Mazzucato’s ‘Innovation as Growth Policy’

These points are taken from a recent article by Mazzucato and Perez titled ‘Innovation as Growth Policy: the challenge for Europe’.

1. The world is in a crucial time of transition as to how to direct the economy after the financial crisis of 2008. We have a polarisation of incomes, high unemployment, low growth and a fearful financial sector which is steering away from the real economy.

2. Presently private and public investment go into speculative and short-term investment. The spread of information and communications technologies (ICT) in the 1990’s and 2000’s turned into casino capitalism. That financialisation has hindered progress.

3. Banks and venture capitalists have become risk-averse wanting returns in 3 years. However major innovations take 15-20 years to develop. That means they are not investing in the ‘big waves’ of the future. Long term funding must therefore come from public institutions.

4. A deeper understanding is needed of the process of innovation so that policies can be implemented to promote it as a driver of economic growth. Innovation is not just about easy money being available. It also needs a direction for the deployment of resources, i.e. a mission-led approach to innovation is needed. ‘Green growth’ can serve as a powerful global direction for deploying the potential of the information revolution.

5. Green growth is relevant to energy sources and uses, designing products, promotion of collaborative economies and promotion of health and education.

6. The markets cannot find the green direction on their own because there is no ready-made route that will make the multiple possible directions and disparate innovations profitable. Governments must take on the required high risk R&D.

7. Present efforts to generate growth which is both smart and inclusive are not working. A major innovation effort is needed to change this and a dialogue in which innovation and employment are not seen as trade-offs.

8. Conclusions:

- public investments are needed in a mission orientated approach

- direct and indirect incentives need to be provided to promote innovation

- EU banks can be used to cure the investment crisis

- ‘green’ can be used as the key challenge and direction

- long term committed finance is required

- definancialisation of the economy is required

- regulation is needed to shift profitability to key green areas

- taxation must reward long-term investment.

You can see the report here.

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