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The Answer to Cameron and the Attack on the State

Mariana Mazzucato, The Entrepreneurial State, 146 pages, Demos 2011, ISBN 20119781906693732, £10, free download at www.demos.co.uk

This is a really important little pamphlet from the Professor in the Economics of Innovation at the Open University and Economics Director of the Centre for Social and Economic Research and Innovation in Genomonics (Innogen). Mazzucato shows convincingly that the major innovations in our modern world -- the Internet, bio-technology, the new nano-technology -- which we tend to attribute to clever individuals at Apple, Google, Microsoft, companies such as GlaxoSmithKlein and venture capitalists, all in fact emerged from state financed networks, institutions and public enterprise, as in Silicon Valley. The first risk-taking investment was always from the state, and it was the state, she demonstrates, that not only fixed and regulated markets but created them. Capitalists took over what the state had launched with fundamental, long-term research, and capitalists made a lot of money in the process, profit which should, Mazzcato emphasises, have been shared with the people who took the first risks. And because these profits are used to finance political parties, governments listen to their paymasters and not to the needs of their peoples. This argument does not just apply to recent developments in the United States; historically in the UK, the steel industry, coal, canals, railways, flying and medicine were all first developed by public bodies; and UK Conservative Parties, notably under Mr Cameron’s leadership, are no less indebted to the rich than their American opposite numbers; and, regrettably, Labour leaders in Britain, too, have fallen for the blandishments of high finance.

What is it, then, that public enterprise can achieve where private enterprise fails? Mazzucato argues that private enterprise looks only at the short term and avoids not so much risks, which may be calculable, but uncertainty. Public enterprise sets no such limitations, but takes advantage of ‘creative destruction’, in Schumpeter’s phrase, to build anew. What is more, Mazzucato insists, public organisation can supply the networks of ideas and action between researchers, producers and consumers that even large corporations lack. She gives examples in the United States of Small Business Innovation Research (SBIR) and the Advanced Technology Programme (ATP), and the similar Advanced Research Projects Agency – Energy (ARPA-E) and, in 2009, the new multi-million dollar Energy Frontier Research Centres (EFRCs). But, while the US Department of Energy is allocating millions of dollars through matching funds and loan programmes to support the development, by public and private enterprise, of production facilities for solar panels, photo-voltaics, electric car batteries, and bio-fuel projects, the UK Coalition Government is cutting back even on the small support it now supplies to advancing green technology.

The lesson which Mazzucato draws in conclusion for the UK is only too clear: an underdeveloped ecology of networks of research and government procurement systems has to be replaced by the creation of systems designed, in her words, to ‘wrench technological progress out of UK business, under the leadership of the Technology Strategy Board (TSB) with a much expanded budget. The funds now given to flat subsidies of research and development activity and small businesses must be diverted and greatly increased to support a truly entrepreneurial state, where innovation is combined with collaboration. The inequality in rewards to the private and public sectors for risk taking has become totally unacceptable and only perpetuates an unproductive system, which fails to support equitable and stable economic growth. This is not only a question of addressing the threats of climate change with a new green technology, but also of advancing the whole welfare of the people.

The Trade Union Congress is organising an open conference, ‘After Austerity: What’s Next?’, at Congress House, London on 26 June 2012, at which Mariana Mazzucato will speak, and all these important questions will be discussed. We should join them.

Michael Barratt Brown

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TUC - ‘After Austerity: What’s Next?’
Tuesday 26 June 2012 09:30 - 17:00
Congress House, Great Russell Street, London, WC1B 3LS

With the country facing a decade of economic stagnation we need real change if we are to secure jobs and living standards for the future.

•Growth is the only long-term solution to getting our public finances back in shape, but where will it come from?
•With another generation scarred by youth unemployment, and job losses in public and private sectors, how can we create more as well as better jobs?
•A growing gap between the rich and the rest helped cause the crash, but what can we do about it?
•As tackling climate change is increasingly presented as a barrier to growth, can a low carbon economy be part of the solution?

'After Austerity' will debate the answers.

Our aim is to host as wide ranging a debate as possible on the key challenges for our economy in the years ahead - boosting jobs and living standards, securing fairer pay at the top and the bottom, developing industrial policies that work and securing the transition to a green economy.

To achieve the scale of debate we are aiming for we hope as many of you as possible will be there taking part – and if you'd like to register you can do so here: http://www.afterausterity.org.uk/.

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For all those interested in the themes of this important conference, IN PLACE OF AUSTERITY, a new book by Dexter Whitfield, uncovers the realities of commissioning, localism, 'big society' empowerment fraud, and the systematic undermining of public services and the welfare state. It perceptively exposes the scale of disempowerment, dispossession and disinvestment, and analyses the dominant rationale, which continues to underpin the financialisation and personalisation of public services, accelerating marketisation and privatisation on an unprecedented scale. This is a vitally important book for trade unions as well as for civil and community organisations.

Published by Spokesman, £18

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