Mariana Mazzucato Thinks We Need More Moonshots

Recorded at the Bloomberg CityLab conference in Madrid, this episode of Odd Lots features Mariana Mazzucato, professor at University College London and founder of the Institute for Innovation and Public Purpose. The hosts note she has been one of the most frequently requested guests since the podcast began.

Mazzucato begins by explaining her work with the Spanish government, including a newly formed Global Council for a Common Good Economy and a Public Sector Capability Index developed with Bloomberg. She describes meeting with Spain's prime minister and minister for economy to discuss what it means for governments to take entrepreneurial risks, noting that unlike venture capitalists who celebrate failure as part of innovation, civil servants are punished publicly for any misstep.

She revisits the central thesis of her 2013 book 'The Entrepreneurial State,' arguing that the post-2020 industrial policy revival is often misunderstood. Governments spending large sums on sectors or technologies does not automatically constitute genuine industrial strategy. She criticizes the tendency to focus on sectors, technologies, or firm types (like SMEs) rather than on bold, problem-oriented missions. Her alternative is 'mission-oriented policy' — defining large societal challenges (like healthy school lunches or climate transition) and mobilizing cross-sector collaboration to meet them, similar to the Apollo program.

On state capacity, Mazzucato distinguishes between three layers: capacity (budgets, headcount), administrative routines (stable institutional learning), and dynamic capabilities (agility, adaptability, inter-ministerial coordination). She argues governments consistently underinvest in the third category because prevailing economic theory still frames government as a reactive market-fixer rather than a value creator.

Mazzucato is sharply critical of the consulting industry, arguing its dominance stems from decades of ideologically-driven government downsizing beginning in the Reagan-Thatcher era. She contends that hiring consultants like McKinsey to perform core government functions (e.g., the UK's COVID test-and-trace program run by Deloitte) reflects both a lack of internal capability and a culture of diffusing political accountability. She advocates for insourcing expertise, better-conditioned contracts when consultants are used, and investing in government's ability to identify and work with the right external partners — citing Ernest Brackett's warning at NASA about 'brochuremanship' as a historical parallel.

On AI, Mazzucato warns that the massive concentration of wealth in big tech companies is causing a dangerous hemorrhaging of top research talent away from public institutions and universities. She argues that without a strong underlying system — such as a well-functioning health system — AI will not solve major societal problems. She criticizes the 'abundance' framing that attributes stagnation to over-regulation, attributing more blame to shareholder value maximization. She discusses a project with Tim O'Reilly on 'algorithmic rents' and AI disclosures as a governance mechanism analogous to climate disclosures or ESG metrics.

Mazzucato also discusses the political dimension, noting that economically successful policies (like Biden's IRA investments in red states) can still fail electorally if people don't feel valued or regain their dignity. She advocates for participatory policy design — bringing citizens, carers, and communities into the process — as both better policy and a counter to populism. She cites examples of transforming food banks into green food cooperatives and Camden Council's mission-oriented adult social care procurement as illustrations.

Finally, she identifies several countries with noteworthy examples: Brazil's ecological transition mission embedded in public bank BNDES's lending conditions; Germany's KfW bank conditioning steel sector loans on reducing material content, yielding the world's greenest steel; Sweden's 'fossil-free welfare state' challenge leading to missions like sustainable school meals; and the UK's Government Digital Service (GDS), which she holds up as an example of insourced talent creating world-class public digital infrastructure that became a magnet for top software engineers.