I wrote The Entrepreneurial State in 2013, to combat the view that in order to restore growth after the 2008 financial crisis, all that was needed was to reduce deficits by cutting public spending. Besides reminding readers that the financial crisis was caused by private debt, not public debt, I argued that it was futile for countries to think they can ‘cut’ their way to growth, given that a key driver of economic growth has been public investment in areas like education, research and technological change. It is the quality not the quantity of debt that matters as the quality can affect long-run growth opportunities. A greater understanding is thus needed about the dynamic of the public investments that led to the Internet, to advances in health innovation, and to those that are today spearheading the green revolution. In all these examples, public funds provided the patience and the long-term strategy, that later made the more risk-averse private sector willing to invest. The problem here, however, is not public vs private, but how to reframe the debate about the state’s role in the economy away from ideology, and towards practical thinking that can steer economies in ways that addresses societal and technological challenges ahead.

I am thrilled that Penguin is bringing out this new edition, as the argument is more relevant now than ever, for two reasons.

First, at the turn of 2018, a decades-old debate among economists is hotting up again: does austerity help or hurt economic growth? Broadly speaking, the debaters fall into two camps: conservatives who call for limited public spending, and thus a smaller state; and progressives who argue for greater investment in public goods and services such as infrastructure, education, and healthcare.

The Entrepreneurial State

It is the quality not the quantity of debt that matters

Of course, reality is more complex than this simple demarcation implies, and even orthodox institutions such as the International Monetary Fund have come around to the view that austerity can be self-defeating. As John Maynard Keynes argued back in the 1930s, if governments cut spending during a downturn, a short-lived recession can become a full-fledged depression. That is exactly what happened during Europe’s period of austerity after the 2008 financial crisis.

Second, in this intellectual climate it has become much easier for politicians to call for public-sector downsizing than to defend public-sector risk taking. And, in the process, they attack not simply the size of public-sector budgets, but the sector’s organizational structure. Not surprisingly, US President Donald Trump has targeted the US Advanced Research Projects Agency-Energy (ARPA-E is the Department of Energy’s key innovation agency, and

the sister organization of the Defense Advanced Research Projects Agency—DARPA—

in the Department of Defense), while congressional Republicans routinely threaten the public broadcaster PBS. In the UK, the BBC’s prestige has not insulated it from years of fierce attacks.

The Entrepreneurial State

Does austerity help or hurt economic growth?

The attack on public organizations, not just public budgets, means that the progressive agenda cannot be just about increasing public spending. It must also be about safeguarding the structures and organizations that, when dismantled, can take decades to reconstruct. While budgets come and go, organizations don’t. They take time to build and to take on the nature of the movements that created them—whether green movements, or movements for transparency and objective broadcasting.

  • The Entrepreneurial State

  • From one of the world's leading economists, a bestselling expose of the state's crucial role in sparking innovation and growth-and the dangers of ignoring this truth

    Conventional wisdom holds that innovation is the preserve of the private sector, best left in the hands of that modern day folk hero-the lone entrepreneur. In this popular tale, the role of the public sector is simply to get out of the way, at best fixing market failures, in order to facilitate our daring hero's bold, risk-taking endeavours. But what if this powerful, contemporary myth is wrong?

    In this sharp and controversial expose, Mariana Mazzucato comprehensively debunks the myth of a lumbering, bureaucratic state weighing down a dynamic private sector, to reveal how public investments have been behind many of the greatest innovations of our time. From the technologies that make the iPhone 'smart', to biotech, pharmaceuticals and today's emerging green technologies, it is the state that has been the investor of first resort, our boldest and most valuable innovator. Meanwhile, the private sector only finds the courage to invest after the entrepreneurial state has made the truly pioneering, high-risk investments.

    This false narrative has real world consequences - a select few get credit for what is an intensely collective effort, privatising rewards reaped from socialized risks. Mazzucato makes a powerful case that a failure to understand the state's entrepreneurial role is leading us down the wrong path-towards a future of stagnant growth and increased inequality.

    As we face the new challenges of the twenty-first century, Mazzucato argues that we need to reinvent the entrepreneurial state, to co-create the opportunities of the future -- and the kinds of public-private deals that will allow smart, innovation-led growth to also be more inclusive growth.

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