Mazzucato, Mariana; (2025) Directing Growth: How a mission-oriented industrial strategy can help drive productivity. (UCL Institute for Innovation and Public Purpose (IIPP) Working Paper 2025-06). UCL Institute for Innovation and Public Purpose (IIPP): London, UK.

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Abstract

Modern industrial policy should shape markets, not just fix their failures. It is the role of governments, as stewards of public interest, to direct growth and shape markets for a just transition. We are nowhere near reaching the climate finance flows of at least USD $5.4 trillion a year by 2030 needed to stave off the worst effects of the climate crisis (Buchner et al., 2023). Existing solutions for problems like climate change that focus on ‘levelling the playing field’ and ‘addressing shortfalls’ will not do. We must move beyond fixing markets and filling financing gaps. Instead, we must design policies that shape markets and restructure finance, and by doing so tilt economies towards achieving ambitious goals with strong direction while leaving open the question of how to reach those goals. In addition, governments must develop the necessary dynamic capabilities to make achieving ambitious goals a reality. This paper considers three key aspects of modern industrial strategy: (1) adopting a mission-led approach; (2) harnessing the power of strategic public finance and establishing thoughtfully designed contracts that ensure reciprocity; and (3) investing in public sector dynamism.

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