Increasing geopolitical tensions from the end of the 2010s gave rise to a technological Cold War. In all likelihood, whichever world order—liberalism or authoritarianism—achieves technological supremacy will be able to fend off its challenger. This chapter aims to understand which world order is better suited for driving and maintaining innovation. To do so, we take historical factors that have shaped past waves of innovation and review these alongside data from the Atlantic Council’s Freedom and Prosperity Indexes. This chapter finds that, even though the liberal order seems better positioned to foster technological innovation, there are ways in which authoritarian regimes can elbow their way into innovation.
Introduction
As different worldviews have become increasingly wary of each other, the basic geopolitical fabric of the last few decades has been remade. Throughout the 2000s, the Western worldview appeared to run out of steam, particularly after the 2007 and 2008 financial crises ravaged the welfare of citizens in the West. Increasingly, Western leadership fell out of touch with everyday citizens by burdening them with failed policies aimed at generating economic prosperity. And citizens seemed to regard their leaders as hypocritical elites that did not care for the general welfare of the population. Meanwhile, nationalistic movements, such as the Brexit campaign and referendum in the United Kingdom and the Make America Great Again movement, seemed appealing to voters in the Western world—even if, or precisely because, these movements appeared to break with the status quo.
As events in the Western world appeared to be dismembering the liberal order, authoritarian leaders seemed encouraged and determined to out-compete the West. Vladimir Putin, for example, moved to break the “rules-based world order” by invading Georgia in 2008 and annexing Crimea in 2014. In China, Xi Jinping broke with his country’s political norms by extending his period as prem-ier, accelerating the “integration” of Hong Kong, and increasing the threat of annexation of the territory of Taiwan. Even the COVID-19 pandemic, in the beginning, appeared to be making the case for authoritarian regimes, as President Xi seemed to have controlled the spread by implementing a draconian “zero-COVID” policy; and both Russia and China seemed to be able to produce vaccines within the first months of the pandemic and mandate inoculation of their populations, bypassing the bureaucracy that appeared to stifle the West.
Even if, in retrospect, both China’s COVID pandemic blunders and failed imperialistic exercises like Putin’s invasion of Ukraine have removed some of the bravado from authoritarian leaders, it is still unclear how the events of 1990–2020 will remake the geopolitical fabric. What appears increasingly clear is that scientific and technological tools, such as the ones used to create a vaccine in record time or monitor public compliance with draconian measures like “zero COVID,” will become extremely important in shaping the new geopolitical order.
Emerging technologies, such as online social media and its “rabbit hole” of recommendation algorithms, allowed anti-liberal movements to occur. For example, machine learning and artificial intelligence technologies allow the Communist Party in China to keep track of its citizens and enable the diffusion of misinformation and propaganda. Moreover, this technological revolution powered the development of know-how to harness existing chipsets, new chip architectures, and investment into new technologies like artificial intelligence and machine learning. Thus, a “new arms race” between world superpowers has emerged as theoretical research has shown these new technologies—like quantum computing—could upend our current encryption technologies and supercharge machine learning development.
However, it is precisely the development of these technologies that is enabling the discovery of new, lifesaving drugs, improving the efficiency all sorts of manufacturing techniques, and allowing more people access to all kinds of information; they will also allow humanity to simulate and explore the farthest reaches of space and look into unimaginable places like black holes. Furthermore, emerging challenges, such as the climate crisis or the new space race, have allowed technologies such as nuclear fusion and reusable rockets to emerge. But, once again, the question will be whether countries use these innovations to bolster prosperity or curtail freedom; this will be the choice that remakes the geopolitical fabric of the days to come. In short, technology and the way it is used will tilt the balance of power in this new era.
Because of its importance in shaping the new world order, the question “Which order—liberalism or authoritarianism—is better prepared to foster technological innovation?” deserves some consideration. Below, we compare factors that social scientists deem relevant to innovation. By reviewing these factors through a historical lens, this chapter aims to help readers form an opinion of which worldview is better positioned to foster innovation. In addition, this chapter informs policy recommendations by taking a data-driven view of the positions of the different orders, and outlining factors that might help technological innovation.
To be clear, this author does not believe there is a clear path to technological innovation. Because the liberal order of the nineties itself aimed at spreading freedom and democracy through the free market and flow of information, much of the world we still live in now is connected; a large portion of the products we use in the West are manufactured in China, with processes developed in the West, coupled with locally grown know-how. As much as talks of “decoupling” and “reshoring” are happening now, disentangling manufacturing, value chains, and knowledge networks created during the “golden age of liberalism” will be difficult, if not impossible. Because the information has flowed freely during the last decades (at least from West to East), it is nearly impossible to know which world order will harness this information in the best possible way. But the exercise within this chapter aims to understand which is the most fertile ground for innovation in an era of decoupling.
Determinants of invention and innovation
Innovation is social by its very nature. Social factors are the ones that will ultimately determine which societies nurture or discourage innovation. As Joel Mokyr puts it, summarizing Joseph Schumpeter’s argument: “The enemies of technological progress were not the lack of useful new ideas but social forces that for one reason or another tried to preserve the status quo.”1Joel Mokyr, The Lever of Riches: Technological Creativity and Economic Progress (Oxford: Oxford University Press, 1990).
Conditions conducive to invention and innovation can be broken into the individual component and, for lack of a better term, the environmental component. However, the individual part is probably the most difficult to quantify, as doing so requires measuring the ingenuity required for invention. As such, this chapter will turn its attention away from this component.
On the other hand, even if not entirely quantifiable, environ-mental features can be assessed to a certain degree. To further our analysis, we will divide such environmental issues into two elements: one related to aspects of societies that may affect the individual or their behavior, and a second related to the “structure” of the society in which he or she lives. The former includes values, willingness to accept risk, attitudes toward science, and resistance to innovation. The latter involves demographics, labor costs, politics and the state, and path dependency.
Factors related to innovation
Demographics. Adam Smith, in The Wealth of Nations, observed that the demographics of a specific population were essential determinants of technological innovation.2Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776. Smith’s concept of innovation referred to the generation of know-how in production. Smith argued that the larger the population, the more specialization in labor; and the more specialized the labor force, the more know-how the workforce would develop. In sum, Smith argued that large populations tend to be more innovative.
Labor. Another factor—closely related, yet contrary to Smith’s demographic argument—is the size of the labor force. It can be said that the larger the labor force, the cheaper this factor of production (labor) will be. Because this production factor is cheap, there will be fewer incentives to complement or substitute work with technology. In this manner, the argument contradicts Smith: the larger the population, the less innovative it will be.
Risk. The argument related to risk also has different shades. First, societies more averse to risk can develop innovation through constant, incremental steps. However, societies more prone to taking considerable risks could reap the rewards of larger innovation bets, possibly resulting in paradigm-shifting innovations. As such, Mokyr argues that it is precisely societies that are less averse to riskier, long-term projects that are more conducive to innovation.3Mokyr, The Lever of Riches.
Science and technology. Closely related to risks are attitudes towards science and technology. Societies like Germany and France have a long-established tradition of producing theoretical research.4Mokyr, The Lever of Riches. Such practices might be more conducive to incremental innovations. On the other hand, societies like the United Kingdom and United States, although they have now developed and become established in their theoretical research capabilities, have been better positioned to create innovations through engin-eering: a more hands-on approach to innovation. Such a modus operandi might allow these societies to innovate by “thinking out of the box.”
Values. Attitudes toward risk and science and technology are part of a multidimensional set of values, which might also include “aspirations.” Graduates from Western universities might aspire to work in the tech sector, for example. Another critical value is the appreciation of diversity. For example, Mokyr argues that more inclusive, diverse societies have historically tended to incorporate and improve upon innovations coming from outside, thus providing a potential boost to innovation.5Mokyr, The Lever of Riches. The corollary is that more inward-looking communities tend to overlook innovations from outside, potentially curtailing their potential applicability.
Even if not exhaustive, this list of behavioral factors allows us to, if not understand, at least sketch a society’s attitudes toward innovation. Behavioral factors and individual ingenuity shape a society’s attitudes toward innovation. However, this is only one part of the picture. A society’s structural factors, those affecting an individual’s system of incentives, make for the other part.
Institutions and property rights. The mechanism through which property rights incentivize innovation is simple. By protecting property rights, the innovator can exploit the rights to their cre-ation. Simply put, it incentivizes innovation by cre-ating a monopoly over the invention. This rationale assumes the inventor knows how to exploit their innovation, which is only sometimes true. Together with property rights come institutional strength. Among the different roles institutions play in society, one is the protection of such property rights by ensuring the law is observed. Other roles include creating a level playing field through regulation, or supporting promising innovations to make it to the market through financing. Most relevant, good institutional strength will ensure markets operate as well as possible, thus incentivizing the innovator by creating conditions for their inventions to be commercialized. In sum, a healthy institutional environment will protect the innovator and create the right conditions to make their creation reach its full potential.
Politics and the state. Closely related to institutions is the way in which politics and the state operate. It is usually the political process that slowly but surely impacts the operation of institutions. A political process separated from institutions will allow the latter to function in as frictionless a way as possible. If, on the other hand, politics interferes with the dynamics of institutions, their operation will become distorted. Such distortions will indeed modify the incentive structure, thus stifling innovation.
Path dependency. Even if not frequently discussed, path dependency is likely one of the essential factors in determining innovation. Path dependency refers to the ways in which decisions made in the past impact and constrain current and future decisions. As such, countries that enjoy higher levels of innovation because of higher institutional strength, leaner political processes, or the right amount of state intervention are more likely to continue enjoying such high levels of innovation. On the contrary, countries where institutions are weak, or where the political process and state regu-larly interfere with institutions, are likely to follow their path and continue experiencing low levels of innovation. It is worth noting, however, that path dependency is not a “law,” and structural changes may allow a country to set a new course. But alas, this is rarely the case.
Our brief review shows that most behavioral and structural factors conducive to innovations are closely entangled. It is often the case that unique behavioral characteristics, such as an appetite for risk, affect structural elements such as institutions. And because of path dependence, the relationship between factors is circular, making it extremely difficult to point towards a single factor conducive to innovation. Because of this, we need to clarify which worldview might be better prepared to foster the next wave of technological innovation. Our aim in the following section will be to review, rather than evaluate, the differences between liberal and authoritarian regimes to paint a picture of the current state of factors conducive to innovation in these two different worldviews.
The road to technological domination
Historically, the factors discussed above interact in complex ways to determine technological innovation. It is worth noting that no single factor can predict which worldview might dominate over the following decades. However, a simple survey of several pre-requisites for innovation will allow us to understand which worldview is better positioned to develop technology in the years ahead.
As an illustrative exercise, we will use components from the Freedom and Prosperity Indexes to generate a single composite indicator of factors conducive to innovation, which will allow us to understand which countries, with their regimes, are better positioned to sustain innovation. The exercise will not be entirely rigorous and will necessarily lack some important indicators of technological progress. As such, the reader should take this exercise with a grain of salt. Nevertheless, it will still prove helpful for building a quantitative understanding of the different worldviews’ standing and approaches.
Specifically, this exercise will use the following components as imperfect proxies for the abovementioned features. But, again, this experiment intends to illustrate rather than provide definitive answers.
- Investment. Among other things, investment flows can indicate the existence of potential innovation projects— whether privately or state led. As such, they can be an important (if highly imperfect) measure of risk, as every project will have a risk profile, and some certainly involve a science and technology aspect.
- Productivity. This exercise uses a constant total factor productivity measure. Labor and capital are both measured, and one of the factors includes technology. Because of this, productivity can be considered a proxy for both labor and science and technology.
- Education. The intention of including education in our exercise is to use it as a proxy for science and technology and, even if tangentially, to help assess specific attitudes and values; for example, it would be expected that societies that value education more highly might have greater chances of producing innovations.
- Property rights. The measurement of property rights is the most straightforward. Protecting property allows the inventor/innovator to safeguard and exploit its creation. The greater the protection of such rights, the larger the incentives for innovation.
- Trade freedom. Trade allows for the free exchange of goods and, alongside, ideas that might be relevant for innovation. Moreover, it provides access to different markets, thus creating incentives for inventors/innovators.
- Minority rights. In our exercise, this indicator serves as a proxy for attitudes toward the inclusion of minorities. As discussed above, the inclusion of minorities might help innovation by enabling the exchange of different ideas.
- Political freedom. This indicator is used in this exercise as a proxy for the state and the degree to which it intervenes in markets and institutions.
- Legal freedom. This indicator is a proxy for the functioning of a country’s institutions, and how their interaction with political freedom will affect the incentives inventors will face.
Because this is only an exploratory exercise, it must be understood that: (a) Many previously discussed factors still need to be included. (b) Many of the chosen variables have overlapping factors. And (c) many of the factors are heavily correlated among themselves. For these reasons, our indicator will only take the average of these components to show where we can expect a fertile ground for innovation in the years to come.
At the outset, we use the scores from the Political Freedom sub-index (of the Atlantic Council’s Freedom Index) to group the countries into four categories: Free, Mostly Free, Mostly Unfree, and Unfree. For any given year, a country that scores more than 75 in Political Freedom would be classified as Free. A score between 50 and 75 will be Mostly Free. A country that scores between 25 and 50 will be categorized as Mostly Unfree. And finally a score below 25 will be classified as Unfree. In addition to the abovementioned caveats, it is essential to underscore that cutoffs between categories leave countries that might reasonably belong to another category. However, once again, the aim is to provide a picture rather than explicitly and irrevocably offer a causal explanation.
Figure 1 shows the number of countries in each of the four categories. Because of nuances in the methodology used by different sources to produce the Index, most of the countries in the sample are categorized as Free. Also, because of the temporality of the Index, changes in the number belonging to each category cannot be fully appreciated. Because of this, the more informative graphic in Figure 2 tracks the changes in the number of countries of every type. Figure 2 shows that the number of Free countries plateaued in the early 2000s. Interestingly, in the first decade of the 2000s, the number of Unfree countries decreased as the number of Mostly Unfree countries rose. However, looking further into the decade of the 2010s, a wave of undemocratic movements begins to make gains.
When looking into the average of factors conducive to innov-ation (investment, productivity, education, property rights, trade freedom, minority rights, political freedom, and legal freedom), Figure 3 shows that Free countries are ahead of any other classification. Moreover, these trends appear not to change over time. However, when looking at percentage changes using 1995 as an initial base, as in Figure 4, the Unfree world appears to be making gains after 2007. This trend is fed by the increased number of countries in the Unfree category but also coincides with the backlash against the liberal order caused by the 2007 and 2008 financial crises.
A possible explanation for this change might be that one component dominates or distorts our composite indicator. For example, when we look at one factor alone—investment (shown in Figures 5 and 6)—the investment score in Unfree countries increased by almost 20 percent compared to the beginning of the financial crisis.
The trends presented in this exercise reveal that the Free world still holds an enormous advantage in some factors conducive to innovation. They also show that whatever shortcomings different worldviews might have, these can be compensated to a great extent by effective policies, including investment. Below, we discuss the factors and potential advantages that each worldview might have.
Discussion
A quick look into the factors mentioned above clarifies that soci-eties with different political organizations, liberal or authoritarian, also have other features that might allow them to take the lead vis-à-vis technological innovation. For example, some authoritarian or not entirely free regimes enjoy large, young populations that they can exploit to copy and develop know-how. Authoritarian regimes can also “mandate” innovation by investment, streamlining the development of specific technologies, and often avoiding ethical concerns. The threat to Western technological dominance has been so significant that Western powers, including the United States and the European Union, have directed tremendous investments to develop strategic competencies in artificial intelligence, quantum computing, and green energies. However, upon closer reexamination of the components outlined above, it becomes clear that the Western order might still hold an edge in technological innovation.
Demographics. In the two decades prior to 2010, China’s population explosion led to a bonanza in terms of productivity. Outsourcing from the West allowed Chinese manufacturers to employ their large workforce and develop specialized production in many industries. Assisted by lax regulation in terms of intellectual property protection, China was able to build know-how in different industrial sectors. These shortcuts also allowed China to quickly catch up to the West in technological terms, and by the end of the 2010s, China had created good technological capabilities. For instance, the Chinese could harness the data produced by their large population to develop and train complex artificial intelligence systems. However, as China’s authoritarian regime became increasingly assertive and the Western countries decided to begin severing China from their technological supply chains, it became increasingly clear that China had yet to reach the West’s level of development. One of the possible explanations is that China had always been able to rely on its large workforce to cheaply produce everything in its factories, thus reducing the need for technological innovation. Contrast this with the case of Germany and its aging population. As its workforce became smaller, Germany needed to fulfill the need for factors of production. This phenomenon led to an explosion in the development and adoption of automation technologies that complemented human labor and helped keep German factor-ies afloat and running.
Labor. China’s population is aging and its birth rate is decreasing. These two factors will eventually build pressure on the labor market as China’s workforce “ages out.” Because it is not being replaced at the same rate, this factor is likely to become problematic.
At the time of writing, the population of India, the largest democracy on Earth, is about to exceed that of China, thus creating more competition for Chinese manufacturers, as regards labor costs. These pressures might increase China’s incentives to innovate by adopting automation technologies like Germany. On the other hand, Western countries have been facing the problem of a shrinking labor force for two decades now. In fact, not only are manufacturers in Germany developing new automation technologies but also, manufacturers in the United States and Europe are rethinking the whole concept of work. From automation technologies to efficiency tools such as remote work, these economies must deal with new labor-related challenges that have pushed them to innovate.
Risks. Another labor-related challenge—addressed in diametrically different ways by the two worldviews—was how to respond to the COVID pandemic. On the one hand, democratic societies adopted riskier attitudes toward the pandemic, from using unproven technologies to reopen societies, such as MRNA vaccines, to organizational innovations, such as furlough, the four-day work week, or work-from-home policies. These riskier attitudes allowed most Western countries to return to pre-pandemic production levels. By contrast, risk-averse policies in authoritarian regimes, with China being the most evident example, adopted very conservative policies like “zero COVID.” Even though these approaches created the impression of public protection, in the end they stifled growth and innovation. These measures had such an impact on production and services that many firms began redrawing their supply chains, and if Chinese producers are removed from supply chains, this might deprive them of the know-how required to expand their own technological innovation.
Science and technology. In all likelihood, the feature where both liberal and authoritarian regimes are most similar is in their approach to science. Both worldviews have realized the outsized importance of science and technology in generating prosperity. As such, they have both sought to finance significant scientific endeavors. For example, until the outbreak of the nationwide war in Ukraine in 2022, there was still cooperation in space exploration between Russia and the West. European and US astronauts used to travel to the International Space Station (ISS) in Russian-made rockets launched from Russian launchpads.
Similarly, the Chinese regime developed its space programme by building a space station like the ISS. Liberal and autocratic regimes have followed similar, state-led approaches in developing chips, quantum computing, and artificial intelligence. These efforts exemplify similarities between state-led worldviews. However, their differences become clear when deploying scientific insights into technological innovations. Because of the nature of authoritarian regimes, these tend to use industrial policy to deploy their technologies and grow their prosperity. Even if liberal societies have made use of industrial policies for the very same reason, Western societies have tended to rely on “the invisible hand” of the market to allow their innovations to percolate through society. Liberal societies have developed vibrant venture capital investment industries and a “startup engineering” culture that has successfully taken some scientific developments—begun in government laboratories—and deployed them throughout the market. The most notable example is the internet and the many innovations it set in motion, such as social media, online financial services, e-commerce, and so on. But, most recently, there has been a marked movement from government-led research to private industry in liberal societies, noticeable in space exploration, quantum computing, and green energies. Even if Western venture capital has sought to replicate this model in authoritarian regimes, these have resisted the push through institutional intervention. Because of this intervention, the percolation of technological innovation in these societies has frequently lagged.
Values. Value sets and systems are markedly different between authoritarian and liberal worldviews, and these differences are both consequence and cause of the behavioral aspects above. While graduates from top universities in democratic societies might look for jobs they consider attractive, well-paid, and prestigious in the technology sector, graduates in authoritarian societies look for jobs they consider secure and prestigious in the public sector. A second dimension within the value systems is their tolerance of different opinions and appreciation of minorities. While recent nationalistic movements in democratic countries such as France, the United Kingdom, and the United States have tarnished the West’s reputation for openness and tolerance, these countries still have an extensive tradition of opening themselves to views and ideas from different parts of the world. Universities in the West receive students and academics from all nationalities, making them, in all likelihood, the most diverse in the world. By contrast, authoritarian regimes tend to be more inward-looking and appreciative of everything produced within their boundaries.
Leaving aside human ingenuity, a more risk-loving society, willing to listen to different ideas, has a greater chance of creating new technologies, even if they only stumble upon them by chance. This brief discussion suggests that the Western worldview is better aligned with this behavior, even if only marginally. However, the attentive reader can notice that organizational and institutional factors play a prominent role in shaping attitudes and outcomes. Therefore, our attention now moves on to discuss these factors.
Most important is the difference in how both worldviews regard the individual. Whereas liberal societies tend to view the individual as the main component of society, authoritarian societies tend to view the individual as part of a collective. This difference is essential as policies and incentives will be “tuned” to benefit the individual or the society, depending on the worldview.
Institutions and property rights. As values help to define institutions, we move on to discuss institutional design. Liberal countries design their institutions to protect and uphold individual property rights. By doing so, countries like the United States or the United Kingdom incentivize technological innovation by allowing the inventor or innovator to extract fully the potential exploits of her creation. By contrast, institutions in countries like China or Russia are tuned to serve the state. By adjusting institutions and property rights to help the state, individual incentives for innovation are absent. As such, innovation in these countries must be driven or pushed by different forces.
Politics and the state. The political process in free societies is driven by democratic competition. In theory, political competition will allow diversity and incentivize politicians and society to adopt the best ideas and practices. In practice, such competition is always constrained by different factors beyond this chapter’s scope. Nevertheless, allowing competition and the flow of ideas might ensure the best or better-positioned actors arrive at the institutions. It also constrains bad actors from staying in positions of power for an extended period. By contrast, politics in authoritarian societies are captured by an elite that controls the state and its institutions. Such capture allows elites to perpetuate themselves in power and discourages other actors from challenging them.
Path dependency. As our brief comparison shows, most of the elements discussed are closely related; for example, values affect institutions, which are impacted by the political process. Furthermore, this dependency is not only among the factors discussed but also through time. Processes—like the fall into authoritarianism—tend to reinforce themselves, even if marginally, over time. As such, the factors discussed above that impact innovation for both worldviews tend to strengthen themselves. This rationale is not to say that change is impossible but to underscore the inertia of social processes in determining outcomes.
Conclusion
Our brief discussion of the factors determining innovation suggests the liberal order is better prepared to incubate and develop the next wave of technological innovations. Just after the “end of history” decade, and with the turn of the new millennium, pundits on both sides of the ideological worldview began to predict the decline of the West. Factors like the financial crises at the end of the 2000s and the rise of nationalism during the mid-2010s seemed to suggest that the liberal order could be waning, with rising powers led by authoritarian regimes in China and Russia positioned to upend the status quo.
Technologically, a quote from futurist, technologist, and investor Peter Thiel reflects the declining status of the free world. Thiel stated in 2013: “We wanted flying cars, but all we got is 140 characters,” contrasting the vision of a future that was to be radically different against a reality in which the only difference was the rise of social media.6Daniel Weisfield, “Peter Thiel at Yale: We Wanted Flying Cars, Instead We Got 140 Characters,” Yale School of Management, April 27, 2017, https://som.yale.edu/blog/peter-thiel-at-yale-we-wanted-flying-cars-instead-we-got-140-characters on 03/03/2023. However, the landscape had turned on its head by the end of the 2010s and the beginning of the 2020s. Innovations in almost every field—from chip design to artificial intelligence to new, seemingly unattainable developments such as those in nuclear fusion, or CRISPR and MRNA technologies—all developed in free societies, painting a radically different picture.
It is essential to underscore that, regardless of the apparent edge liberal societies have in technological innovation, “Cardwell’s law” predicts that the technological dominance of the West will eventually end.7Mokyr, The Lever of Riches. This view is based on historical precedents: both the Arab world and China once held the edge regarding technology. And the dominance of both civilisations eventually came to an end.
This raises the question: Is there an avenue to delay, if not avoid, such an outcome? We conclude with a short discussion of policy recommendations to sustain technological innovation.
Policy recommendations
The most straightforward recommendation is to reinforce institutions and property rights. The former precludes power-hungry elites from taking control of the state and distorting incentives. The latter protects the innovator’s rights to enjoy and exploit their innovation. Put together, these two elements cover the incentives for innovation.
There might be other avenues to generate incentives for innovators. For example, the state might provide incentives for highly risky bets. However, fully exploiting such innovations requires a free market whose forces will find the right fit for a specific product and reward the inventor accordingly. In this way, policies promoting scientific innovation for risky bets and protecting the early stages of innovations, such as patent systems, are fundamental. However, a careful balance is required to avoid interfering with a free market, as competition in the later stages of creation develops a beneficial incentive ecosystem for innovators. This balancing act—protection of the initial stages of the market, and state intervention to incentivize risky bets versus avoiding interference with free markets—is no easy task. However, it is a task more easily undertaken in liberal societies, where elites are unable to interfere in institutions to extract rents, than in authoritarian ones. Thus, protecting the liberal order itself might be the best way to achieve innovation.
Julio Amador Díaz López is a lecturer at Imperial College London.
Image: A robot from Shenzhen Academy of Robotics draws a portrait at the World Robot Exhibition during the World Robot Conference in Beijing, China, November 24, 2015. The conference, which kicked off in Beijing on Monday, is a three-day event including a forum, an exhibition and a robot contest for youths, Xinhua News Agency reported. REUTERS/Jason Lee