%A Mariana Mazzucato
%A Josh Ryan-Collins
%T IIPP written evidence submission on 'Sustainability of the UK’s National Debt Inquiry'
%D 2024
%L discovery10196781
%I UCL Institute for Innovation and Public Purpose
%O This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
%X There is no magic number when it comes to debt sustainability. The
sustainability of public debt depends on what the government is investing in. In
other words, how debt is being used is more important than the level of debt.
Contrary to the discredited argument of economists Carmen Reinhart and
Kenneth Rogoff, which linked government debt to weaker economic growth and
promoted austerity policies, it is critical to understand that government
spending can take the form of investments in the long-range drivers of
productivity and growth. These drivers include, for example, education and
training, research and development, and wider factors that are critical to
building an innovative, resilient, sustainable and inclusive economy.
Investment-led sustainable and inclusive economic growth can expand
the productive capacity of the economy, which can in turn contribute to
a fall in the debt-to-GDP ratio.
How this investment is structured is also important. Mission-oriented policies
can turn big challenges like climate change into market opportunities,
catalyzing cross-sectoral innovation and investment oriented around
tackling these challenges, leading to spillovers (Mazzucato, 2021). This can
in turn generate a multiplier effect (i.e., where the growth enhancing impacts of
government investments are greater than the increase in debt) (Deleidi et al.,
2019).
%C London, UK