The Role of a Mission-Oriented Framework for a Progressive Economy

The time to put forward ideas for how to build innovative, sustainable economies is now. If we get this wrong, we are only setting the groundwork for reactionary populism to rise further. Rethinking the state is a key piece of the broader vision for an inclusive, outcomes-oriented mission economy.¹ This project goes beyond just industrial strategy. It requires a different relationship between public and private actors and between capital and labor, and recognizes that growth has not only a rate but a direction. What it requires is a new narrative to describe what the state is for: to shape markets rather than just fix them. 

The market economy will not grow in a socially desirable direction on its own. Rather—as my book The Entrepreneurial State stressed over 10 years ago—a dynamic, capable public sector with a decentralized network of public institutions across the innovation chain can shape the direction of growth toward more socially desirable outcomes.² The public sector needs to develop competent and well-equipped national, regional, and local governments that can work together to deploy tools like outcomes-oriented procurement and strategic public investment. Unfortunately, the new government initiative so-called the Department of Government Efficiency appears to be a regurgitation of new public management theory—the idea that private-sector management practices should be applied to the delivery of public services, based on the assumption that the government’s attempts to make things better for people could actually make them worse. This contradicts what we need to do: invest in our public sector to develop the dynamic capabilities necessary to foster innovation-led sustainable and inclusive economic growth.³ And ultimately, this is not about the state doing everything itself—it is also about having the capacity required to work well with others, including private sector actors. 

Historically, governments have been most successful at catalyzing growth in pursuit of other goals when growth itself was not treated as the objective. The classic example is NASA’s mission to land a man on the moon: It generated innovations in aerospace, materials, electronics, nutrition, and software, which would later produce significant economic and commercial value.⁴ Had NASA’s objective been to boost economic growth instead of creating these technologies for such a specific reason, it likely would not have developed the same outputs. And again, this is not just about industrial strategy: NASA could not have achieved its mission without using all levers at its disposal to catalyze private-sector innovation, such as challenge-oriented procurement, a process by which the government acts as a proactive, mission-driven investor in regards to its purchasing. Here, the state exercised its role in market shaping rather than market fixing. 

Today, mission-oriented policymaking should be organized around collective social goals, such as responding to the climate crisis, biodiversity losses, and health inequities.⁵ These missions are not top-down planning exercises. Rather, they must embrace experimentation by relying on a process of entrepreneurial competition and discovery to find solutions to the problems at hand.    

An ambitious national mission strategy requires a new social contract that redefines the relationship between government and business in a symbiotic way—with reciprocity at the center of all partnerships. For example, public support for businesses should be made conditional on businesses doing their part to build a greener, more inclusive real economy.⁶ Rather than subsidizing specific sectors with few strings attached, the public sector should seek to open new market opportunities for willing businesses of all sizes, from all sectors. In doing so, they can hold these businesses to a high standard in terms of greenhouse gas emissions, wages, and reinvestment of profits in productive activities. For example, President Biden’s CHIPS and Science Act took a cautious first step in this direction by encouraging recipients of public funding for companies in the semiconductor industry to pay fair wages, engage in community consultations, and share profits with the taxpaying public.⁷ 

A successful mission-oriented strategy also must tackle the excessive rates of financialization in the economy. While profit rates are high globally, investment rates are not, owing to the increasing financialization of both business and finance. In the US and UK, only 20 percent of finance goes into the productive economy, while the rest flows into the more speculative finance, insurance, and real estate domain.⁸ Importantly, CHIPS funding also discouraged stock buybacks. 

In addition, labor must be at the heart of negotiating an effective green transition. For a green transition to get off the ground, it needs to engage with organizations such as trade unions from the start. Seeing as workers are the real value creators in the economy, their interests should be central to discussions about income and wealth distribution. Contract conditionalities are one example of this, as they can steer companies to reinvest their profits in better working conditions and pay. And, as the 2023 United Auto Workers’ strike emphasized, labor unions are critical in ensuring that the green transition results in reskilling and productivity increases that are matched by higher wages and safe working conditions.⁹

Also pertinent to today’s missions is the role of the digital economy. Governments should focus on governing innovation around areas such as AI in order to maximize the creation of public—not just private—value. As I have argued with Gabriela Ramos, assistant director-general for social and human sciences at UNESCO, given how rapidly AI is advancing, we need governments that can shape the next frontier of the technological revolution in the public’s interest.¹⁰ Doing so would help reduce the digital divide, create mutualistic innovation partnerships between the public and private sector, and mitigate the extraction of excessive rents by companies in the digital technology sector.

And of course, an industrial strategy agenda will only be lasting if it helps incumbents win elections over numerous voting cycles, and/or attracts transpartisan support. 

In sum, a progressive policy agenda must

1. Offer a new narrative about how value is created; 
2. Deliver a well-resourced welfare state and dynamic innovation state; 
3. Foster a new social contract where both the risks and rewards associated with public investments in the green transition are socialized; 
4. Drive forward the new institutional structures needed to make the most of collective wealth creation (such as a data commons); and 
5. Inspire the public, engage with citizens, and forge a clear link between industrial policy and improvements in people’s lives.¹¹

Ultimately, a winning mission-oriented strategy requires engagement across a wide range of stakeholders to secure political buy-in and ensure that the benefits of ambitious policies are shared.