The state doesn't need the private sector to be entrepreneurial

It is widely accepted that business is more dynamic -- but in fact, the state is crucial to innovati

The government's economic strategy isn't working. The post-crisis hangover remains, with growth subdued and recovery elusive and there's little on the horizon to stimulate the optimism and confidence needed to kick start the vibrant economy needed to secure sustainable growth and future prosperity. As Keynes claimed, investment is not driven by simple tax cuts but by the much less predictable "animal spirits" of investors, and such spirits are not currently running high.

Why? Current economic policy is based on the false premise that innovation-led growth will only happen if we pull back the role of the state and unleash the power of entrepreneurship in the private sector. This feeds a perceived contrast that is repeatedly drawn by the media, business and libertarian politicians of a dynamic, innovative, competitive private sector versus a sluggish, bureaucratic, inertial, "meddling" public sector. So much so that it is virtually accepted by the public as a "common sense" truth. In the March 2011 Cardiff Spring Forum, the Prime Minister, David Cameron, brought this view to an extreme when he called "bureaucrats in government departments" the "enemies of enterprise".

It is not a view that is unique to the UK government. The Economist, which often refers to the government as a Hobbesian Leviathan, recently argued that government should take the back seat and focus on creating freer markets and the right conditions for new ideas to prosper, rather than taking a more activist approach. In painting this contrast, it is assumed that the private sector is inherently more innovative, able to think "out of the box" and lead a country towards long-run, innovation-led growth.

However, countless examples in the history of innovation reveal a different picture: one of a risk-taking innovative state -- especially in the most uncertain phases of technological development and/or in the most risky sectors -- versus a more inertial private sector which only enters and invests once the state has absorbed most of the uncertainty, before walking off with all the gains. In pharmaceuticals it is the state, through the NIH in the USA or the MRC in the UK, that has funded most of the priority rated new molecular entities (innovative drugs) with private pharma concentrating on slight variations of existing ones ("me too" drugs). From the development of aviation, nuclear energy, computers, the internet, the biotechnology revolution, nanotechnology and green technology today, it has been the state, not the private sector, that has often engaged with the most high-risk entrepreneurial activities, kick-starting and developing the engine of growth.

It has not done so not just by funding basic research, or "fixing" market failures. It has created new markets; formulating a vision of a new area, investing in the earliest-stage research and development, identifying new pathways to market and adjusting rules to promote them, creating networks that bring together business, academia and finance, and being constantly ahead of the game in areas that will drive the next decades of growth. Ironically, although the US economy is often discussed as a market-based system compared to Europe, in fact, the US federal government has been one of the most active agents in creating new sectors and related technologies: it was civil sector workers in the US Department of Defence that dared to think up the internet. The same is true of nanotechnology, where publicly funded scientists convinced both Congress and the business community that nanotechnology was a key sector. The National Nanotechnology Initiative invented the very idea of nanotechnology.

Of course there are plenty of examples of private sector entrepreneurial activity, from the role of new, young companies in providing the dynamism behind new sectors to the important source of funding from private sources like venture capital. But, generally, it is only this story which is told. Silicon Valley or the biotech revolution are usually attributed to the geniuses behind small, high tech firms like Facebook or the plethora of small biotech companies in Boston or Cambridge. How many people know that the algorithm that led to Google's success was funded by a public sector National Science Foundation grant? Or that many of the most innovative, young companies in the US were funded not by private venture capital but by public venture capital (Small Business Innovation Research, SBIR)?

The most successful economy in Europe, Germany, understands the need for an entrepreneurial state. While fiscal expenditure, like elsewhere, has been cut (from €319.5bn last year to €307.4bn this year), the Ministry of Education and Research's budget is rising by 7.2 per cent; which includes €327m for university research excellence alone. Support for research and development at the Federal Economics Ministry is also increasing. The German government is one of the lead spenders on green technology, stimulating business to do the same. Thus, while Angela Merkel wants Greece to reduce state expenditure, in her own country she claims " the prosperity of a country, such as Germany, with its scarce mineral resources, must be sought through investment in research, education and science, and this to a disproportionate degree." China is following in Germany's footsteps, with the Chinese National Sciences Foundation (equivalent to the UK research councils), increasing its budget this year by 17 per cent, which will mean its budget will have doubled from 2009 to 2011. It is this long run growth strategy that should be feared, rather than the usual talk of the flood of low cost Chinese goods.

This is not the time for our public sector to step back. Now, more than ever, we need an assertive, entrepreneurial state, identifying areas for new growth and investing strategically in early stage innovation. Major growth opportunities are there. Green technology is poised to be the next great technological revolution, and being first will really matter, as the global race for pole position is well underway. This is within our grasp, but only if the government makes it a priority and provides that daring, forgiving investment. The Green Investment Bank is a start but it is not enough. Despite the Prime Minister's pledge to lead the UK's "greenest government ever", there is currently no break from the long trend of below-average business R&D in this sector. Under 1 per cent of UK Gross Domestic Product is being invested in green technologies; half of what South Korea currently invests and less than what the UK spends annually on furniture.

Making the right investments means a new philosophy about what the state's role is in the economy. It is not about just creating the right conditions for innovation, but also having the courage to make direct investments that are subject to high failure rates, which the private sector notoriously shies away from. It is the risk associated with new innovations which challenge the status quo that the UK should specialise in, not just risk-management in the financial sector: risk-taking for creative destruction, not for destructive destruction.

Mariana Mazzucato is Professor in the Economics of Innovation at The Open University. Her book, The Entrepreneurial State, is published today.

Reuters/New Statesman composite.
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When it comes to social media, we all have a responsibility to avoid sharing upsetting images

If Twitter is the new journalism, we are all editors – and responsible for treating our fellow humans with dignity.

“I wish I hadn’t seen that”, my colleague says from across the desk. It’s been an hour since the first reports came in of a shooting outside Parliament, and the news agency Reuters has started posting photographs of injured people, knocked down by the terrorist as he drove across Westminster Bridge.

In one, a brunette woman leans over a victim whose blood is beginning to stain the wet pavement. Lying on her back, she is framed by scattered postcards sold for tourists which have been knocked to the floor. She is clutching the arm of the woman helping her, but her eyes are staring dead into the photographer’s lens.

Another photograph – the one that my colleague is referring to – disturbs me even more: a man who has fallen (or been pushed?) off the bridge onto a stairwell. He is face down in a pool of blood, his left leg at an unnatural angle. It is impossible to tell if he is alive or not.

Briefly, before I scroll past, I wonder if someone, somewhere is seeing the same picture and experiencing a shock of recognition as they recognise their friend’s clothes.

And then there is one picture which I now cannot find on Twitter, but which, lying in bed last night, I could not stop thinking of: a woman’s legs extended from under the wheel of a bus, her skirt hiked up to show her underwear, her shoes missing.

We are a desk of journalists covering an attack on the Houses of Parliament, so I keep scrolling. It is only later, in an article by the Telegraph, that I learn a junior doctor has declared the woman dead.

Of course, the shock of seeing images like these is nothing compared to what war reporters, doctors or police go through on a regular basis. But a 2015 study at the University of Toronto found that extended exposure to violent or disturbing material can have a severe effect on journalists’ mental health.

The impact can be particularly confusing when one does not anticipate seeing violence.On social media, we increasingly encounter images this way: without warning and without a chance to steel ourselves. This is particularly a problem when it comes to members of the public, whose jobs don’t require them to look at shocking material but who can nevertheless be exposed to it just by virtue of using a social media network.

It is for this reason that, shortly after Reuters published their photographs of the Westminster victims, prominent journalists began posting asking their colleagues not to retweet them. Some protested the fact that Reuters had published them at all.

In today’s media landscape, news moves fast and social media faster. Where a picture editor would have previously had until their print deadline to decide which images to run, now photographers are able to send their work back to the office almost instantaneously, and editors must make a snap decision about what to release.

Deciding what images to use can be a difficult call – especially under pressure. On the one hand, there is the urge to not turn away, to bear witness to the full magnitude of what has happened, even if it is shocking and upsetting. On the other, there is the need to treat fellow human beings with dignity, and particularly to avoid, where possible, showing images of victims whose families have not yet been informed.

Social media makes this process even more difficult. Once released online, photographs of the Westminster attack were quickly saved and re-posted by private individuals, stripped of context or warning. One can choose not to follow the Reuters Pictures account, but one cannot necessarily avoid seeing an image once it is being retweeted, reposted and recycled by private accounts.

As the line between traditional news and social media blurs and we increasingly become participants in the news, as well as consumers of it, our sense of responsibility also shifts. On Twitter, we are our own editors, each charged with making sure we extend dignity to our fellow humans, even – especially – when the news is dramatic and fast-moving.

I was glad, this morning, to encounter fewer and fewer photographs – to not see the girl lying under the bus again. But at 3am last night, I thought about her, and about her family; about them knowing that journalists on desks across Britain had seen up their loved one’s skirt during the last moments of her life. It was, without putting too fine a point on it, no way to encounter a fellow human being.

Over the next few days, we will find out more about who the victims were. The media will release images of them in happier times, tell us about their jobs and careers and children – as is already happening with Keith Palmer, the policeman who we now know died on the Parliamentary Estate.

It is those images which I hope will be shared: not just as a way to resist fear, but as a way of acknowledging them as more than victims – of forging a different connection, based not in horror and voyeurism, but in a small moment of shared humanity.

There is no shame in being affected by graphic images, however removed one “ought” to feel. If you would like someone to talk to, Mind can provide details of local services.

The BBC also provides advice for those upset by the news.

Find out how to turn off Twitter image previews here.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland