It is evident that there is a return of statism in the idea of a post-pandemic market economy. It exists not only in the concrete action of governments, but also in economic thought. On the one hand there is Francis Fukuyama who says the State is needed to get out of the pandemic crisis, on the other there is Marianna Mazzucato who, in unsuspecting times, underlined the fundamental role of governments of launching the great economic processes of our time.
Now the scholar of Italian origin, consultant to Prime Minister Giuseppe Conte at Palazzo Chigi and appreciated by the Five Stars and Leu, is going so far as to hypothesize a shareholder state in the name of a citizen's dividend which should distribute the future earnings of the support and rescue interventions implemented by the institutions to respond to the crisis among the whole community. Until now the losses of companies have been socialized, today we need to think about sharing out the possible gains that could result from the bailouts. But who would pay for the losses in the event of bankruptcy? The State or the citizens who invest?
Marianna Mazzucato explains her ideas in an article on the "New York Times" of 1 July 2020 entitled We Socialize Bailouts. We Should Socialize Successes, Too.
Regardless of the difficulty of carrying out a similar project, being all shareholders of something would strengthen the sense of citizenship and belonging, i.e. civil society. Something that is needed as a counterweight to the deep ramifications of the state in the post-pandemic world. But that doesn't erase many perplexities.
Here is what Mazzucato writes.
The lesson of the 2008 crisis
When the economy is in crisis, Who do we turn to for help? Not to companies, but to governments. But when the economy thrives, we ignore governments and let corporations absorb the profits.
That was the story of the 2008 financial crisis. A similar story is repeating itself today. Governments have spent billions on stimulus packages without creating the conditions — such as a dividend for citizens, which would offset public investment — to transform short-term interventions into tools for generating an inclusive and sustainable economy.
This is the heart of what fuels inequality: we socialize the risks but we privatize the benefits. In this vision, only businesses create value; governments simply facilitate the process and correct “market failures”.
The coronavirus crisis offers the possibility to change this dynamic and ask for a better solution. But to do that, we need to redefine the very concept of value. Until now, we have confused price with value — and this confusion has driven inequality and distorted the role of the public sector.
A correct idea of value
Our idea of value has been shaped by politicians and economists who see it as something related to exchange. Essentially, only what generates revenue has value. This approach overvalues goods and services that have a price — which, in turn, form a country's gross domestic product, the engine of public policy.
This conception has perverse effects. A coal mine that puts carbon into the atmosphere increases GDP, and therefore has value (the pollution it produces is not taken into account). But the care of children by grandparents does not produce remuneration, and therefore has no value.
This mechanism also works on an individual level. People who make a lot of money seem to be the most “productive”.
In 2009 Lloyd Blankfein, the chief executive officer of Goldman Sachs, said that the bank's workers are "among the most productive in the world." He said it just a year after the 2007–08 financial crisis; just a year after the bank benefited from a $10 billion government bailout (later repaid).
Price or payment is not the best measure of value. Governments create value every day, from which citizens and businesses benefit. In fact, they benefit from "basic" infrastructures such as highways, education and other essential goods and services, but also from the technologies that shape our economy.
The role of the public
Public funding of research and development has led to innovations like the GPS technology that powers Uber and the very internet that makes Google's existence possible.
The same goes for many major drugs. They have received high-level research funding from the government. This also applies to renewable energy sources such as solar and wind, which are also financed by taxpayers in their development. Indeed, fracking also owes a lot to the public.
That's why something like a citizen dividend—where citizens own equal shares in a fund tied to national wealth—would transform the story of government intervention and create a more equitable economy.
It would give the population a direct share in the value that a country produces, it would help create a better system: Public investments for businesses and research would also produce bonuses for citizens. That is would help reduce inequality — and to socialize both the risks and the rewards.
The example of Alaska and California
Since 1982, for example, Alaska has paid its citizen's dividend through an oil-based Permanent Fund. The state of Alaska is among the fairest in the United States.
And in California, Governor Gavin Newsom he called for a “data dividend” for citizens status as a result of the use of their personal data. A fair request for a state where there are tech billionaires who could not have made a fortune without public investment.
A citizen dividend
A citizens' dividend (sometimes called a "public wealth fund") is a way to rebalance our economy. Equity participation is another tool. When the government bails out private companies or lends them public money, it should structure these interventions so that public interests are protected and the gains are proportionate to the risks.
Citizens could then take shareholdings in companies that receive state support with a high risk component, such as the bailouts linked to the coronavirus package.
It's not a new concept. During the Depression, the US government had equity interests in companies through the Reconstruction Finance Corporation, a quasi-independent government agency that helped finance the New Deal.
A venture capitalist with social goals
Is it socialism? No, it's simply recognizing that the government, a prime investor, can benefit from thinking like a venture capitalist around social goals, such as the green economy. Rather than blaming the government for bad investments, the real question is how to make the country benefit from the good ones?
For example, during the Obama administration, the Department of Energy has made various investments in green companies including $500 million in secured loans to solar company Solyndra and $465 million to Tesla. When Solyndra went bankrupt, taxpayers bailed it out. But as Tesla grew, taxpayers weren't compensated.
Worse, the administration structured Tesla's loan so that the government could get three million shares of the company if Tesla didn't repay the loan. If he did the opposite, that is ask Tesla to pay three million shares if he repaid the loan, the government would cover the loss of Solyndra and have more funds for future investment.
The government needs to have a firmer bargaining hand to ensure that economic growth works for its citizens as well. Grants and loans should be conditional on conditions that align corporate behavior with the objectives of society as a whole.
Today that means companies receiving coronavirus assistance must pledge to keep workers, a reduce CO2 emissions and not to resort excessively to the buyback of treasury shares.
The price at the service of value
This has already happened. In Denmark, the government has offered companies generous wage compensation on condition that they do not make redundancies for economic reasons; he also refused to bail out companies in tax havens and prohibited the use of funds for dividends and stock buybacks. In France, airline bailouts were conditional on meeting ambitious emissions targets.
Finally, it should be the price that is put at the service of valuerather than the other way around. The race for the coronavirus vaccine offers a good opportunity. To begin with, the price that citizens pay for medicines does not reflect the huge government subsidy that pharmaceutical companies receive.
Covid 19 vaccines
In 2019, contributions to medical research exceeded $40 billion. For example, Gilead asked for $3.120 for each course of treatment of its Covid-19 drug, remdesivir, which is being developed with an estimated $70 million in U.S. taxpayer grants.
Il price of Covid-19 vaccines must take into account the public-private partnerships underpinning publicly funded research. We must also ensure that patents on Covid-19 vaccines are shared and that the vaccine is universally available and free.
really socializing the risks and benefits and impact inequality, just start with simple questions: what is value and how is it created? How can we socialize or achievements whatever they are?
