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, co-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 £1 billion (€1.13 billion) 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.

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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 €2 trillion 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 $5 trillion 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 “arty-farty” 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 £1 million 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 roll-out. 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 £600 million 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 thing of ‘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 II, 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.” – Copyright The Financial Times Limited 2023