myAIPMCOVID-19 and public-sector capacity
Mariana Mazzucato, Rainer Kattel | Oxford Review of Economic Policy
Abstract
The paper argues that to govern a pandemic, governments require dynamic capabilities and capacity—too often missing. These include capacity to adapt and learn; capacity to align public services and citizen needs; capacity to govern resilient production systems; and capacity to govern data and digital platforms.
I. Introduction
The COVID-19 pandemic presents a massive challenge to governments world-wide—from the provision of income support to citizens and aid to struggling companies to the strengthening of frontline health services. It also requires an unprecedented level of collaboration between nations—from the race for a vaccine to learning how to test and trace. One of the biggest lessons is that state capacity to manage a crisis of this proportion is dependent on the cumulative investments that a state has made on its ability to govern, do and manage. While the crisis is serious for all, it is especially a challenge for countries that have ignored those needed investments in what we can call the ‘dynamic capabilities of the public sector’ (Kattel and Mazzucato, 2018).
In the pre-COVID-19 world, governments were increasingly turning their attention to how to tackle ‘grand challenges’ or ‘wicked issues’ such as climate change, demographic challenges, and the promotion of health and wellbeing (Mazzucato, 2018b,c). Behind these challenges lie the difficulties of generating sustainable and inclusive growth. Policy-makers increasingly dedicated their attentions to not only the rate of economic growth, but also its direction (Mazzucato and Perez, 2015). Tackling grand challenges requires revitalizing private and public investment, innovation and collaboration. It is not about more state or less state, but a different type of state: one that is able to act as an investor of first resort, catalysing new types of growth, and in so doing crowd in private-sector investment and innovation—these are in essence functions about expectations about future growth areas. This requires a new form of collaboration between state and business, and is more about picking the willing than picking winners (Mazzucato, 2013).
COVID-19 has magnified and accelerated the need for challenge-led policy frameworks. The pandemic and its aftermath offer an opportunity to rethink our (economic) policy foundations and to align them with the needs of the twenty-first century. The COVID-19 crisis has underlined the importance of public-sector capacity and capabilities to handle emergencies, and the particular capabilities required to solve societal challenges—most visibly the protection of public health. The pandemic has also, however, underlined the importance of public sector as market shaper—not only market fixer (Mazzucato, 2016).
The public sector bears responsibility for the long-term resilience and stability of societies, and for shaping public outcomes through policy-making and public institutions. Public-sector capacity is typically defined as the set of skills, capabilities, and resources necessary to perform policy functions, from the provision of public services to policy design and implementation (Wu et al., 2018).1 We argue that the pandemic has shown the areas in which capacities are critical for governments in the aftermath of the crisis and in rebuilding economies and societies: namely, capacity to adapt and learn; capacity to align public services and citizen needs; capacity to govern resilient production systems; and capacity to govern data and digital platforms.
Fundamentally, government intervention is only effective if the state has the corresponding capabilities to act. Far from retrenching to the role of being at best a market fixer and at worst an outsourcer, governments should invest in building their muscle in critical areas, such as productive capacity, procurement capabilities, symbiotic public–private collaborations that genuinely serve the public interest, and digital and data expertise (while safeguarding privacy and security). History shows that without this, governments are not even able to devise good ‘terms of reference’ for the companies to which they outsource (Schick, 2001).
In this article we briefly summarize how governments have responded to the pandemic and then discuss the implications for public-sector capacity in the post-COVID-19 world. We argue that to prepare for future pandemics, governments must build dynamic capabilities in the following areas: capacity to adapt and learn; capacity to align public services and citizen needs; capacity to govern resilient production systems; and capacity to govern data and digital platforms.
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COVID-19 and public-sector capacity, Mariana Mazzucato, Rainer Kattel, Oxford Review of Economic Policy, 2020
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