The space business is about to get really serious


  • Investment
  • Thursday, 28 May 2020

WEDNESDAY is looking like a watershed moment in history.

The scheduled afternoon launch of a spaceX Dragon capsule atop a Falcon 9 rocket from Cape Canaveral, Florida, at 4.33 pm would mark the first time a privately owned vehicle takes Astronauts into orbit.

Elon Musk, the billionaire space entrepreneur and chief executive of Tesla Inc, founded spaceX in 2002.

If the launch succeeds – bad weather could push it to Saturday –- it would be the company’s crowning achievement to date. Musk’s hope is to enable the colonisation of Mars. Delivering two astronauts to the International space Station suggests that his grand ambition might be more than a pipe dream.

Even if not, it will be a breakthrough moment in the commercialisation of space. All of a sudden, space tourism seems plausible.

If spaceX can fly astronauts from Florida to the orbiting laboratory, then why couldn’t it fly you and me – soon – to an orbiting restaurant to have dinner above the atmosphere?

For years, the US has been buying rides to space from Russia, spending US$3.5bil for 52 rides since 2011.

Space race

Instead of turning to Russia, NASA will now rely on private-sector spacecraft. For many Americans, this will be a needed boost of pride.

A half-century ago, the US sent Neil Armstrong and Buzz Aldrin to the moon, in part with the goal of beating the Soviet Union in the space race.

At the height of the Cold War, competition with the USSR. provided an organising principle for US efforts in space, and a remarkable amount of government resources were brought to bear in the effort.

At its peak in the mid-1960s, US$7 out of every US$1,000 of national income was spent by the National Aeronautics and space Administration.

Having beaten the Soviet Union, the US lacked a clear objective, and the space programme drifted. In 2011, the space shuttle programme was terminated. The spaceX launch will mark a rebirth, the first time astronauts have flown to space from the US in nearly a decade.

In these wilderness years, the US gradually forged a new space exploration relationship between the government and the private sector. In 2004, two years after Musk founded spaceX, a presidential commission concluded that business should play a larger role than it ever had.

“In NASA decisions, the preferred choice for operational activities must be competitively awarded contracts with private and nonprofit organisations, ” the commission wrote.

It also defined a more limited role for the US space agency.

“NASA’s role must be limited to only those areas where there is irrefutable demonstration that only government can perform the proposed activity, ” it said.

With the reins for much space activity handed over to commercial interests, the past decade has seen an explosion of investment in a profusion of companies.

In a 2018 paper, economist Matthew Weinzierl documented the rise of “space access” companies sending people and payloads into space, “remote sensing” companies providing images of the earth, “habitats and space station companies” providing secure facilities for tourism, research and manufacturing, and “beyond low-earth orbit” companies focusing on asteroid mining, space manufacturing and colonizing the moon and Mars.

Weinzierl listed several dozen companies, including spaceX.

Weinzierl reported that investment in startup space-sector firms increased to roughly US$2.5bil per year in 2015 and 2016 from less than US$500mil annually during the 2000s.

Commercial interest

Financing often comes from entrepreneurs like Musk, who are wealthy enough to absorb the high fixed costs needed to enter the space-commerce market.

This week’s launch with a crew will heighten commercial interest in space and strengthen market forces already at work. Information about consumer and industry preferences will need to be aggregated.

Willingness to pay for space commerce needs to be determined. Resources and capital need to be allocated to their best uses. Innovation needs to be fostered. Only markets can build a commercial sector in space.

Investors and entrepreneurs will be needed. They will be seeking the enormous profits promised by space commerce, but will need to tolerate enormous risk, as well. If Musk succeeds today, the risk they face will go down a notch.

Indeed, competition is a back story to today’s success.

In 2014, NASA awarded contracts both to spaceX and Boeing. In December, a timing error on its debut flight forced the Boeing Starliner capsule to miss a rendezvous with the International space Station. Boeing will be scrambling to catch up, keeping the pressure on spaceX.

Public policy

Blue Origin, founded in 2000 by the billionaire chief executive of Amazon.com Inc, Jeff Bezos, is another notable competitor, working to create reusable launch vehicles to lower the cost of space access.

Even as the private sector plays a larger role in space, there are glaring needs for governments to provide basic rules and structure.

Public policy in outer space is in its infancy. For example, space debris in earth’s orbit could impose significant damage to private property. It needs to be dealt with, perhaps by assigning property rights or by taxing it.

And with low-earth orbit in the hands of the private sector, NASA should feel intensifying pressure to achieve goals more plausibly beyond the reach of commerce, like landing on asteroids and colonising Mars.

The sad backdrop to this historic achievement is the coronavirus pandemic that has taken hundreds of thousands of lives around the world and devastated economies in many countries, including the US.

The end of the decade-long U.S. retreat from space is like a shaft of light piercing that dark cloud. And when that cloud is a distant memory, spaceX’s accomplishment will still be with us.

Commerce is bringing the US back to the stars. — Bloomberg

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).” The views expressed here are the writer’s own.

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