Writing an update of our original critique of Mazzucato’s thesis was in process, but Roberts beat us to it – and did a better job. No surprise to us.
There are some things of relevance to the work we are doing in her book – so long as they are taken a little out of context.
“Indeed, it turns out that 75 per cent of the most innovative drugs owe their funding not to pharmaceutical giants or to venture capital but to that of the National Institutes of Health (NIH). The NIH has, over the past decade, invested $600 billion in the biotech-pharma knowledge base; $32 billion in 2012 alone.”"
This adds some numbers to our warning in developing a true public model for pharmacare. The only way that we can produce alternatives here in Canada – so a public system is not subsidizing US pharma profits – is to invest in a public drug development program along with the implementation of public pharmacare. The same was the case for public health care. One of the reasons that health care costs continue to rise is that we have decoupled the public spending on health care with the products used/developed in health care. We say 6% inflation in health care costs – a growth since the implementation of public health insurance system caused by the increased use of private IP.
The data in Mazzucato’s book also point to a useful critique to the venture capitalist program design being adopted in the public sector. Social finance, public venture funds, and shifts in the structure of commercialization funding in university are all based on the private venture capital fund structure. Mazzucato’s book present the seeds for the analysis critiquing this policy move by our government funding arms. In fact, they show that Social Democratic parties should abandon this move towards mimicking venture capital funding styles. Long-term funding unmolested by performance metrics is important within both the federal/provincial industrial research programs as well as university research.
There is also the needs to be a push back against the romantic notions coming from the centre-left that there is anything new in Mazzucato’s analysis. Also, to understand why the right says that government does not create value or anything else of use to capitalism, we have to understand what capitalists mean when they say “value”.
Roberts clearly identifies this:
“Now there are many powerful truths in Mazzucato’s theses, and they are very much the kernel of modern post-Keynesian and heterodox economics. But as such, there are also serious weaknesses with her view of value. To argue that government ‘creates' value is to misunderstand the law of value under capitalism. Under capitalism, production of commodities (things and services) are for sale to obtain profit. Commodities must have use value (be useful to someone) but they must also have exchange value (make a sale for profit). From that capitalist perspective, government does not create value – indeed, it can be seen as a (necessary) cost that reduces the profitability of capitalist production and accumulation. GDP is biased as a measure of value created in an economy for that good reason. It measures much more closely exchange value not the production of all use values, which would include government investment and housework (perhaps even happiness, welfare and trust).
Sure, government creates use value (although it is often use values found in weaponry, nuclear arms, chemicals etc and security forces to protect the interests of capital). But it is not productive of value and surplus value for capital. For capital, there is not ‘value in everything'. For capital, it is (exchange) value, not use value that matters in the last analysis."
Indeed, the critique of Mazzucato’s analysis from the dominant liberal position is already being set in the financial news opinion pages (Martin Wolf is an exception here).
We must understand that Mazzucato’s analysis backs us into a corner without a way forward that is critical of real, existing Capitalism. This is outlined in Roberts' article in her interview on Bloomberg, which is just really hard to watch.
While it might be fine for Social Democratic parties to put forward reformist policies in election platforms to help the masses question the dominant ideology, the union movement should not be confused that this leads nowhere. Understanding where capitalist value comes from is important or we will bankrupt the economy before we can convince people our alternative program can work.
What is clear from this analysis is that public ownership of productive capacity is an important step in any real transition away from capitalism.