Sunday, September 01, 2013

Real Job Creators

Right-wing ideology holds that the rich are the job creators, and government should just concentrate on staying out of the way. Mariana Mazzucato, writing in the New Scientist, does some heavy demolition on that particular myth.

Yet it is ideology, not evidence, that fuels this image. A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.

Whether an innovation will be a success is uncertain, and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the United States, China, Singapore, and Denmark, the state has provided the kind of patient and long-term finance new technologies need to get off the ground. Investments of this kind have often been driven by big missions, from putting a human on the moon to solving climate change. This has required not only funding basic research—the typical "public good" that most economists admit needs state help—but applied research and seed funding too.

Apple is a perfect example. In its early stages, the company received government cash support via a $500,000 small-business investment company grant. And every technology that makes the iPhone a smartphone owes its vision and funding to the state: the Internet, GPS, touch-screen displays, and even the voice-activated smartphone assistant Siri all received state cash. The U.S. Defense Advanced Research Projects Agency bankrolled the Internet, and the CIA and the military funded GPS. So, although the United States is sold to us as the model example of progress through private enterprise, innovation there has benefited from a very interventionist state.

The examples don't just come from the military arena, either. The U.S. National Institutes of Health spends about $30 billion every year on pharmaceutical and biotechnology research and is responsible for 75 percent of the most innovative new drugs annually. Even the algorithm behind Google benefited from U.S. National Science Foundation funding.

She has more, but it's not hard to find still more examples. In case after case, government has been either first funder or first customer. Of course private innovation is important, and in many areas dominant. But it's BS to claim that only private innovation counts. It's also interesting how many "innovators" made their bundle largely on the taxpayers dime.