Trump’s 2025 R&D Retreat Ignores Key Lessons from “The Entrepreneurial State”

Having just finished Mariana Mazzucato’s 2024 book The Entrepreneurial State, I was struck by how powerfully it illuminated the reality behind state-led innovation, starkly contrasting with the Trump administration’s current approach of scaling back government investment and hoping that corporate R&D can independently fill the gap. Mazzucato thoroughly dismantles the popular myth that breakthrough innovation is primarily the domain of private firms, carefully documenting the critical role governments have historically played in shaping transformative technologies and new markets.

Mazzucato argues persuasively that it is the state, not the private sector, that typically shoulders the significant risks of radical innovation. Private companies, focused heavily on quarterly earnings and immediate market demands, lack the incentive or appetite for long-term investments in uncertain technologies. The book provides numerous vivid examples — most notably, the creation of the internet. Early-stage technologies such as TCP/IP protocols were developed and financed through sustained funding by government agencies, notably DARPA, at a time when private firms saw no clear path to profit. Without that substantial early commitment of public funds, Silicon Valley, as we understand it today, simply wouldn’t exist.

Mazzucato’s critique of venture capitalism offers an essential corrective to overly simplistic narratives about entrepreneurial risk-taking. Contrary to popular mythology, venture capitalists typically enter the innovation cycle relatively late, once foundational, risky research funded by the public sector has already proven viable.

While venture capital firms are critical in scaling technologies, Mazzucato emphasizes they rarely fund truly uncertain, early-stage innovation, preferring safer bets with clearer paths to profitability. As she highlights, venture capital is often mischaracterized as the prime mover of innovation, overlooking the crucial role of government-funded research in bearing initial risks and laying technological foundations.

A compelling example Mazzucato discusses is the pharmaceutical industry, where public investments in basic scientific research lay the foundation for virtually every breakthrough medication. Take biotechnology. The foundational knowledge and initial technological advances, such as recombinant DNA techniques, came directly from government-funded laboratories and universities, with private firms stepping in only later to commercialize and scale these advances. Despite popular narratives of heroic entrepreneurs and visionary venture capitalists, it was consistent, high-risk government funding that first opened these markets. The industry often privatizes the profits while relying heavily on socialized risks.

The critique extends to energy technologies as well. Solar photovoltaic panels, wind turbines, and lithium-ion batteries all emerged from decades of patient, publicly funded R&D programs before becoming commercially viable. Companies like Tesla, which benefit enormously from advances in battery technologies, depend fundamentally on a platform of technologies originally supported by government funding. Elon Musk’s success, celebrated widely as a triumph of entrepreneurial capitalism, in fact rests on decades of prior, patient government investment in battery research and electric vehicle technology.

Mazzucato’s inclusion of fracking as an example further underscores the critical yet underappreciated role of government-backed innovation. While many regard the shale gas boom as a triumph of free-market entrepreneurship, the reality is markedly different. Early research and technological development in hydraulic fracturing and horizontal drilling were initially funded and nurtured through extensive federal support starting in 1974 after the OPEC oil crisis by Gerald Ford. Decades of governmental money for foundational, high-risk experiments paved the way for private companies to later capitalize on commercially viable shale extraction.

Contrasted against these historical lessons, the Trump administration’s 2025 policies represent a dangerous departure from a proven pathway to innovation. The administration has drastically cut funding to crucial science and technology agencies, including the NIH, NSF, and Department of Energy, while claiming that private enterprise alone can shoulder the innovation burden. This approach ignores the proven reality that transformative innovation, particularly early-stage research, rarely fits neatly into the quarterly financial goals of private firms. The administration’s ideological stance seems less about prudent budgeting and more about a deliberate withdrawal from a state role that history shows is crucial to innovation.

Without robust federal investments, the foundational research necessary for future transformative innovations is at risk. Companies, forced to rely solely on internal R&D budgets, typically prioritize incremental innovations rather than revolutionary breakthroughs. This incrementalism risks stagnation in vital sectors like biotechnology, renewable energy, semiconductors, and artificial intelligence.

Mazzucato emphasizes the importance of mission-oriented government investments. She highlights examples like the Apollo mission to land on the moon, where the U.S. government didn’t just correct market failures, it actively created entirely new markets through sustained, ambitious investments. A mission-driven approach catalyzes extensive cross-sectoral innovation, spurring breakthroughs that private actors later leverage.

The Apollo mission led to numerous technological breakthroughs, including advances in computing technology, miniaturization of electronics, thermal management systems, materials like flame-resistant textiles, and improved telecommunications systems. American businesses later capitalized on these publicly funded innovations, developing commercial products ranging from personal computers to advanced firefighting gear and satellite communication technologies.

Today, such a mission-driven approach could be critical to tackling global climate change or advancing quantum computing, yet Trump’s policy shotgun ignores ambitious public goals in favor of ideological purity and short-term budgetary cuts, along with tax cuts for the already rich and an increasingly bloated deficit and debt-balance.

On that point, Carmen Reinhart along with Kenneth Rogoff famously pointed to a “red line” at around 90 percent debt-to-GDP, asserting that once a nation’s debt surpasses that threshold, its economic growth tends to slow dramatically, roughly halving in pace. Currently, the United States carries a debt-to-GDP ratio of approximately 106 percent, well above that threshold. While crossing such a boundary doesn’t guarantee doom, history shows it often brings sustained drag on growth, underscoring the urgency of aligning innovation and economic policies with fiscal realities.

Trump’s approach also fosters a corrosive skepticism toward science, damaging the trust between researchers, institutions, and government agencies. This breakdown in trust and coherence is detrimental. Historically, when political ideology has overpowered evidence-based policy, such as during periods of anti-science sentiment like China’s Cultural Revolution, the Soviet Union’s Lysenkoism or Hitler’s purges of Jewish scientists, it has undermined innovation capacity. Mazzucato warns against ideological narratives that diminish the legitimacy of public sector involvement in innovation, pointing to damaging outcomes when countries fail to recognize the reality of state-supported breakthroughs.

The ongoing assault on climate science and public health research funding in the U.S. risks setting back American innovation precisely at the moment when global competitors, China and European nations, are aggressively ramping up their own state-supported R&D. The loss of momentum will mean the U.S. falling behind in crucial industries, forfeiting leadership to countries that embrace rather than fear the entrepreneurial state model.

Historical parallels drawn from periods like the Cold War and post-Sputnik era provide further evidence supporting Mazzucato’s thesis. After the Soviet launch of Sputnik in 1957, the United States rapidly invested in science and technology education and research, massively expanding funding through the National Defense Education Act, fostering innovations that led to dominance in computing, telecommunications, and aerospace. Trump’s current path runs counter to this historical lesson, undermining the very governmental mechanisms that built America’s technological advantage.

The administration’s reliance on private-sector myth-making, assuming firms can and will independently fund transformative R&D, is not only historically inaccurate but practically flawed. Corporations have a critical role, but they historically rely on the state’s ability to absorb early-stage risks before they step in to commercialize viable technologies. By cutting back federal funding and expecting private enterprise to spontaneously fill this void, Trump’s administration fundamentally misunderstands how innovation ecosystems operate.

A more prudent approach, consistent with the lessons in Mazzucato’s book, would involve restoring robust federal investment, reasserting scientific autonomy in research, and rebuilding productive partnerships between public institutions and private firms. Public investment should set clear, ambitious missions such as rapid decarbonization or breakthroughs in healthcare around which private-sector innovators can align. This synergy, historically proven effective, is precisely the kind of public-private symbiosis Mazzucato champions as essential for a vibrant, innovative economy.

Reading Mazzucato’s book underscores a profound reality check: innovation thrives when the state boldly invests in foundational research and ambitious technological missions. Trump’s 2025 strategy, betting heavily on the myth of private-sector-led breakthroughs without substantial public backing, seems destined to undermine rather than empower America’s future economic strength and innovative capacity. The entrepreneurial state is not an ideological preference, it’s a historically validated, evidence-based reality that the administration is ignoring to the country’s long term detriment. Thankfully Europe and China are stepping up so the world won’t lose out.