Mariana Mazzucato: Government — investor, risk-taker, innovator

I am sure my friends on the right politically, who think that the state is the arch-enemy, will hate listening to this. Yet, they should, in the hope they can understand a thing or two and come to a more balanced view of economics and stop worshiping the supposedly sacred free market economy.

Why doesn’t the government just get out of the way and let the private sector — the “real revolutionaries” — innovate? It’s rhetoric you hear everywhere, and Mariana Mazzucato wants to dispel it. In an energetic talk, she shows how the state — which many see as a slow, hunkering behemoth — is really one of our most exciting risk-takers and market-shapers.

Which actor in the economy is most responsible for making radical innovation happen? Mariana Mazzucato comes up with a surprising answer: the state.

Mariana Mazzucato

States and governments are often depicted as slow, bureaucratic, risk-averse. That argument is used in support of making states smaller and the private sector bigger. In her latest book, The Entrepreneurial State: Debunking Private vs. Public Myths in Innovation and in her research, Mariana Mazzucato offers a bold contrarian view: States aren’t only market regulators and fixers, but “market makers” — actively creating a vision for innovation and investing in risky and uncertain areas where private capital may not see the ROI. Yes: Private venture capital is much less risk-taking than generally thought. As an example, the technology behind the iPhone and Google exists because the U.S. government has been very interventionist in funding innovation. Private investors jumped in only later. The same is true today of what promises to be the next big thing after the Internet: the green revolution.

Mazzucato, a professor of economics at the Science and Technology Policy Research Unit (SPRU, University of Sussex), argues that Europe needs today to rediscover that role — that what the continent needs is not austerity but strategic investments (and new instruments such as public investments banks) towards an “innovation Union.”

Author: DanutM

Anglican theologian. Former Director for Faith and Development Middle East and Eastern Europe Region of World Vision International

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