The Rise of Mission-Oriented State Investment Banks: The Cases of Germany's KfW and Brazil's BNDES

35 Pages Posted: 8 Mar 2016

See all articles by Mariana Mazzucato

Mariana Mazzucato

University of York - Social Policy Research Unit (SPRU); University of Sussex

Caetano CR Penna

University of Sussex

Date Written: September 16, 2015

Abstract

This paper focuses on the rise of state investment banks (SIBs) as lead funders of mission-oriented innovation in various countries’ agendas regarding smart (innovation-led) growth, and not just fixers of ‘market failures’. The market failure justification for public finance fails to capture the active mission-oriented role that such banks are playing in shaping and creating markets, rather than just fixing them. In tackling innovation priorities and shaping new markets, these banks are developing new financial tools that also help to reform the financial system from within, addressing issues of short-termism and financialisation. This paper documents and analyses the roles of such banks, building on the Neo-Schumpeterian work on mission-oriented policies (that is, policies that aim to address societal issues or challenges). The paper presents a rich analytical description of mission-oriented investments in two of the leading SIBs: Brazil’s BNDES and Germany’s KfW. We discuss the directionality of the investments, the various tools used, and the lessons to be learned for evaluating these tools outside of a market failure framework.

Keywords: State investment banks, mission-oriented policy, societal challenges, public finance, financialisation, innovation

JEL Classification: G20, O16, O38, L52, P16

Suggested Citation

Mazzucato, Mariana and Penna, Caetano CR, The Rise of Mission-Oriented State Investment Banks: The Cases of Germany's KfW and Brazil's BNDES (September 16, 2015). SWPS 2015-26, Available at SSRN: https://ssrn.com/abstract=2744613 or http://dx.doi.org/10.2139/ssrn.2744613

Mariana Mazzucato (Contact Author)

University of York - Social Policy Research Unit (SPRU) ( email )

United Kingdom

HOME PAGE: http://www.sussex.ac.uk/spru/people/peoplelists/person/111262

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

Caetano CR Penna

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

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