Lynn Parramore interviews Mariana Mazzucato in Evonomics:
LP: So what’s the real story of what’s not working for so many?
MM: If we look at the complexity of the challenges facing western societies today, we see that the problems are not really about outsiders, but have their roots much closer to home.
Our current model of capitalism and the dominant ideas in policy making have led to a failure of investment by both the public and the private sector in the things that drive productivity, and which affect its distribution. Shareholder value theory — the destructive idea that companies should be run solely for the benefit of shareholders — has led to financialized businesses that do not invest in the areas that will lead to future growth or the invention of useful new products. Companies prefer to put money in the pockets of shareholders or to hoard cash rather than to raise wages or invest.
But it is not just how these ideas have affected the private sector. They have also had a detrimental impact on our understanding of the role government can play in raising both the rate of growth and shaping its direction. Mainstream economic theories popular in the last several decades have tended to downplay the government’s role in markets and to increase skepticism about even that more limited role. Austerity, particularly in Europe, has added to the problem. It has not worked, even on its own terms.