image from wattsupwiththat.com 

When most American’s picture the relationship between government and capitalism, they see a stark divide. On one side, there is the government, creating roads, funding the military, bettering education, in general putting money into sectors for basic needs. On the other, there is capitalism, Titans of Industry creating inventions like the iPhone, Facebook, or even the Tesla Model S. Mariana Mazzucato is a professor of Economics of Innovation and Public Value at University College London, and she seeks to show how government and capitalism are much more connected than we think.

The glaringly obvious Big Idea that Mazzucato uses is capitalism, and this is how she defines it;

[The] Defining feature of capitalism is how it “has really broken down all sorts of walls, that it’s constantly changing how industries operate; how production, distribution, and consumption work”

She begins her argument by pointing at her definition of capitalism. She argues that the government puts in significant resources into funding early-stage research, largely contributing to the success of technology, pharmaceuticals, and energy. By funding this research, Mazzucato believes that the government is changing how “production, distribution, and consumption work” and are therefore active participants in the capitalist system. Mazzucato points to several government agencies, specifically NASA, DARPA, and the National Institute of Health and how they contributed to inventions such as the internet, GPS, and HD displays. She believes that without these innovations, companies like Google would have no internet to run on and Tesla would have no GPS to lead its cars.

Mazzucato continues on by affirming that not only is government investing billions upon billions of dollars into research, but they aren’t getting credit for it, and they’re not getting much of a return. She illustrates this belief with two companies; Tesla and Solyndra. The government investing 1 billion combined in both companies. Solyndra failed and the government lost its investment and the American people were upset that the government was attempting to act as venture capitalists. Tesla on the other hand succeeded tremendously, and the government got no recognition for it, and no return on investment. Mazzucato suggested that the government should have required tesla to give them 3 million shares and after the significant boost in Tesla’s stock over the years, the government would have to been able to make its money back from the loss on Solyndra. She affirms that if the government is going to spend this money investing in companies, that it should also get a pay-out from them.

Mazzucato also delves into the market on pharmaceuticals. She states that most research during the beginning stages isn’t funded by private institutions, but by the government. She continues by saying that most large pharmaceutical companies don’t speed that much money on research and development, but instead on stock buy backs and dividends. Mazzucato believes that since the government funds so much of the development on these drugs they should be able to influence the price, specifically, by putting a price cap on drugs.

Overall, Mazzucato believes that the government is already an active participant in capitalism. She wants the government to be a co-shaper, and co-creator, not just a worried parent who sits on the sidelines waiting with band-aids for something to go wrong.