John Buell

Governments, Markets and Entrepreneur Success

Ronald Reagan is famous for castigating government as the problem and not the solution. Against government he posed the magic of the free market.

Such rhetoric has always been especially pronounced when the issue at hand was the social safety net, such as the minimum wage, full employment, or welfare. Yet in a quieter voice he and his accomplices knew that “free markets” did not simply emerge spontaneously nor wee they necessarily always compatible with democracy. Clandestine operations in Latin America left hundreds of thousands dead, all in the cause of crushing emerging social democratic movements. Billions also were spent to clean up the messes created by deregulated savings and loan institutions.

The modern day Reaganites, known as neoliberals in academic discourse, have only added new governmental tools and initiatives in the effort to embed and secure their vision of the free market. They pursue laws to limit labor organization even as combinations of banking and industrial giants are increasingly accepted. Corporate membership on boards of higher education and privatization of public schools are promoted as means of inculcating a market mentality among the young. They tout an independent central bank even as they pressure that bank to place concerns about virtually nonexistent inflation ahead of job creation. The combination of attacks on unions, a restrictive fed and selective anti trust enforcement leaves a lob market where workers and capitalists meet on a very uneven playing field. The invisible hand is drugging the workforce before the game begins.

In addition to hiding the role of government in imposing their ideal of the free market, they also fail to acknowledge government’s role in fostering the very technological creativity they attribute to markets and private corporations.

However imposed they may be, neoliberals celebrate markets. As political theorist William Connolly, author of The Fragility of Things, points out they celebrate markets “as having beautiful powers of rational self-adjustment and states as clumsy agents of collective decision. It inflates the self-organizing power of markets by implicitly deflating the self-organizing powers and creative capacity of all other systems.”

Mariana Mazzucato, author of The Entrepreneurial State, points out that the recent Steve Jobs film says not a word about the extensive contributions federal funding made not only to the infrastructure upon which the internet depends but even to the downstream development of individual products. She suggests: “the real iPhone story — or the story behind biotechnology — reveals a very different narrative in which government-funded research made the most exciting innovations possible. The same could be said of Elon Musk today —Tesla and Space X not only benefit from government-funded basic research through agencies like the DoE and NASA, but they have also, as companies, received high-risk investments by the public sector. Just one example is the $465 million guaranteed loan received by Tesla by the DoE. As recently shown by an LA Times article, the entire Musk empire has received close to $5 billion in direct and indirect support.”

Not only is the role of government in funding both fundamental research and product development neglected, government failures become the scandal du jour Thus Solyndra’s failure is widely trumpeted, even though as Mazzucato points out, government has a better batting average than most private venture capital funds. Nor, unlike in the case of venture capital funds, government is prohibited from using profits from its successful subsidies to gain funds for future tries.

These disparities in treatment are symptoms of the cultural lens many Americans bring to economic development stories. From John Locke and the eighteenth century fathers we derive a still strong commitment that government’s only legitimate task is to protect property rights. In addition, the nineteenth century Horatio Alger tales of the self-made man still ring true. Both are buttressed by the practice and culture of lotteries and shows on how to become a millionaire.

Despite talk of the dynamism of private markets, investment in new technologies currently lags. And the market plays a key role in this stagnation .Mazzucato argues that one need only look at “the increasing financialization of business (seen in the high rate of share buybacks emphasized by economist William Lazonick) and the fact that companies are hoarding profits at record levels — that points to a serious investment crisis. It’s not about lack of opportunities. It’s because businesses are choosing to hoard profits or to use them to simply prop up stock options (and hence executive pay).”

More broadly, if one looks at the history of US capitalism, its so called golden age was marked not merely by market successes but by a dynamic combination of government spending on highways, growth of unions and worker rights, government sponsored R&D, public education and tax incentives. Today we need to nurture and monitor a new dynamic combination of alternative transit, smart growth, tax incentives, and R and D in energy, agriculture, and healthy life styles. And it would help if an imaginative filmmaker gave us a movie celebrating the role of government planners and scientists. Like Newton in the seventeenth century, Steve Jobs and his cohorts “stood upon the shoulders of giants.” Unfortunately our media neither acknowledge nor perhaps even recognize their debts.

John Buell lives in Southwest Harbor, Maine and writes on labor and environmental issues. His books include Politics, Religion, and Culture in an Anxious Age (Palgrave MacMillan, 2011). Email Jbuell@acadia.net.

From The Progressive Populist, February 1, 2016

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