Publicly owned innovation drives clean energy investment that avoids cyclical destruction. That saves the planet.

There are at least three lessons vital for effective institutionalization of innovation that stem from Mariana Mazzucato’s analysis. There is a need to strengthen the funding sources of public R&D; a need to increase public commitment to ‘green’ technology innovation and direction setting; and a need to update the Keynesian responses to modern economic crises. If State investment in R&D is a necessary first condition in generating private innovation later, then guaranteeing a steady flow of funds for such purposes is in everybody’s interest. Her account of the Apple story shows that, apart from ‘staying foolish’ as Steve Jobs recommended, what many successful entrepreneurs have done – including him – is to integrate State-funded technological developments into breakthrough products. Given the massive returns generated by their success, shouldn’t entrepreneurs then return some of the rewards to the government, so it can continue taking the big risks that can later be turned into market game-changers? One could indeed hold that the reward is created in new tax revenues. Yet, globalization and information technology have enabled profits to migrate to low tax regions or even within tax havens. It is clear that innovation is needed in the tax system to ensure that highrisk public spending can continue to guarantee future private innovation. Mazzucato’s analysis provides a framework for thinking about ways to reform the current model to achieve that. The other direction for public sector innovation relates to ‘green’ technology. It is my own conviction that other than saving the planet, the green direction can, if properly supported, save the economy. By transforming consumption and production patterns and revamping existing structures and infrastructures, green technology can generate economic growth and long-term environmental sustainability. ‘Green growth’ can have an impact equivalent to what suburbanization and postwar reconstruction did to unleash the golden age in the West on the basis of the ‘American way of life’. It is impossible for the new millions of consumers being incorporated into the global economy to find wellbeing following the energy- and materials-intensive path exploited in the past. The limits to resources plus the threat of global warming could either become a powerful brake against the globalization process or the most powerful driver of growth, employment and innovation in a generation. Mazzucato holds that the ‘green revolution’ will depend on proactive governments. She shows, with ample illustration from the experience of the last decades in Europe, the US, China and Brazil, that success along the green direction has followed where clear, committed and stable government support has been available. As in the case of the US with information technology, it is those countries that are willing to accept the high risks and that are determined to support their entrepreneurs that are likely to lead the world markets in green technologies. Market uncertainty is unavoidable in the context of innovation, but policy uncertainty – as experienced in the US and UK with respect to all things ‘green’ – is deadly. Her analysis suggests that success is met by those countries that have been able to reach a strong national consensus and can therefore maintain the level of funding and sustained policy support through the ups and downs of the economy.