Government–Not Business–Has Been the Source of Breakthrough Innovation

The New York Times obituary for Douglas C. Englebart, identified as the “Computer Visionary Who Invented the Mouse,” is fascinating reading, in part because Englebart, an Oregon farm boy, was in many ways the father of modern networked computing. Beginning in the early 1960s, he put together a team of engineers and computer scientists, funded by the federal government, that developed a prototype for most of the computer tools we all take for granted today. He unveiled them at a conference in San Francisco in December 1968, which “set the computing world on fire.” In the words of the Times obituary:

“Dr. Engelbart was developing a raft of revolutionary interactive computer technologies and chose the conference as the proper moment to unveil them.

For the event, he sat on stage in front of a mouse, a keyboard and other controls and projected the computer display onto a 22-foot-high video screen behind him. In little more than an hour, he showed how a networked, interactive computing system would allow information to be shared rapidly among collaborating scientists. He demonstrated how a mouse, which he invented just four years earlier, could be used to control a computer. He demonstrated text editing, video conferencing, hypertext and windowing.”

Englebart was a visionary, but his ground-breaking work was not supported by venture capital and his innovations were not the result of the private market or corporate enterprise. His innovations were not spurred by the prospects of incredible income and wealth, all lightly taxed. Rather, the work was funded and organized by a visionary bureaucracy in the U.S. government. As the Times describes it, “during the Vietnam War, he established an experimental research group at Stanford Research Institute (later renamed SRI and then SRI International). The unit, the Augmentation Research Center, known as ARC, had the financial backing of the Air Force, NASA and the Advanced Research Projects Agency, an arm of the Defense Department.”

Mariana Mazzucato, a professor of economics at the University of Sussex, has been making the point very effectively in lectures and a new book, The Entrepreneurial State, that the real innovation engine in the global economy is not business, nor the market, but the government. A recent story about Mazzucato in Forbes cites her view that long-term, patient capital–provided by government–is the absolute prerequisite for breakthrough innovation.

“Her case study for myth-debunking is the iPhone, that icon of American corporate innovation. Each of its core technologies–capacitive sensors, solid-state memory, the click wheel, GPS, internet, cellular communications, Siri, microchips, touchscreen—came from research efforts and funding support of the U.S. government and military.”

Mazzucato suggests that, given the extent to which tech companies like Apple and Intel owe their great good fortune to the federal government’s investment in R&D, they should share more of their profits with the taxpayers. Instead, of course, Apple has been offshoring profits to avoid taxation and most of the tech industry is contributing to the efforts of the U.S Chamber of Commerce and the rest of the organized business lobby to cut corporate taxes and shrink the government. As Mazzucato makes clear, cutting taxes and the government is no recipe for an innovative, competitive future—just the opposite.

  • Brian
  • Well, this sort of puts the kybash into Schumpeter’s argument that the process of Creative Destruction (real economic and technological change) requires that firms embrace anticompetitive tactics (buying up patents to not use them, price hikes, long-term customer contracts, etc)

  • A Kaleberg

    This isn’t new either. Governments have long been the major drivers of technology. It wasn’t the free market that developed fire or the bronze sword. The US government was pushing technology before it was a government. The Continental Congress paid for Eli Whitney to develop guns with interchangeable parts, and it was this research that restructured manufacturing in the 19th century. There’s a reason the Wright Brothers operated out of Dayton, Ohio. That was the army’s big procurement center.

    It’s high time government started getting the respect it deserves.

  • themberg

    Two comments about your last paragraph: 1) Apple isn’t offshoring profits; they’re not bringing foreign profits back to the US. 2) Apple, as well as Yahoo have quit the US Chamber of Commerce, and others, like Microsoft, have denounced it.

  • Anon
    • JPT1023

      Agreed; r&d is only a part of innovation that needs its private sector entrepreneur counterpart. Link is for an interesting blog post about this same topic. URL:

    • Warburton MacKinnon

      I think you,and the post you link to miss the point being made. That is that the actual technology,and driver of technilogical improvement tends to be governments,and not private idustries. They both play different roles of course and do things for different reasons,and of course often complement eachother. No matter how you slice the pie the growth of technology is the basis for the growth of consumer goods and a rising of the standard of living,in the post you linked it said that governments don’t do things for consumers,I disagree. If you consider a countries citizens a governments comsumers then when it works right it does almost everything it can for them,I wonder if it isn’t a little bit of semantics getting in the way to purposefully obfuscate the truth. On the other hand maybe you would prefer that the governments around the world kept their patents on all things,and any innovation would be done by government think tanks that would then produce and market their inventions,and all money would flow to the governments. On the bright side I am sure if we went this way there would be almost no need for taxes,and we’d all get free housing,healthcare,and utilities at least I would hope so,considering probably 75% of all populations would be government workers since most of the technology of the last say 250 years at least were based on research done with government money.

      • Anon

        The point I was making is that governments are not good at turning R&D into things that directly improve the lives of citizens.

        The technology that helped develop the internet was partially government funded. However, the things that make the internet useful to consumers (youtube, google, social networking, etc) are all from private entrepreneurs).

        Of course, they couldn’t have invented these things without the original, state funded research. However, it is not honest to say that the government would have capable of creating the same dynamic marketplace we see on the internet today.

        Making silly, dogmatic, and misleading statements like “most of the technology of the last say 250 years were based on research done with government money” does not help anyone.

        The lesson here is that the private sector is indeed much better at making useful things that improve lives than the government is. The government can be useful in basic R&D.

        I find it funny that people make these absurd claims about government being the main driver of innovation and then accuse the other side of being dogmatic and ill informed.

        Anyone who claims that the government has been the main source of consumer innovation is simply ill informed or dishonest.

  • Careful now, you’ll be blacklisted as a communist for these kinds of sentiments…