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Roscosmos struggles to figure out how private enterprise works

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Liberty for private enterprise in Russia’s space industry?

Doug Messier at Parabolic Arc today published a translation of an interview given by Oxana Wolf, Roscosmos Deputy Director of the Department of Advanced Programs and the Sphere Project, describing Roscosmos’ effort to work with Russian private commercial aerospace companies.

Though she declared near the end of the interview that “We want our private companies to succeed,” the rest of the interview indicated that she and Roscosmos don’t really understand how private enterprise works, though it also appeared both are struggling to figure it out.

For example, when asked why Russia is having so much difficulty changing its regulations to encourage private enterprise, Wolf said the following:

I wondered this question. I saw at what point the Americans decided to change their legislation in order to raise a whole galaxy of private owners and entrust them with tasks that were previously solved by the state. Changes in space laws began in the 1980s, and laws that got [Jeff] Bezos, [Elon] Musk and [Richard] Branson and others on their feet were passed in the mid-1990s. That is, the “era of private traders education” began more than 30 years ago!

When the “private traders” proved their ability to provide quality services, the American government agencies involved in space, on a competitive basis, gave them orders for launches. [emphasis mine]

To her mind, the government led this change. In Russia’s top-down culture, such change must always come from above, from government leadership. However, her impression of this history is wrong. Though the U.S. government tried for decades to change the laws to encourage private enterprise, those changes either didn’t really jump start anything in the 1980s, 1990s or even the 2000s. In fact, some of those legal changes worked against private enterprise.

What made the difference was the freedom of a new private company, SpaceX, to independently build its own rockets and compete with the established players. Neither NASA nor the federal government gave Elon Musk any help initially. Nor could either do anything legally to squelch his effort. He conceived the idea of a cheaper new rocket himself, and marketed it to both satellite companies and NASA. Similarly, the government had nothing to do with the rise of both Virgin Galactic and Blue Origin, both of which developed their suborbital spacecraft entirely with private funds.

It was the cultural freedom in America, combined with the obligation to let new companies compete, that made this renaissance possible.

Wolf’s interview suggests that the Putin government really doesn’t understand these fundamentals. Though it wants to encourage private companies to develop capabilities its existing government-run corporations do not have and are not interested in developing, once this is accomplished that government has no interest in allowing them to compete. Instead, as she notes,

Roscosmos and other departments have an interest in launching small spacecraft with a short preparation time for launch. If a private company creates a rocket with suitable technical characteristics and a good economy, then Roscosmos will be quite ready to place orders or even talk about creating a joint business. [emphasis mine]

In reality, Roscosmos never “talks” about creating a joint business. If a private company like S7 Space is eventually successful in creating a new smallsat rocket, the power-brokers in the Putin government will immediately move in to absorb that company and its profits into Roscosmos and the government. This is essentially what the Putin government did in 2013-2014 when it took over Russia’s entire aerospace industry and consolidated it into a single corporation run by Roscosmos and controlled by the government. Since then Roscosmos has effectively squelched any attempts by independent companies to enter the market building anything that duplicated what it already had. It has diligently and forcefully protected the market “territories” of its various divisions against all competition.

The only reason one new company, S7 Space, is apparently being allowed at this time to develop a smallsat rocket like Rocket Lab’s Electron is that no division of Roscosmos presently builds such a thing. Once built and earning profits however the Putin government has already made it clear that it will then move to gain control of it.

In other words, the Russians still don’t understand that it was freedom and competition that revitalized the U.S. space industry, not government action. And until the Russians figure this basic fact out, they will continue to trail behind everyone else.

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11 comments

  • BtB’s Original Mark

    Mr. Z.
    What strange times we live in presently. Your article rightly celebrates a revitalized U.S. space industry based on American legal and cultural freedoms & economic competition. The contrast with Russian Space is stark. But then later this afternoon, I’ll expect to read some new trampling of freedom in your series ‘They’re coming for you next’.
    You have previously stated that “it will be very very very difficult to recover the free country I was born into” and that you were formulating an essay on that subject.
    While you are doing that, please consider such factors as History, Economics, Geopolitics, and National Elites (regarding U.S. elites you mentioned Codevilla’s “The Ruling Class” was on your reading list).
    Regarding your impression that my comments in another thread on BtB was that I and others were entirely too focused on defining “isms”, I request that you reread my comments.
    Geopolitics is not an ‘ism’;
    American History is not an ‘ism’;
    The study of Global Economics & the 21st century global corporation is not focusing on an ‘ism’; &
    The study of World History including nation states and empires is not focusing on an ‘ism’.
    The proposition that discussing History, Economics, Geopolitics, and National Elites equates to the futility of “arguing about how many angels can dance on the head of a pin” trivializes those areas of study. So although we may agree on the outward problems of our time, there seems to be a wide gulf in terms of analyzing how these problems evolved over time, how deep their roots go, and how wide the problems branch out.

    These large scale trends do affect the ‘Space’ topics covered on BtB. For example, what motivates the U.S. administrative state to throttle SpaceX?
    Why does Blue Origin arrogantly try to sue its way into NASA Contracts?
    How will the US led Artemis Accords evolve this decade? How are the Artemis Accords related to long term US Foreign Policy & National Security Strategy?
    Will ill-conceived U.S. Foreign Policy drive Russia to join China to form a significant Sino-Russian Axis in Space?
    Will China beat us to the Moon and/ or Mars? Will China create a ‘Belt & Road’ for the Solar System?
    Will Russian overcentralization & it’s oligarchic economy continually stifle RosCosmos this decade? (Your excellent post today on Roscosmos largely answered this)
    Will France & Germany continue to subsidize Arianespace, but mainly milk the ESA as a jobs program while dabbling in Smallsat rockets?
    How should we view the Space initiatives of such diverse nations as Japan, India, South Korea, Poland, and Israel?
    I’m sure others on BtB can propose similar types of questions.

    It’s going to be an interesting decade for BtB to chronicle, and I wish you great success in that endeavor.

    Let’s make space exploration great again!!

  • Robert Pratt

    There is similar confusion here from the do nothing academic Left. Obama’s comment that “you didn’t build that,” or similar, was echoed many times by Democrats. They argued preposterous things such as business being successful because “government” built infrastructure. In most of the cases these dim bulbs went on about, they missed the fact that infrastructure followed need that was first created by free market entrepreneurial innovation. In their minds, innovation is concurrent with government action loosely related. Such is the exception not the rule. Seems very similar to the Russian comments.

  • Jeff Wright

    Now, early on- rockets were seen as a symbol of revolution…and in the same way Musk’s men work their tail off for the cause of spaceflight…as did the Soviet Chief Designers who were Cosmists. It didn’t matter which pocket the funds came from-the gov’t pocket or the private pocket. If anything, profiteering is what killed both Russian space and publically traded old aero firms. Space is something you put money into-not take away from as both Putin and Branson have done…that one wears the gov’t hat and the other a private enterprise cap is meaningless.

  • Reading between the lines, Oxana Wolf expresses some surprise that ‘private traders’ [capitalist pirates], are able to do ‘great things’. It doesn’t translate to her world.

  • Jason Lewis

    EveryAstronaut (Tim Dodd) has a fantastic video (and articles) reviewing the history of Soviet rocket engines, in which their 1960’s technology rivaled current technology in the US. While watching the video (~1.5 hrs), I kept wondering why they were so innovative and successful in those early days while so seemingly inept these days.

    It appears that their system of separate OKB development entities facilitated this. “OKB” is a Russian acronym which roughly translates to “Experimental Design Bureau,” and they were scattered throughout the Soviet Union. In the video, Tim Dodd states “Despite them being state owned, they were super competitive with each other and often had strong figure heads who were competing for projects against each other.” It seems their current consolidated system has eliminated the element of competition. Any thoughts?
    https://everydayastronaut.com/soviet-rocket-engines/

  • Jason Lewis: I discuss this in Leaving Earth. In the 60s the various design bureaus not only competed, but were allowed to build competing engines, rockets, and spacecraft. One bureau built the Proton and Almaz stations, another built Soyuz rockets and capsules, both in direct competition with each other.

    Roscosmos as structured by Putin does not allow this. Each bureau has its area of work, and no one else can invade that space.

  • Col Beausabre

    Jason, You are right to an extent, but each OKB had a defined sphere and was not allowed out of it. MIG and Sukhoi produced tactical aircraft, Tupolev strategic aircraft, Antonov transport aircraft, MIL helicopters, etc

  • Edward

    What made the difference was the freedom of a new private company, SpaceX, to independently build its own rockets and compete with the established players.

    I know that this was shorthand for the history, but I like to include more: it was more than just one private company. Some companies, such as Armadillo and Kistler tried but eventually went broke. Kistler even received the same kind of contract as SpaceX for ISS cargo transport, but Kistler had failed to make the first milestone of raising private funds (from outside the company). Half a century of a government virtual monopoly in space made investors skittish about investing in space and competing with the government. Orbital Sciences was then chosen to replace Kistler, and its previous success reassured investors, made the first milestone, and ultimately succeeded, as did SpaceX.

    The freedom and liberty extended beyond private companies. The X-Prize was possible, because We the People are free to not only offer such a prize but to work toward winning such a prize. These prizes are not new, and one such private prize is what gave Charles Lindberg the incentive to try flying across the Atlantic Ocean.

    It isn’t just that Oxana Wolf doesn’t get it that free enterprise has the liberty to accomplish great things (how can greatness come from anything other than a centrally-controlled government?) or that there is a lack of competition. Both are important concepts in innovation, but it is the lack of freedom to do your own thing. This is the power of the new company, S7 Space, and the tragedy if it is absorbed into the Soviet — er — Russian bureaucracy.

    Peter Diamandis was at liberty to offer the X-Prize, and a score of groups and companies were at liberty to try to win it. SpaceX was at liberty to build a less expensive rocket and then to make its booster reusable. Blue Origin was at liberty to solve the reusable booster problem in a different way. Rocket Lab is at liberty to make a completely reusable rocket, different than Falcon 9 and Starship.

    It isn’t just the competition to find a cheaper way to do the same thing but the freedom to do the same thing in a very different way. A lack of this freedom is why Russia is having problems with its quality control.

  • Edward

    What can you try when you are free to try? Here is an idea that didn’t work out, the bopper car on railroads:
    https://www.youtube.com/watch?v=jlmyWyI9HT8#t=67 (6 minutes)
    “Not every great ideas work, but until you try, you never know.”

  • Jeff Wright

    Von Braun was able to out-Soviet the Soviets, who like Glushko got into ugly fights over fiefdoms. Houbolt killed C-8…but everyone in Apollo were on the same page. I have to disagree with Mr. Pratt…gov’t infrastructure like the Interstate helped trucking firms that never could have built that themselves. Sadly, Greens also hate roads and cars-proving that anti-infrastructure stupidity is bi-partisan.

  • Edward

    Jeff Wright wrote: “gov’t infrastructure like the Interstate helped trucking firms that never could have built that themselves.

    But at what cost? The railroads suffered, because they had to pay to build and maintain their own rails. This led directly to the government-run Amtrak and to mergers of many of the great railroads.

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