North American pointers for John McDonnell’s growth strategy

North American pointers for John McDonnell’s growth strategy


Don Brind on Friday

The biopic of Steve Jobs had its premiere of at the London Film Festival last weekend. Just days before, the company he founded was in the dock in a New York court – and lost.

The jury found that Apple had infringed patents held by the University of Wisconsin by using technology developed by University researchers in their I phones and IPods. The university is claiming $400 million in damages which would be a record patent award to a university.

I was alerted to the case by a tweet from Professor Mariana Mazzucato author of the ground-breaking “The Entrepreneurial State” which shows how the success of Apple and other stars of Silicon Valley was based on innovations developed in the public sector.

I was in the Commons the following day and there in one of the coffee shops was the striking figure of Professor Mazzucato in a huddle with John McDonnell and his shadow Treasury team. She is a member of the economic advisory committee McDonnell announced in his speech at the Labour conference in Brighton and her ideas are likely to form a key part of McDonnell’s strategy for dealing with the deficit through economic growth.

Mazzucato’s argument can be summed up as “Do what the Americans do — not what they say they do.”

The Apple court case was grist to her mill. Her book explores how US federal government cash was used by universities and research institutes to develop technologies which are the foundation for the success of Apple products. She argues that the state can and should be an Entrepreneur developing technologies and shaping markets.

Another of her tweets takes us to the website of the American Energy Innovation Council and a clip of Microsoft’s Bill Gates  calling for basic research – paid for by governments – as the best way of getting a clean energy breakthrough. Mazzucato is out to bust the myth that innovation can be left to the private sector.

It’s part of a broader argument about the role of government in promoting growth. By contrast to Osborne and the Tories the Obama administration’s American Recovery and Reinvestment Act of 2009 (ARRA) which provided a near $800 billion stimulus package – equal to about 4% of America’s GDP. The story of how it was done is recounted in Michael Grunwald’s The New New Deal: The Hidden Story of Change in the Obama Era.

The Obama programme was consciously modeled on the public works projects undertaken by President Franklin D Roosevelt. And a new biography of Republican presidential hopeful Donald Trump shows that the fortune he inherited from his father came massively from public contracts. Deborah Friedell’s book Never Enough: Donald Trump and the Pursuit of Success reviewed in the London Review of Books suggests Trump may not be quite the brilliant business man he presents himself as. His estimated fortune is around $3-4 billion dollars. “The National Journal has worked out that if Trump had just put his father’s money in a mutual fund that tracked the S&P 500 and spent his career finger-painting, he’d have $8 billion.”

On the other side of the 49th parallel Canadians have elected a Prime Minister who argues for the kind of public investment which is at the heart of John McDonnell’s anti austerity drive.

“Every dollar we spend on public infrastructure grows our economy, creates jobs, and strengthens our cities and towns,” said new Prime Minister Justin Trudeau.

He routed the Tories despite the best efforts of Lynton Crosby which was the subject of my last post. One of my “good guys” won but I was disappointed with the outcome for the NDP.

I was disappointed too with John McDonnell’s clumsy U-turn over Gimmicky George Osborne’s fiscal charter. I had high hopes for the shadow chancellor based on his assured appearance on BBC Question Time, his conference speech and the quality of his team. As I said in a previous post he is the key figure in the Corbyn team.

The veteran commentator William Keegan took a charitable view (certainly more charitable than some Labour backbenchers)  McDonnell, said Keegan, “fell into Osborne’s trap. But the shadow chancellor is plainly aware of Denis Healey’s dictum: “When you are in a hole, don’t dig deeper.” Keegan’s point being is that it was his original support for the charter that was wrong not the decision to vote against it.
Looking back at the records of Tory Chancellors Anthony Barber, Geoffrey Howe and Nigel Lawson Keegan says the “argument that the Conservatives have always been the party of economic and fiscal responsibility takes some swallowing ….. And now its obsession with balancing the budget – indeed, aiming for a surplus on both current and capital accounts – promises to make the austerity we have experienced so far look like a vicarage tea party. “
“The damage about to be wreaked by the reductions in tax credits may well prove to be Osborne’s poll tax moment. There is much for an opposition that gets its act together to oppose.

“These are early days to be writing off Mr McDonnell,” says Keegan. I agree.

Donald Brind

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