The history of financial bubbles and crashes – and of the banality yet necessity of the former and the inevitability of the latter – fits nicely with Schumpeter’s vision of economic development through waves of creative destruction. Speculation in the financial markets from time to time finances discontinuous innovation that transforms the market economy, redistributing monopoly profits while generating and liquidating transient financial gains. However, for a theorist–practitioner of entrepreneurial finance who has spent well over three decades performing on a stage constructed by government investment in innovation, the game so summarized is incomplete. Where is the state in this story?

From the First Industrial Revolution on, the state has served as an enabler – sometimes as the engine – of economic development, subsidizing if not directing the deployment of transformational technology and, more recently, taking responsibility for funding the advanced science and engineering from which economically significant innovation has come to be derived. Even in liberal nineteenth-century Britain, where the state played no role in planning or funding the build-out of the railways, acts of Parliament were required to reassign property rights from landowners to entrepreneurial “projectors,” and the state subsequently acted to promote cartels to limit the destructive competition that followed. Elsewhere – in the United States, across the continent of Europe and throughout Asia – the state has played a central role in sponsoring emergent market economies in an uncertain and competitive world. As Dietrich Rueschemeyer and Peter Evans wrote over twenty-five years ago in their contribution to the foundational collection of essays Bringing the State Back In: