<Nb. i have updated this post to clarify my points>
The idea of building wealth is a commonly held consequence to our economic system, be it in wages or dividends, the wealth created through the economy is partly shared with individuals who accordingly support themselves.
However, there is also an argument that increasingly the economy is less about wealth creation but rather increased value. In essence, increasing the value of any asset increases its worth but in a way which largely benefits a select few owners and others within the system.
This is a rather abridged version of what Mariana Mazzucato (among others) has argued in a series of books. Building upon the broad impact of Thomas Piketty work on capital, she has argued that the state has had a key role in the development of economic sectors and systems which have created our most powerful companies today.
My interpretation of her work is that there is a role for the state to be included in the development of, economic systems through (partly) the ability of the state to invest to access some of the value extracted by firms. Because value is expressed mainly in dividends, this is a form of shareholder state capitalism. Rather than a position which holds that individuals rather than the state should be the stakeholders within the economic system.
Her current book ‘The Value of Everything’ is compelling but contentious. It reviews the global economy and its relationship with finance. It makes for a strong case that the increasing dominance of finance within the economy is undermining the potential for both the economy itself and the state to take a role to affect the market and challenge inequalities.
However, to me, the passage of public policy weighs heavily on her prescriptions. With the transfer of the policy burden on to households and away from the state, the idea that the state should be wealth owners raises questions about how this should be expressed back to households. If households have failed to accrue wealth but have been exposed increasingly to debt to make up for declines in wage growth – how could the state share out this value?
Would this value be expressed through lower taxes, better infrastructure or a combination of the two. Would local taxes reflect effectly as shares or units bought in the prospect of a dividend? Would this dividend work like national insurance used to, or more like a Stocks and Share Isa? Could it be targeted to accounts to fund future care needs, or invested back in economic development?
To an extent, these questions cannot be answered as it would depend upon how the value was secured within a given economy, industry or sector.
That said, the idea of local value ownership is compelling against the backdrop of the emerging industrial strategy. The idea that the state could invest to share in value creation is interesting for the potential endowments for local areas.
Aside from the complications suggested above, it would be a way of squaring the problem which is manifest in the current devolution argument and is a challenge since Total Place was first suggested – how to retain the benefits to compensate for the costs.
Instead of seeing public spending as a public good with an inevitable transaction cost (the money its lost) it would be a way of looking again at how public investment it used to underpin economic development and dynamism.
In relation to the Industrial Strategy – the key element is how local services can invest and secure value for their communities, use this to develop new industries but also underpin preparations for future economic shocks and impacts.
If nothing else, its a book that is worth reading in the context of our times.