Ever since her book The Entrepreneurial State, Mariana Mazzucato has been engaged in a “discursive battle”. A fight for the control of the meaning of words. Claiming that the big problem of big government was the bad press it was saddled with, she strove to redefine, for instance, the meaning of some key words: such as innovation.

In her last article for Project Syndicate, Mazzucato reacts to the the annual letter to CEOs by BlackRock Chairman and President Larry Fink.

In that letter, Fink offered an interpretation of “stakeholder capitalism”. His starting point is the following:

At the foundation of capitalism is the process of constant reinvention – how companies must continually evolve as the world around them changes or risk being replaced by new competitors. The pandemic has turbocharged an evolution in the operating environment for virtually every company. It’s changing how people work and how consumers buy. It’s creating new businesses and destroying others. Most notably, it’s dramatically accelerating how technology is reshaping life and business. Innovative companies looking to adapt to this environment have easier access to capital to realize their visions than ever before. And the relationship between a company, its employees, and society is being redefined.

COVID-19 has also deepened the erosion of trust in traditional institutions and exacerbated polarization in many Western societies. This polarization presents a host of new challenges for CEOs. Political activists, or the media, may politicize things your company does. They may hijack your brand to advance their own agendas. In this environment, facts themselves are frequently in dispute, but businesses have an opportunity to lead. Employees are increasingly looking to their employer as the most trusted, competent, and ethical source of information – more so than government, the media, and NGOs.

Confronted by a reputational challenge which he sees as investing the whole of the business world, Fink expects corporations to lead a change. In part, his letter suggests that capitalist enterprises are the best venue for innovation, and many contemporary challenges (like decarbonization) are technological ones and hence should see corporations at the forefront. In part, his letter embraces the rhetoric of stockholder capitalism, emphasizing the need for partnership of businesses with politics and society at large. Now, as always with stakeholder capitalism, it is hard to distinguish what is simply a description of reality (it is unlikely for a corporation to achieve success if people are unhappy to work there) and what is actually a normative program. But Fink’s letter is a testimony to the power of the words that Mazzucato and many politically committed social scientists like her have crafted and pushed in the agenda. Larry Fink speaks their same language, literally.

For Mazzucato, that is not quite enough:

consider climate change. Fink celebrates progress in dollar terms, stating that sustainable investments have reached $4 trillion. Yet the aim should not just be to invest trillions more in sustainable development; rather, those trillions should be coordinated democratically, by stakeholders, to support ambitious missions like global decarbonization. A carbon-neutral economy is what would maximize the benefits for all stakeholders.

For missions to motivate action, generate momentum, and inject purpose into the economy, the gap between stakeholders and shareholders must be closed. In practice, that means empowering stakeholders. Workers, citizens, trade unions, community groups, state institutions, and NGOs must have strong financial and political stakes in the capitalist economy’s operations.
Such a paradigm shift begins with recognizing the inherently collective process by which value is created in the first place. Value is co-created by producers and consumers, workers and managers, inventors and administrators, and regulators and investors. It does not simply spring from the heads of heroic entrepreneurs, risk-taking venture capitalists, and corporate leaders. It is the result of organizational and institutional configurations that enable all these actors to work together.

Here Mazzucato hints at her dream of going back to the labour theory of value. She thinks society should look back, look at who *actually* originated inventions that later on come to be of use in other products or services, and reward them properly. As Deirdre McCloskey and I point out in The Myth of the Entrepreneurial State, Mazzucato confuses economics with past accounting. But production decisions are forward looking. Such decisions are matters of expected marginal utility or marginal product and expected opportunity cost. Any other way of deciding what to pay for present inputs will result in inefficient use of the inputs and smaller production of the outputs. For a critic of intellectual property, Mazzucato seems to conceive rewards in an economy pretty much like a version of copyright which extends way back in time.

Her final stab at Fink is worth reading:

For all the attention it has received, Fink’s vision of stakeholder capitalism focuses far too narrowly on intra-organizational corporate governance. In failing to address the wider landscape of extra-organizational, institutional relations between different domains and sectors of society, Fink maintains the traditionally stark distinction between stakeholders and shareholders.

In short, Fink focuses too much on private companies as agents of change — but they can be such only and insofar they are properly led from above, by government institutions.

So, if companies prioritize shareholder value, they are greedy and putting the future of the world at risk. But if they claim they are thinking of stakeholder value, insofar as they are not ready to become mere instruments in a planner’s hands, they are actually not serious about stakeholder value: it is only putting lipstick on a pig.

Surrendering the vocabulary, Mister Fink, is not enough.