Top economist schools Labour on public-private partnerships, rather than corporate handouts

Mariana Mazzucato, professor at UCL, has shown how Labour should be less willing to simply hand out public money to corporations. Instead, she says that subsidies and grants should come with a guarantee of public benefit.

‘Conditionalities’ — types of public benefit

There are various possibilities for making the most out of public money when it comes to partnering with the private sector.

Mazzucato outlines them in four categories. The first, ‘access’, means requiring that the resulting products or services that the government puts money towards are affordable to the population. The second, ‘directionality’, means mandating that the company follows desirable goals such as green power. The third, ‘profit sharing’ means that the company returns some of the profits to the government. This could go further, with the government taking a stake in company. The fourth, ‘reinvestment’, means that some of the company’s profits are reinvested into socially desirable activities.

Of course, a government could use the mandate and popular support of a manifesto to at least take basic essentials into public ownership, to deliver common good without relying on corporations. But if large corporations still dominate some sectors, equitable partnerships could be the way forward.

Mazzucato — No nonsense approach

The government can already use legislation to ensure companies act in a certain way. Failing that, public-private partnerships can be useful.

Direct subsidies are not the only way the government hands out money to corporations.

22% of The Union of Shop, Distributive and Allied Workers receive universal credit (UC). That means the public purse is essentially subsidising the profits of companies like Tesco, which makes £6,150 of profit per employee.

This parliament, the government is providing £2.5bn to the steel industry. And that’s without taking a stake or profit-sharing with steel companies.

Although, the government has said that Tata Steel, which is receiving a £500m grant, will have to transition to Electric Arc Furnaces (EAFs) to address climate change or share its profits with the government. This is an example of a conditionality as Mazzucato outlines, but alone is quite the piecemeal approach to the neoliberal system.

Featured image via UCL