Mariana Mazzucato: Governments must embrace failure for innovation, the UK’s COVID-19 spending revealed inefficiencies, and a mission-oriented industrial strategy is essential | Odd Lots

Economist Mariana Mazzucato argues that governments must build institutional capacity and embrace experimentation to drive innovation, citing the UK's COVID-19 spending inefficiencies as evidence of state weakness. She advocates for mission-oriented industrial strategies rather than reliance on external consultants, which exposes critical gaps in government economic competency.

Mazzucato's commentary addresses a fundamental challenge in modern governance: the erosion of state capacity and institutional knowledge. The heavy reliance on management consultants during the UK's pandemic response revealed systemic weaknesses in government's ability to execute complex projects efficiently. This outsourcing of critical functions indicates that public institutions have atrophied in their core competencies, forcing expensive dependence on private sector expertise. The broader implication is that governments have abandoned the in-house capabilities necessary for strategic economic planning and execution.

Historically, state-led investment in research and infrastructure drove major technological breakthroughs, from the internet to GPS. However, decades of neoliberal policy and austerity have hollowed out government institutions, making them dependent on consultants for basic operational guidance. This trend undermines the state's capacity to pursue ambitious industrial strategies or manage crises effectively. The COVID-19 spending inefficiencies exemplify how this institutional weakness translates into wasted resources and poor outcomes.

For crypto and blockchain industries, this debate carries indirect relevance. A stronger, more innovative government sector could either embrace technological progress or regulate it more effectively. Conversely, continued state weakness might perpetuate fragmented regulatory approaches that disadvantage innovation. The push for mission-oriented industrial strategies could accelerate investment in emerging technologies, including digital assets and blockchain infrastructure, if governments strategically prioritize these sectors.

Moving forward, the success of any government-backed innovation initiatives depends on rebuilding institutional capacity. This requires sustained investment in talent, expertise, and infrastructure—a reversal of decades of outsourcing trends.

• →Government overreliance on external consultants signals deeper institutional capacity deficits
• →UK's pandemic spending inefficiencies demonstrate the cost of hollowed-out state institutions
• →Mission-oriented industrial strategies require governments to rebuild in-house expertise
• →State-led innovation has historically driven major technological breakthroughs
• →Institutional weakness may fragment regulatory approaches across emerging technology sectors