Prof Mazzucato exposes the myth that the private sector is the prime generator of innovation. It isn't, because the bill for the risks endured is too huge for the entrepreneurs to pay. The private sector did not create the internet - governments did. The same goes for GPS technology and touchscreens. Everything that makes a smartphone smart, rides on the back of taxpayer funded research and development. Yet the giant IT companies Google and Apple now manage to pay little tax. There is thus no payback by the venture capitalists who come in when the new technology had proved itself and was ready for mass markets. At the Transforming Finance in May in London Mazzucato gave probably the fastest speaking talk of the conference ( Her short presentation is here. ) but what she said we need is the 'real slow' telling about the state investment in technology now profitably reaped by iPhone, green investment, etc. This can be read in her book which is now out : The Entrepreneurial State. Debunking Public vs Private Sector Myths
In the FT Martin Wolf (5 Aug 2013) rates her book very highly:
'A brilliant exploration of new ides in business argues that government is behind the boldest risks and biggest breakthroughs'.
Wolf says her view matters because the state is seen usually as an obstacle and is thus inhibited from taking entrepreneurial risks for the good of humanity and for prosperity. He says what has developed is acceptance of the state taking the risks and the private sector the rewards which makes the private sector parasitic.
How to invest without increasing the deficit
But our government is hung up on reducing the deficit and, in refusing to spend for such innovation as Mazzucato implies we need, it is not doing the best for our future. Even if you accept that deficit spending is needed, Edmund Gray in a letter to The Times in March said that Keynes showed that deficit spending is a remedy to restore demand in a recession because national economies are not like the budgets of individuals. Unfortunately Cameron and Osborne seem to think they are. Moreover in the FT on the same page as MartinWolf's review is a letter from Richard Wood which shows how to finance the deficit, if you must, with newly created money. But he doesn't say 'debt free money', which as Prof Richard Werner declares, governments can create 'debt free and interest free' to cover such productive, innovative investment that Mazzucato says that only government is capable of: see YouTube . So there is a way out of the crisis, without raising the deficit whilst recognising the unique role of the state as essential innovator.
'A brilliant exploration of new ides in business argues that government is behind the boldest risks and biggest breakthroughs'.
Wolf says her view matters because the state is seen usually as an obstacle and is thus inhibited from taking entrepreneurial risks for the good of humanity and for prosperity. He says what has developed is acceptance of the state taking the risks and the private sector the rewards which makes the private sector parasitic.
How to invest without increasing the deficit
But our government is hung up on reducing the deficit and, in refusing to spend for such innovation as Mazzucato implies we need, it is not doing the best for our future. Even if you accept that deficit spending is needed, Edmund Gray in a letter to The Times in March said that Keynes showed that deficit spending is a remedy to restore demand in a recession because national economies are not like the budgets of individuals. Unfortunately Cameron and Osborne seem to think they are. Moreover in the FT on the same page as MartinWolf's review is a letter from Richard Wood which shows how to finance the deficit, if you must, with newly created money. But he doesn't say 'debt free money', which as Prof Richard Werner declares, governments can create 'debt free and interest free' to cover such productive, innovative investment that Mazzucato says that only government is capable of: see YouTube . So there is a way out of the crisis, without raising the deficit whilst recognising the unique role of the state as essential innovator.
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