PUBLIC FUNDS BROUGHT SMART PHONES

Theory. Interview with Mariana Mazzucato

[Mariana Mazzucato is a professor in Sussex, Germany. In her book “Das Kapital des Staates,” she urges a new focus on innovation and growth. This interview published on 12/27/2014 is translated abridged from the German on the Internet, http://www.taz.de.]

Taz: Ms. Mazzucato, you imagine states with declining growth can easily solve their problems. The relation of state and market must be reconfigured. What do you mean?

Mariana Mazzucato: I have analyzed high-growth countries and investigated how they achieved that high growth. The governments of these countries actively created and shaped markets. The US does much more than solve problems when the market fails. Because of the delusion that an inflated state inhibits growth, we can no longer speak about the necessity of a state that thinks strategically.

You write in your book Apple’s success story was not invented by people undisturbed by the state.

Exactly. Obviously they are clever and can even be called geniuses. But that is only one side of the story. The other is that everything that makes iPhones smart was encouraged by public funds. Steve Jobs and his people only combined several existing technologies and gave them a cool design. The Internet, GPS, the touch screen, Siri, the personal assistant – all these only exist through public money. This state share is completely faded out in the conventional story about business history. They keep the profits for themselves.

APPLE PAYS TAXES

Every conceivable loophole is used. In this way, Apple and Google pull the rug from under their own feet. Together with the Venture Capitalist Association, these firms have done lobby work for tax cuts for years. The capital gains tax in the US is only 15 percent.

The amount may be controversial. But who denies on principle that equalization of burdens is necessary. Aren’t you shooting a cardboard dummy, particularly in Europe?

…Germany tells weaker European states like Greece, Spain or Italy they must cut, cut and cut to be competitive… The imbalance in Europe did not arise in that Germany was tricked in the introduction of the Euro, by Agenda 2010 or by low wages. Germany simply has a very functioning eco-innovation system.

Should states invest more money in research and development and in the area of utilization? So Silicon Valley functions in truth. Everyone stares there and all that they see is the flexibilization of the labor market. Silicon Valley has received huge amounts of state investments in information technology for which it is known and in other branches like bio-technology.

Some see economic growth with critical eyes. What do you say about the de-growth movement?

I find this rather snobbish and regressive. When one has a static situation without immigration, without population growth – good, then one can do de-growth. If not, unemployment is produced. Still there is a good side: growth is not at any price. Growth should be rational sustainable and exclude no one. For me, green growth means changing the way we live, not only spending money for wind and sun. The IT-revolution must be fully exhausted.

Surprisingly, you do not see the US and China as the greatest climate killers. You praise their engagement for green technologies. What do you mean?

Today China is trying to massively reduce its CO2 production although the environment is still incomprehensibly polluted. After a huge green economic program, the American government has now fallen back again through the promotion of fracking. I do not praise anyone. I only show that states could achieve something if they wanted. This is obviously one more reason for being vigilant. What happens when the state begins to finance really stupid things? In any case, we cannot leave environmentally-friendly technologies to the private sector. Its investments are much too short-sighted. The state is necessary for great visions.

To finance the state, you propose in the book a kind of share in profits or royalties that businesses could pay. How should that be negotiated?

I am not a lawyer. Asking where the money will come from is obviously important. The problem of equalizing burdens must be solved. This can happen through a kind of Golden Share with loans whose repayment is tied to later profits that some countries already earn, through royalties or through tax hikes.

That sounds like Thomas Piketty.

Yes, but Piketty only speaks of the wealth tax as a solution. I think we must reflect about many different ways for the state to gain revenue. Socializing the profits more strongly and not only the risk would be smarter.

Will not companies threaten to move to other countries?

But they do not move. The businesses that people want to stay will remain… This hollow threat is the reason the governments do all this nonsense.

Isn’t it real?

The biotech firm Pfizer, for example, closed a business here in Kent and went to Boston. Pfizer moved to Boston because of the $32 billion with which the US promotes innovations in this sector, not on account of the taxes or because of fewer regulations there. You forget the businesses that are only on the lookout for cheaper workers.

The financing is still not clear to me. Must not businesses pay more in the short-term or must more state debts be incurred?

Tax hikes are not realistic now. I only say it would be smarter to constantly cut state spending. I do not say it should be different but show better results are realized where it happens.

Maybe the others do not have money.

Have you heard of a country that said we don’t have money to go to Iraq? Whoever needs money for war finds a way to finance war.

Do you see any good chances for breaking the knot this year as to the Euro crisis?

Germany must stop forcing weaker countries to austerity. The bond purchases planned by the European Central Bank are a huge waste of money. Money should be guided to the real economy and not simply land in the banks. No solution to the crisis in Europe is possible if we do not change the narrative and spend money in the areas crucial for Europe’s future competitiveness. I think that is a green direction.

In your book, you castigate half-hearted strategies for the energy turn and emphasize that Germany is a successful model in producing growth with green energy…

Denmark is not bad.

Should everyone in Europe ride the same horse?

The energy turn involves green technology and how every individual sector works: new motors for cars and green cities. There is also much to do for other countries… States have to make a choice. That can be a green, yellow, red or blue future. Their decisions are creative to a great degree. By hook or by crook, they should adjust to massive state interventions. They will fail if they think they can manage with a few subsidies or positioning little control screws.

Mariana Mazzucato is a professor of innovative economy at the University of Sussex. A graduate of the New York New School for Social Research, she has taught in Denver, London, Mailand and Sydney. Her book “The Capital of the State” was nominated for the German Economic Prize.