HENRY WISSINK
In an article published on June 24, I explored the role and potential impact of the “visible hand” in promoting good governance within the South African economy.
To reiterate, this concept involves the government adopting a more proactive role in shaping the socio-economic future of South Africa. This would be achieved through leading, devising, and implementing innovative and entrepreneurial strategies that can significantly address the country's pressing challenges.
Considering the paradigm shifts we are experiencing that challenges governments in the digitised, post-industrial, and globalised world (a meta-modern world), we also have to observe requirements to ensure sectoral collaboration, commonly known as the “quadruple helix” approach, that allows for a dynamic space where government, business, academia (entrepreneurial universities), and our environment (natural and complex socio-economic-cultural environments) are all engaged and purposely bound in.
In line with this “visible hand” philosophy, the author who recently captured my attention in this space is Mariana Mazzucato. In this globally renowned textbook, The Entrepreneurial State, Mazzucato debunks the long-held myths of the role distinction and division between the public and private sector – seen as distinctively different by 20th century scholars who mainly contrasted public versus private management and argues that they are fundamentally alike in all unimportant functions and purposes.
This approach left states with distinctive chasms between government purposes and services, and private enterprise, and a “never the twain shall meet” attitude, often leaving the market and economy to the works of an “invisible hand” mechanism.
The key point is that in the meta-modern world, all the critical sectors of society must collaborate closely as partners in economic development and growth, focusing on a unified purpose.
Mazzucato’s position is clear: “Debunking myths is never easy. Swimming against the tide requires determination, a serious commitment to the truth, and massive evidence...” She successfully challenges the widespread belief that the state cannot pick winners, and that it is clumsy, bureaucratic, and incapable of entrepreneurial risk-taking.
In other words, the modern-day state cannot merely act as a Keynesian style intervenor in the macro-economy, a “market fixer”, a “passive financer of research and development” projects, or an economic kick-starter during recessions and depressions by raising interest rates, and flushing state funds into public works projects.
We must consider the state as an entrepreneur, risk taker and market creator, akin to the US state initiatives that led to the development of the internet and ground-breaking pharmaceuticals such as the recent Covid-19 vaccines driven by courageous, risk-taking governments.
These ideas are not novel, and can be traced to Joseph Schumpeter (1883-1950), an Austrian economist, economic historian, and prolific author renowned as one of the foremost intellectuals of the 20th century. He gained prominence for his theories on business cycles and the evolution of capitalist economies, notably introducing the pivotal concept of entrepreneurship.
Schumpeter posited that entrepreneurs were central to capitalism, serving as catalysts of innovation, which he identified as the dynamic force propelling capitalist economies forward. His seminal work, Capitalism, Socialism, and Democracy (1942) further solidified his legacy, particularly through his theory of creative destruction.
Additionally, Schumpeter made significant contributions to economic methodology, notably popularising methodological individualism in both German and English economic discourse. Schumpeter presented a fresh perspective on economic growth that diverged sharply from the prevailing economic doctrines of his time.
Contrary to the belief that markets naturally move towards equilibrium until competition erodes profit margins, Schumpeter contended that economic advancement is marked by disruptive, sudden, and occasionally turbulent changes.
Unlike John Keynes, who saw the state as an influencer in creating economic growth and employment, and not a private enterprise, Schumpeter viewed capitalism as a continual revolution that disrupts or destroys the existing social and economic structures and the economic importance of entrepreneurship to the world, emphasising that these individuals wield significant influence over the economy by driving innovation and technological advancement.
Hence, Mazzucato’s ideas are aligned with key Schumpeterian concepts. In the public sector, such innovation can lead to the transformation of government services, policies, and regulatory frameworks, making them more responsive and effective.
The “entrepreneurial role of the state” in fostering innovation requires governments to actively promote innovation through investments in research and development, education, infrastructure, and supportive policies.
This involves governments taking proactive steps to drive technological advancements and address societal challenges, such as the example used in my previous article – the Durban Aerotropolis – creating large-scale urban developments and smart maritime-port and airport cities that will attract industry, grow tourism, provide employment, and conducive infrastructure and living conditions close to new employment opportunities.
Even though it is laudable to introduce “needs-based” developments such as the recent Norwegian-based Scatec ASA 540 MW Kenhardt hybrid solar and battery facility in the Northern Cape, it is critical that we must implore local shareholders and facilitators of such opportunities to support learning and research to advance our own technologies and capacity to produce local innovators and engage the many unemployed university graduates in such catalytic projects.
Partnering with global innovators to reproduce and assist in our own development should be the main modus operandi in our entrepreneurial state. Learning and transferring such skills and technologies between entrepreneurial universities that are focused on becoming dynamic partners in global innovations and development will be critical.
The Aerotropolis Institute Africa at UKZN and the Global Initiative at Delft University of Technology in the Netherlands are currently exploring transferring such learning, innovations and relevant entrepreneurial incubators to Durban – hoping for a Yebo!KZN innovation.
In summary, a strong “visible hand” public sector driven but “all-sector” engaged local innovation efforts to align with Schumpeter and Mazzucato’s ideas by recognising the transformative power of local innovation and entrepreneurship in driving economic growth, improving public services, and addressing societal challenges. It underscores the proactive role of governments in driving innovation ecosystems that spur technological progress and ultimately enhancing general societal well-being.
Professor Henry Wissink is an emeritus professor of public governance at the UKZN and the research and postgraduate coordinator at the Aerotropolis Institute Africa.
He is also the co-editor and author of the 2024 edition of a widely used postgraduate textbook, Improving Public Policy for Sustainable Development Impact in the Digital Era. He writes in his personal capacity.
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