The Entrepreneurial State explores the leading role that the State has played in generating innovation and economic growth in modern capitalism. It began as a collaboration with the UK think tank DEMOS, and is now part of a new project funded by the Ford Foundation (Reforming Global Fi- nance). This second phase of the project includes a new book, published by Anthem Press, on June 10th 2013
This book (Anthem, 2013), debunks the myth of the State as a large bu- reaucratic organization that can at best facilitate the creative innovation which happens in the dynamic private sector. Analysing various case stud- ies of innovation-led growth, it describes the opposite situation, whereby the private sector only becomes bold enough to invest after the courageous State has made the high-risk investments.
The volume, which builds on the author’s work for a high-impact DEMOS report (and more than double the size), argues that in the history of modern capitalism, the State has generated economic activity that would not other- wise have happened, and has actively opened up new technologies and markets that private investors can later move into. Far from the often heard criticisms of the State potentially ‘crowding out’ private investments, the State makes them happen, shaping and creating markets, not only ‘fixing’ them. Ignoring this reality only serves ideological ends, and hurts effective policymaking.
This book examines case studies ranging from the advent of the Internet to the emergence of the biotechnology and nanotechnology industries. In par- ticular, the volume debunks the myth that Silicon Valley was created by entrepreneurial venture capital. A key chapter focuses on the State invest- ments behind Apple’s success, and reveals that every major technology behind the iPhone owes its source to public funds. Thus, while entrepre- neurial individuals like Steve Jobs are needed, their success is nearly im- possible without their ability to ride the wave of State investments. And if Europe wants its own Googles, it needs more State action, not less.
Two forward-looking chapters focus on the emergence of the next big thing after the internet: the ‘green revolution’. Both solar and wind technology are currently being led by State spending, whether through the US ARPA-E programme or the Chinese and Brazilian State investment banks. The dis- cussion refreshingly moves beyond the usual division between proponents of austerity vs. the proponents of fiscal stimulus. It argues that State invest- ments not only help kick-start growth during periods of recession, but that they also, even in boom periods, lead to productive investments in radical new technologies which later foster decades of growth.
The book ends with a fundamental question: if the State is so important to investments in high-risk innovation, why does it capture so little direct re- turn?
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