Financing the Common Good
Financing the Common GoodMay 1, 2023MARIANA MAZZUCATO
The United Nations has warned that “cascading and interlinked crises” are jeopardizing not just the 2030 Agenda for Sustainable Development, but “humanity’s very survival.” Mitigating the threat requires a radical reform of international finance, based on a market-shaping paradigm that advances the common good.

LONDON – The International Monetary Fund and the World Bank recently held their annual spring meetings, which, according to the organizers, produced a “strong message of confidence and a willingness to cooperate.” But lofty rhetoric and good intentions will not be enough to create a truly inclusive and sustainable economy fit for the twenty-first century. For that, deep structural change is needed.

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In Defense of Industrial Policy

MICHAEL SPENCE justifies government intervention to alter market outcomes – and explains the right way to go about it.
Some are calling for it. Mia Mottley, the prime minister of Barbados, advocates a “New Consensus” between wealthier and less wealthy countries. Similarly, UN Secretary-General António Guterres has called for a “Common Agenda” – a roadmap for global intergovernmental cooperation aimed at moving from “ideas to action.”

Reforming international finance and cooperation goes to the heart of how we “do capitalism.” If we are serious about the Common Agenda, then it needs to be complemented by a new economics of the common good.

The international monetary system that emerged in the aftermath of World War II undoubtedly represented an important innovation. But its structure is no longer fit for purpose. The challenges we face today – from climate change to public-health crises – are complex, interrelated, and global in nature. Our financial institutions must reflect this reality.

Because the financial system echoes the logic of the entire economic system, this will require a more fundamental change: we must broaden the economic thinking that has long underpinned institutional mandates. To shape the markets of the future, maximizing public value in the process, we must embrace an entirely new economics.

Most economic thinking today assigns the state and multilateral actors responsibility for removing barriers to economic activity, de-risking trade and finance, and leveling the playing field for business. As a result, governments and international lenders tinker on the edges of markets, rather than doing what is actually needed: deliberately shaping the economic and financial system to advance the common good.

This helps to explain why the world is making so little progress toward the Sustainable Development Goals, which are supposed to be achieved by 2030, and why, as action lags, the costs of meeting the SDG targets are rising. Reflecting the current system’s inability to respond promptly to crises, let alone prevent them, the SDG financing gap has increased from $2.5 trillion annually before the COVID-19 pandemic to between $3.9 and $7 trillion today. While compensating countries for the loss and damage they suffer as a result of climate change or other crises is essential, creating the kind of sustainable, inclusive, and resilient economies envisioned by the SDG agenda will require a proactive approach.

At the same time, many developing economies are struggling with large debt burdens, exacerbated by an international trade and monetary system that favors rich countries. To mitigate, prepare for, and prevent crises, developing economies need patient, long-term finance. The question is how to mobilize and direct it.

The answer must reflect the principle of the common good. The need for governments, international financial institutions (IFIs), and multilateral development banks (MDBs) to account for the public good is well established. It is widely agreed, for example, that governance is needed to manage digitization, guide the energy transition, and protect public health. But this consensus remains rooted in an ex-post mindset: the state intervenes only to correct market failures. Instead, state actors should be deliberately shaping – even co-creating – markets in which the common good is the primary objective.

ACTING EX ANTE
Such a system requires an outcomes orientation; collaboration and knowledge-sharing; equity, accessibility, and sustainability; and transparency and accountability. In each of these areas, the “how” is just as important as the “what.”

The first step toward ensuring that finance supports the common good is to establish a clear mission. The 17 SDGs – with their 169 underlying targets – offer an ideal framework. But governments, IFIs, and MDBs must articulate their objectives and commit to designing the tools, institutions, and financial instruments needed to advance them.

This will entail a fundamental rethinking of the “social contract” between the state and business, with governments (as well as IFIs and MDBs) using innovative incentives, partnerships, and conditions to align private finance with the public mission. For example, the German state-owned bank Kreditanstalt für Wiederaufbau (KfW) has promoted the green transition by issuing loans to the steel sector, conditioned on firms’ reduction of their resource use and greenhouse-gas emissions. Such interventions work not by leveling the playing field, but by tilting it toward the desired outcomes.

If done right, missions can shift the emphasis from financing particular sectors or types of firms to promoting ambitious goals that require cooperation among many sectors and types of firms. Rather than picking winners, the state would coordinate intersectoral responses among the willing.

Second, the COVID-19 pandemic highlighted the importance of broad-based cooperation – within andacross borders – to tackle global challenges. And yet, rich countries, aided by a flawed system of intellectual-property rights, hoarded vaccine doses when they became available, and subsequent efforts to support effective redistribution were far from adequate. By making accessibility and equity an explicit objective, this “vaccine apartheid” could have been avoided, and more than a million lives could have been saved.

Unfortunately, the world seems to be moving away from cooperation. Tensions between the United States and China are increasing the risk of financial fragmentation, and divergent investment strategies by regional MDBs are not helping matters. In fact, MDBs, which together hold $509 billion in assets and loans must play a central role in advancing mission-oriented policy, because they typically offer developing countries concessional financing. In its recent SDG Stimulus report, the United Nations estimates that MDBs could increase their loans by $487 billion – and nearly $1.9 trillion if governments paid in more capital. If these loans are to be leveraged for the common good, MDBs must incorporate shared objectives into their mandates.

More broadly, a common-good approach requires a comprehensive framework for global collaboration, coordination, and knowledge-sharing. What counts as collective intelligence must be clearly defined, and structures that impede its formation (such as IP regimes) must be reformed. Likewise, if countries are to invest in tackling shared challenges, they must be able to benefit from a more equitable global financial system. Specifically, they need sufficient administrative capacity to absorb international finance, design contracts with business that maximize public value, and ensure that the money is spent in ways that advance the common good. (Outsourcing capacity to intermediaries is not the answer.)

Third, conditionality is crucial for placing equity, accessibility, and sustainability at the center of contracts and financial instruments. The COVID-19 vaccine produced by Oxford and AstraZeneca was relatively cheap and easy to transport and distribute globally because it met the condition of being storable in a normal refrigerator. The Pfizer-BioNTech vaccine, by contrast, required expensive ultra-cold storage and transport when it was first approved.

Such examples demonstrate why conditionality must underpin initiatives like the World Bank’s Financial Intermediary Fund, which leverages public and private resources to strengthen pandemic prevention, preparedness, and response capacities at the national, regional, and global levels. To reach its potential, the FIF should commit to incorporating “common good” conditions – concerning, say, IP and pricing regulation – into its contracts, with the goal of ensuring inclusive governance and universal access.

Lastly, an objective-oriented common-good approach is impossible without an equitable, accountable, and credible financial system. But, because our current global financial system is designed to be reactive, it promotes short-termism and perpetuates inequality between North and South. Changing this will require, for starters, reforming the governance of the IMF and the World Bank, so that developing economies have a greater voice.

Furthermore, strengthening accountability and transparency mechanisms can help prevent misappropriation of funds, tax evasion, and fraud. The FIF can help here, by embedding transparency-related conditions into all of its partnerships with MDBs that involve investment in private-sector projects.

The UN secretary-general’s new report this week says that the “defining principle of the 2030 Agenda for Sustainable Development is a shared promise by every country to work together to secure the rights and well-being of everyone on a healthy, thriving planet. But halfway to 2030, that promise is in peril.” Fulfilling it requires getting international finance right, which will be possible only if we replace the market-fixing paradigm with a market-shaping mindset, centered on the common good.
FEATURED
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MARIANA MAZZUCATO

Writing for PS since 2015
55 Commentaries

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Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College London, is Founding Director of the UCL Institute for Innovation and Public Purpose, Chair of the World Health Organization’s Council on the Economics of Health For All, and a co-chair of the Global Commission on the Economics of Water. She is the author of The Value of Everything: Making and Taking in the Global Economy (Penguin Books, 2019), The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Penguin Books, 2018), Mission Economy: A Moonshot Guide to Changing Capitalism (Penguin Books, 2022), and, most recently, The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies (Penguin Press, 2023).

永續視角：國際貨幣系統是二戰後所建架構早已不合時宜
馬祖卡托（Mariana Mazzucato） 2023年05月15日 07:00:00

 

 

馬祖卡托（Mariana Mazzucato）

●倫敦大學學院創新暨公共利益研究所創始所長

●世界衛生組織全民健康經濟委員會主席

國際貨幣基金（IMF）和世界銀行最近舉行春季年會議，主辦單位稱此次季會釋出「信心和尋求合作意願的強烈訊息」。但華麗辭藻和良善立意，並不足以創造可適應二十一世紀情勢、真正具備兼容性與永續性的經濟，而是必須對結構做出更深層的改變。

這樣的理念有許多擁護者，如巴貝多總理莫特利提倡富裕國與貧窮國應建立「新共識」。同樣，聯合國秘書長古特雷斯則主張「共同議程」、一項全球跨國政府合作藍圖，目標是將「理想化為行動」。

改革國際金融與合作方式需要直搗「資本主義如何運作」的問題核心。落實共同議程必須搭配心繫共同利益的新經濟制度。

當今國際貨幣系統是在二戰後所重建，無疑具有劃時代創新意義。但是這樣的架構早已不合時宜。我們當今遇到的挑戰，如氣候變遷、公衛危機等，已經變得更加複雜、牽連更廣且更加全球化。因此，我們的金融機構必須與時俱進。

由於金融系統反映出整個經濟體系運作的邏輯，所以我們需要從基礎開始改變，我們必須跳脫過往基於制度規範的舊經濟思維。為了塑造迎合未來的市場，並在過程中盡所能追求共同利益，我們必須擁抱全新的經濟思維。

大多數當代經濟學觀念認為，國家及多邊行為體應擔負移除經濟活動阻礙、降低交易與金融風險、打造公平競爭的商業環境之責。因此，各國政府和國際債權人只願意改善市場邊邊角角的問題，而非真正做出市場需要的改變，也就是專注打造以共同利益為本的經濟與金融體系。
https://www.project-syndicate.org/commentary/new-economic-paradigm-common-good-market-shaping-by-mariana-mazzucato-2023-05