If we want growth today to be more innovation-driven, more inclusive and more sustainable, then we need a more active state, not a less active one. Yet we still hear the dogma that we should just fix market failure by focusing on science and infrastructure, and to "level the playing field."
Fixing markets isn't enough. We have to actively shape and create them and tilt the playing field in the direction of the growth we want.
What is needed is both a New Deal in terms of mission-oriented investments but also a new deal in terms of a modern social compact - one that allows the state to socialize not only risks but also rewards. Maybe then innovation-led growth will also become growth that includes all of us.
Shareholder value theory - the destructive idea that companies should be run solely for the benefit of shareholders - has led to financialized businesses that do not invest in the areas that will lead to future growth or the invention of useful new products.
While infrastructure is of course important, it must be part of a bigger vision. The point is not to simply dig ditches but to steer those investments towards transformational growth.
Growth in productivity has diverged from growth in the share that working people can expect right across advanced economies, but this trend started earlier and has been more pronounced in the U.S.
Brexit has shrunk the market opportunities. Exiting trade deals will do the same for the U.S. Those deals must be actively shaped and governed to make growth more inclusive.
