From the capitalist perspective, it has always been considered that the private sector is innovative, dynamic and competitive, while the State plays a more static role, intervening in the market only to correct possible failures in the development of its activities. Economist Mariana Mazzucato argues that this is a "false myth" and that the State is the most entrepreneurial organization in the market, the one that assumes the most risky investments.
The professor of Economics of Innovation at the University of Sussex (Great Britain), author of The Entrepreneurial State and co-editor of Rethinking Capitalism, argues that innovation is an enormously uncertain and cumulative collective process. Because of these characteristics, it is not economically attractive to "short-sighted private individuals".
In this context, he suggests the need to rethink the process of wealth creation under the concept that all actors are responsible for creating value. He insists that the idea of a "boring" State that only generates a regulatory framework for private action must be set aside. It is necessary to give way to dynamic partnerships between the public and private sectors and with a focus on innovation.
What is the role of the State in the economy and innovation? Is it better to have a strong, intervening State or a small one, with little participation?
Many governments around the world are aiming for the same goal: how to achieve smart innovation with inclusive economic development. The traditional view of mainstream economics has been that, to achieve that goal, the state should play as limited a role in the economy as possible, but the public versus private sector needs to be demystified. The places that achieved innovation-led growth took the opposite path; the state took the lead in making mission-oriented investments all along the chain, including financing for early-stage enterprises.
Is the division between states and markets false?
Capitalist markets did not emerge spontaneously, they are the result of interactions between different agents of the economy, public and private. Traditional policies allow only a limited role for the state in fixing market failures, such as the provision of public goods like basic research. But that framework is inadequate to describe what is needed now to address the challenges, and it is also inadequate to explain what happened before. We need a new framework for understanding the role of the state in creating and sharing new markets.
What are the rules that should govern the relationship between the State and the private sector?
The rules must change. We need new types of contracts or agreements, a new dynamic between public and private actors that take into account the role of the state in financing innovation. The reality is that wealth creation is a collective process, the result of dynamic interactions between many different actors. This vision is key to free policy makers from the idea that they should be "business facilitators" and allow them to think about the kind of dynamic mutual relationships between the public and private sectors that can generate long-term productive growth.
What is the State's mission in addressing innovation?
An entrepreneurial state should focus on how to transform social challenges - inequality, climate change, population aging - into concrete goals that innovation can solve. This scheme requires the state to have vision and a willingness to dream. It also involves a leadership role in investment in areas that are very risky for the private sector. It means having a presence not only in basic science and research, but throughout the entire innovation chain by providing resources to the few companies interested in committing to innovative objectives. It means difficult but rewarding choices. It means tilting the playing field in the direction of particular areas such as biotechnology, nanotechnology, ecology, but above all allowing different actors (public, private and third sector) to work together on new ways of solving problems.
Excerpt from the article published by Estrategia & Negocios magazine, issue N° 204.
