Project Syndicate: Build Back the State
In promising to "build back better" from the pandemic, US President Joe Biden has certainly struck the right note. But to succeed, he will need to forge a new social contract, drawing on the lessons of a previous era when the US state led a program that is still paying economic dividends.
READ STORY ORIGINALLY PUBLISHED AT PROJECT SYNDICATE
LONDON – The development of COVID-19 vaccines in less than a year was clearly a major achievement. But the rollout has been far from perfect. In the United States, Operation Warp Speed met its manufacturing targets but stumbled in coordinating initial shipments. The plan neither prioritized vaccine recipients according to need, nor did it go far enough to address racial inequality in the distribution.
Clearly, creating safe and effective vaccines and creating equitable vaccination programs are two different things. States’ Mission-oriented innovation agencies, especially the Defense Advanced Research Projects Agency (DARPA) and the Biomedical Advanced Research and Development Authority (BARDA), have proven to be critical in seeding the development of the cutting-edge mRNA vaccines. But is the technological mission of Warp Speed linked to the health mission of delivering a “People’s Vaccine”?
US President Joe Biden’s administration will need to keep this distinction in mind as it tries to “build back better” and reinvigorate science and technology funding after four years of Donald Trump’s dismissal of science and contempt for scientists. The vaccine rollout in the US – and even more so in Europe – shows that it is just as important to get the details of public-private partnerships right as it is to start with an ambitious overall objective.
In my new book, Mission Economy: A Moonshot Guide to Changing Capitalism, I argue that NASA’s program to put a man on the moon still offers lessons in catalyzing and governing public-private relationships that deliver results. Costing taxpayers the equivalent of $283 billion today, the Apollo Program stimulated innovation in multiple sectors – from aeronautics and nutrition materials to electronics and software – while also strengthening the public sector’s own capabilities.
NASA paid hundreds of millions of dollars to companies like General Motors, Pratt & Whitney (known then as United Aircraft), and Honeywell to invent the new fuel, propulsion, and stabilization systems inside its legendary Saturn V rockets. These publicly funded technologies then created numerous spinoffs that we still use today, including baby formula (from the astronauts’ dried food) and cordless vacuum cleaners (from the machines that scoured the moon’s surface). The integrated circuits used for navigation were a foundation stone of modern computing.
Critically, NASA made sure that the government got a good deal, offering companies “fixed-price” contracts to force them to operate efficiently, while also providing incentives for continual quality improvements. And the contracts’ “no-excess profits” provisions helped to ensure that the space race was driven by scientific curiosity, not greed or speculation.
Equally important, NASA avoided overreliance on the private sector. Had the agency outsourced its governance role, it would have been vulnerable to what its then head of procurement called “brochuremanship”: when the private-sector party dictates what is “best.” Because NASA had developed internal expertise, it knew as much as the contractors did about technology, and thus was well equipped to negotiate and manage its contracts.
By strengthening the public sector’s capabilities and outlining a clear purpose for public-private alliances, the Biden administration could both deliver growth and help tackle some of the greatest challenges of our age, from inequality and weak health systems to global warming.
These problems are much more complex and multi-dimensional than sending a man to the moon. But the imperative is the same: effective strategic governance of the space where public funding meets private industry. For example, whereas Big Pharma portrays the public sector as a mere consumer of medicines, the discovery of those drugs typically begins with publicly funded research.
Consider the $40 billion the US government invests every year in the National Institutes of Health. The NIH (along with the US Department of Veterans Affairs) backed the Hepatitis C drug sofosbuvir with over ten years of taxpayer-funded research. But when the private biotech company Gilead Sciences acquired the drug, it priced a 12-week course of pills at $84,000. Similarly, one of the first antiviral treatments for COVID-19, Remdesivir, received an estimated $70.5 million in public funding between 2002 and 2020. Now, Gilead charges $3,120 for a five-day course of it.
This speaks to a parasitic, rather than a symbiotic, partnership. The NIH must do more to ensure fair pricing and access to the innovations it funds, rather than chipping away at its own power, as it did in 1995 when it scrapped the Fair Pricing Clause from its cooperative research and development agreements. Conditionalities must be considered for innovations from mission-oriented agencies such as DARPA, BARDA, and the newly proposed Advanced Research Projects Agency-Health (ARPA-H), which will focus exclusively on health priorities.
In the case of the pandemic, various governments poured $8.5 billion into the development of vaccines that are currently being manufactured and sold by US companies like Johnson & Johnson, Pfizer, Novavax, and Moderna. The question now is whether vaccine knowledge and know-how will be shared with as many countries as possible to bring an end to the pandemic. Will the NIH join a voluntary technology pool created by the World Health Organization for this exact purpose?
In preparing for the post-pandemic era, Biden’s promise to “build back better” implies more than a return to normalcy. But reshaping the economy for the better will require not just a shift in mindset but also a new social contract that promotes value creation over profit extraction; socializes risks as well as rewards; and invests in the common good, rather than just in specific companies or sectors.
While the US Coronavirus Aid, Relief, and Economic Security (CARES) Act imposed some conditions on businesses receiving government aid to maintain jobs, the new $1.9-trillion American Rescue Plan and the proposed $2 trillion American Jobs Plan must go further. They must ensure that public-sector investment is accompanied by a transformation in the relationship between the state and the private sector.
Here, lessons can be drawn from Europe. In France, President Emmanuel Macron made sure that recovery funds to airlines and automobile makers were conditioned on commitments to lower their carbon emissions. And in Austria and Denmark, firms receiving recovery funds had to commit not to use tax havens.
The task for the Biden administration is to provide leadership for the missions that will shape the decades ahead, starting with the fight against climate change. The US, said President John F. Kennedy in 1962, would “choose to go to the moon in this decade and do other things, not because they are easy, but because they are hard.” Today, the same type of visionary leadership is not a choice, but a necessity.
We need top-down direction to catalyze innovation and investment across the economy. And the Apollo era’s examples of government leadership, bold public-interest contracts, and public-sector dynamism offer a valuable template. Unless we use it, building back better will never be more than a slogan.