Johnson has taken the wrong economic lesson from the Covid crisis

The writer is professor at University College London and author of ‘The Entrepreneurial State’

Boris Johnson attempted to look beyond the Covid-19 pandemic at the Conservative party conference this week by warning against drawing “the wrong economic conclusion from this crisis”. For “those on the left, who think everything can be funded by uncle sugar the taxpayer”, the UK prime minister said, “there comes a moment when the state must stand back and let the private sector get on with it”.

This crude characterisation of how innovations come about has worrying implications. It is the wrong economic vision for the post-pandemic recovery the UK desperately needs; the same vision that led to our unpreparedness in the first place. This is not about left versus right, or public versus private. It is about working together to shape a symbiotic innovation system fit to solve the greatest challenges of our times. 

Mr Johnson’s claim also reveals a poor understanding of the history of innovation. Contrary to his view that “it isn’t the state that produces the new drugs and therapies”, governments have funded some of the highest-risk research and development, leading to the most important innovations, including in biopharmaceuticals. The US National Institutes of Health spends more than $40bn a year in health innovation and contributed more than $200bn to research on innovative drugs approved from 2010-2019. 

Optimism about the private sector’s “rational interest” in competition, market share and sales as a driver for innovation is misplaced. The private sector has in fact been slow to respond to medical needs that are vital to public health but financially unattractive, such as new infectious diseases and antibiotics.

In contrast, the pivotal role of the state has been accentuated in the pandemic. Governments and supranational organisations have provided close to $6bn of investment in the R&D and manufacturing of therapeutics, vaccines and diagnostics for Covid-19. At $1.2bn, the UK’s contribution is among the largest. The NIH’s investment in R&D for coronaviruses between 2002, when Sars first emerged, and 2020 led to promising drug candidates including Remdesivir, which was recently prescribed for US President Donald Trump. 

The private sector has a critical role to play, but in partnership with public sector efforts. Mr Johnson is right about one thing: the state does not “hold the intellectual property of the vaccine”, even though vaccines are indebted to huge public investment. The state should be proactive in guiding innovation in the public interest. This means ensuring drugs are available at fair prices that reflect public contribution and intellectual property rights are not so broad and strong that they stifle innovation.

Latest coronavirus news

Follow FT’s live coverage and analysis of the global pandemic and the rapidly evolving economic crisis here.

It also means attaching conditions to public investment, for example preventing big pharma companies using so much of their resources for share buybacks. The 18 listed on the S&P 500 from 2009 to 2018 have spent $335bn on buybacks and $287bn on dividends in that time. Combined, their R&D spend was $544bn over the same period.

If Mr Johnson wants to beat the pandemic and unleash innovation, he must first overcome his biases and acknowledge the critical role the state can play to build back better. The UK’s contribution to the World Health Organization’s Covax programme is a strong start to delivering a “people’s vaccine”. But it can go further: by pursuing ownership of patents resulting from publicly funded research by changing its mind and supporting the WHO Covid-19 technology access pool. 

Given his own policy agenda to boost the UK’s R&D system through public sector investment, the prime minister should be better aware of the role of the state in innovation. The stakes could not be higher and there is very little margin for error.

Henry Lishi Li at the Institute for Innovation and Public Purpose contributed

This article has been amended since publication to correct a reference to the NIH

Source Article