Governments need to work hand in hand with the private sector, rather than leaving business to its own devices. They should be “moving away from fixing market failures and government failures towards actively shaping how markets are governed”. International economist and adviser to governments, Mariana Mazzucato, argues this in her new book, the Common Good Economy.

Review: The Common Good Economy (A New Compass) – Mariana Mazzucato (Allen Lane/Penguin)

Mazzucato is known for arguing that, all too often, the public sector socialises risks while privatising rewards. Innovative products from private companies such as Apple are often co-created with the state. State institutions may do the basic research, train the skilled workers, provide the infrastructure and clean up the pollution generated. But when this pays off, the resultant profits go to the shareholders of the company.

She believes more of the profits generated should be shared with the public.

This can be done through a combination of taxes on corporate profits, income, capital gains and wealth. Or it can involve equity stakes, where the government takes a part ownership stake in the enterprise. Examples in this book range from Norway’s sovereign wealth fund to the London borough of Camden’s Community Wealth Fund, which invests in businesses to create jobs.

She also reiterates her idea of governments setting out clear “missions”. These involve collaboration between private and public organisations to address major challenges.

And she remains critical of outsourcing policy development to consultancies. This has eroded the capacity of the public service.

The Common Good consolidates her earlier books and articles. (Over 50 are listed in the comprehensive bibliography.)

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