The state as an innovator

The reason that the state will fund these innovations is that is not bound by profit motives. Its primary concern is solving problems for its citizens

Throughout the Labour Party’s history using the state to more evenly distribute wealth and power in society has been essential to its mission, leaving us with a conception of the state as an idle, reactive body. This outdated falsehood must be dispelled if Labour is serious about once again winning power and changing society for the better. In its place the party should promote an ambitious and radical vision of a proactive state.

Today the state is often seen in terms of its consumption of wealth, wealth which is said to be solely creation of great entrepreneurs; this is a total misconception of the state which has played a major role in creating wealth. Take the iPhone, many of technologies that were brought together create it were not the brainchild of Steve Jobs, or anyone in silicon valley, but were funded and developed in, various ways, by states. For instance touch screen, a key component of the iPhone, was first developed by scientists at CERN, the European Organisation for Nuclear Research, which is funded by the governments of its 21 member states. That’s not to say that private business is not important in creating wealth out of these innovations but we must recognise that it is derived from a variety of sources. If taxpayers money makes up a large proportion of the initial capital investment in new technologies then how can it be justified that all the profit ends up in the bank accounts of a few shareholders?

The reason that the state will fund these innovations is that is not bound by profit motives. Its primary concern is solving problems for its citizens (which in, for example, health cannot be ignored), in this sense it is more of a risk taker than private businesses. The state can be far more efficient in spending money with targeted investments in specific areas showing tangible outcomes.

While this active state should be celebrated there is more governments can do to ensure that they retain profit from their investment which could be reinvested in public services. The state can no longer allow its intellectual property to be given out freely to the market, it must regulate how the private sector is able to access its innovations to ensure that when state funded technology is sold the state is able to benefit. It seems that there are two ways this can be done: putting a levy on the use of state funded technologies (this could be a flat rate or based on the profits made from the use of the technology) or, what I think is the preferable option, creating new partnerships between business and state institutions.

The IFS’s study of the 2017 Labour manifesto showed that the tax raises proposed would not cover the gaping hole in public service funding that is a result of seven years of austerity. There is a strong case for raising taxes, in the UK we are taxed far less than France and Germany, but the state will need to complement the tax take, especially with an aging population. In the military and NHS, for example, there is a lot of scope for investing in research and development, if the innovations that result from this can become a significant source of income then these services can become somewhat self funding. This would free up public money to be spent in areas such as welfare that do not have the same capacity to generate revenue.

If Labour wants to be a truly radical party then it needs to move beyond old dogmas and find a new, modern conception of the state. The state as an innovator, active in shaping markets and standing up to the challenges of our era; going beyond being a safety net and becoming a creator of common wealth.

 Mostyn Taylor is a Young Fabians Member. Follow him on twitter at @mostyntc

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