How Venture Capitalists Came to Rule the World
This was no utopian idea. After World War II, a number of European governments invested heavily in key sectors — electricity, steel — toclose the technology gap with the United States. Similarly, the South Korean government built up a shipbuilding industry in the 1970s from nothing into the largest and more successful in the world. To a certain extent, the Pentagon accomplished something similar with the Internet (though no American would dare call such a thing “socialism”).
Industrial policy has never really gone away. Many governments, including China and the United States, have focused funds on the clean energy sector (wind turbines, solar cells). But the prevailing economic orthodoxy since the creative destruction unleashed by Reaganomics has been that the invisible hand of the market, not the state, should determine winners and losers.
It turns out, however, that the market’s hand is very often not invisible at all. Actual people, with very visible hands, are picking the winners and losers in the marketplace. Consider the impact of venture capitalists.
Although they’re responsible for only 0.3 percent of U.S. GDP, the influence of these elite investors is disproportionate. Their decisions determine how you communicate, how you shop, how you organize your life. Venture capital has been instrumental in launching companies that today make up over 20 percent of America’s GDP.
