Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
describe the entrepreneurial state narrative and outline how it has manifested historically
evaluate the role of the entrepreneurial state in regenerative economies
If you have a smartphone, you might use it to message friends, find your way, or ask a voice assistant a question. Companies like Apple and Samsung often get the credit for these amazing tools. But many of the key technologies were developed with public money. The global positioning system (GPS) came from the US military. Voice recognition was funded by government research. The touchscreen was invented at a publicly funded UK university. Even the internet began as a US government project. These tools were not created to make profit. They were designed to solve problems and support science. Private companies used them to build their products later.
Economist Mariana Mazzucato uses this story to show that states often lead in innovation. This entrepreneurial state narrative is a very different worldview of the state from neoliberalism presented in the previous Section 5.1.5.
In this entrepreneurial role, the state doesn’t act alone. It works with universities, businesses, and communities and often does the hard part first. It invests when the future is uncertain. It stays committed for years, sometimes decades. This long-term vision is especially important for dealing with the big problems that face humanity like planetary boundary overshoot and poverty.
Figure 1. Many technologies that make your smartphone smart were developed by states or through state funding.
(Credit: Jennifer Brandsberg-Engelmann, CC BY-SA 4.0)
What is the entrepreneurial state?
What is the entrepreneurial state?
According to Mazzucato, the state can act like an entrepreneur in three key ways:
investor: The state can fund early-stage research and support technologies that are still too risky for private investors. In the past, this helped create the internet, solar panels, and life-saving medicines.
market shaper: States help create and guide markets. Public policies, like guaranteed prices for renewable energy or regulations for clean transport, have helped new industries grow and give direction to private businesses. These actions can also crowd in private investment, by reducing risk and building confidence that the market will grow.
mission-oriented actor: The state can lead bold missions to tackle big challenges like climate change. These missions set clear goals and bring together science, business, and communities. Only the state has the power and long-term reach to unite so many actors. Mazzucato often uses the Apollo moon mission (Figure 2) to show how public leadership can drive innovation toward a shared goal.
Figure 2. The USA’s Apollo program is an example of a mission-oriented state leading bold innovation to land the first humans on the moon in 1969.
(Credit: NASA, public domain)
The entrepreneurial state is not a new concept. Throughout history, governments have played a crucial role in shaping economies and driving innovation. Economist Ha-Joon Chang points to examples of industrial policy, where states (like his own South Korea) actively supported key industries to strengthen their economies. Countries that now promote the neoliberal narrative have had active states guiding economic development. For example, in the 19th century, the United States protected its young industries with tariffs and subsidies, allowing them to grow before competing on the global market.
China’s solar industry is a modern example. In the early 2000s, China invested in solar energy to reduce pollution and improve energy security. The state paid for research, helped factories scale up, and supported exports. As a result, China has become the world’s largest producer of solar panels. Prices declined, and solar power became more affordable around the world.
Another example is the early research into COVID-19 vaccines. Governments paid for basic research, helped develop vaccines, and promised to buy them. Without this support, private companies might not have taken the risk. The result was a faster global response to the pandemic.
Figure 3. China leads the world in solar energy production, led by strong state policies and funding.
(Credit: Jiri Rezac, CC BY-NC-SA 2.0)
What is the role and importance of the entrepreneurial state for regenerative economies?
What is the role and importance of the entrepreneurial state for regenerative economies?
Regenerative economies restore and sustain Earth systems while meeting human needs. This requires the bold action and long-term investment of an entrepreneurial state.
Take climate change, for example. Transitioning to renewable energy (Section 5.4.6 - link coming soon) on a global scale involves building new infrastructure, investing in research, and supporting industries that reduce greenhouse gas emissions. Private companies alone cannot take on all these responsibilities, especially when there is uncertainty about profits. States can take the lead and assume the risk.
The entrepreneurial state can also drive innovation in other vital areas. It can fund research into soil restoration, provide grants to and supply-chain coordination support for businesses in the circular economy, or expand affordable public transit to reduce dependence on cars.
Mazzucato also emphasises the importance of sharing the rewards of innovation. If states take the risks to fund breakthroughs, then the benefits whether in the form of profits, affordable products, or public services should also flow back to society. This approach ensures that innovation supports everyone, not just a few wealthy investors or the companies that profit from the products.
Activity 5.1.6
Activity 5.1.6
Concept: Regeneration
Skills: Thinking skills (transfer), Research skills
Time: varies, depending on the option
Type: Individual, pairs or group
Option 1: Functions of the state
Time: 15 minutes (or a bit longer if students need to revisit state functions)
Section 5.1.3 explained three broad functions of the state provisioning institution (Figure 4). You may wish to revisit that section to remind yourself about those functions.
Which of the functions of the state does the entrepreneurial state narrative emphasise? Share your ideas with a partner or briefly discuss as a whole class.
Figure 4. Three broad functions of the state. Which function(s) does the entrepreneurial state narrative emphasise?
Option 2: Interview with Mariana Mazzucato
Time: 40-45 minutes (interview is ca. 30 minutes)
Listen to Financial Times columnist Martin Wolf’s interview with economist Mariana Mazzucato:
Martin Wolf interviews Mariana Mazzucato:
In the interview Mazzucato refers to the idea of ‘entrepreneurial systems’. What does she mean by that and what is the state’s role in such a system?
Mazzucato mentions that one thing that states have gotten wrong in their entrepreneurial role is that they ‘socialise risks and privatise rewards’. What does she mean by that and how should we change it?
In what missions does Mazzucato think states need to orient on right now?
Option 3: The entrepreneurial state in your context
Time: 40+ minutes (depends on whether students search for information, or whether some information on state innovation policy can be given to them by a teacher)
Does the government of the country where you live (or a country that you are connected to) have an innovation policy? Many countries do, and it can give you an idea of what its priorities are, as well as an idea of how it might be using state investment, setting mission-oriented goals, and coordinating many stakeholders to achieve them. See if you can find out what’s going on in your area!
Ideas for longer activities and projects are listed in Subtopic 5.5
Checking for understanding
Checking for understanding
Coming soon!
Further exploration
Further exploration
Martin Wolf Interviews Mariana Mazzucato: Can the state innovate? - a ca. 30 minute interview with economist Mariana Mazzucato where she outlines her work on the entrepreneurial state and the need for mission-oriented state leadership to solve today’s most pressing problems. Difficulty level: medium
Governments Are Not Startups - an article from economist Mariana Mazzucato explaining why and how states are different from businesses in markets, and arguing that we need to stop treating the state as a business. Difficulty level: medium
Military inventions we use everyday - a webpage from the North Atlantic Treaty Organization (NATO) describing innovations that came out of military research and funding. Difficulty level: easy
Mariana Mazzucato’s website - information on key ideas, publications, talks, videos and podcasts. Difficulty level: medium/high
The Role of the State - This video lecture of economist Ha-Joon Chang for the Institute for New Economic Thinking (INET) explains how the state can guide economic development. Chang uses real examples to show that markets often need strong government. Note: the subtitles of the video do not always accurately transcribe Chang’s strong accented English. Difficulty level: medium
23 Things They Don’t Tell You About Capitalism - a book full of economic insights by economist Ha-Joon Chang, with a few chapters particularly relevant to state functions:
Thing 12 Governments can pick winners
Thing 19 Despite the fall of communism, we are still living in planned economies
Thing 21 Big government makes people more open to change
Sources
Sources
Chang, H.-J. (2002). Kicking away the ladder: Development strategy in historical perspective. Anthem Press.
Chang, H. (2010). 23 Things They Don't Tell You About Capitalism. United Kingdom: Penguin Books Limited.
Mazzucato, M. (2018). The Entrepreneurial State: Debunking Public Vs. Private Sector Myths. United Kingdom: Penguin Books Limited.
Mazzucato, M. (2023, August 10). Governing the economics of the common good: from correcting market failures to shaping collective goals. Journal of Economic Policy Reform, 27(1), 1–24. https://doi.org/10.1080/17487870.2023.2280969
van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.
Terminology (in order of appearance)
Terminology (in order of appearance)
Coming soon!
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