We have socialised the risk of innovation but privatised the rewards
blogs.lse.ac.uk
blogs.lse.ac.uk
Serious mental gymnastics.
Page and Brin doing research with NSF grants isn't even remotely the same thing as Google, their future company, getting a check directly from the government.
Page and Brin produced publicly available research with NSF money. They started a company based on that public research. That company created untold billions of dollars of value out of thin air. Taxes are paid out of those new dollars, some of which go to fund the NSF.
This is exactly how it's supposed to work.
You left out the part where Stanford patented the results of the research, thereby monopolizing it.
Likewise, Google did not create untold billions "out of thin air." Google created untold billions by leveraging NSF-funded research, and the patent which Stanford licensed to them, in the midst of an explosion of new opportunities which was created when the NSF lifted commercial restrictions on the use of the Internet (which had also been built with public funding).
I know Americans like to imagine that even acknowledging the public sector exists is the same thing as surrendering to the USSR, but the USSR doesn't even exist any more, and there's actually a lot of merit in being aware of history and being honest about how economies work.
Just like putting a man on the moon, the Internet was a massive public research project which succeeded wildly. As OP says, America likes to tell a "hands off the market" story about how its government relates to its industries, but that story doesn't match the reality.
You say it as if it was easy. Like they had it handed to them. Clearly a lot of tumblers fell into place, but that doesn't mean the NSF is due a share of the profits. Would you claim Harvard is due a share of Microsoft if it gave Bill Gates a scholarship?
> I know Americans like to imagine that even acknowledging the public sector exists is the same thing as surrendering to the USSR, but the USSR doesn't even exist any more, and there's actually a lot of merit in being aware of history and being honest about how economies work.
What are you getting at? I have no idea what you're trying to say here.
A private educational institute giving a student a scholarship is very much not the same thing as a public institution granting monies for research. That isn't to say the NSF ought to receive a share of profits, necessarily, but your comparison isn't reasonable.
Moreover, it underlines the point: that the risk of research was socialized (NSF Grant), but the profits were privatized (Google). I think the debate is whether or not that's a good thing. Personally I think it depends on the context but generally I don't think that public grants should result in private profits (at least not exclusively), and it should be especially closely scrutinized if any of the resulting research work is not 100% made available as public knowledge.
> What are you getting at? I have no idea what you're trying to say here.
He's mocking the "rah rah free market! American Capitalism is awesome!" mentality that he perceives "Americans" (clearly a generalization; I doubt he thinks all, and hopefully not even most, Americans actually subscribe to that view) to have.
I can't say I disagree with his point. It's especially prevalent in the software industry, where all the programmers are Jon Galt (apologies to Garrison Keillor). It's an especially amusing thing to see given just how much the software industry is and has been, since its inception, reliant on government for its existence.
These are two completely different things. A university gives a student a scholarship as a discount on a good the university provides, for which they would normally charge a price. The state funds research as an open-ended investment, and would normally not expect any fixed quantity of money or other assets in return. Since they weren't selling anything to Stanford or Page-and-Brin in the first place, they were investing, and are indeed due a share of the profits.
You should read the NSF mission and goals (http://www.nsf.gov/about/glance.jsp).
> Initiate and support, through grants and contracts, scientific and engineering research and programs to strengthen scientific and engineering research potential, and education programs at all levels, and appraise the impact of research upon industrial development and the general welfare.
The entire point of the NSF and other similar institutions is to spur innovation. They aren't investing in the way you state they are, rather they are funding. They give money away to those who they feel will continue to push the field forward.
> So, in addition to funding research in the traditional academic areas, the agency also supports "high risk, high pay off" ideas, novel collaborations and numerous projects that may seem like science fiction today, but which the public will take for granted tomorrow.
http://www.politifact.com/georgia/statements/2012/jul/09/bar...
Also the $504,000 SBIC investment in Apple actually returned $44 million apparently to it's sponsoring bank. In fact the program is exactly what the author is against as the frequent losses end up being covered by the government. More here:
http://articles.latimes.com/1990-09-25/business/fi-1303_1_sm...
What if the Federal Government subsidizes mortgages causing a housing bubble and subsequently making our entire financial system to collapse costing hundreds of thousands of jobs? What if California spends $6B+ on a high speed rail system and no one uses it?
I understand what you (and by extension, she) are trying to say, but remember that every government action has risk and reward, just like every action taken by the private sector. It would be nice if we could keep the risks/rewards of the two sectors completely separate, but that would entail moving to either a completely communist or completely anarcho-capitalist model of society, which might be nice to think about in theory, but will never happen.
It's important to note that even if Apple and Google send all their profits and jobs overseas, their investors still have had to pay out $100B+ in capital gains taxes over the years. This has more than paid back any investments the gov has made in them.
The argument we have socialized risk but privatized the successes is invalid, because when those successes pay off, the taxes paid by those success stories repay the individual investments in those individual success stories.
That is not what the term "risk" means. "Risk" also includes all the investments which did not pay off.
That's certainly true, but I'm not sure what you're getting at. I'd appreciate it if you could clarify.
Diversifying your investments to hedge against those that don't pay off is the foundation of modern portfolio theory. You can see it in action at virtually every level of society: individual firms have employees that don't generate returns, but they hope that the collective productivity of the entire company can generate a positive return, angel investors and VCs invest across a broad spectrum of companies hoping that a few big wins will offset those investments that don't pay off, and governments invest in a variety of projects, research, and (sometimes) companies that they hope will generate positive returns for the economy as a whole.
From the look of it, the author is trying to make it seem like the public funds it, and the private people reap all the benefits. Weird scenarios aside (such as the NSF research grant stuff), we should see the "public" in the same light as all the other investors.
Interestingly, here in Belgium, the press often states that Google pay his taxes as requested by the law. And that Google have some very expert accountant who read the law in suach a way that those taxes are close to zero.
I'm afraid Google doesn't pay his taxes like we, the tax payers, think it should...
Of course, that's totally proof-less, but well, I've heard that quite often (cf. intérêts notionnels)...
> Google declares little profit in Ireland because the unit there sends almost all of the profit earned from the non-U.S. clients to the Bermudan affiliate, in the form of licence fees for the use of Google intellectual property.
http://www.huffingtonpost.com/2013/09/30/google-taxes-overse...
> Google Inc. avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.
http://www.bloomberg.com/news/articles/2012-12-10/google-rev...
I am sure the same could be said of every company beyond certain size (200-300 employees comes to mind, but this is just a wild guess), regardless of industry.
This is even the same for individuals. If you try to file taxes yourself (or have your employer do it for you, if possible), you will end up paying a higher rate than if you had taken the good sense of forking $100USD to some accountant to give you some basic advice. Of course this only works if you are wealthy enough that those $100US are marginal compared with what you would end up paying in taxes using the DIY approach.
(I'm Belgian)
The fact that corporate entities are able to shift their profits to places with favorable tax regimes mean that the calculations about the assumptions about increased tax receipts from business activity generated by publicly funded research are at least partially wrong.
Edit: Sorry if this came off as rude, was not intended.
This clued me in as to why someone might call google 'he.'
Given current "financial technology," government is indeed the only entity that can make R&D investments that are both high-risk and broad-payoff -- broad-payoff meaning that they pay off unpredictably and often across the entire economy. ROI is captured through economy-wide growth via taxation. Only governments can do this because there is currently no private financial instrument that can securitize that kind of investment or capture its upside.
Is/was the public research that led to PageRank patented? If that were the case, it's the only thing I would disagree with. Public research should not be patented, or if it is it should be made available to all domestic (US tax paying) companies and individuals royalty-free. It'd be appropriate to charge foreign licensees fees, as they are not paying into the US R&D fund, but the impracticality of that makes such a national patent licensing scheme kind of dubious.
Edit: yes -- so my comments above should be tempered by this: https://encrypted.google.com/patents/US6285999
https://en.wikipedia.org/wiki/Bayh%E2%80%93Dole_Act
It's also worth pointing out that before this was passed in 1980 federally funded research was typically owned by the gov't.
That's the entire point. That's why the patent system exists. To say something is patented is the same as saying it's publicly available.
https://en.wikipedia.org/wiki/Patent#Effects
To quote the supreme court:
"A patent is not the grant of a right to make or use or sell. It does not, directly or indirectly, imply any such right. It grants only the right to exclude others."
The point is to provide some temporary protection for inventors in exchange for public usage once the patent has expired.
A government, however, doesn't actually care if the inventor gets paid. The government provides a patent office in order to make inventions public. In return, it provides what the inventor wants: a way to defend ownership.
Notice that you cannot patent something without making it publicly available. It's not possible. If exclusion from intellectual property was the only goal, this would not be true. You should be able to register your invention with the government and reference it in court, only divulging its details when the facts of the case demand it.
There's a difference between the details of the invention being known and it being available for use. In the case of Google, it cost them $300M to license the PageRank algorithm because Stanford owns the patent (despite its inner workings being widely known).
Yes.
> There's a difference between the details of the invention being known and it being available for use.
"You have to pay for it" doesn't equate to "it is not available". You can argue that it's an exorbitant price, but Google is paying for it.
It's almost like it's baked into the system.
He makes it sound like the USA would be just as well off if big tech companies weren't here.
The US government is basically a ~15% shareholder in all US companies due to salary and other taxes. If they can invest in technology research and build more US companies, then the US government earns a net profit.
I would like to see a breakdown for a major technology company to see what percentage of their revenue goes to income tax withholding, and then see how much government funding went into helping that company come to life.
Edits:
1. Number adjustment
2. By "income tax witholding" I mean the income tax that the employees pay. If 50% of revenue goes to salaries, and 20% of salaries go to income tax witholding, then 10% of a company's revenue goes to income tax.
If your beef is that the US govt shouldn't subsidize things via the tax code, then that's a separate issue. If your beef is that GE should pay nonzero taxes, then you should view it as "GE paid X% taxes, and then did things it did not want to do unsubsidized in order to earn back -X% taxes as a reward." In which case, GE did pay taxes. They just then took advantage of an opportunity to earn back those taxes in exchange for investing in green energy related things.
The only way to tax an international entity is to tax them on the things that actually exist in your country: Customers, employees, property, etc. But that's not corporate income tax anymore, it's sales tax, personal income tax, property tax, etc. The closest thing you can get to corporate income tax that actually works is VAT.
Money is meant to be spent, not hoarded.
Mazzucato points out how the government is actually good at funding very high risk work, with a low chance of pay off (think DARPA research in the US).
She does say the sentence used in the title, but the context is very important:
What this means is that we have socialized the risk of innovation but privatised the rewards. This dynamic is one of the key drivers of increasing inequality. Because innovation today builds on innovation tomorrow, the ‘capture’ can be very large. This would not be the case if innovation were just a random walk. Policy makers must think very hard how to make value creation activities (done by all the collective actors in the innovation game) rewarded above value extraction activities (in this sense capital gains taxes are way too low). And since the booty from the latter can be very large, redirecting incentives and rewards towards the value creators is essential. The problem is that some of the ‘extractors’ like to sell themselves as the creators.
Her argument appears to be that public funds need to be directed into areas that have a chance of "industry transformation", which may create job or new (tax paying) industries in the country that funded them.
Here argument about public funding of Google and Apple is this:
For every Internet there are many Concordes or Solyndras. Yet this is also true for private venture capital (VC). But while private VC is then able to use the profits from the 1 out of 10 successes to fund the 9 losses, the state has not been allowed to reap a return. Economists think this will happen via tax (from the jobs created, and from the profits of the companies), yet so many of the companies that receive such benefits from state funding, bring their jobs elsewhere, and of course we know they also pay very little tax.
There is possibly a valid point here. Corporate tax minimisation by offshoring profits is a real challenge to the tax system.
I don't think she makes any real suggestion for how to solve the problem, though (Retaining a share of IP rights won't work, because companies can easily disassociate profits from the IP that generated them, meaning that any return-on-profits-generated scheme will fail. See Hollywood Accounting,[1] which does a similar thing in the film world)
While it's easier to make the case for basic research the governments attempts to sponsor commercial innovation have almost always ended in failure or turned into subsidies for politically connected companies and industries. A good case study was the $600 Flat Panel Display Initative in the 1990s. It's a good bet something similar is currently happening in the various green initiatives.
She is actually correct about these programs socializing risk and privatizing reward. Stanford got the Google shares from research funded by NSF and Continental Illinois got the Apple shares from the SBIC investment guaranteed by SBA.*
However this is the one role government has a unique advantage. And this is a good thing - think NIH, NASA, NSF, etc but also pretty much every social safety net program. Of course she (being quite left) is actually making the case for increase government ownership of public companies or at least greater taxation and license fees.
*-You could argue the U.S. got some this back when that bank failed a few year later in the largest bank failure in US history - until WaMu surpassed it in 2008. Although the $44 million from Apple shares was insignificant compared to the billions in bankruptcy costs. BTW-The Continental Illinois failure is where "too big to fail" was coined.
She does. Just not here. The piece is called "Five minutes with..."; her arguments that government funds commercially viable innovation are easily found.
I suppose the most obvious commercially viable innovation funded by governments (both directly and through various defence department funds) was computing.
I don't think this is her point. Either way, I agree with you.
I also agree that private enterprise is much, much better at commercialising research.
I think her point is that basic research - which the governments are generally pretty good at funding - doesn't provide a good return on investment.
I have some sympathy with this argument, but at the same time I don't think she provides a viable solution for the problem.
As a specific example: DARPA kick-started the entire set driverless car technologies with their well-funded competitions in the early 2000s. This involved both prizes, and direct funding of robotics labs.
One can argue that this was done to seed a solution in the 20-year timeframe, and the fact that we'll probably see a decrease in combat deaths from IEDs in a future war in 10 years as driverless trucks come online is reward enough.
One can also argue that society should see some financial return on that - very risky - seed investment.
Both arguments have merit, and I remain unconvinced either way.
Without disagreeing with your point I have to point out that beyond basic research the government has also successfully provided infrastructure for commercial innovation with things like the Internet, GPS and nuclear power. It tends to accomplish this without really trying.
I agree but not for the same reasons I am sure. This title is an old saw from the socialists and has been around for decades. The implicit conclusion is that to make things "fair" we should socialize risk AND reward. How convenient for the socialists. No. The discussion we should be having is; What is the proper function of government? What is your standard?
> Her argument appears to be that public funds need to be directed into areas that have a chance of "industry transformation", which may create job or new (tax paying) industries in the country that funded them.
The end of this road is fascism or communism, take your pick but it doesn't really matter if you value freedom.
Its worth pointing out that 'the end of the road' is an implication that the extreme end of a political system is a goal. It's not, and it is rare anyone would argue that a hybrid economic system isn't the most sensible.
NB: Socialism is the wider term and means that the individual serves or lives by permission of the society. Communism and fascism are two types of socialist systems, different in form but not function. In a communist society the government owns ALL the property as a matter of law. A fascist society allows private ownership of property but the government has unlimited power to use, direct, control or confiscate private property for the "good" of the society, i.e. private ownership is in name only. Guess which system the USA is moving toward?
> Its worth pointing out that 'the end of the road' is an implication that the extreme end of a political system is a goal.
It is an implication many people refuse to identify, that doesn't make it any less real. Your position is the same as that of a bank robber who refuses to identify that the end of his road is death or jail and then laughs at you when you point it out, that that is not his goal; his is to get rich.
> It's not, and it is rare anyone would argue that a hybrid economic system isn't the most sensible.
Am I suppose to be intimidated by the majority opinion? I am not. A "hybrid" system or the so-called "third way" in politics (a split between socialism and capitalism) are a complete sell out to the socialists and is not sensible but stupid if you value freedom. There are somethings that can't be split down the middle, its either/or, like Solomon and the baby. Some things are all or nothing, like honesty. Can you claim to be an honest man if you only steal on Tuesdays (or only steal from the "rich")? No. Social systems either recognize and protect individual rights or they abrogate them and consume and use individuals for their own ends. You can't have it both ways. Finally, you need to realize that by advocating for a "hybrid" social system, by the logic of it, what you will get is fascism.
Straw man. Fairness means:
public funding -> public benefits
private funding -> private benefits
As I indicated, you need to widen your view. Where does public funding come from? Is it valid for the government to confiscate money from some people to give to other people (poor people, investors, kings; the recipient does not matter)? This is the fairness that I was referring to and the wider question; is government funding of investment a valid function of government? What is your standard?
And stepping back is a shortage of funds really the problem holding back innovation? Seems like there is plenty of seed and VC money for good business ideas.
I think more and better managed basic research is what the government should focus on. One area that seems obvious is basic energy research which seems grossly underfunded.
http://dotearth.blogs.nytimes.com/?s=koizumi+research+energy...
If the problem were that we have socialized risk of innovation but privatized the rewards, that wouldn't really be a problem. It's a good thing to incentivize innovation.
The real problem is that we don't incentivize innovation.
Instead, we incentivize investment. People who already have money to invest take on small calculated percentages of risk to make back large amounts of money. Frequently the money investors are investing isn't even their own, and they are paid a significant salary to do so, meaning they actually take on none of the risk.
The negative results of this are twofold:
1. Often investors don't invest in innovation. It's equally profitable to invest in number-twiddling schemes that provide no benefit to anyone except the investor, and often that's easier.
2. We speak of companies as if they are single entities. But the reality is that executives and shareholders and of a company are the beneficiaries of any innovation within a company, while innovation typically comes from workers with technical expertise who are typically paid a relatively limited salary perhaps with some minimal stock options.
The way around this problem is typically to get into a company early enough that the line between technical worker and executive is blurred. But that avoids only the problems with lack of reward--it actually exacerbates the risk problem because early commitment to a company is a high-risk endeavor.
In the end, I think that a lot of innovators don't innovate for money anyway--I personally would rather see something I make change the world than make a lot of money off an idea that doesn't make any difference (or makes things worse!). As long as I have enough to live I'm okay. But it would be nice if we stopped pretending that our distribution of wealth is at all meritocratic.
I sure got that as the takeaway. Public investments targeted at innovation we've identified as important, or worth it, whatever should be increased.
There is another aspect to this as well. Check out this history of PDX area Tektronix: http://www.opb.org/television/programs/oregonexperience/segm...
Between Tek, Intel, and a couple others, the area was transformed into something we call "silicon forest" and it spawned a ton of great companies, many of which are in business today.
It was a very interesting mix of private and public investments in education and investment support. Spin offs, not competitive with Tek, got Tek support while ramping up. Colleges offered targeted programs for people to get educated, companies did the same.
The founders got very wealthy, but so did a lot of other people.
We need more of this kind of thing.
But the article does not aim at this real problem. Rather it's just a basket of plausible sounding but totally unsubstantiated claims and deliberate ignorance of inconvenient facts. For example, we're supposed to view China's giant investments "environmentally friendly technologies" as destined for success. We won't question the competence of the government that has so recently built several cities (yes whole cities, yes plural) which are completely empty while peasants subsist in garbage heaps on their outskirts.
Polemicals like this equate corporatism and cronyism with capitalism and free markets. Then with the straw man destroyed, it's not hard to guess what the solution will be.
Because innovation today builds on innovation tomorrow... Policy makers must think very hard how to make value creation activities (done by all the collective actors in the innovation game) rewarded above value extraction activities (in this sense capital gains taxes are way too low).
Peter Thiel's book talks about this, and on the one hand it is of course very good strategy, yet it's also quite sad and pathetic, because the principle he advocates is that you should focus on capturing a market, rather than creating value.
OP is saying, if this is a logical choice for entrepreneurs to make, then policy makers have done a very bad job at structuring incentives. It would make more sense if policy set up incentives which encouraged creating value over capturing it.
Another aspect is the speed at which profit is made. At one end there is education, for example, which is an exceedingly bad investment in financial terms because it is very slow and very uncertain. At the other end there is pure trading and seed/startup investment, with profit goals of, what, 25% per year.
Who would finance education? Certainly not a financial investor in his right mind.
A summary from http://events.newschool.edu/event/politics_talk_albena_azman...
> A key feature of the new modality is the renewal of the state's redistributive function, with an altered logic of distribution, and a simultaneous increase in the state's administrative power and a decrease in its authority - a process that has failed to trigger a legitimacy crisis of the socio-political system, despite the recent confluence of financial, economic, and social crises. And no wonder society accepts the pain with equanimity, Professor Azmanova will argue, as the very social contract in Western democracies has been recast, thus breathing new life into capitalism.
Revenue generation is only the goal of government so that it can support its citizens.
Banks take (less than they used to, since some legislation was brought back) insane risks because they know Joe public will cover disastrous losses when it goes wrong, and the bankers can keep the massive profits when they get lucky. Socialised risk, private profit.
Bell labs was financed because AT&T had a monopoly status on landlines; whatever the costs, AT&T could just raise fees for a cent and cover all expenses. AT&T lost its monopoly so it could no longer pay for Bell labs.
so this monopoly status was good for Bell Labs, but it also covered up the many gross inefficiencies of a monopoly body and it did limit competition - and growth.
> I believe the green economy merits much more funding than it is currently receiving by government
I suspect that this is a value based judgment.
Who is to know if the next growth period will rather be based on nano technology, or maybe will be based of artificial intelligence? I guess that civil servants are in a bad position to make such judgments, because they bear little personal responsibility for their decisions.
If one looks at the internet boom, then one can discern many stages here:
- first was the fundamental research that explored the subject of packet switching networks; this was funded by the US military - next was the gradual development of networking technology, which took some ten-fifteen years. Here there were many actors, part of them from research and part from industry - next came the first boom-bust cycle of the nineteens; whatever one thinks of it, it helped to build the required networking infrastructure for wider adoption and it helped to create many technologies that were important for the next stage. - next came the present growth based on targeted advertising / private sector surveillance based on social networks.
No one actor could have directed this process; public sector did facilitate basic research, it created the prerequisites for growth, but actual growth was still several steps away from that; at any of these stages it could have been stopped by some misguided policy decision.
Prof. Mazzucato seems to underestimate the risks that entrepreneurs had to take during this process; Research financed by the public sector is a prerequisite for growth, but state dirigims would not have led to it either;
Dirigism in France created the minitel network, but that is not quite the internet of today.
[1] http://longnow.org/seminars/02014/mar/24/entrepreneurial-sta...
The state creates an environment that allows individuals to make profit in a safe way (contracts, violence, laws, etc). An underlying bit of information that is ignored is that the individual profiting means that we all profit, in small and not necessarily measurable ways. And sure why not, why can't the public be the one to bear the risk in the examples stated? It does for everything else. Isn't this the "collective" way?
And I have seen this line of thinking elsewhere, particularly when discussing the merits of having a state at all. The idea that somehow we "owe" the state for all these nice things it gives us beyond what we already pay in personal taxes.
"Go live in Somalia", they would tell me, if you don't like paying taxes.
The state, any state, is a very bad administrator of funds, because the so called state are basically a bunch of people spending other peoples money on things that they dont understand and they dont really care about. What they care about is building their own public image with those money in order to be reelected.
I'd feel much more confortable in having to pay lower taxes and let the private investors do the investment, because VCS actually care about how their money are spent.
I don't believe for a second that private investment would have done these earlier or better if the greedy government had stolen less tax money from you.
edit: downvotes yay! Please enjoy using the Internet to show your distain for giving credit for revolutionary federally-funded technology projects.
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” -Upton Sinclair
Interestingly, one of your examples, genomics, is exactly contradicted by Celera. At the time of inception the human genome project was slated to take 20 years! (We'd only be halfway done with it now). Say what you want about their idiotic and immoral business model - patenting and licensing human genes - the "private arm" of the human genomics project pushed for shotgun sequencing and got the genome sequenced in 3 years; and the hapmap shortly thereafter.
The "idiotic and immoral business model" is seriously not cool though. Clinton banned patenting human genes directly, which might make pure capitalists cross.
The author met that they've benefited in the sense that we all have benefited.
I very much doubt that there are many people in the world who have directly benefited (i.e., received grants from) all of NASA, the NIH, and DARPA.
For bonus points, try to do your job today without making use of federally-bootstrapped technology.
edit: also, Fede_V's sibling comment is spot-on.
Did what?
If you're asking if the federal government has wasted a lot of my money on things I don't like: sure they have. First, that's not the topic at hand, and second, private ventures also waste fortunes on stupid things, and sometimes with my money e.g. pension funds.
NASA and the NIH are explicitly research-focused. And DARPA may be part of DOD, but its charter is right in the name -- advanced research.
That sounds like it describes the purchasing department in any big corporation, or the got-the-job-through-nepotism nephew or cousin of the owner in a small business.
You know what they say, right? Capitalism works...in theory.
What is a public corporation, but 'a bunch of people [C-level,VP-level,Manager-level] spending other people'[sic]s[shareholder's] money on things that they[shareholder's] don'[sic]t understand and they[shareholder's] don'[sic]t really care about[shareholders seem to only care about 'ROI' and/or 'ROE']'.
Private capital, and the humans who administer it, has repeatedly mismanaged funds, and been responsible for enormous fuck-ups that have far-reaching and devastating social, environmental, political, economic, material, and global impacts. Private investors routinely make bad investments. They also rather frequently are found to prioritize the extraction of value from their investments in spite of the potential or realized impacts of such extraction.
The state does not take money. We no longer live under feudalism, friend. We no longer labor under the unquestionable divine right of kings. The modern democratic state is, by the free association and choice of its underlying organizational units, and the continued consent of its citizens, asked to assume the role and responsibilities, at least in the US, of the following:
- form a more perfect union
- establish justice
- insure domestic tranquility
- provide for the common defense
- promote the general welfare
- secure the blessing of liberty to its citizens and their posterity
Private capital could never fulfill these obligations, because its focus is most definitely on extracting value from that which it invests in. I doubt very much you'd enjoy living in a world where its investment in you was dependent on extracting value from you (well, actually, you already do, but you don't feel the full brunt of that burden thanks to ... you guessed it ... the state).
Now, if you'd much rather live under feudalism, serfdom, obedience to divine kings, etc., well cool. But those are sociopolitical conditions under which people lived for centuries where they definitely were able to "pay lower taxes and let the private investors do the investment". Those are the systems under which money/property was actually taken from people, because people had no methods or institutions by which they can seek to protect themselves from the arbitrary whims of value extraction, or engage in political action that can bring change. That's why most now-democratic states saw revolutions in their past--it was the only way to make change happen, the only way to abolish systems of unfettered value extraction and replace them with something that protected the masses.
At least in the US, even the revered and worshipped founders realized pretty quickly after becoming an independent nation that taxes were unavoidable, because without public funds, the state could not fulfill the obligations for which it was instituted.
I shudder at the thought of living in a world where people trust VCs to provide that which the state, even in its dysfunction, works to provide.
And what if we do not consent? I certainly don't, and yet I have no where to go. You call it freedom of association, I call it compliance under the threat of imprisonment.
Make no mistake about it, you can use fancy words and ideas to make it noble. However, if you choose to gloss over those that do no consent to your wonderful little 'union' of 'domestic tranquility' then you are not at all better than the feudal kings/lords that you use as a counter-example to democracy.
You know what was the big thing about the Feudal system? Absolute ownership of all land by kings/lords, where the peasants had to rent it by virtue of being born on the land. Oh so very analogous to what we have now where people have very little choice but to live in the state that they are born with. There is simply no alternative, no place where free people can go to pursue actual free-association through peaceful means. You just have to replace 'lords/kings' with 'state/government' and you quickly see the picture.
But of course, I am "free". I am free to move to Somalia, apparently. Either that, or more to another King/Lords piece of land.
> And what if we do not consent? I certainly don't, and yet I have no where to go. You call it freedom of association, I call it compliance under the threat of imprisonment.
Out of curiosity, how much that is afforded you by the existence and operations of a state--be it a member state or the federal state--can you look at and honestly say you both rely on and utilize, despite these ideals you espouse? Of that which the state provides in the course of fulfilling its duties to its citizens, and in its pursuit of the ideals of those whom its citizens elect to represent them, how much do you diligently deny yourself and decline to enjoy in the interest of remaining true to your ideals?
You say you do not consent, and I'm quite curious as to how diligently you live your life according to this principle.
Let's imagine you are faced with a decision to diligently stay off all state-funded roadways, or to use them instead. If you use them, do you deny that this provides a tacit consent to the social, political, and moral obligations that are inherent in funding these roadways? Do you argue that there is some social, political, or moral justification for using the common roadways freely, while also arguing there is justification for refusing to submit to funding them?
Alternatively, let's imagine some tragic accident befalls you, resulting in a need to seek medical care. Do you live out your refusal of consent of the obligations of citizenship and likewise resign yourself to not seek out medical care? You will likely have to travel to the hospital, and perhaps even use the state roadways that connect to it, perhaps even in an emergency vehicle that is funded by the state. If you truly deny that you consent to the authority of the state and the obligations of citizenship, then you obviously must deny yourself use of these state-provided things, yes? Surely you wouldn't argue that a person would be in the right to take advantage of these things provided by the state, and then, when the bill comes due, claim you have not consented, would you?
Because if, even in these simplest of scenarios, one denies that one created for oneself source(s) of obligation and tacit consent, then that person is just making it clear s/he desires to be an asshole, who wants the world to operate on his/her terms. That kind of person wants to freely enjoy the benefits of the state's operations, without being bothered to help foot the bill when able. (I am very much ignoring, for the sake of a simplistic dialogue, leaving out the condition of being unable to help shoulder the financial burden).
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You present this idea of a "place where free people can go to pursue actual free-association through peaceful means". In what way can you explain this to be a free-association that is more real than the free association people operate under as citizens of a liberal-democratic state that guarantees a legitimate level of freedom, justice, and equality? Do you deny this other place you dream of would be yet another polity, yet another state? Are you simply not happy with the selection of liberal-democratic states that exist in the world, all trying in their own way to obtain the ideals of liberty, equality, justice, and a good life for their peoples? Because you are most certainly free to renounce your citizenship and pursue life elsewhere, are you not? I mean, you appear to be advancing a very hard-line notion of being actually free. And, as far as I know, there is no threat of imprisonment that prevents you from renouncing your citizenship. Sure, there are some nasty and punitive financial obligations of doing so in the US, but you won't be imprisoned. So, at least you've got that going for you.
We'll see who owns your "money" after that.
But the article's author has a huge blind spot - if you search the article for "tax", you will see just a couple of occurrences, and the author basically dismisses the mechanism. It's almost as though the author had no idea how the state even gets money - the author just thinks the state's role in innovation is underplayed.
That may be true, but the size of the state depends (obviously) on the size of the economy. It's obvious that if the state invests in innovation that causes a 1000x rise in productivity, hugely increasing the size of the economy, then the state also becomes larger, through the usual mechanisms.
Taxes are how anything is socialized - the author almost behaves as though the state's money comes out of nowhere.
Another good example of applying the title incorrectly would be public education. People generally go to elementary and high school for free. They can then go off to work, sometimes even founding companies, which they could never do if they're illiterate. You could consider education a "risk" on these entrepreneurs: not everyone who becomes literate can create a ton of value in private enterprise, either as a founder or someone working for a good salary at a company; but nobody needed to take a risk on these people in elementary school (with 10 years+ until payoff), the state does it. In fact it's mandatory.[1]
So could we say, "We have socialized the risks of education but privatized the rewards?" (in that you're a free person who is now educated.) Well, yes. But who pays for all that public schooling - everyone does. The author perhaps fails to see the relationship between a state causing an increase in society's private benefits - and the fact that that the state is in a position to do so due to the latter.
All the state is, is a percentage of the economy, which is public. It has a good and important role - but that role comes from being a percentage. The Thatcher quote is appropriate: "The problem with socialism is that eventually you run out of other people's money to spend." That never happens if the state remains 20%-30% of the economy. The size of the economy can simply increase indefinitely.
It's not possible (which may surprise the author) for this to happen in a way that doesn't cause the state to also increase in size. So while I agree with the main contention, it bears pointing out that it is a two-way street: private enterprise (and private citizens) get 'free' public goods from state spending, that they don't have to pay for. But the state gets a 'free' percentage of all private enterprise (and private earnings) - in fact, set at whatever it wants. The state can literally tax whatever level it wants and in whatever ways it wants.
So it is, in fact, a two-way street.
[1] see compulsory education - since the 1800's, "Fines were imposed on parents who did not send their children to school and the government took the power to take children away from their parents and apprentice them to others if government officials decided that the parents were "unfit to have the children educated properly"."
If you agree with John Taylor Gatto, you could argue that the purpose of universal education was never to provide children with opportunities to learn how to make a living (apprenticeships rules date from the middle ages, and every other human society solves this problem somehow), but to condition them to blind obedience and dullness... for the direct benefit of the government (in the age of Napoleonic Wars, you needed lots and lots of idiot sheep that would literally march towards the enemy lines and shoot each other at point blank range) and indirectly to the nascent class of industrialist who needed a new kind of workers who would perform the same micro task over and over again with no regard for the total process.