The world is facing a number of very grave threats – climate change, air and ocean pollution, organised crime, cyber-threats, antibiotic resistance, pandemics, cancer, dementia, road deaths, persistent poverty and so on – all of which demand some form of intervention and leadership by the state. What is at issue is the way in which the state should intervene.
The seductive new ideology of the ‘entrepreneurial state’ is the wrong way to go. Most of the challenges listed above will only be solved by means of hefty doses of new technology and business models. Anything that reduces the global economy’s ability to innovate, however well-intentioned, will have serious consequences.
The first two decades after the collapse of the Soviet Union were difficult for socialism. The centre left was forced to concede the primacy of markets, the hard left was forced into exile. All of that changed with the financial crisis. Suddenly capitalism looked vulnerable again, but if it was to take advantage of the situation, the Left needed new ideas. Lo and behold, along came two: Thomas Piketty’s inequality and Mariana Mazzucato’s entrepreneurial state.
Piketty and Mazzucato both based their prescriptions on painstaking research. Piketty’s volume Capital in the 20th Century – bought by so many, read by so few – is a tour de force of statistics, carefully arranged to show wealth increasingly concentrated in the richest few percent of society. Mazzucato, for her part, tracked the origins of the technologies behind some of the era’s most iconic products, in particular the iPhone, showing the extent to which they originated with state funding and programmes.
The reason Piketty and Mazzucato became instant champions of the Left lay in the solutions they were proposing: Piketty became a vocal advocate for punitive levels of redistributive taxation; Mazzucato’s entrepreneurial state more subtly suggests that the state should maintain (at least part) ownership of the technologies whose development it has helped to fund – in effect a combination of state planning and a tax on innovation.
The intellectual flaws in Mazzucato’s work lie not in what she has proven, but in what she has omitted. Yes, state funding helped create a number of valuable technologies – but at what cost? Would additional state investment result in more innovation, or more waste? What innovations might have resulted had money not been siphoned off by the state in the first place? Why only technology? By Mazzucato’s logic every logistics company which uses publicly-funded roads should be government-owned.
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