It is no coincidence that countries with mission-driven governments have fared better in the Covid-19 crisis than those beholden to the cult of efficiency.

Decades of privatisation, outsourcing and budget cuts in the name of efficiency have significantly hampered many governments responses to the Covid-19 crisis. At the same time, successful responses by other governments have shown that investments in core public-sector capabilities make all the difference in times of emergency. The countries that have handled the crisis well are those where the state maintains a productive relationship with value creators in society, by investing in critical capacities and designing private-sector contracts to serve the public interest.

From the United States and the United Kingdom to Europe, Japan and South Africa, governments are investing billionsand, in some cases, trillionsof dollars to shore up national economies. Yet, if there isone thing we learnedfrom the 2008 financial crisis, it is that quality matters at least as much as quantity. If the money falls on empty, weak or poorly-managed structures, it will have little effect, and may simply be sucked into the financial sector. Too many lives are at stake to repeat past errors.

Management creed

Unfortunately, for the last half-century, the prevailing political message in many countries has been that governments cannotand therefore should notactually govern. Politicians, business leaders and pundits have long relied on a management creed that focuses obsessively onstatic measures of efficiency to justify spending cuts, privatisation and outsourcing.

“Social Europe publishes thought-provoking articles on the big political and economic issues of our time analysed from a European viewpoint. Indispensable reading!”

As a result, governments now have fewer options for responding to the crisis, which may be why some are now desperately clinging to the unrealistic hope of technological panaceas such asartificial intelligenceorcontact-tracing apps. With less investment in public capacity has come a loss of institutional memory (as the UKs government hasdiscovered) and increased dependence on private consulting firms, which have raked in billions. Not surprisingly, morale among public-sector employeeshas plungedin recent years.

Consider two core government responsibilities during the Covid-19 crisis: public health and the digital realm. In 2018 alone, the UK governmentoutsourcedhealth contracts worth 9.2 billion ($11.2 billion), putting84 per centof beds in care homes in the hands of private-sector operators (including private-equity firms). Making matters worse, since 2015, the UKs National Health Service has endured1 billionin budget cuts.

Outsourcing by itself is not the problem. But the outsourcing of critical state capacities clearly is, especially when the resulting public-private partnershipsare not designedto serve the public interest. Ironically, some governments have outsourced so eagerly that they have undermined their own ability tostructure outsourcing contracts. After a12-year effortto spur the private sector to develop low-cost ventilators, the US government is now learning that outsourcing is not a reliable way to ensure emergency access to medical equipment.

Successful approach

Meanwhile, Vietnams successful approach to Covid-19 has emerged as a striking contrast to the US andUK responses. Among other things, the Vietnamese government was able to amass low-cost testing kits very quickly, because it already had the capacity to mobilise academia, the army, the private sector and civil society around a common mission. Rather than simply outsourcing with few questions asked, it used public research and development funding and procurement todrive innovation. The resulting public-private collaboration enabled rapid commercialisation of kits, which are now being exported to Europe and beyond.

New Zealand is another success story, and not by coincidence. After initially adopting the outsourcing mantra in the 1980s, the New Zealand government changed course,embracinga spirit of service and an ethic of care across its public services, and becoming the first country in the world to adopt awellbeing budget. Owing to this vision of public management, the government adopted a health first, economy second approach to the current crisis. Rather than seeking herd immunity, it committed early to preventing infection.

Similar lessons apply to data and digital technology, domains in which governments performance has varied widely. In Pakistan, citizens were able toapplyfor emergency cash transfers (made available to an impressive12 million households) directly from their mobile phones, whereas Italians have had toprint out self-evaluations to show that they are complying with lockdown rule.

To be sure, south Asian governments have benefited from the institutional memory built up during the 2002-03 SARS epidemic, which also altered publicattitudes about privacy. But many of these countries also have invested in their core data capabilities, which have been particularly effective when facilitating decentralised action. South Korea, for example, adopted an aggressive, high-tech tracking approach, andpublishedreal-time data on mask stocks and pharmacy locations, allowing start-ups and ordinary citizens to create add-on services to ensure more effective and safe distribution.

Important lessons

The contrasts between the US and UK, on the one hand, and Vietnam, South Korea and New Zealand, on the other, offer important lessons. Far from retreating into the role of fixer of market failures and outsourcer of services,governments should investin their own critical faculties. The pandemic has laid bare the need for more state productive capacity, government procurement capabilities, symbiotic public-private collaborations, digital infrastructure, and clear privacy and security protocols.

Such amission-driven approachto public administration should not be confused with top-down decision-making. Rather, it should be viewed as the best way to ensure dynamism, by nurturing fruitful relationships between innovators and tapping into thevalue of distributed intelligence. Governments that have long abdicated their duties to the private sector now need to catch up, which will require them to rethink intellectual-property regimes and their approach to research and development, and public investment and procurement more generally.

Why, to take one real-world example, should a low-cost ventilator that has beenapproved by regulatorsin Japan not be readily accepted by other countries? Clearly, in addition to a renewed role for national governments, we need an international clearing house for grassroots and citizen-led solutions.

In any crisisfinancial, public-health, or climate-relateda lack of choice drastically limits the public sectors room to manoeuvre. After years of pursuing a misguided governance model, policy-makers around the world surely are lamenting the lack of in-house know-how and resources to deploy the digital toolsneeded to save lives. Effective governance, it turns out, cannot be conjured up at will.

Mariana Mazzucato is professor of the economics of innovation and public value and director of the University College London Institute for Innovation and Public Purpose. She is the author ofThe Value of Everything: Making and Taking in the Global Economy. Giulio Quaggiotto is head of the Regional Innovation Centre in the Asia Pacific at the United Nations Development Programme.

This article is reproduced with the agreement of Professor Mariana Mazzucato who delivered the John Menadue Oration in Sydney in 2018,‘Can the State Deliver’