It\’s the usual Guardianista rant.
Banks don\’t lend to innovative companies therefore we don\’t get enough innovation. Thus government must step up and fund innovative companies doing innovation.
What\’s so cretinous about this logical chain is that it entirely ignores the environment which is being described. You know, that strange system of \”Anglo Saxon\” capitalism. As opposed to Continental, Rhineland, whatever you want to call it.
It\’s exactly the same mistake that Willy Hutton has been making for the last couple of decades.
In this Anglo Saxon system, whether it\’s a good one or a bad one, we don\’t look to commercial banks to fund innovation. We don\’t look to them to provide equity finance, nor anything like equity finance. We look to them to provide debt finance.
Sure, you can argue that they\’re not providing enough of that at present: but let\’s not forget the difference between cyclical swings and the structural shape of the financial economy.
In this Anglo Saxon system we look to markets to provide equity. Not banks. Anything and everything from a few friends chipping in on their credit cards through Crowdcube to AIM. This is where the equity portion of business investment comes from in this, our system.
Maybe it\’s a good system, maybe it\’s worse than that Rhineland system. But if you\’re going to talk about it the least you can do is point out that this is the system, not just complain that banks don\’t provide equity therefore the state must.
Just as an example, I raised equity at the beginning of this year. First round was quite simply to fund me wandering around the Erzgebirge while shouting \”Wo ist der scandium?\” to all and sundry. And to have someone check out a hillside in Madagascar, peer into an Austrian mountain of processing waste, mutter \”Gdiya scandie?\” to Czech geologists (err, that\’s Russian, I think, but a Slavic language at least) in the Krusny Hory.
We\’re currently prepping the spreadsheets for the second round of financing as we found some, know how we\’re going to get it out, where, with whom and who we\’re going to sell it to.
Now, that\’s a fairly risky adventure there. Something that really does require equity financing, not debt. But we found this money. In The City of course.
Raising funds for innovation is indeed possible in this Anglo Saxon* system it\’s just that we don\’t do it through banks.
* See, that\’s a funny. Because the Erzgebirge is in Saxony…umm, OK, it\’s not a funny.