Free Market Capitalism: The Greatest Lie Every Told

The Entrepreneurial State: Debunking Public vs Private Sector Myths

By Mariana Mazzucato

Anthem Press (2013)

Book Review

This book totally shatters the lie that the free market makes the US the world’s greatest economic power. Mazzucato leaves the reader with absolutely no doubt the exact opposite is true: the US became an economic powerhouse after World War II as a direct result of massive government intervention – more so than any country in history except for China.

As Mazzucato’s research ably demonstrates, capitalism doesn’t work without massive state investment in research and development because no private investor (ie neither banks nor venture capitalists) will risk investing in new technologies that require 15-20 years to produce returns.

Without massive state intervention, there is no economic growth – anywhere. This is why austerity budgets adopted by most of the industrialized world have been so damaging. According to Mazzucato, austerity itself is directly responsible for current global stagnation (with a decade of near zero growth). Moreover industrialized countries with the lowest level of state-subsidized research and development (Greece, Italy, Spain, Portugal) are the ones struggling the most economically.

The book mainly focuses on US programs that have financed technological research and development – via grants to universities and researchers, loans, loan guarantees, and subsidies. Not only does this funding support basic research (which venture capitalists almost never fund), but it also assists private corporations in commercializing these new technologies. She emphasizes that without strong support by alleged free market champion Ronald Reagan for massive state intervention (during the 1980s), there would have been no personal computer and Internet revolution the following decade.

The main federal agencies responsible for funding technological research and development (R&D) are National Aeronautics and Space Administration (NASA), Defense Advanced Research Projects Agency (DARPA)*, National Institutes of Health (funds research for nearly all new pharmaceuticals before handing them over to pharmaceutical companies), Small Business Administration, National Science Foundation (developed Google’s search algorithm), ARPA-E, and Department of Energy (helps private industry bring clean energy technologies to market).

Among other technological innovations made possible by federal R&D funding:

  • nanotechnology
  • biotechnology
  • Tesla electric vehicle
  • Apple computer, ipod, ipad, iphone, and SIRI (Apple bought SIRI from Stanford Research Institute aka SRI)
  • the jet engine
  • aerospace (space) technology
  • semiconductors, hard drives, microprocessors, hard drive, and RAM technology making personal computers possible
  • GPS
  • lithium batteries
  • fracking technology
  • nuclear technology (still massively subsidized by the state in all countries that employ it)

*NASA and DARPA were not only responsible for creating the Internet but for helping private industry to commercialize it.

 

 

5 thoughts on “Free Market Capitalism: The Greatest Lie Every Told

  1. Pingback: Free Market Capitalism: The Greatest Lie Every Told — The Most Revolutionary Act | Aisle C

    • It is the MIC, Trace. But the really important point mazzucato makes is the capitalism won’t work without this type of government investment. For capitalism to work successfully, you have to have investors willing to invest money into technologies that won’t be commercially viable for 15-20 years. Banks and venture capitalists aren’t willing to wait that long for a return. And it’s virtually impossible to sell shares in your company before it comes to market.

      Liked by 1 person

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