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“At the heart” of capitalism, Iowa State University philosopher Tony Smith writes, “we find neither bold entrepreneurs, venture capitalists, nor established firms.”

Genuine path-breaking investment is risky, he explains. The “advances sought” may never come, and when they do, they may not be commercially viable. Profits may take decades, and initial investors may get much less than they’d like in return.

Accordingly, Smith writes, private capital tends to “systematically underinvest in long-term research and development. Despite popular perceptions that private entrepreneurs drive technological innovation, the leading regions of the global economy do not leave the most important stages of technological change to private investors. These costs are socialized.”

Smith continues at Jacobin:

In the quarter-century after World War II, the high profits garnered by American corporations due to their exceptional place in the world market allowed corporate labs to engage in “blue-skies research” projects. But even then, public funding accounted for roughly two-thirds of all research and development expenditures in the United States, creating the foundations for the high-tech sectors of today.

With the rise of competition from Japanese and European capital in the 1970s, private-sector funding of research and development increased. However, long-term projects were almost entirely abandoned in favor of product development and applied-research projects promising commercial advantages in the short-to-medium term.

Basic research continued to be funded by the government, like the work in molecular biology that supported the move of agribusiness companies into biotechnology. The same was true for projects of special interest to the Pentagon — the developments associated with the Defense Advanced Research Projects Agency, for instance, which paved the way for modern global positioning systems — and other government agencies.

But medium-to-long-term R&D in general was in great danger of falling into a “valley of death” between basic research and immediate development, with neither the government nor private capital providing significant funding for it.

Continue reading here.

— Posted by Alexander Reed Kelly.

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