Thank you.
So, thank you so much to Richard, to Doug, especially to Fiona who asked me to do this, and we had to nail down the date when I was free, and then I ended up not being free today, but I said I absolutely cannot not go because this is so important to honor, especially you, Fiona. We were together advising Nicola Sturgeon when she was First Minister of Scotland, and many of the issues, actually, thank you so much, that I'll talk about today, I think we actually struggled with, right? Like all of us who actually wanted to have an economy that was doing good, whether it was around climate change, around water, one of the biggest problems we actually have today is around the global hydrological cycle, which has become very unstable, around biodiversity, health and well-being during COVID, how do we actually do that while fostering growth, directed growth, and how do we do that also in a way that is governed by all the different actors in our capitalist system.
We often, wrongly I think, how do you say, confuse business with the market when people say, you know, the state versus the market. The market is an outcome. It's an outcome of how we choose to govern and to structure our public organizations, or private organizations, or civil society organizations, including trade unions. We should all remember the only reason we have weekends, Saturdays and Sundays, best social innovation ever, is because the trade unions fought for that. And how all these different organizations, including again in civil society, work together determines the kind of markets we get.
And of course, Karl Polanyi, wonderful economic historian, actually he was more than just that, he was also somewhat an anthropologist, reminds us that even the notion of the free market is not only wrong in the sense that we all know that there's never been a free market. Markets are always, if you want, embedded in our institutions, but the market itself as we know it when we talk about the free market was forced into existence by the state. And if you're interested in that, definitely read his book, The Great Transformation, written in 1944.
But anyway, so for me, I think this is a positive message, right? Because all the problems we have, and I'm sure we'll talk a bit both now in my presentation and the Q&A on the problems, but they are outcomes of decisions we've made, and so that's both depressing because it's like we made the wrong decisions, but it's also full of hope because there's nothing deterministic in the system. There are no market forces, you know, forcing for example companies to be overly obsessed with their quarterly returns, that's a choice. We know there's many different ways to structure companies, in fact, right? Not just maximizing shareholder value, but also stakeholder value. And what does that mean?
Anyway, so that's really where I want to kind of just begin in terms of the context. I have way too many slides, so at some point I'm going to start clicking through them. In fact, I even have my stopwatch, which I forgot to put on, so I don't talk too much. But it's really also to give you a flavor of why I think this matters and the work that my institute, I have two friends here from the institute, Emily and Anna, that I've set up called the Institute for Innovation and Public Purpose. The work we've been doing around the world around bringing this notion of purpose and public value back to the center of both economic theory and practice.
And again, you know, even though many people complain against all the politicians, I've been very lucky to work with some amazing policymakers in Barbados, Mia Mottley, in Brazil, President Lula, but also in Camden, where I live in London, Georgia Gould. She's actually now an MP, but she was the leader for Camden Council for quite a while. And I'll be bringing some of the lessons that I've learned along the way.
And ultimately, you know, what really, I don't want to say bothers me because I'm going to get too negative too quickly, but what frustrates me is that even though we know that, you know, again, the market is an outcome of how we organize the economy, so on and so forth, and that growth is an outcome of investment in both the public and private sectors, we often then stifle the conversation by forgetting that unless we're actually bringing the what's to be done, whether it's around climate, biodiversity, health and well-being, to the center of how we think about the economy, then we will end up getting a trade-off between the what's to be done and economic growth.
So for me, this idea of kind of market shaping and mission orientation is all about kind of flipping that narrative and saying why don't we begin with the goals and then backtrack and structure the economic system to deliver on it, and in so doing actually help both catalyze growth but along the way solve problems. And during COVID, that was mentioned, I was asked by Dr. Tedros, who runs still, who's the director of the World Health Organization. He first asked me to be the chief economist of the WHO. I said no, life's already too complex, but I said I'd be happy to run a council on the economics of health for all for the WHO.
And I brought together many women economists, and people said, why only women? I said, well, why are there only men in all these other councils? And it's funny because Dr. Tedros actually, like many Ethiopians, speaks Italian. So we would swear in Italian so no one could understand us when they asked that question. But what we did in this wonderful 11-woman council that I chaired for three years was precisely to do what I've just done. We said if health for all is the goal, what does it mean for how we think about value? What does it mean for how we innovate and collaborate and form public-private collaborations around innovation that's needed for health for all? What does it mean for how we finance?
So we go away from thinking about financial gaps as though there's a hole to fill, and there is a big hole, something like seven trillion for the Sustainable Development Goals, but going away from a hole to thinking of the shape of finance, the structure of finance, if we actually care about health for all, and also that idea of public sector capacity. So we actually worked, and I'm going to come back to capacity because that's the key to everything. That idea that, you know, on the one hand we should always make the argument that we need to invest in health and it's also good for the economy, but that's not enough. Invest in health for all and ask what it means for the economic structures. Again, that's that kind of narrative flip that I'm very interested in.
And of course, both in the UK but also in Germany, if you look at what happened in Germany in the previous government and the reason it fell was due to this false dichotomy. You had Minister Habeck, who was the minister of the economy coming from the Green Party, you know, wanting to do the green net zero, you know, a stimulus package across the German society and economy, and then the finance minister Lindner saying there's no money, right, constrain, you know, go back to like a measly little budget for green. And of course then when it came to defense, money as usual comes out of thin air. So this idea that there's a limited budget and there's trade-offs, a bit more on climate, it's going to be, you know, less on education or less on health, except during war when all of a sudden all these budget constraints, you know, disappear.
But it was very interesting if you compare some of the discussions here today in terms of, you know, where is the ambition in terms of this current government and the degree to which we're really putting what Lula would call the ecological transition at the center of how we structure the economy, and this idea that there's these budget constraints and there's fiscal rules that are limiting, if you want, that ambition. But again, the, you know, what happened in Germany I thought was absolutely incredible, and then the government actually fell, well, because of that. Oops.
And what I'm sorry, this is the self-promotional slide. What I've really tried to do in all my books, including the one I'm writing, actually handing it in tomorrow to Penguin called The Economics of the Common Good, and I'll come to that one at the end, has been actually to try to debunk so many of the false assumptions behind everything I've just said, both in terms of what is the market, but also what do we know about places that actually we call, you know, how do you say, hubs of innovation like Silicon Valley, what was that kind of distribution, that division of innovative labor between the state, business, and other actors.
And I wrote The Entrepreneurial State really to debunk this idea that the state was just there to kind of fix a market failure and then get out of the way. And when people didn't like that story, I said, well, then throw away your iPhone because everything that makes your smartphone smart and not stupid was actually not only state-funded, internet, GPS, touchscreen, Siri, and more, but through public organizations that were actually mission-oriented, purpose-oriented. The internet came about because there was a problem to solve. The satellites had to communicate. GPS came about because the Navy was trying to solve a problem to know where all the ships were.
So that idea of kind of purpose-oriented public organizations has, you know, fascinated me for a long time and is the reason why also through the institute we set up a network of different public organizations which we call the Mission-Oriented Innovation Network, where different organizations like a public bank, a digital agency, the BBC, public broadcaster, share their experiences, the learnings of when they actually step out of this super narrow box of just fixing market failures.
And that in fact then led me to be very interested in mission-oriented policy, not just organizations. And I'll be talking a lot about that today. But also that idea that underlying all this needs to be a different theory of value, of collective value creation. That's what I talked about in The Value of Everything, where I also argue that when we get confused in economic theory and stop knowing what the difference is between value creation and value extraction and value destruction, we also forget to do with the classical economists, and here I bow down to John Eatwell, who is my professor actually at the New School for Social Research, where we properly studied these classical economists, that difference between profits and rents.
And I won't go into that because that's a huge conversation in and of itself. But that idea that in order to move beyond a lot of these false dichotomies, we actually have to start almost at first principles. What does it mean to collectively create value? What does it mean to know the difference between profits and rents along the way, so that the free market is not free from the state but free from rents, which is actually ultimately what I think Adam Smith really meant by the notion of the free market.
And in the latest book, which Doug, thank you for saying that you're inspired by, and I said, is that because you worked in McKinsey? He said, no, but because you saw the McKinsey of the MOD. For me, this is critical. Like, unless we actually invest in state capacity, in the brains of government, there's no way that we're going to be able to govern any of the challenges we have. And the reason that the subtitle there is The Infantilization of Government was because during COVID, how can I forget his name? What was his name? Oh my god, what was the name of the guy who came up with this wonderful term? Anyway, it'll come to me later. He's a Tory Lord. You should know you're a Lord. Hold on. It's coming. It's coming. It's coming.
Anyway, he said, what are we doing? We're infantilizing government by giving all these like wicked challenges out to the consultants, and we're not even investing in the ability of civil servants to solve these crunchy problems, because you saw this immense budgets that were being given out to the consultants both during Brexit and during COVID.
What's also interesting is that the private sector has also ultimately consultified itself. Especially when there's hard decisions being made, it's easier just to kind of rubber stamp it with a consultant's logo. And I'll come back to that point later. But to me, this is kind of an, it's all part of the same story. The most difficult challenges of our time require embracing the difficulties, the underlying complexities. And we have to do it together, public, private, third sector organizations.
And if the underlying theory both of what the economy is and what it means to co-create value is part of the problem, then we really need to start at those kind of fundamental levels. And again, the reason I set up the institute, which is actually a department, was to really kind of change that story that we're telling ourselves of what the point, for example, of policy is, from fixing to co-creating, from de-risking to welcoming uncertainty. Remember when Kennedy said, we're not doing it because it's hard, sorry, we're not doing it because it's easy, but because it's hard. What does that actually mean for embracing difficulties, experimentation, learning by doing?
And so many of the words we continue to use in the policy-making space are about facilitating. You know, I'm Italian. Facilitating means making something easier. Exactly the opposite of what Kennedy said. We're not doing it because it's easy, but because it's hard. So, embracing difficulty and uncertainty and complex processes as a skill itself is absolutely critical.
Instead of picking winners, picking the willing. How do you kind of, you know, tilt the playing field in a direction and don't choose winners in the sense of types of firms and types of technologies, but be very clear on what the direction of travel is and open on the how to stimulate innovation and entrepreneurship in, for example, the business community. And along the way pick, if you want, those that are willing to work with you, and, you know, making it easier, if you want, if we are going to make things easier for those who are willing to embrace that difficulty together.
And that whole problem around outsourcing, needing to build capacity, but also those new evaluation metrics, and I'll come back to that later when I talk about the incredible dynamic spillovers that we should be trying to catalyze through policy, and how would we capture that outside of a net present value or cost-benefit analysis.
So again, I mean, this is a lot of background, but for me it was very important to go beyond the books, right? You can give a book talk, a TED talk, or a conference talk, but unless we change how we think about the state and the culture within the civil service, then little will change. And in fact, one of the ambitions we had at the institute was to really change the curriculum, the training of the civil service, away from these really boring MPAs. I'd have to check out your one here at Cambridge if it's as boring as the others.
But, you know, this idea that at best you're going to fix a market failure and everything that then falls from that is what we tried to transform. And it's not a coincidence that literally the names of the courses when you take an MBA, Master in Business Administration, are so much more interesting, right? Decision sciences, organizational behavior, strategic management. That's because we value business, we know that business creates value, so the training of managers is much more proactive and more interesting. So there's books about rejuvenating the mature corporation, right? Because when companies become big and bureaucratic, they should rethink themselves. Whereas when we see public institutions as big and bureaucratic, we roll our eyes and talk about red tape, Kafka, bureaucracy.
So a lot of what we've tried to do in the institute is also to talk about creative bureaucracies. And what does that mean, going back of course to the writings of Weber. And so what I want to do is really kind of put a lot of this in the context of the current issues in the UK. The idea that also they've adopted this idea of missions, which again I'll come back to in a second. But we should also, and I think this is an important slide because we sometimes forget, the biggest problem in this country for a long time has been that lack of investment, not only in the public sector but the private sector.
And what we can do when we shape markets, not fix them. What we can do when we bring clear directionality and mission orientation to catalyze public and private sector investment is precisely to kind of get rid of some of that inertia. So the problem in the world is not profits. We have a very high profit share globally in global GDP, it's investment. And in many countries, not just the UK, we have lagging growth because of lagging investment.
And this is quite extraordinary. Had the UK invested the same as the average OECD on the public side, we would have invested 500 billion more. But the fact that we continue to be very low in OECD rankings on the private side is something that I don't think is talked about enough. I think Brexit made it worse, but it was already a problem before. So what does it mean to also really stimulate business investment in such a way that is not about being business-friendly, that kind of insecure talk that makes me often say I walk in as an economist, come out as a therapist, but to really kind of rethink that social contract so that any public tool, whether it's procurement, public loans, subsidies, guarantees, are actually conditional on business doing its job and the public side doing its job, because as we know, there's a problem on both sides.
And this is also why I was, you know, quite, how do you say, happy that Keir Starmer and this current Labour government put this idea of missions at the center both of the manifesto and then for a couple of months after winning the election, the talk around that. And I want to really ask, you know, forget the negativity. What could it mean for this economy to really have a mission-oriented approach? You know, growth is not the mission. Growth is important. Without growth, everything else doesn't follow. But what does it mean to actually think about growth as the outcome, not the goal, as the outcome?
If we can actually catalyze, stimulate that multiplier effect, the Keynesian multiplier effect, by actually increasing the expectations in the business community of where future opportunities lie in this country, but also again with care of a new social contract. And I'll focus quite a bit on issues around climate because I do think that that third or second, sorry, mission there, making Britain a clean energy superpower, if we actually really transform that to be about sustainability across the whole economy, what would that look like in terms of different types of missions that could in fact, you know, move us beyond what I think we currently have, which is lots of inertia.
But if I have time, I'll say something also perhaps about making Britain's streets safe, because living in Camden where we've seen so much crime after 15 years of austerity, where lots of young people have really been left behind, where we ended up cutting so many crucial services from mental health services, but also public libraries, after-school clubs, and all what I would call the social infrastructure, which has to be at the center of how we understand health and well-being, and the social and economic determinants of health, the social and economic determinants of crime. I really think that's an absolutely critical one to think more about.
And again, this Clean Power 2030, this is actually an area where I don't know where Anna is, she's on my team, we're starting to work with the government around that to say that's great that we have that as a goal, but what does it mean to move that beyond energy, right? Just like going to the moon meant rethinking all sorts of things around nutrition, materials, food. Well, sorry, said food already, but how would astronauts go to the bathroom? All those different problems along the way to the moon. The same thing, of course, with climate change. How do we build? How do we eat? How do we grow? What do we wear? How do we move? Right?
So really turning this net zero mission into a massive economic transformation and putting that goal at the center of the finance ministry itself, the treasury, as by the way I think both China and Brazil have done. China apparently has even gotten rid of their department of the environment because they're really seeing this crucial, urgent problem that they have in terms of pollution really at the center of so many of the different ways they think about the different tasks of government.
And so we've been working, as I mentioned, in the institute around this idea of market shaping, not market fixing, around using the concept of missions to really rethink the role of policy, but along the way to rethink all sorts of different things. And this is what I want to give you some insights on, the work we've done and why I think it's actually a story of hope, because there's lots of interesting things happening out there, but it's hard. And so really reminding ourselves that this can't be done without a different culture within government, but also very different partnership with the business sector.
I'll say a bit about what it means for policy design, the design of tools like procurement or public banks, new ways to think of the deal between public and private, very important points I think about participatory processes, you know, not doing things at people but with them. This is actually why I'm writing this new book on the common good. Remember Aristotle talked about the telos, the goal, but also the polis, the way to actually build community along the way, where how we reach a goal is as important as the what. So valuing each other, having processes that make people have dignity at the center of their life, feeling valued, but also true co-creation.
Economists have nothing to say about that. So I'm learning, but you know, from those who actually have taken that point seriously, and I think this is central to market shaping. And that really crucial point about building capacity and capabilities along the way in an era where I would say for the last 50 years we've weakened the capacity of government to actually think in this kind of bold way.
Right, so the first bit, what does it actually mean for the way we design policy? Hence, you know, why a lot of the work that we're doing again with the government right now, or at least trying. We actually ran some workshops for them before the election when they were starting to use this concept of missions in the manifesto. We had a workshop with Jonathan Reynolds, who later became the minister for business, innovation and trade, but also with Darren Jones, and also spoke to Rachel Reeves about that.
And again, without being too negative, I don't think that this idea of mission orientation has been brought to the center of how we actually think about economic growth. So this is like, these are the points we continue to plug away at with them. And really the point, you know, the reason I wrote this book that started with the Apollo program in Mission Economy was that if you actually unpick what happened with the Apollo program, it was just so much a political economy project, more almost than an aerospace project, to the point that the first thing they did was change the tools that they had, the economic tools.
The head of procurement, Ernest Brackett, said, "We ain't getting to the moon with this kind of procurement," which was just cost plus. He changed it. In fact, in Brazil today where we're working, they have to change the law for procurement to be mission-oriented. And he changed it, which again, with military problems, things, you know, change happens quickly, or during COVID change happened quickly. In normal times, we're very slow, but they changed it very quickly to be outcomes-oriented procurement.
Focus on all those problems again. How would the astronauts go to the bathroom? What would they eat? What would they be wearing? And it was through that outcomes orientation that they stimulated all sorts of different innovations. But what was also very interesting was the confidence they had, right? Because they knew that NASA had a very important role in that procurement contract, and these are contracts. Everything's a contract, and intellectual property rights a contract. A water right is a contract. When we collaborate on innovation, there's contracts.
The procurement contracts, they had no excess profits, so no rents, coming back to the concept of rents in the classicals, in the contracts. And so that confidence that of course NASA is important, it's kind of leading, you know, the mission, but that they were going to leave open the how, and they needed to work with the private sector. 400,000 people worked with NASA in the private sector to solve those problems, and the fact they had that problem orientation produced huge amounts of growth, as you see all these technologies from camera phones, foil blankets, baby formula, baby diapers, software, right? These are all solutions to problems that NASA set itself.
You can just by reading some of these innovations, you will realize these had huge effects on Earth in our civil economy. And in fact, because they had problem orientation through public-private partnerships, well-designed, economic growth followed. They never worried about growth. They never worried about commercialization.
In some work that I've done with NASA over the years, a paper I wrote which is on the NASA website looked at how interestingly as they became less mission-oriented, and indeed the constitution of NASA changed in the end of the 1990s, they worried lots more about commercialization as part of the kind of big, I just call it Reagan change and how we thought about the role of government. They, surprise surprise, ended up commercializing less.
So when you obsess about growth, when you obsess about commercialization and stop asking the big question, what is the mission? Ironically, you end up actually achieving less growth because there's also less of a stimulating and confident public-private partnership. And so the idea of missions is not just a word. It shouldn't be confused with just vision or goal or targets.
For me at least, the concept of missions, which again I was happy this government, you know, found useful in the beginning, is that you start with a challenge like the Sustainable Development Goals, but these are very broad, or in the case of the Apollo program, very broad, you know, beat the Russians, the space race, but unless you turn it into a concrete goal like going to the moon and back in a short amount of time, then the risk is it's just blah blah blah blah blah, everyone can talk about those broad challenges, but turning it into a mission that's concrete, that you can actually answer yes or no, did you achieve it?
But that especially requires intersectoral investment in innovation. Again, with the Apollo program, aerospace, nutrition, materials, software, right? So being clear on what the mission is, but keeping it broad enough that truly requires lots of different sectors to innovate and to invest, because ultimately if you achieve that, you will achieve growth. And then transforming all the tools governments have, and they've got a lot of them, even a small country like Barbados has lots of tools: procurement, loans, guarantees, subsidies, bailouts during COVID, to stimulate bottom-up innovation towards mission accomplished.
And this isn't, by the way, necessarily doing more. Many small countries or developing countries will say, oh, but we're not a big country, we can't do missions. It's exactly the opposite. Every country already invests in lots of things, right? Food, transport, materials, natural resources, and how to actually have a mission-oriented approach which then allows the sum of all these projects to be bigger than the parts, that provides more alignment, and especially that kind of intersectoral but also interdepartmental way of thinking.
And I had the honor to work with the European Union on this. So it was one of the only times where I wrote a report that literally within a couple of months turned into real change. So there's now a missions instrument in the European Commission based on the work I did with them. However, I was quite critical because for me the missions in the European Commission should have gone to the cabinet office, to von der Leyen's cabinet, especially for the whole discussion about the Green Deal. Instead it remained just within the Horizon program, so the DG for innovation.
And you know, that's great because it at least was a tool there, and now there's about 30 billion, very little by the way if you divide by European GDP, but still it's there to test it out, to sandbox it. But for me at least, missions are about bringing goals to the center of how we actually think about how the economy works. But these were just some of the examples that I kind of raised in the report there.
And the criteria, you know, if missions aren't bold, they're not going to work, right? Just remember everyone looking up at space and the, you know, the inspiration for a lot of young people to go study STEM subjects on the back of that. So if a mission can't even be remembered by not only citizens but also the businesses that in theory are working with government, then it's probably the wrong mission. Clear direction, open on the how, driving those multiple bottom-up solutions that are critical to actually fostering innovation, investment, that Schumpeterian creative destruction.
Which, as you know, some theorists around, well, no comment on whether I think their work was as Schumpeterian as, but the Nobel Prize winners this year actually come from this tradition of Schumpeterian economics. But this idea, you know, how do we get that Schumpeterian creative destruction bottom-up with a clear direction by government, leaving open the how, is a design challenge, right? Because it's that nuanced way to have both kind of a top-down direction, right, a net zero direction for example, with bottom-up creativity.
And ultimately, once I talk about participation, you'll see where I'm going, that even that direction ideally should be co-creative with the people, otherwise it's just going to become kind of a political gimmick. It'll be a minister's decision or someone else's decision what these missions are. So who sets the missions is absolutely critical. But let's just move on for now before we get to the participatory structures, which I actually think are the most important thing to build back trust in our economic system.
Missions should lie at the center. You know, climate change is not just for the Department of Energy. Health and well-being is not just for the Department of Health. This is why I've become very interested, for example, in landing this idea on examples like school meals, right? In Sweden they have a very high-level challenge of a fossil-free welfare state, but they've landed that idea with a mission of net zero, which then means that, for example, how school meals are provided in Sweden, they have to be healthy, tasty, and sustainable.
So you can see already that it becomes a very concrete way to address, for example, SDG 1 and 2, hunger and poverty, but in such a way that then requires interdepartmental thinking: Department of Health, Department of Agriculture, Department of Finance, Department of Education. School meals, healthy, tasty, sustainable is a moonshot, right? It's not just lunch. You might remember when we did have cost-plus procurement around lunch, as many countries still do, you end up with this dysfunctional dynamic like we had in the US where Reagan, when he wanted to reduce the cost of school meals, he said ketchup was a vegetable, and a lot of us had T-shirts that had ketchup and Reagan, and which is the vegetable, okay?
But that is the logic, right? If it's cost-plus procurement, you will try to reduce the cost and you'll end up with pretty crappy school meals. And that idea that then a moonshot as simple as lunch, you know, from the moon to lunch, then requires a very different way to structure the tool procurement, a different public-private partnership, a way to stimulate regenerative agriculture, local manufacturing, and, you know, a more diversified economy, not over-relying on one large monopolist as we have at UCL, my own university, which uses Sodexo, a large, I think they're French, multinational company to produce food that is not as, you know, healthy, tasty, sustainable as one can imagine.
And in fact, what's interesting is even though this government has taken on this concept of missions, when I set up the institute back in 2018, I had the honor to work almost right away with Greg Clark, when he, he's a Tory minister in the coalition government, and the first paper that they actually cited in the industrial strategy was our paper on missions, which we had just written in the institute. And the idea was to move away from a sector-specific strategy towards a challenge-oriented strategy.
The sectors they had been focused on were five. You might remember them. Vince Cable came up with them. It was aerospace, automotive, life sciences, finance, and the creative sector. I have no idea how I remember that each time. I literally cannot remember half the things. Anyway, so moving away from a random list of sectors towards bold challenges that would require those sectors but also many more, like again food and digital, to transform, to invest, to innovate in order to achieve.
And so they set these four challenges for themselves. And then we worked with them. I ended up co-chairing a commission with David Willetts called the Commission for Mission-Oriented Innovation and Industrial Strategy, and came out with this report where we worked with the government, the challenge teams. They came up with their mission statements underneath each challenge. Bit of a mouthful. I'll read it for you. For the future of mobility, it was by 2040 to put the UK at the forefront of safe, sustainable, universally accessible travel, creating congestion and emission-free, zero-accident systems.
I mean, it is ambitious though, right? I mean, it's not to the moon and back in a short amount of time, and it's probably less memorable than that. But the fact that there was criteria, just like with the school meals, healthy, tasty, sustainable, meant that you couldn't just, you know, get a contract. You had to show that you would innovate, train workers, invest. And the fact there was the word accessible meant that, for example, some of the bottom-up projects were in the areas of disabilities. That second one on the left to the right, 100% accessible public transport.
And this, the idea was again to work between the ministries. This wasn't just for transport, but of course transport would be fundamental, but sustainable mobility is a much wider kind of area. And by the way, I still remember at the time the whole innovation budget when we were working together was 10 billion. Just the procurement budget of the Ministry of Transport was 40 billion. So imagine going across again that interdepartmental collaboration that you need when you think of these bold challenges. Your procurement budget becomes your innovation budget, right? Because if there is that moonshot of, you know, congestion-free, accessible, sustainable transport, then how you're going to procure in solutions will require innovation.
So it's also about taking innovation outside of its little silo of the innovation budget and using all the tools governments have to do that. And so on the current industrial strategy, so that was 2018, pre-COVID. Then, by the way, Brexit also happened, and that was quite depressing because many of the people that we worked with in the challenge teams, like Tom Hayden, like Sam Lister for a while, were moved over to deal with Brexit.
And by the way, that comes back to that issue of capacity, capabilities, continuity, which unfortunately we often don't have, let alone that Brexit also put a big break, I think, on investment and innovation. But what we found with the current industrial strategy that was launched last summer when Jonathan Reynolds was still minister was that there was the risk at least that we were returning to just a different list of key sectors, right? Forgetting if you're going to do missions, which on the one hand they were saying put it at the center of your industrial strategy and your growth strategy.
To make sure that, for example, net zero wasn't just about energy but truly achieving that kind of lower material heaviness, for example, across manufacturing. In Germany, where they have been very clear with their Energiewende strategy, the way that that mission then or challenge was kind of fed down was that the public bank, which is very large in Germany, the KfW, put conditionality related to the loans that it was providing to other sectors like steel, right? Not just renewable energy, but steel had to lower the material condition of production to receive the loan from the KfW in Germany.
That's the only reason there's green steel in Germany, because of that kind of deal with government, and that required investment, innovation, and training. So this is really kind of where we are currently at, trying to also help inform, you know, what does this then mean for a wealth fund? What does it mean for the public banks? What does it mean for procurement?
And we also just launched recently, a month ago, in Scotland, Fiona, after the great work we also did together in Scotland, a paper on what a mission-oriented approach would look like in Scotland. This was on the back of actually working for almost five years in Scotland, setting up the mission-oriented investment bank there. It's called the Scottish National Investment Bank. But here too we argued that much more attention had to be paid in this paper that was put out by the government and our friendly critique of it to the actual tools, like what does it mean to have a green industrial strategy for the tools, the coordinating tools, the transforming potential of institutions that unless we actually rethink them, they become part of the problem.
Many public banks, by the way, are part of the problem. In Italy, one of the three countries that I have a citizenship in, the public bank is part of the problem. They just give out money to any sector that is in trouble. I'd say similar actually to here, right? Steel has been in trouble here and we bail them out. We save them. We don't transform steel.
What does it mean for the capabilities and monitoring and evaluation? Making sure we have true additionality, making things happen that otherwise would not have happened in the economy. And again, the work on school meals that I just mentioned, we just presented this actually at Climate Week in New York. And it's really through these concrete examples that you can sandbox what it means to really rethink policy in the interdepartmental way, working with business with moonshots around that.
And actually also looking at what that means for diversifying again the supplier base for a government. GDS, Government Digital Services, is a great example actually when it was led by a pretty ambitious team of how they transformed the way that government was procuring digital services for really interesting missions and what that meant for diversification, which ultimately is about competitiveness, but you reach it not because you're focused on competitiveness and growth, but because you're focused on really providing dynamic, flexible services for citizens.
And could say more about school meals, but that will take too much time. So I've already kind of given you also some in passing kind of, you know, insights on why it means that we have to get serious with the nitty-gritty of tools like procurement, but also with the public bank. I already mentioned the KfW example, but, you know, these are tools that exist everywhere. Public banks, procurement, just globally.
Again, we talk about financial gaps, but there's plenty of finance. Even in the public space, there's plenty of finance, let alone in the private space, but it's misdirected. Just looking at public banks globally, they have over 20 trillion dollars in them, but they're not really aligned. They're not aligned with the MDBs, the multilateral development banks, and those banks are not aligned with the goals. But so asking what does it mean to have a goal-oriented financial system where not only are these in theory public entities aligned with public...
goals but also then use their ability to work with the private sector to transform the private sector to get them to invest with additionality in a goal-oriented way. We've been thinking a lot about what that means for the whole rethinking of the public bank architecture globally. And the national wealth fund again, you know, asking similar questions here. There's a new fund that the government has set up. What does it mean also to learn from some of the lessons with public banks globally when the funds themselves become part of the problem? You'll know that the sovereign wealth fund, for example, in Norway has also come under attack for not being ambitious enough on the word, you know, public fund. What does it mean to be a public fund in terms of making sure that it's actually part of a transformative process towards public goals? And also in terms of procurement, what does it mean for a new culture of procurement? We worked in Camden with again a test case, just like the school meals was a test case. We worked across 10 housing estates around adult social care and found that if we really wanted mission-oriented procurement or goals around adult social care, key to that was to work with the carers and with the cares to design that process. Right? So kind of that principle of subsidiarity which Pope Francis used to talk a lot about, bringing the attention of government to the most local level and listening to the people who are experiencing this so-called good service that you're providing, putting them in the driver's seat of actually designing that service itself. And that was super interesting. And again, if you're interested in it, we have a bunch of papers on the adult social care mission, but also the green mission in Camden was fascinating because again we worked with resident associations and first just opened up the discussion: what does green even mean? And part of that process was then transforming this, was also during COVID, the food banks, which as you know are alive and well in a country with so much inequality, into food cooperatives, green food cooperatives, where again the sense of ownership and dignity was a critical part of that process. And personally, I find that I've learned so much more from these local examples. And then the question is, what does it mean to reveal the principles of these examples for the national level, let alone the global? That new social contract which I've been talking about, that kind of idea of conditionality between different actors, it was super interesting again during COVID that only one of the vaccines won and it was the one made in this country with AstraZeneca and Oxford had that idea of a mission at the center because the goal during COVID wasn't just to come up with a bunch of vaccines. It was to allow those vaccines to be distributed globally and to even be produced globally like in Africa so they wouldn't have to be reliant on, you know, charities to send over expired vaccines, which is actually what happened, which Dr. Tedros called vaccine apartheid because of the hoarding that we had. We had vaccine nationalism. So the Oxford University publicly funded researchers, I always remind my friends in America, you know, Oxford and Cambridge are state schools. So publicly financed research. They put conditionality on joining a patent pool, on not abusing patents, on keeping prices and costs low. So there's different ways to collaborate when we are in fact mission-aligned. The Pfizer vaccine did not do that. It was also interesting that the French government, unlike the UK government, put conditions attached to the companies that were receiving lockdown money because people weren't on the airplanes or driving their cars. So those industries got support. But in France, that support was reliant on Air France and Renault committing to reducing their carbon emissions over the next five years. So even during, you know, a COVID tragedy, we can truly build back better as everyone was saying, and then we didn't do it. If we learn what it means again to be outcomes-oriented instead of just always handing out money too little, too late, and not leading to that transformative potential with additionality. And I wrote a paper with Dani Rodrik. You know, I'm almost done by the way. Are you coming down to tell me to shut up? No. Okay. On what does it mean to bring conditionality at the center of all sorts of different contracts. We had the honor to work with Gina Raimondo, who was the Secretary of Commerce for Biden, around the CHIPS Act. She had actually called me when I was up in the Alps and I said, I'm busy. They said, no, you have to speak to this woman. She's a Secretary of Commerce in the US. She's read your books and wants to talk about how to learn from the mistakes made in Silicon Valley to put some conditionality at the center of these public subsidies that were about to be given to the chips manufacturers. And we focused on two or three that we thought were really central in an economy that has so much shareholder value maximization extraction. Right? Seven trillion dollars is what the large US companies have spent just to buy back shares to boost stock prices, stock options and executive pay. That condition of no share buybacks, conditions of improving working conditions and energy-efficient supply chains were the three areas we focused on. They ended up making a longer list which some people have critiqued as an everything bagel. But again, it's not about conditions or not conditions. Of course, we need conditionality in order to make sure it's a good deal. Then the design challenge, of course, is to make sure it's not too long so it stifles innovation. But that idea that this was a moment where we could actually learn the mistakes from the past. Similar in Scotland, we've been advising how to bring some, you know, a better deal. A green deal is about negotiation, not just money given out by the government. And that idea of public sector capabilities. Apollo's head of procurement, same guy I mentioned who transformed procurement from cost-plus to outcomes orientation, he said if we continue to outsource our brains, McKinsey, which was founded in the 1920s, was already getting into the halls of NASA. He said we won't even know how to work with the private sector. So market shaping requires knowledge, capacity, capabilities. He said we're going to end up getting captured by brochuremanship, which was cute because there was no PowerPoints at the time. Um, wait, it's coming. Theodore Agnew. Agnew. That's him. Is he your friend? No. Yeah. Agnew. Agnew. Agnew. That was his name. Yeah. So, he's the one who said, "What are we doing in this country? We're infantilizing the public sector." And that idea that all these issues actually really require reinvesting within the state and stopping that excessive, excessive, because some consultants and advisers of course are needed, but excessive consultation. And interestingly in the story we tell in the book actually a lot of that actually happened during Labour, during New Labour. So it's not even a partisan issue. But again that's a different story. And we did a study actually during COVID of which countries did better and these were countries in the developing world. We were comparing actually developing countries. It was Rwanda, Togo, Vietnam, Kerala who had made investments in their civil service on the back of previous crises including in the informatics side of things, governing data and digital platforms. One of the reasons why Agnew called out that alarm bell was that we were spending during COVID here 1.6 million a day on Deloitte doing the test and trace which failed and then had to be again done in other ways by government, but all that money that's kind of not just wasted but not used to invest in our ability to be more prepared next time around. So gov labs are really interesting, you know, welcoming that experimentation, trial and error across government. We've been working with quite a few organizations of this sort like in Chile, laboratory. So it's one thing to say welcome risk-taking. It's another actually to put that at the center of the culture of how we think about the government as a laboratory to test things out like outcomes-oriented school meals. And in fact in the institute we've just started working with Bloomberg around this notion of a public sector capabilities index. Working actually across the world with different cities. So, we're starting with cities and actually working with the mayor's teams around better understanding the capabilities they think they have and don't have in order to tackle their own challenges. And over time have been building this index which will be launched probably next summer. But again, too many words up here at the end of this deck. And what it also means for policy evaluation. Remember all those things I said happen along the way to the moon? That's very different from doing a cost-benefit analysis. Do we know how to capture in our green books, right? All those dynamic spillovers along the way because one could argue that even if they had blown up just before getting to the moon, one could have judged it as quite successful given all those solutions that happened along the way. Participation, I'll finish with this because I said economists have very little to say about it. We should learn from others. Shut up and listen. And as I said, I've learned so much from working with cities and even councils within my city on what it means to truly work with and not at people, which is the reason I'm currently writing a book on the common good economy, where that idea of not just purpose and directionality, but also co-creation and participation, collective learning, but also collective reward sharing is central. I'll come back in a year or two to talk to you about this book because it's not out till next spring, but I've written an article recently. And for me the reason I started writing it was precisely due to the work with local communities like in Camden where they put so much emphasis on actually working with, as I mentioned, with the resident associations, the citizen assemblies, the carers and the cares to design those policies. But also, you know, that first mission to make sure that those holding positions of power in Camden are as diverse as the community itself. I thought that was super interesting because I would have put that as a cross-cutting kind of principle across any mission and they said no, it's too important, it has to be a mission in and of itself. Similar to what's our work in Barbados, as you know, that was at the center of the slave trade. Mia Mottley, who's quite famous for her work on the Bridgetown initiative around global finance, the work that we did with her was using this mission-oriented approach also to bring back dignity to citizens, to people, to make them feel part of something. You know, what is a blue and green large island state, large ocean state, instead of a small island state? That ambition that everyone could also be part of, enabling citizens to engage directly with government. We held lots of town hall meetings, but the social partnership together, and it was very interesting that they actually put as one of the principles going across all their missions promoting the Bajan culture and identity as well as, like Camden did, a mission itself around that to transform Barbados into a country of active, involved citizens. All Bajans will feel empowered and engaged in the social, economic and cultural development of the country as confident, creative, compassionate and entrepreneurial citizens. This was different from their more kind of, how do you say, not obvious but directed blue economy and green economy mission. But we just thought that was so interesting because in a country which lacks that social cohesion and globally where we have so much distrust, creating also principles of cohesion across any mission that puts social partnership discussions at the center of the how was again something super useful that we learned from in Barbados. And this last slide is just because connected to that, she was actually the prime minister of Barbados, the minister of culture before, and some say she might become the next secretary general. But talking to her about culture, the importance of music and the creative arts, but also in Camden, you know, we had Amy Winehouse. The idea that arts and culture are central actually to this process of economic transformation. It's not a surprise that Roosevelt brought artists and designers to the WPA or the German Bauhaus at the time. That idea that arts and culture are about a conversation of who we are, right? You know, what life is about. Think of the importance of poetry. There's often this notion of missions might just translate into the STEM subjects, but you know what the missions are, what it means to truly co-create. We actually need to be investing in the humanities. And that idea, and I know that for John Ewell here it really matters also given your own interest in music, dance and the orchestra work that you were telling me before that you do, it goes beyond seeing it as a sector. It's really about that national conversation of what is this all about. So we just set up a working group on this and had our meeting two days ago. We had George the Poet, Peabody award-winning podcaster, Albert Barington, Anthony Gormley, Brian Eno, as well as the Treasury folks, DCMS, actually asking why is it that culture is so siloed in this country and wouldn't it be great if we actually had not just missions and redesigning these missions in a way that are more mission-oriented, but actually opening up the black box of what kind of society, what does it mean to live a good life, and start with those conversations and really make them about a cultural conversation instead of just going right away to, you know, what the right kind of industrial strategy. So on that I will finish. I'm sorry I've gone a bit over.
