper over time,” he wrote, “every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

Both statements argue that companies’ excessive short-term focus is hurting their ability to create more value in the long run. Some prominent politicians — including US Senator Elizabeth Warren — are advocating a more inclusive and less predatory form of capitalism. 

But despite these calls, little seems to be changing. The financial sector invests mostly in other parts of finance, insurance, and real estate. Companies also are spending more on share buybacks and dividends than on human capital, machinery, and research and development. And the buyback mania is getting worse. Many businesses talk soothingly about corporate social responsibility, impact, and social purpose, but very few put these at the core of their operations.

Real change means putting purpose at the centre of how value is defined by firms, governments, and economic theory which informs policymakers. As I argue in my new book The Value of Everything, Adam Smith and Karl Marx made the objective conditions of production — the division of labour, machinery, and capital-labour relations — central to their understanding of value. In neoclassical economics, however, value is merely a function of exchange. Only what has a price is valuable, and “collective” effort is omitted, because only individual decisions matter.

Unsurprisingly, public officials, long accused of “crowding out” business, have internalised the belief that they should do no more than fix market failures. Yet the public organisations that put a man on the moon and invented the Internet did more than just correct market failures. They had ambition, a purpose, and a mission.

To get real about purpose, we need to recognise that value is created collectively and build more symbiotic partnerships between public and private institutions and civil society. In doing so, we must address three questions: what value to create, how to evaluate the impact, and how to share the rewards.  

Paul Polman, the departing CEO of Unilever, has rightly tried to focus companies on creating value in line with substantial targets, especially the United Nations’ 17 Sustainable Development Goals. Of course, neither the public nor the private sector alone can meet all 169 specific targets underpinning the SDGs. But governments can use the goals to create initiatives that require investment from many organisations.

PICKING THE WILLING

To do so, companies evaluating their social impact should ditch fuzzy objectives and focus on concrete steps to help solve problems. Financial institutions would no longer evaluate their loans on the basis of categories of firms or countries, but rather in terms of activities that help fulfil specific missions — such as removing plastic from the ocean or creating more sustainable cities. Likewise, governments should give fewer handouts to companies and instead rely more on procurement and prize schemes to nurture corporate innovations aimed at achieving the SDGs. In other words, there should be less picking winners and more picking the willing.

Finally, a truly stakeholder-driven model means sharing not only risks but also rewards. Business has benefitted enormously from public investment not only in education, research, and basic infrastructure, but also in technologies like those powering today’s smartphones. Governments could, therefore, retain more of the upside returns to cover the downside losses that risk-taking involves. In my 2013 book The Entrepreneurial State, I argued that this could be done both via equity stakes in companies that the government supports. There could be conditions on reinvestment back into production for those companies that have received public benefits. Bell Labs was formed in a time when there was pressure on monopolies like AT&T to reinvest their monopoly profits. That courage has been lost.

For the financial sector this means finding ways to steer finance in more productive ways, such as the EIB’s Clean Oceans Initiative, as well as building new types of financial institutions— including public banks— that can not only steer investments towards societal goals but also share the rewards.

In sum, a more purposeful capitalism requires more than just letters, speeches, and goodwill gestures. Business, government, and civil society must together frame the problems to be tackled, invest together, and share together — otherwise the purpose talk will remain just that… talk. 

Mariana Mazzucato (PhD) is Professor in the Economics of Innovation & Public Value and the Founding Director of the UCL Institute for Innovation & Public Purpose (IIPP). She is the author of The Entrepreneurial State: debunking public vs. private sector myths, and The Value of Everything: Making and Taking in the Global Economy.

  • By EuroWeek Editor 1
  • 20 Oct 2019

All International Bonds

Rank Lead Manager Amount $b No of issues Share %
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1 JPMorgan 353.47 1629 8.35%
2 Citi 326.07 1388 7.70%
3 Bank of America Merrill Lynch 283.34 1182 6.69%
4 Barclays 259.26 1043 6.12%
5 HSBC 207.22 1150 4.89%

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Rank Lead Manager Amount $b No of issues Share %
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1 BNP Paribas 39.66 183 7.00%
2 Credit Agricole CIB 37.82 159 6.67%
3 JPMorgan 30.63 81 5.41%
4 Bank of America Merrill Lynch 26.33 79 4.65%
5 Deutsche Bank 26.03 96 4.59%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $b No of issues Share %
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1 JPMorgan 11.22 75 9.54%
2 Morgan Stanley 10.77 52 9.16%
3 Goldman Sachs 9.63 50 8.19%
4 Citi 7.78 60 6.61%
5 Bank of America Merrill Lynch 5.53 30 4.70%