Social Policy in Ontario

Public investment gives private ingenuity a springboard

Posted on January 28, 2015 in Debates

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TheStar.com – Opinion/Commentary – Globetrotting economist Mariana Mazzucato makes the case that governments can spur innovation and shape future markets.
Jan 27 2015.   By: Carol Goar, Star Columnist

There are places in the world where working for the government is the coolest job you could have.

Brasilia is one of them. So are Berlin and Beijing. Ottawa definitely is not.

It used to be. A generation ago, Canada’s capital was a talent magnet, a place to think big, work with smart people, take policy risks and steer public money into projects that would shape the nation’s future. Ed Clark, who just stepped down as CEO of the Dominion Bank, got his start in the federal public service. So did Kevin Lynch, vice-chair of the Bank of Montreal; Michael Sabia, CEO of the Caisse de dépôt et placement du Québec; Wendy Dobson, chair of the Pacific Trade and Development Research Network; Derek Burney, former CEO of Bell Canada; and Paul Tellier, former chief executive of both Canadian National Railway and Bombardier.

Today no one seeking a stimulating career would head for Ottawa. Brainstorming and foresight are no longer valued in the federal public service. The prime minister wants functionaries who can implement his ideas cost-effectively. Voters think bureaucrats are meddlesome, overpaid paper-pushers. The business community regards them as a drag on the economy.

The private sector is where the exciting opportunities are.

Mariana Mazzucato, a globe-trotting economist, author and lecturer says this is a false dichotomy. She goes on to argue that Canada can be global innovator — with the state providing the impetus.

The Italian-born, American-educated academic spoke with the Toronto Star’s editorial board last week. “You can’t just cut spending and hope investment will go up,” she said. “Canada should be talking about investing the profits from the extractive sector in innovation, research and development and sustainable economic activity.”

Tax incentives won’t trigger innovation, she maintained. It takes government-led goal-setting backed up with public funds — Mazzucato calls this mission-based investment — to generate transformative knowledge, spawn technical breakthroughs and improve the economic outlook for everyone, including those at the bottom of the income pyramid. She identified a few such missions.

“I think the green challenge is so overwhelming that it could be a game-changer,” she said. But there are other strong candidates. “Who is thinking about adapting to an aging population? Who is reimaging the labour-intensive personal-care sector?”

The first imperative, Mazzucato acknowledged, is changing public opinion. She is making an all-out effort to debunk the myths underlying the private-sector-good/public-sector-bad mindset, starting in the U.S. where it is most deeply entrenched. In speeches, debates, influential journals and opinion pieces in leading American newspapers, she demonstrates how cellphones, hydraulic tracking, the Internet and many other innovations Americans attribute to the genius of private entrepreneurs are actually adaptations of government research done in the 1960s or earlier.

She is less familiar with Canadian economic history, but she sees the same pattern here. Blackberry, for instance, grew out of the work done at Bell Northern Research, which received millions of dollars in federal funding. Engineering student Mike Lazaridis adapted the technology to create the first smart phone. But he didn’t start from scratch. Bombardier, likewise, benefitted heavily from government support. Its founder, mechanic Joseph-Armand Bombardier, designed the first vehicle that could “float on snow” but it was an adaption of motor vehicle technology underwritten by the government during the First World War.

“The way Canada tells its success stories ignores public sector investment,” she said. “The government is now depicted as the enemy of innovation and entrepreneurship.”

Outside North America, there are more dynamic models, she contends. Brazil’s ministry of science and technology is an active investor in everything from pure and applied mathematics to nuclear energy. It co-ordinates the nation’s labs and helps turn their discoveries into commercial products. The German Ministry for Economic Affairs and Energy operates research institutes, uses public procurement to drive innovation, invests in cutting-edge technology and helps businesses commercialize it. The Chinese government aggressively invests in homegrown innovation, adapts foreign technology, uses megaprojects and directs state-owned enterprises to propel itself to the forefront.

It is not the specific that interests Mazzucato; it is the idea that governments can pull together multi-talented teams of problem-solvers, spur innovation, marry science and industry and trigger waves of economic growth.

“We have a cartoonish image of the state as a dinosaur,” she says. “In fact, in countries that owe their growth to innovation, it is a key partner of the private sector — and often a more daring one.”

< http://www.thestar.com/opinion/commentary/2015/01/27/public-investment-gives-private-ingenuity-a-springboard-goar.html >

Tags: budget, economy, globalization, ideology, standard of living

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