Capitalism in Space:
Private Enterprise and Competition Reshape the Global Aerospace Launch Industry


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After much delay and discussion, my policy paper for the Center for a New American Security, Capitalism in Space: Private Enterprise and Competition Reshape the Global Aerospace Launch Industry, has finally been published.

You can download the pdf here or at the Center here. Please feel free to distribute this widely. If you visit other websites please pass it on to them. This should be read by as many people as possible, especially since the space policy of the Trump administration remains at present undecided. This policy paper will help them work out a wise policy, with the paper’s key data point contained in this table:

SLS vs Commercial space

I document my numbers very carefully. The result illustrates clearly how much a failure the government model has been and continues to be. We have spent a lot of money since the 1970s on NASA and space, and have generally gotten very little for that investment, as demonstrated by the comparison between the accomplishments of private and government space in the past two decades. Going forward it is going to be very difficult for SLS/Orion to compete with the heavy lift rockets coming from SpaceX and Blue Origin.

My concluding words:

A close look at these recommendations will reveal one common thread. Each is focused on shifting power and regulatory authority away from the federal government and increasing the freedom of American companies to act as they see fit to meet the demands of the market. The key word that defines this common thread is freedom, a fundamental principle that has been aspired to since the nation’s founding.

Political leaders from both parties have made the concept a central core tenet of American policy. Democrat John Kennedy stated that his commitment to go to the Moon was a “stand for freedom” in the Cold War. Republican Ronald Reagan proposed “Freedom” as the name for the new space station, and viewed it as a platform for promoting private enterprise in space.

Freedom is actually a very simple idea. Give people and companies the freedom to act, in a competitive environment that encourages intelligent and wise action, and they will respond intelligently and wisely.

The United States’ history proves that freedom can work. It is time to prove it again, in space.

Anyway, read the whole paper. I make a number of recommendations that I hope both Congress and the Trump administration will consider seriously. If they do, the United States will lead the world in the exploration and colonization of the solar system, and we will do it quickly and for a reasonable amount of money.

More importantly, we will be doing it under the banner of freedom.

26 comments

  • Robert Pratt

    Congratulations (finally!) on the paper. May it have influence, “bigly”!

  • wayne

    Yes, Congratulations!
    Will be forwarding this to my regional Business Journal.

    Just did a search on BING– this post and the pdf-file, come up number 4. “How Obama brought capitalism to Space,” and variants thereof, are 1-3. (And there were not “4,300,00” entries when I checked a few weeks ago.)

  • Todd Brown

    Well Done Robert, Will link this to as many sites as possible.

    Look forward to hearing you on John Batchelor to discuss.
    Freedom…What a concept…If only our politicians thought the way you do…perhaps with this they will.
    Cheers,
    Todd

  • Vladislaw

    I posted this elsewhere. In economics there is something called the multiplier effect. It is where government dollars are measured to find out where you get the biggest economic bang for the buck. Which dollar generates the most jobs and wealth and … tax revenues. It is clear from the data in this article that the government funding manufacturing rocket start ups is better than a government built one.

    “Manufacturing Leads Economic Growth

    While factory sector employment may not provide politicians the cover they need on the job creation front, they are still correct when they tout manufacturing’s crucial role in the economy. That’s because no sector does more to generate broad-scale economic growth — and, ultimately, higher living standards — than manufacturing.

    Nothing demonstrates this more than manufacturing’s multiplier. A sectoral multiplier effect tells us which companies and industries give the economy the biggest bang for the buck, literally. Every dollar of output in a sector generates a certain level of economic activity across society — sales and purchasing transactions that lead to a direct and indirect need for employment and resources within other facets of society.

    Because manufacturing has so many substantial links with so many other sectors throughout the economy, its output stimulates more economic activity across society than any other sector. That’s a major reason manufacturers play such a critical role in growth. As factory output grows, it requires more inputs from mining and utilities and suppliers and creates job and investment opportunities in all the other sectors that use its products, such as transportation, construction, and retail. It also spurs growth in services such as finance and transportation.

    So what’s the actual impact? Earlier projections based on Bureau of Economic Analysis (BEA) annual input-output tables have calculated that a dollar’s worth of final demand for manufacturers generates $1.48 in other services and production. This is higher than any other sector. The retail and wholesale trade sectors have much lower multipliers, generating 54 cents and 58 cents respectively in other additional inputs for every dollar of economic activity they generate.”

    http://www.industryweek.com/global-economy/competitive-edge-manufacturings-multiplier-effect-its-bigger-you-think

  • Orion314

    Thank for your work on this Bob, and of course, congrats!

  • wayne

    Vladislaw–
    While I empathize with manufacturing, the author of that Industry Week article is mixing two different concepts together & assuming certain factoids open to discussion as they relate to economic activity.

    highly recommend—
    The Keynesian Multiplier Concept Ignores Crucial Opportunity Costs
    Quarterly Journal Austrian Economics
    https://mises.org/library/keynesian-multiplier-concept-ignores-crucial-opportunity-costs

  • ken anthony

    I will be linking to this from various places.

  • eddie willers

    Good work!

  • wodun

    Very cool, look forward to reading this.

  • Max

    Well done Bob, never has opportunity in manufacturing and technology been so ready for this advancement. Your numbers, the bolts and nuts of cause and effect, are undebatable.

    The time is right, and the regressives are faltering and losing their ability to stop the free enterprise achievements of those who love this country and what it historically represents as well as its unique position that is so different from all the others. What we could imagine, has now become reality. The future looks bright. Especially for what we can do to help advance the rest of the world, by our example, to make it a better place for all of us.
    The top / down command and control structure that has failed so miserable in so many countries is fresh in our mind. (Venezuela, Cuba, Russia, North Korea, etc.)
    The way out for those that don’t want to repeat history is that their doorstep! They will all need to run to catch up, even the Arabs see this and worry.
    Again, Well done!

  • wodun

    Vladislaw
    March 10, 2017 at 6:12 pm
    I posted this elsewhere. In economics there is something called the multiplier effect. It is where government dollars are measured to find out where you get the biggest economic bang for the buck. Which dollar generates the most jobs and wealth and … tax revenues. It is clear from the data in this article that the government funding manufacturing rocket start ups is better than a government built one.

    Your argument in the context of this post is much stronger than the other place you posted this. But it is important to note that in this case, what makes the difference is that these companies market their products to customers other than government so they have to compete in a tough environment to attract new customers. The intent of these companies is to have NASA as one of many customers.

    Many of them could succeed without NASA but they don’t really have that opportunity in our society. Space launch is one of the highest regulated industries. To tout the result of COTS should also come with the recognition that it is successful through reducing the role of government, changing to fee for services, and allowing companies to control their products.

    Government can help create a good environment for business but that doesn’t mean all government actions are beneficial. What had a bigger effect on the success of the COTS programs, the money spent or the changes in government policy and method of procurement?

    Perhaps there is a different multiplier effect act work here.

  • Good job Robert, a well-reasoned paper.

    Like others here, I will be passing on links to your paper along with the natural companion piece, “The Joint Confidence Level Paradox: A History of Denial”.

    (it’s 20130012835 on the NTRS server)

  • LocalFluff

    $33B for SLS/Orion to date. What a formidable sabotage against US space flight! That money could’ve been used for 500 or so Falcon 9 launches. A launch per week during a whole decade, putting ten thousand tons in orbit, like twenty space stations.

    Orion is a failure by design. Even if it existed, worked and was for free, it has no purpose, it is of no use. A crewed Dragon is vastly superior to Orion. It doesn’t need the dangerous 3 ton launch escape tower and it will fly several times per year making it a well tested and reliable spacecraft.

    SLS does have some potential reasons to exist, now that the absurd development costs are sunk. It will of course be the largest launcher. It could send an Apollo style mission to the Moon in one fell swoop. With a Dragon instead of an Orion it becomes more capable and cheaper to operate. The strength of SLS is that its components are very well understood from Shuttle experiences. (But that should’ve made it cheap too, so maybe the reliability aspect will fail as hard as the cost aspect has).

    However, crew should be launched on well proven frequently launched rockets, like Falcon 9 and Atlas V, rockets and spacecrafts that have a market also in LEO. SLS could launch the uncrewed Lunar lander mission to LEO which then docks with a crewed Dragon. But if one is to dock stuff in LEO, one might as well do it with several smaller launchers instead of with an SLS. SLS and Orion are like Laurel and Hardy, they just don’t fit in anywhere. A comedy by design.

    The intermediate upper stage of SLS is an especially funny point. A unique upper stage (but based on Delta) that will be produced in the quantity of one and be used once. It is a leftover of a corrupt political process. And now NASA is investigating if they can launch astronauts on that first flight. It is very telling that the ambition of SLS is to regress from reusability as in the Shuttle, to expendability. The only advantage of the Shuttle over the Soviet Buran was that its main engines were reused. With SLS that’s gone. Five shuttles were manufactured during 30 years. Using that same production line for yearly launches must be a challenge.

  • Edward

    Excellent report. It is educational. Thank you for your effort in writing it.

    I can now better justify comparing and contrasting the COTS/CRS and CCDev programs to the Constellation/SLS programs. Rather than scramble for the costs and payments for Ares, SLS, Orion, COTS, CRS, and CCDev, I can easily reference your report, as you have them in one place.

    The recommendations have a common theme: free market capitalism. Allowing the launch services and other suppliers design their equipment for general use, they are better able to serve all customers, not just government customers, resulting in reduced costs to the government as well as the other customers. As costs decline, demand increases, just as expected in any economic system, increasing the economy rather than reducing it.

    By the way, a requirement change mid program is typical of what happens in many FAR contracts — large changes that dramatically increase costs and cause schedule slips. Thus, we can justify including the entire amount of the Ares rocket and Orion spacecraft in the final costs when comparing Constellation/SLS to other cost-plus FAR programs.

    Vladislaw wrote: “Because manufacturing has so many substantial links with so many other sectors throughout the economy, its output stimulates more economic activity across society than any other sector.”

    manufacturing not only adds more to economic activity, but it adds to wealth and prosperity. Manufactured goods tend to be durable and tend to last longer than foods and services. With the general improvement in prosperity that comes from manufacturing, we are better able to afford to buy services. Food costs decrease with the increase in industrial methods in agriculture, also freeing up disposable income for non-food goods and services.

    As manufacturing, agriculture, and industry in general become more automated, due to the manufacture of automated machinery, each worker becomes more and more productive, allowing for more goods and services to be available for purchase by those with increasing amounts of disposable income. Thus economic activity increases not due to the manufacturing relationships alone, but due to the increase in disposable income and the increase in available goods and services on which to spend the disposable income.

    Thus even the poor become richer:
    https://www.youtube.com/watch?v=OkebmhTQN-4 (9 minutes, Bill Whittle: “Rich Man, Poor Man”)

    The same thing is happening with launch rockets. They are more automated and less expensive, and now more companies want to launch more satellites than ever before.

    wodun asked: “Government can help create a good environment for business but that doesn’t mean all government actions are beneficial. What had a bigger effect on the success of the COTS programs, the money spent or the changes in government policy and method of procurement?

    I know that this is rhetorical, because Robert answers this in his report. The launch industry was losing customers, because the customers were not able to continue to afford the high cost of launches, high costs driven mainly by government interference in the business.

    Here we see that increased costs reduces overall business.

    In 1999 there were 76 commercial launches, pulling in $2.3 billion in revenue. By 2003, when Elon Musk unveiled his Falcon 1 mockup in Washington, the number of commercial launches had plummeted to only 18, with revenues falling to $1.2 billion, a decline that helped prompt the Air Force to forge its EELV bulk-buy deal with ULA. Essentially, the launch industry had priced itself out of the market. Just as Musk had discovered that he couldn’t afford to buy its very expensive rockets to send his private science probe to Mars, the satellite industry at the time was struggling and failing to cope with these high costs as well.

    In 1999, the average launch revenue was $30 million, and in 2003, the average revenue was up to $67 million, with a 75% reduction in launches.

    Robert also points out in a couple of places that the fixed price contracts under both the SAA and the antiquated FAR procurement systems worked better than the cost-plus contracts.

    The change from one-time use of rockets and hardware allows for additional value of the equipment. Rather than a rocket being thrown away on the launch of each spacecraft, it can be used for multiple spacecraft. The launch may cost less, but the rocket becomes worth not just one satellite launch but many satellite launches.

    It is similar to the difference between the value of the three little pigs’ straw house and brick house. The straw house has to be rebuilt after being blown down by every monsoon (or huffing and puffing wolf) and the brick house is worth many of those rebuilt straw houses (plus the lives saved when it does not blow down from the blowing wind).

  • Thank you all for your kind comments about Capitalism in Space. As I mentioned in the post, however, it is essential that this gets spread far and wide. I am not asking this for my benefit (though of course I will benefit by the wide distribution of this report). I am asking because the more exposure the report gets, the more likely it will influence policy.

    Is anyone here a registered member of Free Republic and can post it there? If someone other than I lists my post, or the CNAS link, it will garner a lot of attention.

    Similarly, is anyone an active commenter at Hot Air or Ace of Spades? These sites generate a lot of traffic in conservative circles. If they post about this report it will help shape the debate.

    Is anyone an active poster at Lucianne.com? They do not take blog posts, so my BtB post might not fly, but they will certainly accept a link announcement highlighting the CNAS website.

    The Trump space policy has not yet been set. It is imperative that the administration sees this report, even if they are forced to see it through the conservative press. Any help my readers can give me would help make this happen.

  • John E Bowen

    Excellent paper; hopefully it will get a lot of exposure. Congrats!

    A couple of very small proofreading nits, very minor polish:

    p. 6
    Conastoga
    >>
    Conestoga

    p. 17
    NASA, and NOAA, which paid high prices and generally were not interested reducing costs.
    >>
    NASA, and NOAA, which paid high prices and generally were not interested in reducing costs.

  • LocalFluff

    I read that the 2018 budget basically leaves NASA untouched. Planetary science and astrophysics are to remain at the same level. I’m relieved! Given that other “discretionary” agencies are slaughtered, this is great and looks good priority wise for the coming years when perhaps things look up economically.
    https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/2018_blueprint.pdf

    $3.7 billion to the SLS/Orion next year. Crazy waste on autopilot. That stuff will really try to fly one day. They really try hard. I don’t see anything changing with commercial flights, so that’s probably also same-same. My impression is that the new administration didn’t consider NASA, that ½% of the federal budget, and it got away under the radar and goes on as if nothing happened. It could’ve been better, but it could’ve been alot worse too.

    The Europa lander is explicitly scrapped. Wasn’t that rep. Culbersome’s idea? People who seem to know stuff about planetary missions never liked it. I suppose it is too hard to do today, and they got their way.

  • Joe From Houston

    Yay! Boo hoo! Yay! Boo hoo! What is going on here, Bob? I did not realize that space access was so hard or easy to do all at the same time. Well, at least we got Russians paying for NASA astronaut tickets. Whaaaat? So, why is NASA paying Russians to take astronauts up when the Russians are paying NASA to for the privilege of taking astronauts up?

  • Frank

    Kudos. Like your books, this is well researched, written and very informative Bob. I see you were covered in Forbes. https://www.forbes.com/sites/lorenthompson/2017/03/16/capitalism-in-space-the-beguiling-myth-market-forces-can-fix-everything/#43472d641af3

  • Frank: I had not known about this review. It is clearly written by a big space advocate, trying to defend their failure to achieve anything with SLS/Orion while denigrating the successes of SpaceX. I also suspect this writer was one of the reviewers that helped delay publication with a lot of invalid complaints about my paper.

  • wayne

    Wow, that Thompson guy is a total progressive-crony-hack, Statist mastermind.

    “I hold doctoral and masters degrees in government from Georgetown University and a bachelor of science degree in political science from Northeastern University. Disclosure: The Lexington Institute receives funding from many of the nation’s leading defense contractors, including Boeing, Lockheed Martin, Raytheon and United Technologies.”

  • Edward

    wayne is right. Thompson seems to be beguiled by the myth that government can fix everything. It must be because of his advanced degrees in government — he thinks that if it is government then it must be good.

    Thompson first quotes Robert Zimmerman’s report, then comments: “‘This will result in increased competition and performance at a lower cost.’ That is not the way Washington has historically preferred to run either its civil or its military space programs.

    Of course increased competition and increased performance at lower cost is not how government has historically done space, and that is exactly the problem. The historical way results in high costs and slow advances in technology, exploration, and expansion. After 60 years, all NASA has is partial ownership of an expensive space station in LEO that it can’t even get people to.

    The historically preferred method is the very problem that needs to be fixed.

    Thompson writes: “partly because of the risks involved, and partly because they didn’t trust private companies to always make the right choices.

    Who is the arbiter of the “right” choice, and what makes an alternate choice wrong? The government decides what is right and not-invented-here makes a choice wrong. Thus, private markets cannot make a right choice unless they do as government says.

    But then again, that is the beauty of competition. Government can choose to buy from the company that kowtows to government — which is why the defense contractors that fund Thompson’s Institute do such a lousy job for the taxpayer (disclosure: I have worked for one of the listed leading defense contractors that help fund Thompson’s Lexington Institute). And having multiple companies reduces the risk that government takes by putting all the eggs into the basket of one contractor — a contractor that they trust so little that they oversee every step the contractor makes. The historical way mitigates the risk by adding more people to the project.

    Thompson writes: “Zimmerman offers a series of complex comparisons purporting to do just that, but he doesn’t cite hardly any numbers to support his case. So let’s fill in a few details about how SpaceX, the leading non-traditional supplier of launch-services, has actually performed.

    He compares a rocket still being optimized to rockets that haven’t changed in design for a couple of decades. Apples verses oranges.

    Well, let’s compare SpaceX’s Falcon early record with the early Atlas and Delta rockets, apples to apples:
    https://en.wikipedia.org/wiki/Atlas_(rocket_family)

    Oh, my! Look at that. The first rocket was cancelled before any launches, the second version failed on all three launch attempts, and the next version had a success rate of a whopping 76% out of 49 launches.

    The government-designed Atlas was not quite as successful as the commercially designed Falcon.

    https://en.wikipedia.org/wiki/Delta_(rocket_family)#Thor-Delta_flights

    Oh, look. The Delta rockets did better than the Atlas. Delta had only one failure out of twelve attempts for a success rate of 91.7%. However, this does not look like it includes any development flights, only flights with payloads, starting with Echo 1.

    The falcons:
    https://en.wikipedia.org/wiki/Falcon_1#Launch_history
    https://en.wikipedia.org/wiki/List_of_Falcon_9_and_Falcon_Heavy_launches#Past_launches

    The Falcon 1 had two successes out of five launches and the Falcon 9 had 29-1/2 successes out of 31 launches.

    Falcon 1 success rate: 40% (no payloads lost)
    Falcon 9 success rate: 95.2%
    Aggregate success rate: 87.5%

    SpaceX has a better aggregate rate than Atlas’s early flights, which includes test flights, and SpaceX has a better success rate for payload flights than Delta’s early payload flights.

    To really put the nail into Thompson’s argument’s coffin, the Air Force believes the Falcon 9 to be reliable enough to launch Air Force payloads, so now Thompson is second guessing the US Air Force.

    I guess it is that PhD that he has that makes him smart enough to do so.

    Thompson writes: “No doubt about it, SpaceX prices are low — but it isn’t the model of market-driven responsiveness that Zimmerman would have you believe. On average, its launches are over two years late, and the unlaunched missions it is carrying in its backlog on average are nearly three years late.

    Equating price, availability, and reliability show that his PhD is most definitely not in business. In fact, it suggests that he knows little about business or acquisitions.

    He also fails to compare how late SpaceX is with how late defense contractor are, on average, with their projects. Should we look at the James Webb Space Telescope as an example?

    Thompson writes: “But there’s no danger of SpaceX causing a problem there, because it can’t actually lift heavy payloads into high orbits.

    Somehow, Thompson uses the limitations of one rocket type as an argument against commercial space. Logical?

    He then goes on to discount future rockets by suggesting that the Falcon Heavy, being only in development, does not count as a rocket. Perhaps he should not consider future government rockets as real rockets, such as the SLS.

    Thompson writes: “but much of the overhead associated with space efforts goes into assuring the safety of missions.

    This shows that he has no experience in government-contractor relations, either. A lot of the overhead is in bean counters making sure that the money is being spent in the approved manner. A lot more is spent in redesign after the government entity has changed requirements mid-project.

    Thompson writes: “When you leave it to market forces to decide what stays in and what gets taken out of vehicle designs and launch procedures, risk can easily creep into the tradeoffs.

    Not a PhD in aerospace, either. It has been 15 years, now, and the US airlines still haven’t killed a passenger, despite their lack of such close government babysitting as the defense contractors get.
    https://www.youtube.com/watch?v=GXbdJ3kyVyU (7 minutes; Bill Whittle: “The Deal” again)
    the reason that we have cheap, affordable, and safe air transportation today and no space transportation whatsoever is simply because we were serious about air travel, serious enough to pay the price in blood and money, and we are not serious about space.

    Airlines and aircraft manufacturers have figured out how to not kill their passengers. Even the government’s NASA hasn’t figured out that one. The lack of safety of both Apollo and the Space Shuttle is why both were cancelled before their planned duration.

    Thompson writes: “A NASA advisory panel warned that it wasn’t a good idea to let SpaceX boost its rocket performance by loading supercooled fuel while astronauts were already aboard. Last year a routine test of that procedure blew up a rocket on the launch pad.

    And now the good PhD thinks that SpaceX’s engineers are too stupid to fix problems. With all that oversight and babysitting of defense contractors, it seems that the government has the same low opinion and expectation of all non-government engineers.

    Thompson writes: “In other words, the main thing that makes SpaceX commercial today is not its launch vehicles but its contract vehicles — which allow it to hold government overseers at arm’s length in a way that United Launch Alliance usually can’t.

    Now I understand Thompson’s problem with Zimmerman’s report. He didn’t read it. In actual words, Zimmerman defines the main thing that makes commercial space commercial is that its “crew capsules [are] being designed and built by private space companies” rather than designed from NASA requirements, as is Orion.

    I sum it up, paraphrasing Whittle’s video: Thompson is not serious about space.

  • Edward: Does Forbes allow comments? If so, could you put this comment there?

  • Alex

    @Edward: You cannot compare a major technology in respect to reliability from now (2002-2017), as applied by SpaceX, with technology’s infancy / begining from time peoride beginning in 1955-1965. That is a significant fault and not allowed.

  • Richard M

    “The Europa lander is explicitly scrapped. Wasn’t that Rep. Culbersome’s idea? People who seem to know stuff about planetary missions never liked it. I suppose it is too hard to do today, and they got their way.”

    It was Culberson’s baby, which is is why it may not be dead yet, not even in the FY 2018 budget.

    In any event, the Europa Lander was going to launch separately after the Europa Clipper had – it’s a followup probe meant to take advantage of what Clipper’s initial surveys show to help identify ideal landing sites – so even if funding doesn’t make it into the budget this year, that’s not fatal.

  • Edward

    Robert,
    Yes, and done. It will apparently be reviewed by Forbes staff before appearing on the site, so I do not know when — or if — it will be available.

    I replaced the opening sentence with the author’s first name and modified one paragraph to read:

    “Airlines and aircraft manufacturers have figured out how to not kill their passengers. Even the government’s NASA hasn’t figured out that one. The lack of safety of both Apollo and the Space Shuttle is why both were cancelled before their planned duration. Spacecraft from these two projects killed four times as many astronauts than all other countries combined, and Apollo 13 came very close to making that five times as many. Since SpaceX and Boeing rely upon NASA’s safety expertise, we can expect a safety record no worse than we would get under the usual type of NASA contract.” [emphasis on added sentences]

    Alex,
    Maybe it is not allowed, but I disagree. It is the closest that I have to comparing the development of the rocket families and the companies that are involved in Thompson’s argument.

    Thompson has compared a new rocket family, whose design, processes, and procedures are still being developed, to a well established rocket family. Is that allowed? Further, he only uses the period of time that ULA has been launching the Atlas and Delta rockets, not the development time and pre-ULA launches of their well established rocket families.

    During the 1955 to 1965 time frame, orbital rocketry was being developed. Today, SpaceX and Blue Origin are redeveloping orbital rocketry, just as ULA plans to soon develop durable, continuous-use, space-only rocketry with the ACES rocket — as a commercial-space company, not a government-space company.

    So far, our workhorse rockets have only been launch rockets, but soon we should have a workhorse rocket family that will take payloads from one orbit to another, then return for the next payload. What problems will ULA encounter as they develop — and learn how to do — that capability?

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