Original to:
https://www.theguardian.com/commentisfree/2017/jul/12/phone-state-private-sector-products-investment-innovation
(bwo Barbara Strebel, with thanks)
Look at the phone in your hand – you can thank the state for that
Rutger Bregman, The Guardian Opinion, 12 July 2017
We know the private sector has given us life-changing products. But we
forget that it is state investment that makes innovation possible in the
first place
• Rutger Bregman is the author of Utopia for Realists (translated by
Elizabeth Manton)
Who are the visionaries who drive human progress? The answer, as we all
know, is the geeks, the free spirits and the crazy dreamers, who thumb
their noses at authority: the Peter Thiels and the Mark Zuckerbergs of
the world; the likes of Steve Jobs and the Travis Kalanick; the giants
with an uncompromising vision and an iron will, as though they have
stepped fresh from the pages of one of Ayn Rand’s novels.
“Innovation,” Steve Jobs once said, “distinguishes between a leader and
a follower.” Now, if ever there were a prototypical follower, it would
have to be the government. After all, why else would nearly all the
innovative companies of our times hail from the United States, where the
state is much smaller than in Europe?
Media outlets including the Economist and the Financial Times never tire
of telling us that government’s role is to create the right
preconditions: good education, solid infrastructure, attractive tax
incentives for innovative businesses. But no more than that. The idea
that the cogs in the government machine could divine “the next big
thing” is, they insist, an illusion.
Take the driving force behind the digital revolution, also known as
Moore’s law. Back in 1965, the chip designer Gordon Moore was already
predicting that processor speeds would accelerate exponentially. He
foresaw “such wonders as home computers”, as well as “portable
communications equipment” and perhaps even “automatic controls for
automobiles”.
And just look at us now! Moore’s law clearly is the golden rule of
private innovation, unbridled capitalism, and the invisible hand driving
us to ever lofty heights. There’s no other explanation – right? Not
quite.
For years, Moore’s law has been almost single-handedly upheld by a Dutch
company – one that made it big thanks to massive subsidisation by the
Dutch government. No, this is not a joke: the fundamental force behind
the internet, the modern computer and the driverless car is a government
beneficiary from “socialist” Holland.
Our story begins on 1 April 1984 in a shed knocked together on an
isolated lot in Veldhoven, a town in the south of the Netherlands. This
is where a small startup called ASML first saw the light of day.
Employing a couple of dozen techies, it was a collaborative venture
between Philips and ASM International set up to produce “hi-tech
lithography systems”: in plain English, machines that draw minuscule
lines on chips.
Fast-forward 25 years, and ASML is a major corporation employing more
than 13,000 engineers at 70 locations in 16 countries. With a turnover
of over €5.9 billion (£5.2bn) and earnings of €1.2bn, it is one of the
most successful Dutch companies, ever. It controls over 80% of the chip
machine market – the global market, mind you.
In point of fact, the company is the most powerful force upholding
Moore’s law. For them, this law is not a prediction: it’s a target. The
iPhone, Google’s search engine, the kitty clips – it would all be
unthinkable without those crazy Dutch dreamers from Veldhoven.
Naturally, you’ll be wondering who was behind this paragon of
innovation. The story told by the company itself fits the familiar
mould, of a handful of revolutionaries who got together and turned the
world upside down. “It was a matter of hard work, sweat and pure
determination against almost insurmountable odds,” explains ASML in its
corporate history. “It is a story of individuals who together achieved
greatness.”
Government isn’t just there to administer life-support to failing
markets. Without it, many would not even exist
There’s one protagonist you never find mentioned in these sort of
stories: government. But dive deep into the archives of newspapers and
annual reports – back to the early 90s – and another side to this story
emerges.
From the get-go, ASML was receiving government handouts. By the fistful.
When in 1986 a crisis in the worldwide chip industry brought ASML to its
knees, and while several big competitors toppled, the chip machine-maker
from the south of Holland got a leg-up from its national government.
“Competitors who had survived the crisis no longer had enough funds to
develop the next big thing,” explains the company’s site. So while its
rivals licked their wounds, ASML shot into the lead. Is ASML an anomaly
in the history of innovation? Not quite.
A few years ago the economist Mariana Mazzucato published a fascinating
book debunking a whole series of myths about innovation. Her thesis is
summed up in the title – The Entrepreneurial State.
Radical innovation, Mazzucato reveals, almost always starts with the
government. Take the iPhone, the epitome of modern technological
progress. Literally every single sliver of technology that makes the
iPhone a smartphone instead of a stupidphone – internet, GPS,
touchscreen, battery, hard drive, voice recognition – was developed by
researchers on the government payroll.
Why, then, do nearly all the innovative companies of our times come from
the US? The answer is simple. Because it is home to the biggest venture
capitalist in the world: the government of the United States of America.
These days there is a widespread political belief that governments
should only step in when markets “fail”. Yet, as Mazzucato convincingly
demonstrates, government can actually generate whole new markets.
Silicon Valley, if you look back, started out as subsidy central. “The
true secret of the success of Silicon Valley, or of the bio- and
nanotechnology sectors,” Mazzucato points out, “is that venture
investors surfed on a big wave of government investments.”
True innovation takes at least 10 to 15 years, whereas the longest that
private venture capitalists are routinely willing to wait is five years.
They don’t join the game until all the riskiest plays have already been
made – by governments. In the case of biotechnology, nanotechnology and
the internet, venture investors didn’t jump on the bandwagon until after
15 to 20 years. Venture capitalists are not willing to venture enough.
The relationship between government and the market is mutual and
necessary. Apple may not have invented the internet, GPS, touchscreens,
batteries, hard drives and voice recognition; but then again, Washington
was never very likely to make iPhones. There’s not much point to radical
innovations if no one turns them into products.
To dismiss the government as a bumbling slowpoke, however, won’t get us
anywhere. Because it’s not the invisible hand of the market but the
conspicuous hand of the state that first points the way. Government
isn’t there just to administer life support to failing markets. Without
the government, many of those markets would not even exist.
The most daunting challenges of our times, from climate change to the
ageing population, demand an entrepreneurial state unafraid to take a
gamble. Rather than wait around for the market, government needs to have
vision, be decisive – to take to heart Steve Jobs’ motto: stay hungry,
stay foolish.
This article was translated from Dutch by Elizabeth Manton
• Utopia for Realists: And How We Can Get There:
https://thecorrespondent.com/utopia-for-realists/
https://www.bloomsbury.com/uk/utopia-for-realists-9781408890264/
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