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Mazzucato, Kattel, and Ryan-Collins start from a full-scale attack on neoliberal conceptions of markets to advocate a new approach to the role of government in the economy. They locate market fundamentalism at the root of the worse disasters of our times: growing inequality, financial crises, and a worsening climate. Many of these charges against neoliberalism are by now familiar. But two things stand out as original and powerful in their critique: the challenge to neoliberalism’s limited role for government as a market-failure fixer, and the conception of the state as a risk-taker.
On the neoliberal view, the legitimate realms of state intervention include areas such as defense, public health, and clean air. These involve problems of collective action that private actors and markets cannot solve because of free riding: a universally desired societal outcome cannot be achieved because of inherent failures of cooperation. Imagine a simple example. If apple farmers get together and decide to hire a plane to seed clouds so that rain rather than hail will fall on their apples, some farmers are certain to free ride. Since rain cannot be made to fall only on apples of the dues-paying farmers and hail on the apples of the others, the job will have to be done by state agricultural services, and the costs will have to be covered by taxes that all will be required to pay.
Confining government intervention to these cases of market failure involves little or no long-term risk—which is inevitable in tackling more serious problems. Mazzucato and her colleagues urge that the government take on vaster challenges such as “reducing inequality, fostering sustainable development, or arresting climate catastrophe.” Such missions involve great uncertainty, not least about whether they are achievable at all. It’s also uncertain whether there will be gains—and of what magnitude—for private actors who are “to fill in the details.” This is why the authors refer to these missions as “moonshots,” analogous to the Apollo program of the 1960s.
But thinking of industrial policies as moonshots is just one of several ways of conceptualizing government intervention in the economy. Each prioritizes a different range of policies. Historically, with the exception of wartime and defense manufacturing, industrial policy in the United States has mainly been trade policy. Alexander Hamilton’s 1791 Report on Manufactures urged both tariff protection and subsidies to encourage infant industries, but even at the time, Congress only went along with the tariffs. Trade policy would continue to be the main channel for industrial policy through much of U.S. history, and it reappeared in that guise during the Trump administration. Subsidies for specific industries—for semiconductors (as with Sematech in 1987) and advanced manufacturing technologies (as with the Obama administration Manufacturing Innovation Institutes)—have been the exceptions.
Quite a different conception of the government’s role in the economy emerged after World War II with large-scale federal support for basic science. This was the approach advocated in Vannevar Bush’s Science: The Endless Frontier (1945). Bush defended federal support for basic science as a critical foundation for fighting disease, advancing defense, and stimulating the economy, where he argued it would be essential for creating more jobs, more goods for consumers, and new companies. In a way, government financing of basic research can be understood as fixing a market failure, as private actors and firms are not likely to invest in early-stage research, since gains from such investments are uncertain, slow to appear, and impossible to fully capture. This may explain why this kind of government financing can find political support even across partisan lines.
But some question whether support for fundamental research is really industrial policy at all. MIT’s president Rafael Reif described Bush’s vision of basic science “as a kind of wild garden: individuals seeding ideas based on their intellectual interests with no overall design.” Reif then argued that “we cannot assume, as Bush did, that curiosity-driven advances in science someday will be useful in some fashion.” Reif and others instead promote “use-inspired basic research.” In current debates over the Endless Frontier Act before Congress in the summer of 2021—as well as in the ongoing controversy over whether the National Science Foundation, an agency dedicated to basic research, should support more targeted funding of technologies—support for basic science appears pitted against support for applied research. But “curiosity-inspired basic research” and “use-inspired basic research” are clearly complementary.
Consider the development of the COVID-19 vaccines. They built on NIH-funded basic genomic research and years of research on how to get mRNA into the human body. In 2010 the Defense Advanced Research Projects Agency (DARPA) identified these developments as relevant to its interest in protecting U.S. military personnel from exotic diseases in foreign countries. In 2013 DARPA provided $25 million to Moderna, then a private company with no commercial products, to work on mRNA. The pandemic produced the public resolve that led to Operation Warp Speed and the extraordinary cooperation between silos in government and between government and private industry. Between April and November 2020, in record speed, mRNA vaccines moved from a lab project to the arms of Americans.
Does the success of the vaccine and the Apollo project provide support for the “mission-driven” approach to industrial policy that Mazzucato and colleagues advocate? Could it work for missions on the scale they envisage, “reducing inequality, fostering sustainable development, or arresting climate catastrophe”? I have doubts, for a few reasons.
First, there is the matter of public support. The Apollo project had some critics, but there was widespread public excitement about going to the moon. Operation Warp Speed also had massive public and political support (which fissured once vaccines became available). In contrast, none of the societal missions that Mazzucato mentions would generate across-the-board public support. Indeed each would find passionate enemies among large blocs of the public, and not just hostile lobbyists.
Second, David Hart and Richard Lester have pointed out that programs like the Manhattan Project and Apollo had limited objectives:
there was a single, unambiguous, high-risk technical goal—a bomb that worked in the former case, a trip to the moon and back in the latter. There was only one ‘customer’: the federal government itself. Success meant the technology had to work only a few times. In each case the goal was to be achieved in just a few years. And cost was essentially no object; the government was committed to doing the job, whatever it took.
Finally, the three previous moonshots were all technological feats, even as they built on years of basic research, superb organization, cooperation, and planning. They did not require profound changes in politics and society.
The missions that Mazzucato, Kattel, and Ryan-Collins propose could not be accomplished without a transformation of politics as we know it, even if some of the tasks involved do not draw much controversy. Mazzucato suggests breaking down “the grand challenge of climate change” with specified do-able subtasks, giving the example of clearing plastics out of the oceans. Even there, the question of territorial waters—who gets to enter whose waters to pick up the plastic—might make it a challenging act to coordinate internationally. What if ocean tides wash the plastics from waters that are being cleared into waters whose coastal states have declined to participate in the operation? Again, politics would be challenging. And, however worthy, would adding up these projects lead to anything like a moonshot response to climate change?
Perhaps, then, the most valuable element in this vision of industrial policy is the concept of the state as investor and guarantor of high-stakes risk. None of our past experience suggests that discoveries in domains such as climate change and disease—not to mention their implementation at scale—could be achieved through voluntary cooperation and coordination. Both in fundamental research and in “use-inspired” industrial policy we have been far too stingy in our investment in the future: we need both. Without years of basic research investment by NIH in genomics research and the work of university scientists, DARPA would have been of no avail in advancing vaccine research. Without DARPA and other institutions that support use-inspired research, discoveries in basic research move into social use too slowly and too fitfully.
In lieu of the visionary politics of missions, in short, we need to work through the kind of politics that is possible in the United States today. This means trudging across political battlefields poisoned by resentment and fear with slow advances, partial victories, and hope of better for the future.
Market fundamentalism has failed to improve economic and social conditions. Now, we need a mission-oriented approach to the economy that embraces an active role for government in spurring growth and innovation.
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