“We have socialised the risk of innovation but privatised the rewards”

Feel free to read the article, which ha ssome interesting points, but it was the title which really caught my eye:

"socilaised the risk but privatized the rewards."

This sounds, to me, exactly the path that Canada has taken under "the Harper Government." By having NRC provide an "innovation help desk" to industry, the Canadian taxpayers pay for the risky (i.e. most likely to fail) part of business innovation, but isolates the taxpayers from the rewards (i.e. profits).

When Google received funding for its algorithm from the National Science Foundation (NSF), is it right that after it earned billions nothing went back to the NSF (which is today starved of funds), or that some of Apple’s profits go into a national innovation fund to fund the next wave of Apples?

This offends me in at least two ways. The first is that this directly contradicts what I would view as "pure capitalism," where the party that takes the risks reaps the rewards, just as they would reap the cost of failure. In this way the risk/reward calculation is skewed away from taking risks because industry will not feel that it is no longer their role. To my mind this will reduce the actual amount of internal R&D done by industry.

The second way that this "privatization of rewards" offends me is that the risk/reward relationship is broken, in that the party that incurs the most risk (in this case, the taxpayer) does not incur the reward - industry does. Now, some will argue that the taxpayer gets their reward in the form of taxes. I will not argue against that at the moment (but ask yourself how much tax the biggest industries actually pay) but I would argue that the taxpayer should get a portion of the proficts above and beyond the taxes. Once again, it is the taxpayer that is paying the risk portion - you and I should see the rewards (which ideally would come in the form of better services and lower taxes).

So ask yourself, would a truly "conservative" government really socialize the risks and privatize the rewards? Or would it want to step back from direct intervention in the innovation process and let the chips fall where they may?


(as an aside, think about other areas where reward is privatized but risk is socialized. What jumps immediately to mind is natural resource extraction and environmental remediation. Who pays for the cleanup? Oh sure, industry might pay a bit, but not the full amount. Think Exxon Valdeze, the Gulf of Mexico oil spill, and - eventually - the oil sands. Then think about whether this is fair to you and me and our pocketbooks.)