Political leaders should back government spending to boost economic growth, according to an award-winning economist.
Winner of the 2014 New Statesman SPERI Prize in Political Economy, Marianna Mazzucato, claimed that the focus on cutting government debt had no basis in economic theory.
Marianna was speaking to a 100-strong meeting of the Holborn and St Pancras Labour Party on 23 June at Camden Town Hall.
She is the Chair in the Economics of Innovation at the Science Policy Research Unit at the University of Sussex and a permanent member of the European Commission’s expert group on Innovation for Growth.
At the meeting, she drew applause for criticising ‘pro-business’ policies and the ‘dysfunctional’ analysis on Labour’s defeat by senior figures like Tony Blair and Liz Kendall.
She said: “Evidence shows that countries that have growth have also had public investment and they invest during the boom and not just the downturn. Governments in successful economies have shaped the market. We need governments to do crazy things such as create the NHS or go to the Moon.
“The UK has a productivity problem due to a lack of public and private sector investment. The International Monetary Fund has woken up to the fact that austerity doesn’t work.”
She said that innovation in new technology created by companies in Silicon Valley depended on large sums of public money.
She also pointed to the US government forcing telecoms giant, AT&T to invest some of their profits in research and development. It created Bell Laboratories, one of the world’s leading, innovative private sector companies.
Italy has had a low public sector deficit for the last 20 years but has a rising debt compared to the size of its economy.
While, evidence showed that cutting business taxes does not lead to increases in investment or growth, she explained.
She said: “There’s no relationship between deficit, debt to GDP and growth. It is amazing that this has not been mentioned.
“Governments need to learn how to build public, private partnerships and to make demands on business.”