Venture capitalists might be expected to take risks; but should they gamble with taxpayer’s funds at the expense of public good research, asks CSIRO Fellow and Former Staff Association member Dr Nick Abel.
DEBATES ABOUT CSIRO’s future in the Senate and media raise the question ‘what is CSIRO for?’
The answer seems clear: it’s research should enhance the public good because the organisation is publicly funded, but CSIRO’s Corporate Strategy takes a different view.
Public goods are benefits that are readily accessible by citizens because their use is not rationed by private ownership. Public health, education, knowledge and infrastructure, the rule of law, peace, security and a sustainable environment are examples.
Markets supply private goods to society efficiently if revenue can be channelled from paying consumers to those who produce the goods, and harm is not done to others, including future generations. They do not work for the many goods for which the injustice, cost or impossibility of imposing payments or limiting access means there is insufficient incentive to pay for or produce them.
Left only to the market, public goods would not be produced, hence CSIRO.
CSIRO’s past public good research has contributed to the foundations on which Australia’s whole market economy depends – clean air and water, liveable cities, productive and conserved landscapes, and above all, scientific knowledge.
When market growth precedes investments in public goods – China comes to mind – a society has to pay to repair past public harm caused by the market economy before it can enjoy the benefits from public goods. If Australia was now suffering environmental and health problems of the same magnitude as China’s, a CSIRO would have to be created. Only a publicly funded but independent organisation like this would be able to muster the objectivity, disinterest, public trust and breadth of disciplines necessary to address these widespread and inter-connected public harms.
As we face a future in which climate change, sea level rise, new diseases and mass migration are among the threats to our public goods, CSIRO is already able to continue and extend its work to build Australia’s resilience in anticipation of these shocks.
Surprisingly, CSIRO’s 2020 Corporate Strategy and its 2015 -16 Plan intend to shift taxpayers’ money out of public good research that does not bring dollars directly to CSIRO, into multiple small and risky hi-tech ventures which if successful, will ‘spin-off’ into profitable businesses. The Productivity Commission advocated in 2007 that to achieve economic efficiency, publicly funded R&D should not misuse the advantage of taxpayer funding to crowd potential new businesses out of markets, but should rather focus on public good research that would not otherwise be done. CSIRO’s 2015-16 corporate strategy has a high chance of doing this, even as it leaves major gaps in public good research.
The problems inherent in CSIRO’s strategy are compounded by the pursuit of profitability by a public research organisation. Value can exist where profit does not. The attributes of marketed goods and services that confer profitability do not necessarily make them more valuable than public goods enjoyed outside the market. Many of the latter are orders of magnitude more valuable than the marketed kind because of their role in supporting lives, societies and economies – ecosystems that purify pollutants, provide water, food, fibre, oxygen, habitats, amenity and stabilise climates.
Our Murray Darling Basin, for example, grows some 40% of Australia’s marketed agricultural production, but this relies on the ecological functioning of its catchments. It is also home to around two million people who depend on those catchments, along with the Basin’s Indigenous values, treasured native ecosystems and substantial tourism and recreation sectors. CSIRO has a past and should have a continuing role in helping maintain those fundamental life-support functions of the Basin, the Great Barrier Reef and our climate.
Individuals and businesses know the value of public goods and seek to divert some to themselves. But international experiences show that stewardship of public goods cannot be left to market forces. The outsourcing of the US public health system has left Americans with an ineffective, costly and fraudulent system. The dismantling of the US Environmental Protection Agency that began under the Reagan administration led to scandalous environmental abuses by businesses. CSIRO and others have already shown how Australia could and should lead the world in environmental stewardship, but instead its Corporate Strategy and Plan show an intention to follow the USA down a costly, discredited and potentially irreversible path to privatisation of public goods.
The CSIRO Strategy focuses strongly on ‘businesses and customers’ but this contradicts the Australian National Outlook document produced by CSIRO researchers which states that “Decisions we make as a society matter – and will shape Australia’s future more than decisions we make as businesses or individuals.”
CSIRO is dis-investing taxpayers’ money from stewardship of public goods, where it already yields enormous value, and instead placing bets on startup companies. Kusiak wrote:
“Innovation is a central plank of national and local policies and it consumes billions of dollars of investment worldwide. Yet the evidence base for these innovation efforts is close to nothing. We simply do not know how the innovation happens. We should do more to find out.” And “In commercial terms — comparing investment to output — the innovation process might have a failure rate of 99%.”
Venture capitalists are expected to take risks, but should use their own money, not taxpayers’, especially when the gambling money is taken out of public good research.
CSIRO’s strategy is akin to mortgaging parts of our land, inland waters, oceans and climate to fund visits to the casino.
Dr Nick Abel is a CSIRO Fellow and former Staff Association member.