Large companies have been quite successful at lobbying governments to offer low taxes and light regulation, arguing that doing so helps them create jobs and foster innovation. But Mariana Mazzucato – renowned global economist, government advisor and author of the bestselling book, “The Entrepreneurial State” (Anthem 2013, Public Affairs 2015, Penguin 2018) – argues the assumption that low-tax, small-state policies are best for innovative corporations is not just wrong, but ultimately a dangerous threat to companies’ abilities to innovate in the long run.
Government, she believes, is the most successful financial backer of technological innovation; by shrinking the state, we are jeopardizing the future of innovation.
Chair of Economics of Innovation and Public Value and founding director of the Institute for Innovation and Public Purpose at University College London, Professor Mazzucato has long held – as seen in her popular TED Talk, “ Government – Investor, Risk-Taker, Innovator,” – the most important factor in the emergence of Silicon Valley’s tech giants was financial backing by the U.S. government.
“Breakthrough technologies, such as the internet and biotech, did not emerge from governments worried about ‘commercialization;’ they emerged from the spillovers of investments that were focused on long-run public missions,” she wrote in Harvard Business Review. Today, however, we are missing out on important new innovations due to a misguided ideology: “Left unchallenged, this narrative leads to counterproductive policymaking and a distribution of rewards from growth that doesn’t reflect the actual distribution of risks.”
Her newly published and highly anticipated book, “The Value of Everything: Making and Taking in the Global Economy,” (Penguin) goes further: to rescue our economy from the next, inevitable crisis and foster long-term economic growth, we need to redefine how we measure value in our society. Only by rethinking the collective process by which value is created can we aim to create a capitalism that is smarter, more inclusive and more sustainable. Last week, in his Financial Times review of the book, Martin Wolf called it “challenging and stimulating,” forcing us to “re-think the relationship between markets and governments; make a clear distinction between creators of wealth and those who merely extract it; embrace bolder collective ambitions.”
Advisor to many of the world’s policymakers, Mazzucato’s speaking, research and writing focuses on the economics of innovation, economic growth and the role of the State in modern capitalism. She is currently the Special Advisor for Carlos Moedas – the European Commissioner (EC) for Research, Science and Innovation – helping him steer, through her high profile report on Mission-Led Innovation, the €100 billion of EC funds for innovation toward missions that require cross-sectoral problem solving. What is now widely recognized as the “Mazzucato Report” has received wide support across European stakeholders.
Take heed: Mariana Mazzucato’s work serves as a roaring call to action for everyone – businesses, entrepreneurs and policymakers – to rethink rather than downsize the State at a time when the world economy desperately needs public investment. Only in this way can public-private partnerships drive investment-led growth toward new types of value creation that also help solve society’s most pressing challenges. It’s a win-win.