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Economic Development

Public Sector Investment Key to Innovation Economies

Waterloo Innovation Summit - The world needs a new role for government in the freewheeling private-capital research sector, says Mariana Mazzucato, whose controversial 2013 book, The Entrepreneurial State: Debunking Public Vs. Private Sector Myths, stirred the waters of the international economic community.

Mazzucato, saying that the discussions over public policy have “been rendered incredibly dry,” led an enthusiastic keynote address for 250 attendees at the Waterloo Innovation Summit, Thursday, Sept. 17 at the University of Waterloo.

Book demolishes myth of intrusive government
Mazzucato, whose book demolishes the myth of the bureaucratic state hindering the innovative private sector, is a key economic advisor in Europe, holds the RM Phillips Chair in economics innovation at Science Policy Research Unit at the University of Sussex, and is a member of various economic panels, including the European Commission’s expert group on Innovation for Growth.

Thank government for the iPhone
As an example of the long-term role governments can play in innovation, she showed how every technology behind the iPhone was government-funded: the internet, GPS, touch-screen displays and even the voice-activated “intelligent assistant.”

What happened is that “dynamic people put those technologies together in cool ways and found a market for them.”

Yet, she told the crowd, anyone reading any book by a Silicon Valley success story will find not a word mentioning the role of government.

She said that the phrase “state versus market” is wrong from the outset.

“The words we use set us up to be quite narrow when we talk about exciting things.”

Mazzucato said that between the public and private sectors, there has to be a “sharing of the risks and the rewards — precisely because there are going to be massive amounts of failures.”

She said that “for any success you can have eight, nine, 10 failures.” She pointed out that this loss rate is very familiar to those in the private sector, but went on to say, “the internet did not come out of the government ‘de-risking’ its investments.”

Essentially, she said, “we need a new narrative of the role of the state in the process.”

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