When should states be creative, innovative or entrepreneurial – and when should they not?

Blog by Geoff Mulgan: “…So what about governments being entrepreneurial as opposed to creative and innovative? Here things get even trickier. The classic commentary on the subject was written by the great Jane Jacobs (in her book ‘Systems of Survival’). She pointed out the differences between what she called the ‘guardian syndrome’ and the ‘trader syndrome’. The first is common in governments, the second in business. She argued that all societies have to find a balance between these very different views of the world. The first is concerned with looking after things and protection, originally of land, and can be found in governments, ecological movements as well as aristocracies. The second is concerned with exchange and profit, and is the world of commerce and trade.

These each see the world in very different ways. But in practice they complement each other – indeed their complementarity is what helps societies to function.

In her view, however, fusions of the two tended to be malign pathologies, for example when businesses became like governments, running large areas of territory, or when governments start thinking like traders. Donald Trump was a classic example – who saw the government machine rather as an entrepreneur would see his own business. Silvio Berlusconi was another – a remarkable proportion of his initiatives were essentially designed to promote his businesses, or protect him from prosecution.

Jane Jacobs’ points become very obvious in some industries, like the contemporary digital industries that have become de facto utilities on which we depend every day. It remains far from clear that companies like Meta or Google appreciate that they risk becoming pathological fusions of business and government, without the mindsets appropriate to their new-found power.

The pathologies are also very visible in many parts of the world where the state runs a lot of industry, often with the military playing a leading role. Examples include Pakistan, Myanmar, China and Russia. In these cases public servants really have become entrepreneurs. In some cases – like Huawei – great businesses have been grown. But most of the time such fusions of government and entrepreneurialism tend towards corruption, and predatory extraction of value, because when the state’s monopoly of coercion connects to the power to make money abuses are inevitable.

There may be occasional examples where states should be entrepreneurial at least in mindset – spinning off a function or using some of the ethos of a start-up, for example to create a new digital service. But in such cases very tight rules are vital to avoid abuse, so that if, for example, a part of the state is spun out it doesn’t do so with advantages or easy money or legally guaranteed monopolies or inflated salaries. Much depends on whether you use the word entrepreneurial in a precise sense (the first definition that comes up on Google is: ‘characterized by the taking of financial risks in the hope of profit’) or as a much looser synonym for being innovative or problem-solving…(More)”.