Solyndra VC backers, who had invested US$1.1 billion in the company, were the
first to jump ship. Even though all of Solyndra’s (public and private) stakeholders
were betting on the company’s success – not failure – for the critics, the company
has become the most recent symbol of government’s inability to invest competently
in risky technology and to ‘pick winners’.
Yet nearly the same amount of money that was lent to Solyndra was lent to
another company: Tesla Motors. Tesla received a US$465 million guaranteed loan
for its S car. Unlike the Solyndra investment, this one fared very well and Elon
Musk, its founder, is today treated as the new hero of Silicon Valley. As is the case
with all innovations, for every success there are many more failures. The problem
is that by not admitting that the State provided the high-risk investment and that
it is subject to the same high failure rates as private venture capital, innovation
policy ends up socializing only the risks and not the rewards (Mazzucato, 2013b;
Lazonick and Mazzucato, 2013). Instead of worrying about picking winners or
losers the real question should be why the ‘entrepreneurial state’ does not insist
that a small per cent of Tesla’s profit comes back to the state coffers that provided
the high-risk finance so that the Solyndra loss could be shouldered not only by
the taxpayers but the entire innovation ‘ecosystem’ that benefits from such public
risk taking.
The role of an active private sector
There is nothing ‘accidental’ about clean technology development or the formation
of markets for renewable energy. Rather, clean technology firms are leveraging
technologies and cashing in on the prior investments of an active public sector,
and responding to clear market signals proclaimed by progressive government
policies about the desired change and to the availability of support for clean
technology industrial growth. The hope is that innovation will produce economic
wealth, employment opportunities, as well as a solution for climate change.
While the performance of countries has varied tremendously over the decades,
it is obvious that Germany has provided a glimpse of the value of long-term support,
China has demonstrated that a rapid scale-up of manufacturing and deployment is
possible and the United States has shown the value of R&D, but also the folly of
permitting uncertainty, shifting political priorities and speculative finance to set
the clean technology development agenda. Governments leading the charge into
clean technology do not have to allow themselves to be cheated when investments
go sour. Nor should they expect that taxpayers will happily bear the full risks of
investing in these technologies and establishing markets without a clear future reward
to be gained.
The challenge is to create, maintain and fund a long-term policy framework
which sustains momentum in the clean energy sector that has built up over the
last decade. Without such long-term commitments, it is likely that clean technology
will become a missed opportunity for many nations. Such a framework would
include demand-side policies to promote increased consumption of solar and wind
148 Mariana Mazzucato
first to jump ship. Even though all of Solyndra’s (public and private) stakeholders
were betting on the company’s success – not failure – for the critics, the company
has become the most recent symbol of government’s inability to invest competently
in risky technology and to ‘pick winners’.
Yet nearly the same amount of money that was lent to Solyndra was lent to
another company: Tesla Motors. Tesla received a US$465 million guaranteed loan
for its S car. Unlike the Solyndra investment, this one fared very well and Elon
Musk, its founder, is today treated as the new hero of Silicon Valley. As is the case
with all innovations, for every success there are many more failures. The problem
is that by not admitting that the State provided the high-risk investment and that
it is subject to the same high failure rates as private venture capital, innovation
policy ends up socializing only the risks and not the rewards (Mazzucato, 2013b;
Lazonick and Mazzucato, 2013). Instead of worrying about picking winners or
losers the real question should be why the ‘entrepreneurial state’ does not insist
that a small per cent of Tesla’s profit comes back to the state coffers that provided
the high-risk finance so that the Solyndra loss could be shouldered not only by
the taxpayers but the entire innovation ‘ecosystem’ that benefits from such public
risk taking.
The role of an active private sector
There is nothing ‘accidental’ about clean technology development or the formation
of markets for renewable energy. Rather, clean technology firms are leveraging
technologies and cashing in on the prior investments of an active public sector,
and responding to clear market signals proclaimed by progressive government
policies about the desired change and to the availability of support for clean
technology industrial growth. The hope is that innovation will produce economic
wealth, employment opportunities, as well as a solution for climate change.
While the performance of countries has varied tremendously over the decades,
it is obvious that Germany has provided a glimpse of the value of long-term support,
China has demonstrated that a rapid scale-up of manufacturing and deployment is
possible and the United States has shown the value of R&D, but also the folly of
permitting uncertainty, shifting political priorities and speculative finance to set
the clean technology development agenda. Governments leading the charge into
clean technology do not have to allow themselves to be cheated when investments
go sour. Nor should they expect that taxpayers will happily bear the full risks of
investing in these technologies and establishing markets without a clear future reward
to be gained.
The challenge is to create, maintain and fund a long-term policy framework
which sustains momentum in the clean energy sector that has built up over the
last decade. Without such long-term commitments, it is likely that clean technology
will become a missed opportunity for many nations. Such a framework would
include demand-side policies to promote increased consumption of solar and wind
148 Mariana Mazzucato