Happy New Year! For governments + companies

Happy New Year!

I have good news for you: also in 2024 the end of the world is probably not going to happen. Human ingenuity and organisational talent are so strong that we can master the great challenges of our time, provided that governments and private companies work together. Over the Christmas holidays, I read two books by an economist who advocates better cooperation between governments and companies. Her name is Mariana Mazzucato. I’ve also read the latest book by one of her opponents, Johan Norberg, and I’ve been watching YouTube videos and reading articles by thought leaders such as Hans Werner Sinn and Gabor Steingart.

Based on these readings, reflections and conversations, I will try to describe the extent of the challenges and make it clear that cooperation between governments and private companies is necessary.

A strong state (thesis)

The photo above shows the New Year’s Eve fireworks on the London Eye. This firework shows that governments, in this case the London City Council, can prevent firework chaos by organising them well, and can convey optimism and enthusiasm for the future.

London is also the hometown of Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College. She is an inspiration and a voice for academics and practitioners who believe that a strong state must take the lead to tackle the great challenges of our time. Think of the energy transition. We need adequate infrastructure for energy transition, but also for transport and climate adaptation, e.g. higher dykes.

Mazzucato refers to Kennedy’s mission to put a man on the moon and bring him safely back to Earth as a shining example. In this moonshot mission, the US government formulated the goal, and public authorities and private companies worked together to realise the mission within a decade. Mazzucato proposes the following format for that:

1. why? Governments formulate clear missions. For example, CO2 neutrality by 2050 or an efficient, future-oriented infrastructure – measured in kilometers of congestion, for example.

2. what: cross-sector collaboration to achieve these goals.

3. how? A portfolio of projects in which public organisations and private companies innovate bottom-up.

Failing states (antithesis 1)

Germany’s climate policy is phasing out the use of fossil fuels. Hans Werner Sinn points out that this increases electricity costs disproportionately and unnecessarily weakens Germany’s competitive position. He calls it the green paradox. The aim is to reduce the use of fossil fuels. The reality is that oil companies continue to pump oil undiminished and German competitors on the global market receive the commodity at lower prices. As a result, Germany is weakening its industry and does effectively nothing for the climate…

With unilateral bans, governments show little understanding of how innovation works and overestimate their influence. Cell phones have caught on without the government having to ban landline phones. Banning fossil fuels on a global scale would make perfect sense. Governments could do more to achieve that.

What the Dutch government should put an end to are the tax breaks totalling around EUR 37.5 billion for companies that cause pollution, primarily in the form of tax reductions and tax exemptions for the use of fossil fuels and CO₂ emissions. These distort the level playing field for renewable energies.

Failing companies (antithesis 2)

The business case for carbon-neutral energy is not simple. The production costs for fossil fuels are many times lower than those for carbon-neutral energy. Many companies make use of government incentives in the early stages of technology development (TRL 1 – 2 = Technology Readiness Level 1 – 2), as they cannot achieve the energy transition on their own.

Governments are urgently needed in the development of clean energy. In the words of John Maynard Keynes, it is not a question of governments doing things better than private companies, but of governments doing things that otherwise would not be done at all.

Mission Economy (Synthesis)

If you look at the literature on the role of the state versus private companies, you will find that it often takes an ideological stance that either glorifies the state or private companies. However ideological discussions are not helpful. It’s not about government or business. Cooperation is needed to overcome the challenges.

We, the team at Mobilé 4 flow & innovation, support both governments and companies looking for practical solutions, far removed from any ideological discussion. We are experts in effective project management and innovation. This expertise fits in with levels 2 and 3 in Mariana Mazzucatos format (see above), where public institutions and private companies work together and innovate bottom-up.

We are currently working with both governments and companies to tackle challenges such as efficient infrastructure and the energy transition. One of our formats is the Innovation Dialogue, through which we can help initiate and accelerate collaboration between governments and companies.

With this in mind, we look forward to working together in the new year!

Willem de Wit
4th January 2024
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