Governments Need to ‘Radically Transform’ the Way They Think About Spending

(Bloomberg) -- There is no silver bullet policy to take on the twin crises of Covid-19 and the climate emergency. Governments have the upper hand on private industry for the first time in a generation, which means they can intervene with a portfolio of policies, not only for stimulating the economy but also for radically transforming it.

We cannot return to an austerity-based approach to public spending, which looks at how much money is ­available—determined by faulty conceptions of public budgets—and then at how thinly it needs to be spread. Economic growth in a green direction brings jobs, improves living standards, and builds the vital resilience we will need to take on the impending climate emergency.

Governments should focus on smart conditions that will secure strategies that lower carbon emissions while also investing in workers. One policy area we have been writing about at the Institute for Innovation & Public Purpose is the conditions attached to Covid-19 government assistance. It’s important to resist simply handing out money, particularly to high-polluting industries, or companies that treat staff poorly.

Markets won’t find a green direction by themselves; they require clear policy and early-stage, risk-­welcoming investment from the public sector. Public funding mobilizes private funding and gives a clear indication to the business community of the path for the new economy: toward a stakeholder approach, not the shareholder approach at the center of capitalism.

Mariana Mazzucato, founding director, Institute for Innovation & Public Purpose at University College London

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