Economy

BANGKOK (Reuters) -Thailand’s economy could grow faster than forecast this year as a revival in tourism quickens, while the pace of monetary tightening to stave off inflationary pressures remained “reasonable”, the country’s finance minister said on Monday.In an interview with Reuters, Arkhom Termpittayapaisith said the Bank of Thailand had been aligning policy with the needs of the domestic economy rather than mirroring the aggressive pace of tightening by the U.S. Federal Reserve. “Our central bank’s interest rate adjustments have been reasonable, not following the Fed but consistent with our economy,” said Arkhom.”Raising rates too much will sharply drag down the economy that is getting better,” he said, adding monetary policy must ensure the economy would fully recover.The Bank of Thailand has raised the key rate by a total of 100 basis points since August to 1.50%. But its tightening cycle has been less aggressive than many regional peers, as Thailand’s economic recovery has lagged other Southeast Asian countries as the tourism sector only started to rebound last year. It will next review policy on March 29, when most economists see a further hike.Arkhom said Thai gross domestic product may beat a forecast of 3.8% growth this year on a rebound in tourism.”Tourism is playing a key role in supporting the economy … there is a chance that tourist numbers will beat our forecast of 27.5 million this year,” Arkhom said.TOURISM TARGET Tourism will gather steam this year, with the return of visitors from China, at least 7.5 million of whom are expected to arrive this year following China’s reopening, he said.Thailand beat its tourism target with 11.15 million foreign visitors in 2022, but was still far from a record of nearly 40 million in pre-pandemic 2019.For 2022, he expects Southeast Asia’s second-largest economy to grow about 3%, after a 1.5% expansion in the previous year, which was among the slowest in the region.Growth in the fourth quarter of 2022 is estimated at 2.8% on the year and 0.2% on the quarter, he said. That would be a slower pace than the previous quarter as exports weakened.The government will report official 2022 GDP data on Friday.Arkhom played down concerns over the impact on the economy of the strength of the Thai currency, which was moderate compared with peers.”The private sector said the baht was too strong, but it’s not very strong,” he said. “The baht is strengthening on the fundamentals of the economy that has started to recover”.The baht has appreciated about 2.2% against the dollar so far this year, becoming Asia’s second-best performing currency after Indonesia’s rupiah.Arkhom said a transaction tax on share sales, which had been waived for more than three decades, was still in the process of becoming law but this was taking longer than originally expected. More

The EU is set to dodge a previously forecast recession as falling gas prices, supportive government policy and firm household spending boost the region’s outlook, according to the European Commission. Brussels lifted its predictions for EU growth this year to 0.8 per cent, stronger than the 0.3 per cent forecast in November, and said the region would avoid a technical recession — defined as two successive quarters of economic contraction. The euro area is forecast to expand 0.9 per cent in 2023, better than the 0.3 per cent that the commission expected towards the end of last year. The upgrades bring the commission into line with analysts, which now predict the region will dodge a recession after forecasting a severe contraction during the latter half of 2022. The spectre of shutdowns in Russian gas supplies coupled with falling industrial output and flagging business sentiment fanned fears last autumn that the EU was heading into a deep recession. However, a mild winter and government subsidies have also helped ease pressure on households and businesses, as Europe’s gas benchmark price fell well below levels recorded during the summer of 2022. The region’s economy managed to avoid a contraction during the final quarter of last year — in part due to strong growth figures for Ireland. Europe experienced its third warmest January on record, according to the EU’s Copernicus Climate Change Service. The bloc’s underground gas storage levels have stayed unusually high for the time of year — facilities are currently 66 per cent full — raising hopes that the EU should have less need to rush to refill storage ahead of next winter. Prospects have also improved overseas, including in China, where the easing of Covid-19 lockdown policies had prompted a positive reassessment of the growth outlook, the commission said, along with reduced supply chain interruptions. “We have entered 2023 on a firmer footing than anticipated: the risks of recession and gas shortages have faded and unemployment remains at a record low,” said Paolo Gentiloni, EU economics commissioner. “Yet Europeans still face a difficult period ahead. Growth is still expected to slow down on the back of powerful headwinds and inflation will relinquish its grip on purchasing power only gradually over the coming quarters.”Growth this year would be markedly slower than the 3.5 per cent recorded for the EU and euro area in 2022, the commission said, warning that strong “headwinds” would continue to weigh on the outlook. Brussels also declared that inflation had peaked, predicting that consumer price growth would be 6.4 per cent this year in the EU, down from last year’s 9.2 per cent. Euro area inflation is projected to moderate to 5.6 per cent this year from 8.4 per cent in 2022. Inflation in the single currency area will ease further to 2.5 per cent in 2024, according to the forecasts. Real wages would continue falling in the short term given the high price rises, Brussels said, observing that core inflation, which excludes energy and unprocessed food, was still rising in January. Higher official interest rates would start bearing down on credit flows and investment, the commission added. The European Central Bank lifted rates to 2.5 per cent earlier this month and signalled that a further half-point increase lies ahead in March. Germany’s central bank boss Joachim Nagel, who is a member of the European Central Bank’s rate-setting governing council, warned this month there was “a great danger” that inflation could remain too high if it stopped raising rates too soon.Risks to the growth outlook were “broadly balanced”, Gentiloni said in a press conference on Monday in Brussels. The main risk looking ahead, he added, was “the war of aggression in Ukraine and the geopolitical tensions”. However, he highlighted that it was “really impressive” that Europe had been able to manage energy dependence on Russia. Additional reporting by Alice Hancock in Brussels More

Investing.com — The European Commission has lifted its economic forecasts for the EU, saying the bloc will likely dodge a recession thanks in part to a dip in gas prices – but warned that inflationary headwinds remain persistently strong.In its interim winter projections, the EU’s executive arm said it now expects its 27 member states to expand by a combined 0.8% in 2023, up by 0.5 percentage points compared to its autumn forecast. The euro zone, which is made up of countries using the euro currency, is seen growing by 0.9%, an increase of 0.6 percentage points versus its prior estimate.Meanwhile, EU gross domestic product expansion for 2022 is now estimated at 3.5%, 0.3 percentage points above the autumn projections.Despite the lingering impact on key Russian energy inflows following the outbreak of the war in Ukraine last year, the EU Commission said there had been “favorable developments” since its previous outlook. Continued “diversification of supply sources and a sharp drop in consumption,” along with a milder-than-anticipated winter, have allowed gas storage levels to remain above the seasonal averages of past years and pushed down wholesale gas prices.The EU’s labor market has also remained resilient, with the unemployment rate touching an all-time low of 6.1% at the end of last year, according to the announcement. Consumer and business confidence is improving as well, leading some surveys in January to suggest that the bloc may avoid a contraction in the first quarter of 2023.”A better than previously expected turnout for growth at the end of last year and improving economic sentiment suggest that the EU economy is thus set to narrowly escape the technical recession that was projected back in autumn,” said EU Economy Commissioner Paolo Gentiloni in a statement.He added that, following the drop in energy prices, price growth has “peaked” and is on track to decline further. Headline inflation in the EU is projected to fall from 9.2% in 2022 to 6.4% in 2023 and 2.8% in 2024. The autumn estimates had placed the figure at 7.0% this year and 3.0% in 2024.However, the EU Commission flagged that energy costs are still elevated on a relative basis, while core inflation – which excludes items like energy and unprocessed food – rose in January. As a result, the body foresees ongoing monetary tightening by the European Central Bank, arguing that this trend will weigh on business activity and exert a drag on investment. More

In a more normal bout of inflation and without automatic spending adjustments, the bloc’s debt ratio would indeed fall, the ECB argued. But the energy shock, the subsequent slowdown in growth, and rigid spending rules mean that governments’ fiscal position is negatively affected already after a year.”In subsequent years, however, spending pressures intensify and more than offset the benefits on the revenue side, leading to nearly 0.5% of GDP deterioration in the budget balance level in 2024,” the ECB said in an Economic Bulletin Article.While inflation normally boosts tax revenue, the energy shock’s income boost is modest, weighs on corporate profitability, reduces overall growth and puts pressure on nominal public spending.”Moreover, the monetary policy reaction required to avoid this inflation shock leading to undue second-round effects is being translated into an increase in interest payments on government debt,” the ECB added.The ECB has raised interest rates by 3 percentage points since July and markets expect at least another percentage point of increases before rates peak.About a third of government spending is also indexed, mostly to inflation, so high price growth automatically forces governments to spend more, the ECB said.The ECB added that excess government spending aimed at curbing the harmful effects of inflation was only temporary and would be reversed, so inflation was merely pushed out over a longer period. “The impact on growth (of discretionary spending) is assessed to be positive only in 2022, before turning mildly negative in 2023 and more strongly negative over the 2024-25 period,” the ECB said. More

SINGAPORE/TOKYO (Reuters) – As surprise gives way to scrutiny of the men set to lead Japan’s central bank for the next five years, investors are dialling back bets on swift shifts away from super-easy policy settings.Japan is likely to appoint economist and former policy board member Kazuo Ueda, as the next governor of the Bank of Japan, officials with knowledge of the matter have told Reuters, with former banking regulator Ryozo Himino and BOJ executive Shinichi Uchida as deputy governors.The news was initially met with yen buying, short-selling in the bond market and pressure on stocks as traders reckoned the choice of a candidate nobody thought likely, with two new deputies, was a signal to expect change and fresh thinking.With inflation accelerating, Ueda could finally set Japan on a path to raise rates after the BOJ spent a decade fighting deflation risks with its unorthodox bond buying scheme costing trillions of yen.But the reality of high costs for shorting bonds and poor returns on a low-yielding currency such as the yen while uncertainty swirls over Ueda’s intentions and timeline – took the heat out of a trade that was running white-hot a month ago. “There are no strong convictions at the moment,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore.”Just fast money doing tactical trades, but without any clear strong view following the announcement,” he said, such as short-term options contracts betting the yen weakens. Ueda himself on Friday said current policy settings were appropriate, which also put a bit of a dampener on expectations of any shift. The yen, which climbed as far as 129.80 per dollar, was back to 132.16 to the dollar by Monday while bonds and bond futures were bouncing, especially at longer tenors.Implied volatility has also eased in the forex options market, suggesting an ebbing in bets on big shifts in the yen exchange rate. [JP/]”The initial read of the market was probably that this is a hawkish development and that doesn’t appear to be justified,” said Shafali Sachdev, head of fixed income, currencies and commodities for Asia at BNP Paribas (OTC:BNPQY) Wealth Management.”It’s not very apparent that (Ueda) would take on the job and then immediately change the policy.”Japan’s government is expected to formally nominate Ueda for the job on Tuesday.HARD TO MANAGEWhile traders scramble for detail on Ueda’s background and thinking, a changing of the guard at the BOJ comes at a pivotal moment for monetary policy and investment in Japan.Inflation is finally arriving after decades spent delving deeper and deeper into experimental ways of loosening rates.A surprise tweak to the BOJ’s limit on 10-year yields led foreigners to rush into short positions in Japanese government bonds in anticipation that more changes could follow quickly.The surprise choice of Ueda makes navigating that process a bit more tricky, especially while current policy settings are making it expensive to keep short positions open.”Shorting JGBs was always going to be the hardest trade to manage this year,” said James Malcolm, head of FX strategy at UBS in London. He expects shorts can profit, “but it’s probably going to be a rather uncomfortable ride,” he added. To be sure, 10-year Japanese yields were untraded at the BOJ’s ceiling on Monday, indicating plenty of investors are staying short. But analysts say they are going to need to hold on for a while now.”Even if the new governor sends a dovish message, they may not take off their short positions,” said Naka Matsuzawa, chief strategist at Nomura in Tokyo. “But it’s not going to happen in the first few meetings.”Those who know Ueda also say he’s not the sort to rush.”Ueda is the teacher of everybody who is anybody here in Japanese finance,” said Jesper Koll, expert director at financial services firm Monex in Tokyo, who came into contact with him while working at J.P. Morgan and Merrill Lynch.”I can guarantee you that he’s not interested in – and he’s under no pressure to provide – quick wins, in any fashion.” More

Global stocks began the week with small gains as investors looked ahead to upcoming economic data they hoped would ease the pressure on the US central bank to continue lifting interest rates. The region-wide European Stoxx 600 was 0.2 per cent higher on Monday, near its highest level in a year. London’s FTSE 100 was up 0.3 per cent, close to the record high it touched last week. Germany’s Dax rose 0.4 per cent.Contracts tracking Wall Street’s blue-chip S&P 500 and those tracking the tech-heavy Nasdaq 100 were flat ahead of the New York open. US equities last week recorded their biggest five-day decline in two months.The moves come ahead of a crucial set of US inflation figures on Tuesday, with consumer prices expected to have risen 6.2 per cent in January, down from 6.5 per cent the previous month, according to economist forecasts compiled by Bloomberg. That would represent the smallest decrease in the annual rate of inflation since September.However Francesco Pesole, forex strategist at ING, said such a reading would probably embolden officials at the US Federal Reserve who wanted raise rates more aggressively. That would increase the chances of a quarter percentage point rate rise in May. Investors expect a move of the same size at the US central bank’s next meeting in March.“US data in January should be strong throughout, largely thanks to greatly improved weather conditions compared to December,” Pesole said. “The big jump in hiring seen in the latest jobs report also suggests increased demand.”US stocks have declined and government bonds yields have jumped since data in early February showed the US added more than half a million jobs in the first month of the year, roughly triple the number that had been forecast. After a confident start to 2023, “investor positioning has turned decidedly more bearish”, said analysts at JPMorgan.The two-year Treasury yield rose 0.02 percentage points to 4.53 per cent on Monday, its highest level since late November. The 10-year Treasury yield fell 0.05 percentage points to 3.73 per cent. A measure of the dollar’s strength against a basket of six peers gained 0.1 per cent. The yen slipped 0.7 per cent against the greenback to ¥132.38 as investors digested news of the expected appointment of academic Kazuo Ueda as the next Bank of Japan governor.Brent crude, the international oil benchmark, declined 1 per cent to $85.53 a barrel while US marker West Texas Intermediate fell 1.2 per cent to trade at $78.81.In Asia, Hong Kong’s Hang Seng index fell 0.1 per cent, Japan’s Topix declined 0.5 per cent and South Korea’s Kospi dropped 0.7 per cent. China’s CSI 300 added 0.9 per cent. More

What’s the best language through which to understand the complex events of the world today? Is it economic? Political? Cultural? I’ve begun to think it might be psychological.Psychologists (at least many of those I know) tend to divide the world up into two types of personalities: paranoids, who operate as if they are always playing a zero-sum game, and depressives, who are more willing to embrace nuance (and thus sadness). Just as people can lean towards either of those personality poles, so too can nation states. Nazi Germany was paranoid, as Russia is today. Scandinavian social democratic states are depressive. So is the EU, at its best.Recent global events, from Brexit and the election of Donald Trump to Russia’s war on Ukraine or economic decoupling, can also be viewed through a psychological lens. As behavioural economist Robert Shiller has laid out in his work on narrative economics, such events are driven by “the prevalence and vividness of certain stories, not the purely economic feedback or multipliers that economists love to model”.Such stories may be subjective, but the effects are real. Shiller’s work explores how events like the 1920-21 market correction, the sharpest in history, were driven as much by unsettling narratives about the rise of communism, influenza and race riots as by flawed interest rate policy. Stories have an impact on our psychology, and that psychology changes the world.Nowhere is this truer today than in the US-China relationship. In his recent book Accidental Conflict, former Morgan Stanley Asia head and Yale professor Stephen Roach applies a psychological lens to the increasing friction between the two countries. This culminated in the calling off of US secretary of state Antony Blinken’s diplomatic trip to Beijing after a Chinese balloon was discovered floating over US airspace.Roach likens the reaction, as well as the general ratcheting up of diplomatic tensions between the two countries over the past few years, to that of an insecure couple deep into the conflict phase of codependency. The couple, in this case China and the US, need each other for reasons they don’t like to express. “A savings-short US economy lacks a certain sense of economic self,” writes Roach, and is anxious about China’s development goals, which involve putting its own surplus savings to use in ways that may move capital away from the dollar. Meanwhile, “China, lacking in its own internal support of consumer-led growth” feels threatened by American tariffs.He’s right. While US politicians on both sides of the aisle like to blame China for “stealing” jobs, it was America’s own choice to build an economy based more on asset inflation than income growth. Foreign capital helped enable the profligacy. US debt relative to GDP has risen 95 per cent since 2000, and is now higher than it was before the financial crisis. Government debt grew at 0.7 times GDP, mostly as a result of that crisis and then the Covid-19 pandemic. Household debt and financial sector debt are down from their pre-2008 peaks, but are still higher than they were before 2000, according to McKinsey Global Institute data. All this would be far less sustainable if China stopped buying US debt.China, meanwhile, may point the finger at the US for trade wars, but it has for years pursued a mercantilist economic policy, and has yet to prove that it can inspire enough domestic political confidence to get people to part with their cash hoards, or deal with the structural problems of over-leverage, particularly when it comes to real estate. If the current paradigm holds, China will get old before it gets rich. The problem with this economic codependency, says Roach, is that it is inherently reactive. “The slightest disturbance becomes amplified, risking retaliation and a progressive unravelling. China’s balloon triggers a diplomatic response from Blinken that is strikingly reminiscent of cold war 1.0 actions in 1960, when the USSR shot down our U-2 spy plane. That, of course, ushered in the most dangerous phrase of the first cold war, culminating in the Cuban Missile crisis,” he says. “There is no trust in a conflicted codependency, making it hard to put the pieces of a once healthy relationship back together. That leaves the conflicted codependency hyper-vulnerable to flashpoints.” With House of Representatives speaker Kevin McCarthy heading to Taiwan soon, one might wonder if that island nation will be the next Cuba. So, how do both sides tiptoe away from such a disastrous outcome? By doing what any good therapist would advise — using “I” statements. American policymakers need to admit that debt matters, and the US must eventually start living within its means, saving more, and using those savings to fund the things that fuel real growth — infrastructure, education and basic R&D — rather than the financial kind. This White House has made a good start with the American Rescue Plan and the Chips Act, but it will take years, if not decades, to plug the gap of Main Street investment in America.China, for its part, needs to grapple with how and why it has lost the world’s trust. From lockdowns to political attacks on the private sector to surveillance capitalism, there’s a reason that Chinese consumers still keep so much cash under their mattresses. You don’t need a balloon to see that it is not America’s [email protected] More

The theory is simple. When organisations face challenges, they bring in high-IQ, high-octane outsiders with specialist skills and new ideas. Although the outsiders cost a lot, they don’t stay long and they more than pay their way by improving efficiency. No one ever got fired for hiring McKinsey.The reality has long been more complex. What do these outsiders — strategy consultants, such as the ‘Big Three’ of McKinsey, Bain and Boston Consulting Group — really know? Critics say their ideas are often ones that the hiring organisation has already thought of. There are some complete disasters, such as McKinsey’s work promoting opioids. Yet consultants, supposedly brought in for short projects, never seem to leave.If Mariana Mazzucato were afraid of controversy, she might leave this well-rehearsed debate alone. But Mazzucato, a fast-talking, 54-year-old economist at University College London, leans into intellectual combat. For the past decade, she has waged a sometimes lonely battle to rehabilitate the state’s reputation as an economic motor. Her new book, The Big Con, written with Rosie Collington, argues that consultancies are hobbling governments’ ability to perform that role. In her office, holding a Diet Coke, she says: “For me, the big wake-up call was Brexit [preparations], because [the consultants] were everywhere.” In 2019-20, the British government spent nearly £1bn on strategy and other consultants — to the despair of some MPs. Mazzucato and Collington also widen their critique to include the Big Four accounting firms, such as Deloitte, and outsourcing companies, which carry out chunks of the state’s core functions.

The Big Con of the book’s title is not a crime; it’s a confidence trick. Consultancies and outsourcers, Mazzucato argues, know less than they claim, cost more than they seem to, and — over the long term — prevent the public sector developing in-house capabilities. “We’re not against consultants. The problem is when an industry [has] no incentive to get government to be independent. A therapist who has their client in therapy forever obviously isn’t a very good therapist.” Consultants are not “neutral” about the role of the state, either, Mazzucato argues, citing their private sector work. They promoted slimming the state after 2008. On both sides of the Atlantic, advocates of state action like Mazzucato are in the ascendancy. But she worries that there is still an unwillingness to invest in the bureaucracy itself. “The state is back, if you look at the figures.” The EU has a €2tn recovery plan. Mazzucato despairs that, in Italy, even under “a great leader” like Mario Draghi, the plan for EU funds was guided by McKinsey. The US spent $5tn in Covid aid. “It’s going to be wasted if we don’t know how to govern that.” ***Born in Italy, raised in the US, Mazzucato has lived in the UK for 22 years. She is charismatic and media-savvy. Before we meet, I receive an email instructing me to refer to her as a professor, not an economist. I assume this is a status game, but she laughs it off as a point of principle. “I’m proud to be an academic.”Mazzucato’s work has pushed back against post-financial crisis austerity, and the theory that the private sector knows best. “For the past fifty years, the Chicago school kind of economics, new public management, public choice theory has in some way reduced our faith in what government can do.” Government was “there at best to fix market failures”.Her 2013 book The Entrepreneurial State detailed how governments had historically done much more, seeding technologies, including the internet and electric cars. Although she places herself on the centre-left, her ideas have appealed to those on both the left and right. Mazzucato worked with Scotland’s first minister, Nicola Sturgeon, to set up the Scottish National Investment Bank. She missed going to Davos this year because she was due to fly to Barbados to work with its premier Mia Mottley, and had to juggle childcare with her husband. She has four children with Carlo Cresto-Dina, an “artsy-fartsy” film producer whose latest film, Le Pupille, is nominated for an Oscar.

To highlight the risk of consultants, her current theme, Mazzucato goes back to the Apollo space programme, where Nasa’s director of procurement in the 1960s warned that the agency was at risk of being “captured by brochuremanship”. In recent times, Covid has been a bonanza for consultants: the UK was paying Deloitte £1mn a day for its work on testing and contact tracing. In 2020 Theodore Agnew, then a UK government minister, complained that the reliance on consultancies “infantilises the civil service by depriving our brightest people of opportunities to work on some of the most challenging, fulfilling and crunchy issues”. But his proposed solution, an in-house government consultancy, has now been abandoned, because it struggled to match the range of external consultants. Mazzucato describes that as “a tragic” step, suggesting that Whitehall departments aren’t committed to reducing their spending on consultants. The difficulty in criticising consultants, I suggest, is that the evidence is elusive. Consultants’ work is often opaque, and feeds into broader processes. French parliamentarians criticised McKinsey for its role in the country’s sluggish vaccine rollout. But how do we know that things wouldn’t have been even worse without the firm? “These are private companies, the McKinseys and the Deloittes, that have no expertise in the areas that they’re advising in.” The Big Con covers HealthCare.gov, Barack Obama’s stumbling healthcare portal, which involved more than 55 contractors. An official report blamed a federal agency for failing to oversee the contractors; Mazzucato argues the very complexity of subcontracting would have defeated anyone. But can this debate go beyond competing anecdotes of consultancies’ incompetence and civil service incompetence?Equally, the idea that consultancies’ net zero proposals are shaped by their commercial contracts is plausible, but hard to prove. Mazzucato says what she wants is more disclosure of the firms’ interests. She wants contracting to stop being the “default response”, and for governments to look to public research institutions where possible.Her own unit at UCL does consulting work: “the main difference is that our goal is to make that government entity independent . . . We don’t want that second contract.” The calls keep on coming in: “Just yesterday the deputy prime minister of Spain got in touch because they have their own scandal now with consulting companies,” she says as an aside. You can see how her fluency and confidence would appeal to lost politicians.***What does Mazzucato think of Keir Starmer’s vision of the state? In a speech last month, the Labour leader spoke of investing in “national missions” — her own language. But he also said he would be “more relaxed about bringing in the expertise of public and private”.“That’s a problem,” she says. The question is not to be relaxed about the balance of private and public, it is: “how do you get ambitious?” She praises the BBC, “one of the only organisations that has thought about things like public value”, and how public investment can catalyse private investment.“My recommendation to Labour is to not fall into the trap of public versus private, and when we talk about public, [to always do so] with a warning . . . Starmer needs to step up the narrative on what public and private can do together — sharing risks and rewards — versus how one should facilitate and de-risk the other.”The EU’s Green New Deal, for example, can’t be done “using old tools”. A cost-benefit analysis of the Moon landings would have grounded the crew, she says. “If we applied today’s criteria, there would have been no justification for trying.” The Apollo missions helped to bring about today’s camera phones and baby formula. But the UK Treasury’s methodology for public investment “dismisses” the possibility of such positive spillovers.Governments must learn how to get good value for their investments. The US’s Chips Act, for example, should have more conditions in its loans and grants: “Giveaways are a bad use of public money.” Mazzucato cites Germany, where state bank loans to steelmakers were conditional on lowering material inputs, but with the exact way of achieving it left to the companies. She applauds the French government for making Covid support to Air France and Renault conditional on reducing carbon emissions, while the Bank of England simply “gave” easyJet a £600mn loan.The civil service can’t match the pay or training that private consultancies provide. But if it took more responsibility, and paid a little better, it might attract the brightest graduates. “You can actually have a creative and dynamic civil service,” says Mazzucato. “By design, we’re making it much more interesting to work in the Googles, the Goldman Sachses and the McKinseys. How do you revive the civil service? It’s not by the Dominic Cummings ‘we need geeks in government’. It’s by changing the remit of government. We need to make it really cool.”I wonder if voters’ scepticism of a stronger public sector will linger, because they fear that there is no money left. Mazzucato blasts back: “Money comes out of the woodwork for wars. Has anyone ever said we can’t go to Afghanistan, we can’t fight world war two, we can’t go to Ukraine because there’s no money? When we care about stuff, we create money, especially in countries with their own sovereign currency.”Austerity often creates its own costs, she argues, citing the closure of youth clubs in her neighbourhood in London.For a moment, she is breathless, relentless, ideological. Then she steps back and attempts to appeal to the widest possible audience: “It’s not about big government or small government. It’s about the how.” More