Build Back the State
Apr 15, 2021MARIANA MAZZUCATO
In promising to "build back better" from the pandemic, US
President Joe Biden has certainly struck the right note. But to succeed, he
will need to forge a new social contract, drawing on the lessons of a previous
era when the US state led a program that is still paying economic dividends.
LONDON – The development of COVID-19 vaccines in less than a year was
clearly a major achievement. But the rollout has been far from perfect. In the
United States, Operation Warp Speed met its manufacturing targets but stumbled
in coordinating initial shipments. The plan neither prioritized vaccine
recipients according to need, nor did it go far enough to address racial inequality in
the distribution.
MARIANA MAZZUCATO calls
for a return to mission-oriented public-sector procurement and leadership in
the common interest.
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Clearly, creating safe and effective vaccines and creating equitable
vaccination programs are two different things. States’ Mission-oriented innovation agencies,
especially the Defense Advanced Research Projects Agency (DARPA) and the
Biomedical Advanced Research and Development Authority (BARDA), have proven to
be critical in seeding
the development of the cutting-edge mRNA vaccines. But is the technological
mission of Warp Speed linked to the health mission of delivering a “People’s
Vaccine”?
US President Joe Biden’s administration will need to keep this distinction
in mind as it tries to “build back better” and reinvigorate
science and technology funding after four years of Donald Trump’s dismissal of
science and contempt for scientists. The vaccine rollout in the US – and
even more so in Europe – shows that it is just as important to get the details
of public-private partnerships right as it is to start with an ambitious
overall objective.
In my new book, Mission Economy: A Moonshot Guide to Changing Capitalism,
I argue that NASA’s program to put a man on the moon still offers lessons in
catalyzing and governing public-private relationships that deliver results.
Costing taxpayers the equivalent of $283 billion today, the Apollo Program
stimulated innovation in multiple sectors – from aeronautics and nutrition
materials to electronics and software – while also strengthening the public
sector’s own capabilities.
NASA paid hundreds of millions of dollars to companies like General Motors,
Pratt & Whitney (known then as United Aircraft), and Honeywell to invent
the new fuel, propulsion, and stabilization systems inside its legendary Saturn
V rockets. These publicly funded technologies then created numerous spinoffs that
we still use today, including baby formula (from the astronauts’ dried food)
and cordless vacuum cleaners (from the machines that scoured the moon’s
surface). The integrated circuits used for navigation were a foundation stone
of modern computing.
Critically, NASA made sure that the government got a good deal, offering
companies “fixed-price” contracts to force them to operate efficiently, while
also providing incentives for continual quality improvements. And the
contracts’ “no-excess profits” provisions helped to ensure that the space race
was driven by scientific curiosity, not greed or speculation.
Equally important, NASA avoided overreliance on the private sector. Had the
agency outsourced its governance role, it would have been vulnerable to what
its then head of procurement called “brochuremanship”: when the private-sector
party dictates what is “best.” Because NASA had developed internal expertise,
it knew as much as the contractors did about technology, and thus was well equipped
to negotiate and manage its contracts.
By strengthening the public sector’s capabilities and outlining a clear
purpose for public-private alliances, the Biden administration could both
deliver growth and help tackle some of the greatest challenges of our age, from
inequality and weak health systems to global warming.
These problems are much more complex and multi-dimensional than sending a
man to the moon. But the imperative is the same: effective strategic governance
of the space where public funding meets private industry. For example, whereas
Big Pharma portrays the public sector as a mere consumer of medicines, the
discovery of those drugs typically begins with publicly funded research.
Consider the $40 billion the US
government invests every year in the National Institutes of Health. The NIH
(along with the US Department of Veterans Affairs) backed the Hepatitis C drug
sofosbuvir with over ten years of taxpayer-funded research. But when the
private biotech company Gilead Sciences acquired the drug, it priced a 12-week
course of pills at $84,000. Similarly, one
of the first antiviral treatments for COVID-19, Remdesivir, received an
estimated $70.5 million in
public funding between 2002 and 2020. Now, Gilead charges $3,120 for a
five-day course of it.
This speaks to a parasitic, rather than a symbiotic, partnership. The NIH
must do more to ensure fair pricing and access to the innovations it funds,
rather than chipping away at its own power, as it did in 1995 when it scrapped
the Fair Pricing Clause from its cooperative research and development
agreements. Conditionalities must be considered for innovations from
mission-oriented agencies such as DARPA, BARDA, and the newly proposed Advanced Research Projects
Agency-Health (ARPA-H), which will focus exclusively on health
priorities.
In the case of the pandemic, various governments poured $8.5 billion into
the development of vaccines that are currently being manufactured and sold by
US companies like Johnson & Johnson, Pfizer, Novavax, and Moderna. The
question now is whether vaccine knowledge and know-how will be shared with as
many countries as possible to bring an end to the pandemic. Will the NIH join a
voluntary technology pool created by the World Health Organization for this
exact purpose?
In preparing for the post-pandemic era, Biden’s promise to “build back
better” implies more than a return
to normalcy. But reshaping the economy for the better will require not just a
shift in mindset but also a new social contract that promotes value creation
over profit extraction; socializes risks as well as rewards; and invests in the common good, rather than just in
specific companies or sectors.
While the US Coronavirus Aid, Relief, and Economic Security (CARES) Act
imposed some conditions on businesses receiving government aid to maintain
jobs, the new $1.9-trillion American Rescue Plan and
the proposed $2 trillion American Jobs Plan must
go further. They must ensure that public-sector investment is accompanied by a
transformation in the relationship between the state and the private sector.
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Here, lessons can be drawn from Europe. In France, President Emmanuel Macron made sure that recovery
funds to airlines and automobile makers were conditioned on
commitments to lower their carbon emissions. And in Austria and Denmark,
firms receiving recovery funds had to commit not to use tax havens.
The task for the Biden administration is to provide leadership for the
missions that will shape the decades ahead, starting with the fight against
climate change. The US, said President John
F. Kennedy in 1962, would “choose to go to the moon in this decade and do other
things, not because they are easy, but because they are hard.” Today, the same
type of visionary leadership is not a choice, but a necessity.
We need top-down direction to catalyze innovation and investment across the
economy. And the Apollo era’s examples of government leadership, bold
public-interest contracts, and public-sector dynamism offer a valuable
template. Unless we use it, building back better will never be more than a
slogan.
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