Cooking the Books 2 – Another reformist dreamer
In a speech last year, Rachel Reeves name-checked Mariana Mazzucato who, she said, had long argued that ‘the state’s role is not simply to correct the failures and redress the negative externalities of free markets… Success has always rested upon a partnership between the market and the state’ (tinyurl.com/3m78s2mx).
Although Mazzucato is seen as a radical thinker she has nothing against capitalism as such. Nothing against the private ownership of productive resources. Nothing against production for sale on a market with a view to profit. What she is against is the present ‘dysfunctional form of capitalism’ characterised by ‘the excessive financialization of companies and remorseless pursuit of shareholder value’. As she quotes on her website she is on ‘a mission to save capitalism from itself’. She wants to ‘change’ capitalism, as she put it in her 2020 book Mission Economy: A Moonshot Guide to Changing Capitalism, by ‘restructuring business so that private profits are reinvested back into the economy rather than being used for short-term financialized purposes’. In other words, she is a theorist of reformism. Hence her attraction for the Labour Party. Even under Corbyn, John McDonnell went around echoing her call for an ‘entrepreneurial state’.
Mazzucato’s reform to capitalism is for the state to play a pro-active role in the economy by setting an aim to be achieved — a social or economic problem to be solved — and then mobilising the help of private capitalist corporations to achieve it by ‘shaping’ markets for them. Hence the title of her book which argues that the US government’s 1962 mission to get a man on the Moon within ten years is the example to follow.
There are indeed occasions when capitalism’s spontaneous aim of profit maximisation is set aside. When a country is at war, the ‘mission’ becomes to win ‘whatever it costs’ and the state mobilises resources to achieve this. It is instructive that the only successful example of her ‘change’ to capitalism that she can bring forward had a military dimension. The United States government did not want to get a man on the Moon for scientific reasons but to gain superiority over Russia in rocketry.
Mazzucato herself notes this and asks why a state could not similarly mobilise resources to achieve some peaceful aim such as solving the housing problem or creating a good health and care service. The same question was put by reformists to those who in the 1950s and 60s argued that capitalism had been saved from supposed collapse by providing markets through becoming a ‘permanent arms economy’. Why, the reformists asked, couldn’t capitalism become a ‘permanent welfare state economy’; why couldn’t the state provide extra markets by spending instead on social reforms?
The permanent arms economy theorists struggled to find a coherent answer. In the end, life itself settled the matter — excessive spending on arms turned out to undermine a capitalist state’s international competitiveness by increasing the tax burden on its capitalist enterprises and diverting profits that might otherwise have been invested in cost-cutting innovations. Which explained why in the 1960s Germany and Japan, which weren’t allowed to spend so much on arms, did better on world markets. Excessive arms spending wasn’t saving capitalism but was a burden on the states that practised this. The answer to the reformists was that excessive spending on the welfare state and other social reforms was not practicable because it, too, would be a burden on any capitalist state that tried, undermining its competitiveness.
The same applies to Mazzucato’s reformist project. If, outside of war, the state were to set a purpose for the capitalist economy other than profit maximisation and taxed capitalist corporations to pay for it, this would inhibit, not encourage, growth. In seeking to maximise profits capitalism is not being dysfunctional. It is being itself and can’t be changed to function in any other way.