Ramallah, 3rd Dec 2020: The Palestine Economic Policy Research Institute (MAS) held last Wednesday its eleventh Yusif Sayigh annual development lecture. The lecture entitled “Rethinking Value Creation for an Inclusive and Sustainable Economic Recovery", was delivered live from London by Dr. Mariana Mazzucato, Professor in the Economics of Innovation and Public Value University College London and Director of the Institute for Innovation and Public Purpose.
While welcoming the participants, Mr. Raja Khalidi, MAS’s Director General highlighted the underlying idea of the lecture series held saying that “in recognition of the legacy of the great, contemporary Arab intellectual - a Palestine refugee who lived in Arab countries and the West, for his landmark contribution to the establishment of the concept of Palestinian development studies”. Khalidi then raised the question that anyone may ask “how are Mazzucato's ideas relevant to the very special case of Palestine, where the root of the problem is political; Needless to say, the concept of the “State” in Palestine is fraught with multiple challenges”. He added “that the Professor proposes new areas for policy-making in the areas of public, venture capital and the prioritization of public investment in innovation, as well as in addressing the mismatch between the market value - and real value - of goods and services. These issues are certainly not only theoretical, and they must feature in the coming agendas of Palestinian economic policy-makers”.
As a gesture of Palestine’s appreciation for Professor Mazzucato's lecture, the Palestinian Prime Minister Dr. Mohammad Shtayyeh made a short intervention. Shtayyeh first thanked the institute for organizing such scientific forums, then summarized the 18th Palestinian Government strategy for achieving national development, marked by disengagement from the Israeli economy and adopting cluster-based development. Shtayyeh added that the Palestinian government role in planning and supervising development under the occupation should be bigger (than other countries) being the “first resort”. The inclusive government-planned development will respond to the people’s future needs, he added.
“Some SDGs are achievable in Palestine, but to varying degrees, ... poverty and unemployment are at the top of the government’s priorities list that needs to be addressed”. He added that consumption and real estate loans are dominant, not productive sectors loans, concluding “an investment bank should be established to finance productive sectors, which will have a positive impact on the development process”.
Then Mazzucato started the lecture by presenting the five biggest global challenges; the first of which is the finance problem seen in the increased financialization of the economy and how financial institutions grew at a faster pace than the rest of institutions in the economy. The second challenge was the industrial sector excessive dependence on credit, which affects its growth. She explained how major international companies use a large portion of their profits in buybacks instead of investing these profits in increasing production, which means increased employment. This also means that profits were not invested in human capital development, which will positively affect the skills of the labour force. Then comes the inequality problem, whereby the labour productivity index was higher than the real wages index. Fourth, the climate problem: “Current investment in green energy is only 20% of what it should be” she stressed. Fifth, policy conflict over the state and its role in dealing with market failure.
Following, Mazucato moved to the broken relationship between the public and the private sectors. Fixing this relationship requires solving a fundamental problem in the economy, which is the reform of the concept of value which has been gotten wrong. She said “value is no longer correlated with employment and material production.” This view would be “anathema” to earlier theorists such as François Quesnay, Adam Smith, and Karl Marx. Modern economists understand value as interchangeable with price. She added “The contemporary concept of value has enormous implications for the way economies are structured. It affects how organizations are run, how activities are accounted for, how sectors are prioritized, how the government is viewed, and how national wealth is measured”. Here, it is essential to recognize the investments and creativity provided by a vast array of actors across the economy.
Mazzucato then talked about how people, for too long, have acted as if the private sector were the primary driver of innovation and value creation which is simply not true. She explained how governments made “bold” investments and risk-taking ventures in many sectors and industries. “Appreciating the contribution of this collective effort would make it easier to ensure that all efforts were properly remunerated and that the economic rewards of innovation were distributed more equitably”.
Following the lecture, in-person participants then those connecting remotely had an interactive discussion with the lecturer. Since in-person attendance to this year’s lecture was restricted to 50 attendees for health precautionary measures, the Lecture drew around 200 attendees remotely from Palestine and some 35 countries in the Arab region, Europe, Asia and the Americas.