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A mission-oriented approach to renewing British Columbia’s economy

Photo by Guillaume Jaillet on Unsplash

By Mariana Mazzucato and Laurie Macfarlane

The Canadian province of British Columbia (B.C.) is facing a set of enormous challenges. The COVID-19 pandemic exposed vulnerabilities in B.C.’s economy, and exacerbated already widening economic and social inequalities. Meanwhile, the heatwaves, fires and floods experienced in Canada in 2021, and the immense suffering and disruption they have caused, underscore the need to tackle the climate emergency without delay. These crises are compounded by a series of longstanding economic challenges, including lagging productivity.

In response to these challenges, the B.C. Government has set out an ambitious economic plan for transitioning to a more sustainable, inclusive and innovative economy. The plan, StrongerBC, is framed around meeting two key challenges: delivering economic growth that is both inclusive, addressing inequality so everyone can have a better life, and clean, ensuring that business can thrive in a sustainable economy. The economic plan embraces a mission-oriented approach to meeting these two challenges and sets out six specific mission areas that will reorient future growth to achieve a high-care, low-carbon economy that works for everyone.

Setting out a plan is just the first step, however. Whether or not it succeeds will depend on how missions are designed, implemented and evaluated. In light of this, the B.C. Government commenced a partnership with UCL Institute for Innovation and Public Purpose (IIPP) to help structure the transition required to effectively pursue a new economic model, and learn from the efforts of other governments and organisations in terms of how they have successfully organised and coordinated similar efforts to realign their economies and investment approaches.

In our new report published today, ‘Inclusive and sustainable British Columbia: A mission-oriented approach to a renewed economy’, we explore how three of the most important policy tools — public procurement, Treasury assessment methods and public finance — can be most effectively used to support the delivery of B.C.’s mission-led economic plan, and consider how potential implementation barriers can be overcome.

In relation to public procurement, every year the B.C. Government spends nearly $7 billion on a variety of goods and services, amounting to around 10% of total public spending.. As such a major component of public spending, procurement is a fundamental tool for directing demand and supply, and can also play a powerful market-shaping role by mobilising public purchasing power to tilt economic activity in a desired direction.

In the report we recommend that B.C. should introduce additional environmental and social criteria for assessing procurement contracts that align with the key performance metrics associated with each mission area under the clean and sustainable growth challenges. We also recommend that B.C. should gradually move towards embracing a functional rather than a product approach to procurement. This means that instead of outlining the precise products the Government intends to purchase, the Government should instead describe the function, objective or, even better, mission that it wants to achieve. By providing a clear direction on the problems B.C. is seeking solutions for, and proactively engaging with innovative businesses, the Government can generate a strong ‘pick the willing’ rather than ‘pick the winner’ dynamic.

Finally, we recommend that B.C. seek to forge a new social contract between government and business that better aligns risks and rewards, creates more symbiotic and mutualistic partnerships, and delivers sustainable and inclusive outcomes by design. This should involve attaching conditions to procurement contracts to incentivise desirable corporate behaviour, including in areas such as investment in R&D, employment practice and the price or design of products that emanate from procurement contracts.

One of the key challenges in applying a mission-oriented framework in policymaking is how to relate it to budgetary processes. Conventional approaches to policy appraisal, influenced by the market failure framework, typically involve undertaking a static cost-benefit analysis (CBA). However, in practice these tools often prevent bold and ambitious public policies from being developed. Instead, a mission-oriented approach requires a different kind of analytical framework for policy appraisal and evaluation that is able to capture the dynamic aspects of market-shaping policies, such as spillover effects, uncertainty, innovation and structural changes to the economy. Going forward, we recommend that B.C. seeks to develop a new suite of Treasury assessment methods focused on systemic change to achieve missions which aim to capture the creation of public value, dynamic efficiency and ‘additionality’, learning from best practice around the world.

The final area we consider is public finance. B.C. has already taken the bold step of creating a new public financial institution as a tool to drive transformational change. The InBC Investment Corp (InBC) is a Crown, or public sector, strategic investment fund that was established in September 2020. Going forward, we recommend that InBC’s mandate and investment strategy is aligned with the challenges and mission areas in B.C.’s new economic plan, which should act as a powerful catalyst for accelerating the delivery of clean and inclusive growth. We also recommend that InBC takes a strategic approach to risk and reward, including partnering with other organisations to provide finance to under-served communities that may not fit the risk/reward profiles of conventional impact investors and financial institutions. Ensuring that InBC is able to capture rewards associated with the successes that have occurred as a result of InBC investments, for example by taking equity stakes in innovative projects, will also be key.

Another important area relates to governance. While InBC has been launched with a governing board that reflects a wealth of knowledge and expertise, we identify a range of opportunities to enhance its governance model to make it more democratic and representative, such as reviewing the size and composition of the board, learning from international best practice. Finally, we recommend that InBC should seek to overcome historic barriers surrounding access to capital for Indigenous communities, for example by developing specialised processes and programmes designed to address the unique circumstances faced by Indigenous communities.

Overall B.C. has taken the important first step of embracing a mission-oriented approach to its new economic plan. If structured and governed effectively, the plan can help B.C. achieve its economic goals, while also battling social inequalities and creating a sustainable economy. However, achieving this will require utilising the full power of government policy to create an investment and innovation ecosystem that drives growth while solving key problems in society. Most importantly, however, it will require a drive and determination to succeed, a willingness to take risks and experiment, and a joined-up, coordinated approach across different government departments.

Successfully implementing mission-oriented policy is not easy. But the goal of building a fairer, more sustainable and more resilient economy is now firmly within B.C.’s grasp.

Read the report: ‘Inclusive and sustainable British Columbia: A mission-oriented approach to a renewed economy’

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UCL Institute for Innovation and Public Purpose

UCL Institute for Innovation and Public Purpose

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel