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22 February 2023

Mariana Mazzucato: “Consultancies depend on weak governments”

The economist and author of The Big Con reflects on why capitalism is broken.

By Megan Gibson

After the Brexit referendum, the partygate scandal, Liz Truss’s mini-Budget or any number of the brazen political acts carried out by successive Tory administrations in recent years, it’s hard to imagine that anyone believes that governments lack confidence. But that’s precisely the argument that Mariana Mazzucato, the economist and professor at University College London (UCL), makes in her new book, written with Rosie Collington, The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilises our Governments and Warps our Economies.

The book traces the rise of the consultancy industry, looking at how companies such as McKinsey, Boston Consulting Group, PwC and Deloitte have taken over many of the crucial functions of government and, in the process, left behind an “infantilised” public realm. After decades of relying on consultants for everything from crafting policy to handling crises and streamlining functions, governments have been drained of any faith in their own ability to actually govern. And not without good reason, Mazzucato told me when I met her in her high-ceilinged office at UCL. “Along the way we’ve actually outsourced all the capacity and capability within governments to others,” she said.

Even worse, these consultants – the supposed experts who are repeatedly called in, at great expense to the taxpayer – often don’t have the capacity and capability to solve the problems either. Mazzucato argues that they rarely have any specific expertise in the areas in which they are consulting on.

For example, during the Covid-19 pandemic, Deloitte won lucrative government contracts – £1m per day – to create and run the NHS’s Test and Trace programme. The scheme cost billions but Test and Trace was plagued with problems and deemed a resounding failure as a Commons inquiry found that the programme had been “overly reliant on expensive contractors”. In The Big Con, a source who worked on the government’s pandemic response recalled “loads of wandering Deloitte people” who spent “time asking really basic questions that we had to respond to, taking our attention away from actual work”.

[See also: How consultancy bleeds Britain dry]

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But it’s not just a UK issue. In 2021 the Australian government paid McKinsey A$6m ($4.1m) to help develop its net-zero strategy. But when McKinsey published its strategy report, the modelling that the consultancy had used was criticised for failing to even reach the net-zero targets to which the government had already agreed. One politician referred to the report as a “scamphlet” while another called it “a recipe for climate collapse in Australia”.

The problem isn’t just that McKinsey failed (“Anyone can fail,” said Mazzucato. “I fail as an academic when I try to publish an article if it’s not accepted in a journal”). It’s also that the Commonwealth Scientific and Industrial Research Organisation, an Australian public science agency, had applied for the contract but lost out to McKinsey – a firm that also works with clients such as BP, ExxonMobil and Gazprom. “What was the thinking that led [the Australian government] to outsource its climate strategy,” said Mazzucato, “paying $6m to McKinsey instead of relying on its own intelligence and maybe using McKinsey on the side?

“The point of the book is not to say we don’t need any consulting or advising, that’s always a good thing – nurses can consult, doctors can consult; academics consult all the time,” continued Mazzucato, who has herself worked with many organisations throughout her career including the United Nations, Scotland’s Council of Economic Advisers, and the Organisation for Economic Co-operation and Development. Indeed, after our interview had ended she cheerfully explained that she was about to join a call with “Ted” – Tedros Adhanom Ghebreyesus, the director-general of the World Health Organisation: Mazzucato is the chair of its Council on the Economics of Health For All.

“The problem is when the consulting industry is built on a business model, which almost by definition needs desperate governments,” Mazzucato told me. For many in the industry, “there’s no incentive to actually strengthen and make independent the government entity you’re working with, because then you won’t have the follow-on contract”.

Mazzucato is an energetic and persuasive speaker; she not only makes compelling arguments, she can plant a vivid picture in her audience’s minds. “I believe we need both public and private actors. But when that partnership ecosystem is a parasitic, predator/prey one we have a problem. Just like with couples, we would never say just because someone has a partner, it’s a good thing – many partnerships end in divorce.”

[See also: A reckoning for Silicon Valley]

An Italian-American, Mazzucato was born in Rome in 1968 and moved to the US at the age of five when her father, Ernesto, became a nuclear fusion physicist at Princeton University. She has lived in the UK since 2000 and in 2017 she became the founding director of UCL’s Institute for Innovation and Public Purpose, which works to embed the concepts of public value and purpose in political thinking through policy ideas. She lives with her husband, the Italian film producer Carlo Cresto-Dina, in Camden, north London.

Though writing about the consulting industry is relatively new territory for Mazzucato, she told me that her new book “was in some ways a very natural progression from my previous books”. At 54, Mazzucato has spent her career arguing that, essentially, “capitalism is broken because we have different ways to do capitalism and we’ve forgotten that. So we’ve become much less ambitious in terms of how we govern all the different actors in the system.”

Her first book, The Entrepreneurial State (2013), examined how the US’s strong economy was due to public investment in technology, rather than an especially successful private sector. The 12 key technologies behind the iPhone for instance, such as the touch-screen, the Global Positioning System and the internet itself, were all the product of state-funded research. Her 2018 book, The Value of Everything, argued that in order to transform modern capitalism, we urgently need to rethink who is responsible for value creation and where wealth comes from. In 2021 she published Mission Economy, which posited that the state needed to take more risks for the sake of innovation. (In recent speeches, Keir Starmer has adopted her language of “national missions”.)

Mazzucato has previously summed up the main theme of her work as not only the idea that capitalism is broken – she told me that “it is” – but also the idea that society has under-imagined the role that the state can and should play. “We can reimagine the state, not just in terms of fixing markets, but actively shaping and co-creating markets. We can reimagine the role of the private sector, not just to maximise shareholder value, but maximising stakeholder value.”

The consulting industry in its present form is no small obstacle to that goal. A major part of reimagining what the state can do, Mazzucato argued, is radically changing our relationship with consultants. “The history of capitalism is actually a history of consulting,” Mazzucato said. “Many of the different problems that we know we’ve had in the history of capitalism – such as the privatisation trend; the financialisation trend of companies overly using share buybacks; the downsizing trends, where in the 1980s there was a lot of advice given to companies to downsize and also to weaken trade unions – consulting companies were often behind them.”

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This article appears in the 22 Feb 2023 issue of the New Statesman, The Undoing of Nicola Sturgeon