The value of things. Who produces and who gains in the global economy

Mariana Mazzucato and Manuel Muñiz

The Rafael del Pino Foundation organises, on 11 April 2019, the dialogue "The value of things. Who produces and who wins in the global economy" with the participation of Mariana Mazzucato and Manuel Muñiz.

Mariana Mazzucato is Professor of Innovation Economics and Public Value at University College London (UCL), where she has established the new Institute for Innovation and Public Purpose. Mazzucato has advised policy makers around the world on growth and innovation issues and is currently a member of the Scottish Government's Council of Economic Advisers, the World Economic Forum's Innovation Economy Council and the Finnish Innovation Fund Advisory Panel (SITRA). She is also undertaking a number of research projects, some funded by companies such as NASA. She is the author of the bestselling book The Entrepreneurial State (Anthem, 2013; Public Affairs, 2015), which is on the Financial Times' 2013 Books of Any list. She has also been awarded the 2014 SPERI Prize for Political Economy and the 2015 Hans-Matthöfer-Preis. In 2013 she was named one of the top three thinkers on innovation in the New Republic.

Manuel Muñiz
is the Dean of IE's School of Global and Public Affairs and the Rafael del Pino Professor of Global Transformation. He is also the Director of IE's Center for the Governance of Change, an institution dedicated to the study of the challenges posed by the acceleration of technological and social change in the public and private sectors. Dr. Muñiz's academic work focuses on the fields of innovation, disruption, political economy, and regional and global governance. Between 2015 and 2017 Dr. Muñiz directed the Transatlantic Relations Program at Harvard University. Since 2017 he is Senior Associate and one of the promoters of the Project on Europe and the Transatlantic Relationship at the Harvard Belfer Center for Science and International Affairs. Throughout his career, Dr. Muñiz has advised governments and international organisations such as the United Nations, the G20, the European Commission and the Spanish Department of Homeland Security. He has also published essays or been interviewed by publications such as The New York Times, The Washington Post or Project Syndicate. Dr. Muñiz holds a Law Degree from the Complutense University of Madrid, a Master in Stock Exchange and Financial Markets from the Instituto de Estudios Bursátiles, a Master in Public Administration from the Kennedy School of Government and a PhD in International Relations from the University of Oxford. He has also been a David Rockefeller Fellow of the Trilateral Commission and a Millennium Fellow of the Atlantic Council. In 2016 he was named by Esglobal as one of the 25 intellectuals who are redefining Ibero-American thought.


On 11 April 2019, the Rafael del Pino Foundation hosted a dialogue with Mariana Mazzucato, Professor of Economics of Innovation and Public Value at University College London and founder and director of the Institute for Innovation and Public Purpose, on the occasion of the presentation of her book of the same title. To explain why she wrote the book, Mariana Mazzucato indicated that she was surprised that, the day after the Labour Party lost the 2015 elections, Tony Blair explained the defeat in an article because they had not reached the wealth creators. Labour does not have a complete conception of where wealth comes from and, according to the article, lost because it did not support entrepreneurs. Much of the inequality Piketty talks about comes from taxation. I'm interested in the narrative, that lobbying effort that went on when these changes in tax systems took place. Many of the things that are done are done in the name of wealth, for example, the pharmaceutical sector said that what would stimulate the creation of value would be a reduction in taxes and the government did so when, with the patent law, there is no need to reduce taxes because it guarantees a twenty-year monopoly. All this captures the value narrative very well, with only a few interests in mind. The economics profession needs to talk more about value so that value extraction becomes more difficult to achieve in the name of value generation. What is new about this in modern economics is that value extraction occurs in the name of wealth generation. What we need to do is to bring value back into the economic field so that people feel free to debate. Plato said that storytellers rule the world. The stories we have been told about value are one of the most important sources of inequality in many countries. The chairman of Goldman Sachs said that the bank's workers were the most productive and most valued in the world. Basically, the way we think about value contributes to structural features of the economy. In the 17th century, trade was the origin of value. In the 18th century, value was produced by farmers, as distinguished from the dead hands that appropriated that value. In the 19th century, labour was seen as the source of value because it was the period of the industrial revolution. Adam Smith talked a lot about the division of labour and its effect on productivity. Classical economists had a notion of objective value. The big revolution that took place in modern economic thought was that they started to pay more attention to subjective features of value. This idea that different agents have subjective preferences and what they do is to maximise their individual desires. This change is something that most economics students are unaware of. By emphasising subjective characteristics, it makes it more difficult to distinguish between value creation and value appropriation. In the past, the emphasis was on a price-determining theory of value. What we have today is a theory of supply and demand. Suddenly, much of what is included in GDP is through rent, but without distinguishing between creation and appropriation. Classical economists referred to rent as income that you didn't have to work for, which is something different from profit. It was obtained by moving things around. In modern thinking, rent is simply an imperfection in prices. This is a fundamental difference that many theorists have failed to understand. We sometimes confuse market with business, or market with enterprise. Karl Polanyi says that the market is the result of how the public sector, the private sector and society interact. Without trade unions we would not have Sunday rest or eight-hour days. It is important to analyse the structure of the market, because how the market is structured conditions the behaviour of firms. For Adam Smith, the free market was not the free market of the state, but the free market of rents. What does this mean for people? It has to do with the effects of how we look at production, or the effects of the financial sector, which has grown much larger than the overall economy; or social benefits. These last two were not included in the national accounts before. When we look at it, we should ask some fundamental questions, for example, where do the funds from the financial system go, because only 10% of them go to the real economy. What does this money do? Does it go back into a financial circle? How you think about corporate governance is also very important, because of the problems that occur when companies maximise shareholder value, when they only care about their share price. All this has a lot to do with who are the risk-takers in the economy. This has been used to justify extractive practices. So there needs to be a quantitative analysis of who is doing what, what risks they are taking and whether or not they are commensurate with the rewards. Goldman Sachs workers are said to be the most productive in the world. Public school teachers in countries where public education is free cannot say so, because of how national accounting is done. The way we measure the results of free education does not allow this because it does not take into account the value that is created by a public education system. It is not possible to document this value because only the price is taken into account when valuing things. On the other hand, what the financial sector earns is disproportionate to what it produces, because practices have prioritised the appropriation of value, rather than its generation. Corporate profits are not being reinvested in the economy. In Europe there are two trillion euros that are reported, but there are three trillion that are being used by companies to buy back shares to invest in stock options. We are rewarding that kind of behaviour. This practice of maximising shareholder value is what justifies this practice, but it is one of the main sources of the problems we are experiencing today with regard to workers' wages, skills and other issues related to employment and automation. The introduction of machines may eliminate jobs, but if the profits are reinvested in other sectors of the economy, then jobs are created there. The problem, therefore, is the lack of reinvestment in the economy because of this financialisation of companies. This is part of the problem we have today with professional qualifications, because qualifications are formed within the company, they are an endogenous product of investments. Public sector investment, and there was a lot of it in Silicon Valley, should be made on the condition that the profits are reinvested back into the economy, rather than going into the financial cycle. There should be more conditionality. This used to be the case, for example, with ATT, which was forced by the government to reinvest its profits if it wanted to maintain its monopoly in telecommunications in the US. Imposing conditions helps to limit the excesses of these companies. As for the financial sector, the most basic things that can be done have not been done, for example, a financial transaction tax. Even more structured ideas, for example, what kind of financial institutions could be created, what kind of financial ecosystem we need to be able to ensure long-term growth. The United States could never have had Silicon Valley without long-term financing from government institutions. The issue is how to structure these financial institutions so that they guarantee and represent the public interest. Social democratic redistribution policies are very important, but they are not being pursued ambitiously. As long as there is no wealth creation, we will not be able to redistribute. The solution is not to tax the rich, but to analyse where the value comes from. For example, we need to question why technology companies have free access to data. For example, we must also ask how it is possible that pharmaceutical companies have so much power over the prices of medicines when they are goods created collectively, with 70% or 80% of public money invested in the laboratories. The notion that shareholders are the only ones who face risks must also be challenged.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.