The need for investment-led recovery for Europe

This is a guest post, co-authored by Giovanni Cozzi, economic advisor at the Foundation of Progressive European Studies (FEPS) and Stephany Griffith-Jones, financial markets director, Initiative Policy Dialogue (IPD), Columbia University, in which they are argue that more investment could lead to a significant decline in the government debt ratio of southern Europe.

There is growing consensus that it will prove impossible to restore growth on a sustained basis in the EU without stimulating investment.

The European Council of Heads of Government firmly asserted that the Union needs to take bold steps to increase investments and create jobs. They called for immediate mobilization of the right mix of private and public funding. Read more

How to forward a new golden age

This is a guest post by Carlota Perez, Centennial Professor of International Development at the London School of Economics (LSE) and author of Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages in which she responds to arguments set out by Bank of England chief economist Andrew Haldane at the launch of the Mission-Oriented Finance this week.

Andy Haldane is one of the most brilliant and original minds in analysing the complexity of today’s finance and the policies that could shape it. It is an honour to be his discussant and indeed a challenge. Read more

The importance of patience and the danger of information overload

That Andrew Haldane, chief economist of the Bank of England, believes that short-termism is a bad thing for markets is hardly news.

He’s published numerous papers on the subject of patience in markets and the danger of short-sightedness, speaking frequently about the need to encourage long-term thinking in finance.

But what was fascinating about his speech at the mission-oriented finance launch party this week – where he once again outlined this argument — was not only the breadth and range of the colourful anecdotes he provided to make the case for long-termism, but also the concerns he raised about information overload. Read more

When are monopolies a good thing?

Here’s the proposition. Rule by committee isn’t a good thing.

In the worst-case scenario it leads to the “Lawrence of Arabia” problem, wherein you spend so much time trying to figure out how to rule well, you fail to notice when your sovereignty is being stripped away from you under your nose. Alternatively, it leads to the phenomenon of “settling”, wherein the pressure of arriving at a consensus allows all sorts of sub-optimal scenarios to creep in.

It’s probably not a coincidence, consequently, that great leaps forward tend to be associated with charismatic visionaries who, thanks to a near hypnotic effect on colleagues and associates, end up attracting the sort of approval and following that allows them to sculpt the future as they, not others, see fit.

Once in charge these guys tend to rule absolutely, deploying their wealth and power – often generated by early career triumphs – to implement the change they believe in. A lot of time, their greatest directional successes come as a result of forming monopolies or near monopolies in the areas they operate in. Read more

Patient capital is a virtue

This guest post, part of FT Alphaville’s Mission Finance series, is by William Lazonick, Professor of Economics at the University of Massachusetts Lowell where he directs the Center for Industrial Competitiveness. He argues that stock buybacks and dividends are the mechanism by which financial interests, including top executives, reap gains that should be going to taxpayers and workers.

Whenever financial markets get hyperactive (the norm rather than exception over the past three decades), we hear calls for “patient capital” that can fund long-term investment in the productive capabilities that are essential for a prosperous economy. Read more

Safeguarding the future with public endowments​ for research

We routinely use our smart phones without realizing the research and development that produced it: the transistor, integrated circuits, wireless communication, the laser and optical communication, the internet, the Unix operating system, and so on. None of these existed during World War II. But four decades of post-war research created the foundation for today’s products (as Mariana Mazzucato has shown in her book The Entrepreneurial State).

Can we learn any principles about research and how it should be funded as a result of this example? Read more

Development banks good in crises, even better all other times

This is a guest post by Luciano Coutinho, CEO, BNDES, Brazilian Development Bank for the FT Alphaville Mission Finance series, in which he argues that development banks act as system stabilisers for the real economy.

The 2008-2009 crisis revealed to the world what was known at a national level: qualified public financial institutions are of extreme importance when private credit slows down. Delicate financial situations require immediate and efficient actions and the recent countercyclical success of development banks (DBs) shows to what extent these institutions behave as system stabilisers in times of credit contraction. Read more

De-financialising the real economy

Mariana Mazzucato organiser of this week’s Mission-Oriented Finance conference in London and RM Phillips Professor in the Economics of Innovation, SPRU, University of Sussex, is attempting to rescue the idea of The Entrepreneurial State, debunking myths about private and public sector innovation. Here is her latest contribution to the Mission Finance series at FT Alphaville.

Today our mission-oriented finance for innovation conference begins at the Houses of Parliament. Vince Cable, UK secretary of state for business, innovation and skills will be kicking off this evening arguing that a serious commitment to funding innovation means doubling innovation spend. Read more

Mission Finance: why money matters – Randall Wray

The second guest post in this series comes from L Randall Wray, professor of economics at the University of Missouri-Kansas City. If the first was a call to arms for role of the state as entrepreneur, this is another big idea: we need to rethink the role of money in order to recognise the true challenge for finance.

Our Mission Oriented Finance conference explores how to direct funding toward what Hyman Minsky called “the capital development of the economy”, broadly defined to include private investment, public infrastructure, and human development.

But to understand how, we need to understand what money is and why it matters. After all, finance is the process of getting money into the hands of those who will spend it. Read more

Mission Finance: starting to think big again – Mariana Mazzucato

This is the first guest post in a series to coincide with the Mission Oriented Finance Conference starting in London on Tuesday. Mariana Mazzucato organiser of the get together and RM Phillips Professor in the Economics of Innovation, SPRU, University of Sussex, is attempting to rescue the idea of The Entrepreneurial State, debunking myths about private and public sector innovation. It is time, she writes, for big ideas. To think them will require loosening some intellectual chains.

Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. …I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

Keynes – The General Theory of Employment Interest and Money, 1936 (p. 383) Read more