Beware the Few

The newspapers received the elevation of Perkins with unprecedented hysteria. “Go back to Moscow,” screamed the Sun, unable to come to terms with the fact that ‘Red Harry’ (as the papers insisted on calling him) had never actually set foot in Moscow… in the run-up to polling… newspapers published lists of ‘Communist-backed’ Labour candidates. By way of evidence they offered an article in the Morning Star or a platform shared by a Labour MP and a member of the Communist Party. A week before election day… newshounds ‘discovered’ documents purporting to show that four senior Labour leaders were paid-up members of a Trotskyist cell.

Not to be outdone, the Express took to publishing a picture of Perkins daubed with a Hitler moustache… Another paper splashed on its front page an internal Labour Party document outlining plans to abolish tax relief on mortgages and confiscate all personal wealth over £50,000. Enquiry revealed that the document was a forgery, but the retraction was tucked away at the bottom of an inside page.[i]

The passage above is from the novel, ‘A Very British Coup,’ by the former Labour MP, Chris Mullin. Though published in 1982 and dated, it’s a stingingly prescient work that, if Labour forms the next government, should become required reading for anyone who still harbours any affection for democracy. The novel was a success and, later, playwright Alan Plater wrote a (loose) adaptation for Channel Four.

CorbynPutinStoogeIn his opus, Mullin imagines the various phases of an establishment coup mounted in response to the election of a socialist government led by his protagonist, newly minted Labour PM Harry Perkins. Naturally, Mullin portrays the corporate media as one of the principal fronts in his imaginary battle between democracy and the state and, last month, I touched on this subject when I argued that it is foolish to believe that a genuinely socialist Labour Party could win over the corporate capitalist media. One has only to look at the batterings meted out to Labour under Foot, Kinnock, ‘Red Ed’ Miliband, and Corbyn to see the entirely understandable hostility of private power to anything other than the mildest social democracy.[ii] New Labour, which was substantially (though in fairness not totally) a capitulation to neoliberalism, received a much fairer wind; particularly from the Murdoch press.

The establishment campaign to destroy the Corbyn project, which is currently veiled as a furore over antisemitism, began before he was elected when, in July 2015, senior Labour MPs briefed the press that ‘Corbyn would never be allowed to remain in the job long enough to fight the 2020 general election’ and that ‘a coup could be launched within days of the result.’[iii] Three years later, for all its digging, the establishment has so far found very little to work with, as the paucity of the ‘scandals’ so far illustrate. When your enemy is cropping photos to make it CorbynJigMaillook like you’re dancing at the Cenotaph, you know their battery’s down to one bar. The insinuations and allegations concerning Corbyn’s associations with Sinn Fein and Hamas before the 2017 election fell flat, especially with younger voters, for whom the 80s are not even a memory. Indeed, such was the failure that many were tempted to see it as another portent of the collapse of redtop influence.[iv] This year, allegations that Corbyn was a Kremlin agent, a traitor, or a Czech spy proved so obviously absurd that even Andrew Neil bridled at them, demolishing the Brexit Minister, Steve Baker, in an interview so bloody it could have been directed by Eli Roth.

Inevitably, if Labour win the next election, the media will gain new material. Instead of rummaging through Corbyn’s bins, they’ll be able to blame everything that goes wrong in the country on Labour and on him (and sometimes they may actually be right to do so). As with Corbyn’s election as leader, the media will show scant regard for fairness, honesty or intellectual self-respect. And this will be only one front. In office, a Labour government will find itself having to fight on a much broader battlefield if it also wants to be in power.

LabourSpiesIt’s easy to forget how much any government relies on consent: not merely that of an electorate it has to win over every five years but rival power centres that it has to win over every day. It’s easy to confuse ‘the government’ with the wider apparatus of the state.  It’s worth us remembering exactly what a Labour Government would be in actual physical terms: approximately 120 people running twenty-five ministerial departments.[v] That would be the Labour Government: 120 people. Add to that a further 20 non-ministerial departments and 300+ executive agencies of one sort or another; all of which is staffed mostly by the 560,000 civil servants. Think of 120 people against that. And that of course is just the formal government. To this, we must add all the other centres of power in the country – the finance sector, large multinational corporations (and their media arms), and even the diminished but still influential trades unions. The Government for the Many against the (not so) Few.

And we live now in an incomparably more globalised world with far faster CorbynCollaboratorcommunication than that envisaged by Chris Mullin. Internationally, we are subject to the ‘virtual senate’ of investors and lenders, who ‘conduct moment-by-moment referendums’ on government policies;[vi] what the press refers to euphemistically as ‘the markets’. Capital is capable of ‘staging a general political strike’ against the policies of any nation, with even the US not immune from its ‘veto power.’[vii] A number of studies have shown that ‘the markets’ punish left wing governments and reward right wing administrations. The reason for this is obvious: ‘the probability of policies that are harmful for returns on investments increases under left governments, while right governments are more likely to choose policies that are beneficial for financial returns.’[viii] In other words, financial institutions punish any government that puts people over profit.

I’d argue that much of what is commonly portrayed as the competence of a government is, in reality, the degree to which other actors within the system play ball. Once Labour is in office, its enemies will have countless opportunities to jam the mechanisms of the state and frustrate Labour’s mandate. We’ve already seen the drama acted out on the smaller stage of the Labour Party itself, when Corbyn found himself in office but not in power; a predicament described by his political biographer, Alex Nunns:

The staff wore black for the day of the result… There was minimal help for the new leader — the campaign’s press officer James Mills had to organise an impromptu round of media interviews. There was no car arranged to transport Corbyn through the thronging streets… On member of staff approached Mills and said: “See those three files over there? That’s how the Labour Party works. See you Monday morning.”[ix]

CorbynLungeIndeed, we saw a foreshadowing of the likely problems ahead in September 2015, when an anonymous ‘senior general’ briefed that a Corbyn government would face a mutiny if it ‘tried to scrap Trident, pull out of NATO or announce “any plans to emasculate and shrink the size of the armed forces.”’[x] It’s no secret that Labour are conducting strategy sessions to, as John McDonnell put it, ‘answer the question about what happens when, or if, they [the establishment] come for us.’ In the first instance, that will very likely take the form of a TimesRussiaSwingrun on the pound (currency traders selling the pound so that its value against other currencies drops) or sudden capital flight (people pulling their money out of the country).[xi] In the longer run, there will be a steady war of attrition between a Labour government and institutions that have a vested interest in obstructing even Corbyn’s comparatively mild programme of social democracy. Increased propaganda against the domestic (and foreign) population, non-cooperation, and active sabotage: power protects itself.

Finally, while I’ve concerned myself here with institutions, allow me to suggest that theseExistential Threat are not the fundamental enemy that the Corbyn project faces. That is the class identity, values, and interests shared by that tranche of society we call ‘the establishment’. The institutions are merely the semi-permanent expression of the establishment, accumulated over decades and centuries.  The substance is the people — they are the bricks that make up the buildings, bound by the cement of their common ideology. We might demolish the buildings but the bricks themselves scatter and slot themselves into new buildings (or parties). The longer struggle of socialism will always be to bring about a change in collective wisdom: a ‘battle for hearts and minds’ (but without the bombing). That will take time and the battle for the buildings is a necessary step in winning the war for the bricks. It’s vital that Labour and its supporters don’t under estimate this challenge. Getting elected is not the summit but a foothill on the journey. I’ll leave you with some words Chris Mullin gave to Harry Perkins, which could be as true the morning after the next election as they were in 1982:

All we have won tonight is political power… [b]y itself that is not enough. Real power in this country resides not in Parliament, but in the boardrooms of the City of London; in the darkest recesses of the Whitehall bureaucracy and in the editorial offices of our national newspapers. To win real power we have first to break the stranglehold exerted by the ruling class on all the important institutions of our country.[xii]



[i] Chris Mullin (1982) ‘A Very British Coup,’ Hodder & Stoughton pp. 44-45.

[ii] The treatment of Tony Blair was far kinder, as I discussed in my previous article. John Smith was leader only two years before his untimely death at 55.

[iii] Tim Ross and Emily Gosden, ‘Jeremy Corbyn Faces Coup Plot if He Wins Labour Leadership,’ The Telegraph, 27th July 2015, available at (accessed 03/09/18); The Guardian reports that ‘ [The] argument about antisemitism in the party threatens to turn into a battle over its future…’ neatly reversing the actual events, in which the battle by the Labour right to wrest control of the Party back from the membership has recently morphed into an antisemitism-flavoured souffle (Dan Sabbagh ‘Antisemitism row: Hodge and Brown pile pressure on Corbyn,’ The Guardian 2nd September 2018, available at (accessed 03/09/18).

[iv] See, for example, Suzanne Moore ‘The Sun and Mail tried to crush Corbyn. But their power over politics is broken, The Guardian 9th of June 2017, available at (accessed 03/09/18). Steven Barnett reports that ‘commentators, pollsters, politicians and voters alike, some media pundits were quick to pronounce the end of tabloid power. “This election proves that media bias no longer matters” announced Peter Preston, suggesting that while the printed press “has seldom seemed more overwhelming” in its pro-Tory bias, 2017 heralded the final supremacy of social media over the dinosaurs of the printed press. Veteran media commentator Ray Snoddy also proclaimed “the decline in power and influence of the right-wing tabloids”. Nonetheless, Barnett cautions that this judgement may be ‘simplistic’ (Steven Barnett ‘Is our national press a fading dinosaur? Don’t bank on it’ in Einar Thorsen, Daniel Jackson, Darren Lilleker (eds) (2017) UK Election Analysis 2017: Media, Voters and the Campaign, p. 55.

[v] I’m basing this on the assumption that a Labour government would be broadly the same size and configuration as the current one, which is described (in fairly ‘Janet & John’ terms) here:

[vi] Two phrases from the economics literature used frequently by Noam Chomsky, for example in his ‘The high cost of neoliberalism,’ The Spectator 28th June 2010, available at (accessed 02/09/18).

[vii] Timothy A. Canova, ‘The Transformation of U.S. Banking and Finance: From Regulated Competition to Free-Market Receivership,’ Brooklyn Law Review Vol. 60 No. 4 Winter 1995, pp. 1295-1354.

[viii] Thomas Sattler, ‘Do Markets Punish Left Governments?’ The Journal of Politics 75, no. 2 (2013): 343-56. In Sattler’s study, he qualifies this central assertion by demonstrating that the reaction of markets to left governments depends on their assessment of how otherwise constrained that government is. In other words, a left government that has little room to operate will not be punished so heavily as one with more latitude.

[ix] Alex Nunns (2016 [2018]) “The Candidate. Jeremy Corbyn’s Improbable Path to Power,” OR Books, London.

[x] Caroline Mortimer, ‘British Army ‘could stage mutiny under Corbyn’, says senior serving general,’ The Independent 20th September 2015, available at (accessed 02/09/18).

[xi] Jim Pickard, ‘Labour plans for capital flight or run on pound if elected,’ Financial Times 26th September 2017, available at (accessed 02/09/18).

[xii] Mullin (1982) p. 10.


Tales of Self-Laid Eggs

Nadine Dorries tweet

A fundamental misunderstanding of cause and effect.

Last month, news-sellers reported that BAE Systems (Purveyors of Finest Quality Death to the Gentry) had won a contract to flog the Australian government nine new warships, which will ‘provide the Australian Defence Force with the highest levels of lethality and deterrence.’[i] British companies will supply a number of the internal systems and so play a very real role in Australia’s ongoing battle to repel the onslaught of drowning asylum seekers.[ii]

As one might expect, a clutch of Brexiteers, led by the Ragged-Trousered Stockbroker, Nigel Farage, took time from managing their foreign citizenship claims and overseas investment funds to trumpet this £20bn victory for Global Britain. Nadine Dorries MP lauded it as an example of just the sort of trade deal (completed while we’re still a member of the EU) that the EU (of which we are still a member) has prevented us from doing (it hasn’t).

In fact, though a BAE design, the ships will not be built in the UK at all, but in Australian shipyards, and Britain will receive only a slice of the £19.6bn headline figure. But I’m not concerned here with Brexit, Tory boosterism or even exactly how much national pride should attach to selling engines of nautical slaughter. Instead, consider this caveat, tucked away in the analysis by the BBC’s Scottish business editor Douglas Fraser,

However, this looks like a design which was heavily subsidised by the UK taxpayer, being sold overseas, and wholly to the benefit of BAE Systems. It appears that the UK taxpayer sees none of the direct payback or royalties from that investment.[iii]

This is not unusual. There is a long record, in the US and UK, of the public sector incubating and subsidising private sector success stories; something that the champions of capitalism generally try to hide under a thicket of ‘free market’ euphuism. They prefer instead the ideology of the ‘self-made man’ (or company) that rises to prominence and wealth through nothing but their own vision and hard work. Sometimes, this pretence requires the most preposterous elision; take for instance Philip Anschutz, who the Forbes 400 Rich List in 1998 described as ‘self-made’ even though he had inherited an oil and gas field worth $500 million.[iv]

More generally, there is a long story of the public sector supporting and protecting the private sector and free market. I’ll list a few examples that I don’t have space to discuss: developing and promoting a culture of property rights and, later, intellectual property rights; providing infrastructure, such as roads, railways, ports, power, and communication; providing an educated workforce through a public school system; subsidising low wages through a welfare state; underwriting risky overseas sales (e.g. British export credit guarantees); offering tax breaks and inducements for investment (such as export processing zones); privatisations, bail-outs (such as of the banks in 2008), treating work- or product-related illness;[v] repairing environmental damage; and providing cheap fuel through periodic liberation of oil supplies.

The most obvious form of public sector support for the private sector, and the one that has the worst reputation, is to prevent a free market at all through protectionism: the use of tariff and non-tariff barriers to prevent overseas competitors trouncing one’s domestic industries. While it’s officially denounced – especially by enthusiastic practitioners such as Reagan and Trump –  it’s fair to say that protectionism has characterised US and UK industrial development (and elsewhere); not least through the acquisition of empire.[vi] The US began to champion freer trade only following World War II; at least partly fulfilling the prediction of its 18th president, Ulysses S. Grant, that ‘within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.’[vii]

Even when they don’t protect industries from international competition, governments still provide considerable support in other ways. Despite the fall of communism and the ascendance, until 2008 at least, of ‘free market’ ideology, it’s accurate to say that western capitalist societies still have substantially planned economies. Most obviously, governments plan economies through state-owned enterprises, through Research & Development (R&D), infrastructure spending, and through sectoral industrial policy. Additionally, modern corporate capitalism ensures that a handful of enormously powerful transnational corporations plan their activities, often in concert (often in conflict) with governments.[viii] It’s R&D spending and the use of government purchasing that I’m going to discuss here.

In the UK and particularly the US, government spending on scientific and ‘defence’ R&D has been enormous. For instance, between the 50s and 90s, US federal government spending accounted for 50-70% of the country’s entire R&D spending.[ix]  As late as 1958, federal funding covered an estimated 85% of total R&D on electronics.[x] In the 1950s and 60s, the Pentagon supplied more than 30% of IBM’s R&D budget.[xi] Mariana Mazzucato, in The Entrepreneurial State, summarises the history of hi-tech as one in which ‘nearly all the technological revolutions of the past – from the Internet to today’s green tech revolution – required a massive push from the state.’[xii]

The US’s Defense Advanced Research Projects Agency (DARPA) is a fine example of the US Government incubating hi-tech before it’s released to the market. DARPA was set up in 1958 to give the US ‘technological superiority’ in multiple sectors of its economy and has always been ‘aggressively mission-oriented’ rather than merely profit-oriented. With a budget of $3bn annually, it is structured to ‘bridge the gap between blue-sky academic work, with long time horizons, and the more incremental technological development occurring within the military.[xiii] 

Going way beyond simply funding research, DARPA funded the formation of computer science departments, provided start-up firms with early research support, contributed to semi-conductor research and support to human-computer interface research and oversaw the early stages of the Internet… such strategies contributed hugely to the development of the computer industry during the 1960s and 1970s, and many of the technologies later incorporated in the design of the personal computer were developed by DARPA-funded researchers[xiv]

Early achievements for DARPA were ‘key technologies’ such as ‘high-speed networking, advances in integrated circuits, and the emergence of massively parallel super-computers’.[xv] Such was its success that, under the first Clinton Administration (1993-96), DARPA became the ‘lead agency in a new effort to help fledgling technologies gain a hold in commercial markets.’[xvi] In the 1970s, DARPA funded a laboratory affiliated with the University of Southern California where anyone who believed they had developed a superior design of microchip could get it fabricated to prototype stage. By so doing, the state subsidised the birth of personal computers in the 1970s, the first of which Apple introduced in 1976.[xvii] As the New York Times reported as far back as 1989, ‘many fundamental computer technologies… can be traced to [DARPA’s] backing, including the basic graphics techniques that make the Apple Macintosh computer easy to use’.[xviii] More of Apple in a moment, but let’s also note that much of this spending was disguised (or at least rendered more ideologically palatable) by being conducted by DARPA. The NYT again:

Under the rubric of national security, the Pentagon can undertake programs like Sematech [a research consortium to help the US semiconductor industry compete] that would arouse opposition if done by another agency in the name of industrial policy…[xix]

And DARPA is not the only instrument of government support. Mazzucato discusses several more, including the Small Business Innovation Research (SBIR) Programme and the Orphan Drug Act. Founded in 1982, SBIR plays an increasingly influential role as the first port of call for entrepreneurs looking for funding and, with a budget of $2bn annually, has ‘guided the commercialisation of hundreds of new technologies from the laboratory to the market.’[xx] The Orphan Drug Act of 1983 provides tax incentives, R&D subsidies, fast-track drug approval and strong intellectual property and marketing rights for products designed to treat conditions suffered by fewer than 200,000 people. This support played an important role in the development of major players, such as Biogen and Genentech, but has also successfully been exploited by giants such as GlaxoSmithKline, Roche, and Pfizer.[xxi]  DARPA, SBIR, and the Orphan Drug Act are just three, very large, programmes of market intervention that the US has run over decades.

Let’s go back to Apple for a moment. Discuss the achievements of free market capitalism on Twitter for more than ten minutes and someone will be bound to hold up the ubiquitous iPhone as clinching proof that the profit motive leads to shiny, unscratchable utopia.  Mazzucato makes Apple’s flagship a centrepiece of her study and devotes an entire chapter to tracing the origin of almost its every bell and whistle to the public sector. As a ‘smart’ phone it would be nothing without the Internet; the earliest incarnation of which (ARPANET) was developed by DARPA in the late 60s (with a parallel system built by the National Physical Laboratory in the UK). Touchscreens can be dated back to the work of E. A. Thompson at the Royal Radar Establishment in Malvern in the 1960s and the Centre for European Nuclear Research (CERN) in the 1970s.[xxii] Siri began life as the SRI-led Cognitive Assistant that Learns and Organizes (CALO) project within DARPA’s Personalized Assistant that Learns (PAL), a joint programme with the Swiss Institute of Technology (EPFL). SRI spun off Siri in 2007 as a commercial venture and Apple bought it in 2010, integrating it into the iPhone 4S in 2011.[xxiii] LCD screens were first created by Westinghouse in the 1970s and the work was funded almost exclusively by the US Army when companies such as Apple, 3M, IBM, XEROX, DEC, and Compaq refused to take the risk. The Lithium Ion battery was developed with government funding and the cornerstones of the World Wide Web (HTTP and HTML) were first implemented at CERN. Finally, GPS began life as NAVSTAR, a strictly military use system, to this day still funded by the US Airforce.[xxiv] For a fuller view, consider this schematic:


Taken from Mazzucato (2013[2018), p. 116

So that’s a sample of the US picture. Over the pond, there is Innovate UK, which in 2016-17 had a budget of £561m and, through competitions, awarded grants of between £250K and £10m to businesses and research organisations working on emerging technologies; health and life sciences; infrastructure systems; and manufacturing and materials. The London Co-Investment Fund supports start-ups in the capital and disburses money from a purse including £25 million from the Mayor of London’s Growing Places Fund. Up until 2015, the Government also provided discounted broadband to 50,000 businesses.[xxv]

As of 2017, the British government (like the US) is ‘pouring billions of pounds’ into Artificial Intelligence research, 5G, and driverless cars. ‘Investment in electric vehicles,’ reported Cnet last November, ‘includes £400 million for a charging infrastructure fund, an extra £100 million in Plug-In-Car Grant, which subsidises purchases of electric vehicles, and £40 million in charging R&D.’ This government spending, which also includes more computer science teachers in schools, is to ‘help businesses grow to scale and hopefully find the UK’s next tech unicorn.’[xxvi]


E. A. Thompson’s early touchscreen

A notable difference between state investment and private investment is that the state provides ‘patient capital’ while the private sector is ‘impatient’.[xxvii]  The state takes the long-term view, often sinking large sums into areas that are merely theoretical. In this sense, it deals with uncertainty rather than merely risk. Risk is quantifiable and can be priced into business decisions. Venture Capitalists (VCs) can deal with risk and accept a certain amount of it; a quantified possibility that a given investment won’t come off.  Uncertainty, conversely, cannot be quantified or priced into a business venture. It’s the ‘unknown unknowns’ that may mean years of patient research lead into a wall. Much government investment occurs long before VC comes into play; using public funds to gradually carve eldritch clouds of uncertainty into a still risky but, at least defined, landscape upon which a market can be built.

The Internet and nanotechnology are both examples of this process. The market had no interest in either because they were too long-term (‘blue sky’ as the jargon has it). There was no clear idea of a product, a demand for that product, or the attendant risks. There was only uncertainty. What was required was mission-oriented rather than profit-oriented effort. Similarly, it’s highly unlikely the market would ever have put a man on the moon. There was little obvious commercial opportunity, too much basic research required, and the uncertainty was simply too high. It took the public sector — the vast sums of money, the herculean intellectual effort, and the terrible sacrifice of life — to conquer that uncertainty and create a world in which, decades later, Elon Musk could spend millions proving that no black hole sucks as hard as an arsehole.


Welcome to Earth. Intelligent pop: 0

The state doesn’t merely incubate products by funding their development or the science that leads to them. Government can be the main, if not their only, customer. The US Government is the ‘single largest purchaser of goods and services in the world’ and a ‘vital source of business for companies…’[xxviii] To take a past example, Fortune Magazine conceded in 1948 that ‘the aircraft industry today cannot satisfactorily exist in a pure, competitive, unsubsidized, “free-enterprise” economy.  It never has been able to. Its huge customer has always been the United States Government, whether in war or in peace.’[xxix]  As late as 1968, the US military bought 40% of all semiconductor production and the willingness of the US Government to buy processor chips ‘in quantity at premium prices allowed a growing number of companies to refine their production skills and develop elaborate manufacturing facilities.’[xxx] In 2016, the US Government became the top purchaser (along with private households) of healthcare products, spending $918.5bn annually.[xxxi]

In the UK, the government ‘acts as a significant purchaser in various sectors of the economy,’ with the two ‘stand out’ areas being pharmaceuticals and defence.[xxxii] Since 1957, the UK Government has regulated the price of pharmaceuticals with a policy, which (since 1969) has also had as its objective ‘a strong and profitable pharmaceutical industry’.

Participation by drug companies is voluntary, but universal. Every five years the government sets out a price trajectory that is designed to provide a reasonable rate of return, while ensuring value for money for taxpayers.[xxxiii]

The policy is seen as a success, in that it has kept prices down for the consumer, but is also believed by some experts to have been ‘critical in explaining the difference between the success of British pharmaceutical firms and the failure of their French rivals.’[xxxiv]

In defence, the Government is essentially the sole customer because our exports are comparatively slender. According to an evidence paper submitted to the UK Government’s ‘Foresight Future of Manufacturing’ project in 2013, ‘government purchasing decisions in defence have directly led to the maintenance of a defence sector of reasonable size’.[xxxv] The authors note that, while expensive, the system is successful in that it at least allows Britain to ‘preserve some modicum of military independence.’[xxxvi] Interestingly, they also argue that since foreign exports are so limited, policy in this area should be seen as being about preserving domestic military production capability and so a part of defence rather than industrial policy. In which case, one might wonder why we recycle larges sums of public money into private profit when these companies who are effectively sub-departments of the state.

All of the forgoing raises an obvious question. What does the public sector get in return for its investment; for all the forms of support we’ve discussed? It’s an axiom of business that those who take risks should also take a fair share of the reward when those risks pay off. For the state, this could take two forms. One would be a direct return on the investment made in a new technology, product or supportive measure. This very often does not happen; costs might be socialised, but profits are largely privatised (or the money is squandered). Where was the return on the public sector’s investment in computing or the Internet? SIRI cost at least $150m to develop and, while Apple paid hundreds of millions for it, that money did not go back to the American taxpayer but to the spun-off company that owned it and some VCs who put in an extra $24m late in the development process.[xxxvii]  Take for another example the US telephone companies. As David Rosen wrote in 2013 for Counterpunch,

They’ve pocketed an estimated $360 billion through questionable rate increases, subsidies, tax breaks and overcharges.  Instead of building out the “information superhighway” promised by Al Gore two decades ago, they directed the money to building-out 2nd-rate wireless businesses, overpaying their executives and rewarding stockholders – and all at the customer’s expense.  As a result, the U.S. has become a 2nd tier communications nation, ranked 15th in broadband.[xxxviii]

One can argue that jobs (effectively state-subsidized jobs) are created, but hi-tech firms in particular specialise in producing their goods offshore and for low pay. For example, Mazzucato cites figures estimating that the top nine executives working for Apple together pocketed in 2012 the same amount of money that it took 95,000 of their workers to earn.[xxxix] And we should all remember that jobs are not a gift or a favour from business – they are a transaction, in which the employee comes off worse.

Of course, the main way that the public sector should recoup its investment in the private sector is through taxation and here, dear reader, we hardly need tarry for long. The headline stories of the likes of the GAFA companies (Google, Amazon, Facebook, and Apple) distract from a far larger story of big business avoiding, evading, and lobbying-away tax that I’m not going into here. It suffices to say that the current controversy over large companies not paying their fair share of tax isn’t merely about the state imposing duties on companies in order to fund its expenditure. Rather, it’s often a case of payback: companies returning on the investment the public sector has made, if not in them directly, then in creating the arena in which they operate. The GAFA organisations only exist because of the public sector. It was the American and British state that created the personal computer, the Internet, the World Wide Web, and the capacity to process ‘Big Data’ on which Facebook and Amazon rely. It was the American state, via the SBIR Programme, that provided Apple with its start-up funding. It was the American state that created the Backrub search algorithm on which Google is based.[xl] And it is the state that keeps them safe, builds roads for their customers to reach them, ports and railways for their suppliers to stock them, educates and cares for their workers, and — through welfare payments — subsidizes their wage bill.

What can we conclude from all of this? Five things, I think. Firstly, that the stereotype of the bold, dynamic private sector versus the conservative, staid public sector often reverses the truth. History shows the public sector very frequently to be far more adventurous and farsighted than the private sector. It’s the first dragon in the den: there on the ground floor, thinking out of the box, looking up at the blue sky and scanning the horizon, generating the thought shower, running with it, then taking it to the next level, and not just going for the low-hanging fruit.  It’s Big Business’s mentor, its patron, its partner, and its best customer. We’ve seen how the state is a heavy investor in innovation but, more than that, the public sector is space in which the market is born and thrives. Without the state clearing the ground and guarding the perimeters, there’s nowhere safe to put the market.

Secondly, the conservatism of the private sector is driven by its need to keep one eye on the bottom line, the quarterly return. While the state, at its best, can be driven by a mission, corporations are powered by the fiduciary duty; the need, above all other considerations, to make money for their shareholders.[xli] Yes, there are genuine entrepreneurs, people with a dream, and start-ups with a vision, but corporations as legal entities care only about making the next buck. Putting the argument at its strongest, there can be no sense of public service among these paper psychopaths.

Thirdly, all economies are planned by somebody. Pretending that ‘leaving it to the market’ means that one’s economy is not planned is disingenuous. Rather, the question should be who does the planning: democratically-elected government at the national level and workers’ councils lower down or barely accountable private capital driven by profit?

Fourthly, its past time for an accounting of the true role of the public sector in the world we see around us and carry in our pockets. Not only that, but the investment of workers in innovation should be properly understood, acknowledged, and rewarded – rather than merely perpetuating a culture in which people are told to just shut up and be grateful for the gift of employment.

Finally, the giants of the private sector must be made to realise that they’re cutting away the branch on which they sit. By avoiding tax, and contributing to the hollowing out of the state, concentrated private capital is increasingly parasitic on a withering public sector. And I do mean parasitic rather than merely symbiotic, since the parasite is in danger of killing its host and, before that, of cutting the vital stream of nourishment that keeps it alive: basic scientific research. The less material capacity and ideological freedom the state has to imagine, research, invest, and — yes — often fail, the less fruit will be there for the likes of Apple to pluck. The well of ideas will run dry. The golden eggs need to take better care of the goose that laid them.



“Self made men, indeed! Why don’t you tell me of the self-laid egg?” is a quotation attributed to the political scientist, Francis Leiber, in 1882

[i] BBC News ‘BAE wins multi-billion pound Australian warship contract,’ 29th June 2018, available at (Accessed 08/07/2018).

[ii] See Jonathan Pearlman ‘Australia sends in its navy to push asylum-seeker boats back to Indonesia,’ The Telegraph, 7th January 2014, available at (Accessed 12/07/2018); Ben Doherty and Calla Wahlquist, ‘Australia among 30 countries illegally forcing return of refugees, Amnesty says,’ Guardian 24th February 2016, available at (Accessed 12/07/2018); Mark Isaacs ‘There’s No Escape From Australia’s Refugee Gulag,’ Foreign Policy 30th April 2018, available at (Accessed 12/07/2018)

[iii] BBC News, op. cit.

[iv] Responsible Wealth (2004 Press Release) ‘Forbes 400 Richest Americans: They Didn’t Do It Alone’ 24th September 2004, available at (accessed 09/07/2018)

[v] To give just one example, according to one estimate, between 2000 and 2004 in the US smoking caused more than $193 billion in annual health-related costs, including smoking-attributable medical costs and productivity losses (cited in David Rosen ‘Socialize Costs, Privatize Profits,’ Counterpunch, March 1st, 2013, available at  (Accessed 09/07/2018) ).

[vi] See Ha-Joon Chang (2007) “Bad Samaritans. The Guilty Secrets of Rich Nations & The Threat to Global Prosperity,” chap. 2.

[vii] Chang (2010), pp. 55-67.

[viii] See Ha-Joon Chang (2010) “23 Things They Don’t Tell You About Capitalism,” pp. 199-200.

[ix] Chang (2007), p. 55.

[x] Laura D’Andrea Tyson (1992) ‘Who’s Bashing Whom?: Trade Conflict in High-Technology Industries,’ p. 90.

[xi] Winfried Ruigrock and Rob Van Tulder (1995) ‘The Logic of International Restructuring,’

  1. 220-21, quoted in quoted in Michael M’Gehee ‘Free Market Capitalism and the Pentagon System,’ Znet March 30, 2010, available at Note that this may not be the correct authorship of the article as the url attributes it to a Donald M. Ferguson.

[xii] Mariana Mazzucato (2013 [2018]) “The Myth of the Entrepreneurial State. Debunking Private vs Public Sector Myths,” p. 6.

[xiii] Mazzucato (2013 [2018]), p. 81 DARPA is also often referred to as ARPA, dropping the ‘Defense’.

[xiv] Mazzucato (2013 [2018]), p. 82

[xv] Elizabeth Corcoran, “Computing’s controversial patron,” Science, April 2, 1993, p. 20, retrieved from  (07/07/2018)

[xvi] Corcoran, op. cit.

[xvii] Mazzucato (2013 [2018]), p. 84

[xviii] Andrew Pollack, “America’s Answer to Japan’s MITI,” New York Times, March 5, 1989, section 3, p. 1, quoted in M’Gehee (2010).

[xix] Pollack, op. cit.

[xx] Mazzucato (2013 [2018]), pp. 85-86.

[xxi] Mazzucato (2013 [2018]), pp. 87-88. Mazzucato notes that, as the act allows multiple versions of effectively the same drug to be designated ‘orphan’, Big Pharma has been able to clean up at public expense. She cites a drug developed by Novartis for chronic myelogenous leukaemia that, when marketed as a treatment for four other conditions, received the same designation (and support) each time.

[xxii] Johnson described his work in an article entitled ‘Touch display—a novel input/output device for computers,’ published in Electronics Letters. For more of the history, see Florence Ion, ‘From touch displays to the Surface: A brief history of touchscreen technology,’ ARSTechnica 4th April 2013, available at (Accessed 12/07/2018).

[xxiii] SRI International, ‘SIRI’ undated, available at!&innovation=siri (Accessed 10/07/2018).

[xxiv] Mazzucato (2013 [2018]), p. 6, chap. 5.

[xxv] Scott Carey, ‘How the UK government supports technology start-ups | How to get government backing for your start-up,’ techworld, 11th January, 2017, available at (accessed 08/07/2018).

[xxvi] Katie Collins, ‘AI, 5G, driverless cars on the government’s tech agenda,’ Cnet, 22nd November 2017, available at (accessed 08/07/2018).

[xxvii] Daniel Cichocki ‘Impatient for growth? Time to unlock Patient Capital…’ UK Finance, 27th November 2017, available at (accessed 11/07/2018).

[xxviii] K&L Gates Public Policy and Law Practice ‘Government Contracts and Procurement,’ 2011, available at (accessed 13/07/2018).

[xxix] ‘Shall we have Airplanes?’ Fortune, January 1948, quoted in M’Gehee (2010).

[xxx] Tyson (1992), p. 88.

[xxxi] Kerry Young ‘Federal Government Emerges as Top Health Buyer in New Analysis,’ Commonwealth Fund, 5th December 2016, available at (Accessed 13/07/2018).

[xxxii] Stephen Broadberry and Tim Leunig (2013) ‘The impact of Government policies on UK manufacturing since 1945. Future of Manufacturing Evidence Paper 2’, Foresight Government Office for Science, pp. 28-30, available at (Accessed 10/07/2018)

[xxxiii] Broadberry and Leunig (2018) op. cit.

[xxxiv] Broadberry and Leunig (2018) op. cit. Note that authors cite other experts who question the decisive role the scheme may have had. However, as the other factors they cite as perhaps being more important (‘Britain’s strong record in biomedical research at university level, the early introduction of efficacy regulation and the role of the NHS’) are all examples of public sector support or intervention, this does not detract from my argument.

[xxxv] Broadberry and Leunig (2018), p. 4.

[xxxvi] Ibid, p. 30.

[xxxvii] Erick Schonfeld ‘Silicon Valley Buzz: Apple Paid More Than $200 Million For Siri To Get Into Mobile Search,’ Techbuzz 28th April, 2010, available at (accessed 12/07/2018); Note that an argument can be made to justify this, as it was by Norman Winarsky of SRI in an interview in 2010. ‘When I put it to him that $150 million was a lot for taxpayers to spend on a technology that’s now been taken inside Apple, he corrected my premise on several counts, arguing that acquisitions are a natural outcome of SRI’s spinoff process. “I think the Bayh-Dole Act is one of the most brilliant acts in the history of Congress,” Winarsky says. “What you call ‘taking the technology inside’ has been responsible in large part for the creation of companies like Intel, Cisco, Apple, and Sun. The government would have had to pay billions of dollars, perhaps, to continue to advance this technology, while instead the commercial marketplace is making it available to everybody. Consumer revenue is what drives future products, rather than our taxes.”’ This argument still does not address the loss made by the state and, even assuming Apple went on to spend ‘billions’ developing SIRI, it has made billions selling it. Plus, it has invested its billions much later down the line when the state has turned the uncertainty into manageable risk. Wade Roush ‘The Story of Siri, from Birth at SRI to Acquisition by Apple—Virtual Personal Assistants Go Mobile,’ Xconomy 14th June 2010, available at

[xxxviii] Rosen (2013) op. cit.

[xxxix] (Shapiro 2012) cited in Mazzucato (2013 [2018]), p. 185.

[xl] John Battelle ‘The Birth of Google,’ Wired 8th January 2005, available at (accessed 11/07/2018)

[xli] See Joel Bakan (2004) ‘The Corporation. The Pathological Pursuit of Profit and Power,’ Chap. 2.