Last week economist and iconoclast Mariana Mazzucato completed a series of talks and panel discussions in Sydney and Melbourne following on from her visit in 2018.  Best known for her book the Entrepreneurial State and mission-oriented Government industry support, she raises some good points about how Governments provide and focus industry support. Her key objection is that drip-feeding funding through R&D tax incentives and competitive grant programs to a wide range of disconnected businesses across different sectors has limited impact on advancing national technology capabilities and skills or knowledge diffusion.  At a macro-level this may be right, even if  access to Government funding at a firm level makes an obvious difference.  Mazzucato suggests Government funding is better allocated to a small set of well-defined missions like the US Apollo Moon program.

Mazzucato argues that Government funding is needed to catalyse investment in new industries where private sector investment is seen as high-risk with uncertain returns over time. She sees Government as the market-maker.   Her second point is that Government investment in these big missions needs long-term support.  As a yardstick, the United States Apollo program 1960-1973 cost US taxpayers the equivalent of USD$257Bn (2020 dollars).  The robotic lunar program and its Project Gemini, Apollo’s predecessor program cost another USD$280Bn, a total of USD$537Bn.  Or USD$41Bn per year for 13 years, approximately 2.5% of average US GDP in the 1960’s. Big money over a long time.

Australia’s National Reconstruction Fund, the Clean Energy Finance Corporation and the Medical Research Future Fund do not spend anything like $41Bn per year, let alone every year for 10 years. The results of this program spending are much less than is needed and a drop in the ocean in our national economy (AUD$1.35Tr, 2023).

How committed Australian and State Governments are to business-led economic growth in the way Mazzucato describes?  On this score the jury is out, some would assert permanently.  What institutional barriers prevent effective Government support might be a more practical inquiry.  Are Government portfolios and their associated Departments organised to support economic growth?  Take Agriculture.  The development of this sector from food production to consumption is spread across many Ministerial portfolio’s.  In November 2023, The House of Representatives Standing Committee on Agriculture released a Report into Food Security in Australia and recommended that the Federal Government –

1.  Develop a comprehensive National Food Plan providing for the food security, including nutritional security, of the Australian population.
2.  Appoint a Minister for Food, within the portfolio of the Prime Minister and Cabinet, with responsibility for the development and implementation of the National Food Plan  and accountability for achieving plan outcomes and targets.
3. Appoint a National Food Council, made up of industry and community experts, to advise the Minister for Food on matters pertaining to the food system, and support the development, implementation, monitoring and evolution of the National Food Plan. The National Food Council is to be supported by expert committees covering sectors including but not limited to production, transport and logistics, retail, health and nutrition, defence, education, access to food, environmental sustainability, waste management and Indigenous communities.

Another House of Representatives Standing Committee also reporting in November 21023 recommended a similar approach for advanced manufacturing.

Both House of Representatives Standing Committees recognise that how Government organises itself to support the development of key sectors of the economy needs updating.

Who knows how these recommendations might be implemented. However, we do know that matrix-style accountability rarely works without a fundamental realignment of ministerial  responsibilities and Cabinet portfolios.  Yes, Minister.

 

 

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