Freeman

ARTICLE

Free Enterprise in Space

MARCH 01, 1983 by GARY MCGATH

Mr. McGath is a computer programmer and free-lance writer in Hollis, New Hampshire.

Will the day come when the cost of sending rockets into space will begin to provide profits to those who engage in the venture, rather than just being a sink into which millions of dollars are poured without hope of returning the investment? The answer to this question is no; the day has already come!

Today satellite communication, which allows television, radio, and telephone messages to be sent from continent to continent without expensive cables, is a profitable, multi-million-dollar business. Tomorrow, other industries will be making profitable use of space. Certain alloys can only be made in space, because their components will stay mixed only in the absence of gravity. Zero gravity would also facilitate the manufacturing of the tiny semiconductor “chips” which are vital to the electronics industry; a zero-gravity process would allow higher yields of usable chips while permitting larger and more complex chips to be produced.

These examples are not a matter of mere speculation; the space shuttles are already carrying equipment to test ideas such as these, and companies are preparing to invest large amounts of money in their implementation. Certainly these investments involve more than the usual financial risk; if a satellite doesn’t work after it’s put into orbit, it isn’t very practical (yet) to send out a repairman. But insurance companies have been ready and willing to take on such risks; some insurance brokers have even conducted major advertising campaigns specifically to attract customers for space-venture insurance.

It is true that all private satellites to date (as of this writing) have been launched by government bodies; but private enterprise is beginning to get into the business of space rocketry as well. A German group, OTRAG, made two successful suborbital launches in the 1970s before losing the use of its African launching facility; in 1982, an American corporation, Space Services, Inc., made its first successful suborbital launch in preparation for establishing a satellite launching capability.[1]

New Uses as Costs Decline

Further off into the future may be such ventures as solar power satellites and asteroid mining operations. The cost for efforts such as these seem horrendous now; but technology always grows cheaper when it can be produced in quantity. Could anyone have expected, when the Wright Brothers flew their first plane in 1903, that within a few decades regularly scheduled transatlantic flights would be cost-effective? The cost of the initial development of space industry will be high; but when spaceships become a proven industrial product, and when space stations are built to allow launching from low orbits to higher orbits or to outer space, the cost will certainly come down.

There are, nonetheless, a number of obstacles to space development besides the initial cost barrier. One of these is the American public’s image of space programs as spectacular, costly wastes of money. The source of this image, more than anything else, was our country’s crash program to land a man on the moon. This program succeeded spectacularly—but it was a dead end. As G. Harry Stine, one of the most vocal advocates of space development, put it: “We had to beat the Soviets to the Moon . . . and we did. Once we’d done so, the whole space program was wound down because its function as an instrument of national prestige—not of scientific exploration and not as the exploitation of a new frontier—had been completed.”[2]

The Moon program, seen in contrast with the profit-making space ventures which are beginning today, points out the difference between governmental activity and private economic activity. Both types of activity must show a return on investment; but in governmental activity, the return on investment is measured in votes, not profits.

A politician must make the choices that will gain him the most votes, or he will be out of a job after the next election. Monetary cost matters to him to some extent, since anything that makes taxes go up will turn voters against him. But what is more important is that the result of his actions be something obvious to voters. Something more practical but less spectacular, such as a small manned space station, is not “cost-effective” in the currency of politics. And anything whose results will not be visible until after the next election is out of the question.

Barriers to Private Development

The history of the United States’ space program naturally suggests to many people that sending rockets into space is merely a very expensive kind of fireworks show. But there are tremendously practical uses for space; and if people are spending their own money and looking to gain more money in return from these uses, there is every reason to believe that at least some of them will find cost-effective ways to get above the atmosphere.

The idea that space development must be so large and expensive a task that only the government can accomplish it has even confused many people who remain advocates of space industrialization. These people have, for the most part, spent their efforts lobbying for more funding for governmental space programs, rather than looking for ways to direct private capital toward the achievement of their goals. This lobbying will be self-defeating in the long run even if it achieves its immediate purpose; by keeping space development in the government’s hands, it will perpetuate the inefficiencies, high costs, and unimaginative methodology that are inherent in any governmental operation.

But the false impressions created by the government’s space program are merely a psychological barrier, and one that should not take long to be overcome once the commercial successes begin. There are, on the other hand, more tangible difficulties that the government has put in the way of the private exploitation of space.

One of the worst of these difficulties is that America’s antitrust laws make the amassing of capital and expertise for a huge project, such as space development, very difficult. One of the most effective ways for businesses to go into space industrialization in a major way would be to form a consortium in order to combine technological know-how and to keep the level of financial risk for each company down to an acceptable level. But consortiums of this sort are illegal under antitrust law.

Even a single company that succeeded in a space venture could easily run into trouble with antitrust law. Space is a new field for industrialization; the first company to succeed in it would have a “monopoly” in space until the second company came along. While it is impossible to say with certainty what may be considered legal or illegal under antitrust law, the history of antitrust shows that a corporation can be found in violation of the law, or at least forced to spend huge amounts of money defending itself in interminable court cases, simply because it has been successful; Alcoa and IBM are notable examples. There is little reason why any company would want to risk a large amount of money on space industrialization, when an antitrust suit is the “reward” that awaits it for succeeding.

Such difficulties caused by antitrust law are by no means unique to space ventures. As Presidential adviser Alan Greenspan has noted, antitrust law is “so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict—after the fact.”[3]

Antitrust is not, as many people suppose, a body of law forbidding specific “predatory” practices (whatever such practices might be); it is a collection of legislation without intelligible standards of legality and illegality, in which the mere fact of success in business puts one in dan ger of prosecution, and in which the only guideline to what business activities are (probably) legal is precedents set by the courts. But while traditional businesses can look at precedents that may apply to their own situations to achieve a measure of safety, businesses entering new fields lack this recourse. There are few precedents for business in space, so the risk which antitrust law adds to the naturally occurring risks of investing in space is tremendous.

Yet another barrier to space development is the result not so much of governmental action as of governmental inaction: the lack of any definition of property rights in space. This deficiency is not solely the fault of our government, since other spacegoing governments will also want to have their say. But what the United States has accepted as the “law of space” is quite inimical to property rights.

The 1967 Space Treaty

The principal document establishing international law in space is the 1967 Space Treaty. Under this treaty, liability for damage done by private spacecraft belongs not to the craft’s owner, but to the nation under whose jurisdiction it was launched. This might seem very convenient for the owner, but it also means that the government has an excuse (in fact, a need) to keep strict control over the company’s activities. Whoever bears responsibility for the consequences must decide on the actions. The treaty specifically affirms this requirement, stating that private activity in space may only be initiated with the express authorization and continuing supervision of the national government in question. Moreover, all vehicles and facilities in space are subject to inspection by any nation that can get to them, provided notice is first given. Private property can hardly be considered “private” under such circumstances.

What would the status be of a privately established settlement on the moon? The 1978 US Civil Space Policy does not allow any such settlement. And under the 1979 Moon Treaty (which US negotiators at the UNapproved, but which President Carter fortunately decided not to sign), property rights on the moon would be effectively abolished, and any installation there would be subject to entry by any nation’s inspectors, just as facilities in space are.[4]

Going into space is a risky enough venture at best. But if space investors can’t even be sure of establishing their right to the bases and installations they build, and if any nation is legally entitled to spy upon their industrial operations, they can hardly be expected to be anxious to risk their money there. The situation would be similar to that which exists in international waters today, where there are no internationally recognized property rights, except that the investments to be lost would be greater.

If our government would remove the barriers it has created to private space development, and if it would take the lead in insisting that property rights be recognized in space by all nations, there could soon be a tremendously exciting future for industry in space. Perhaps people will have the ingenuity to attain such a future even with all the legal obstacles that have been thrown in their way; but it will be much harder.


1.   Stewart Cobb, “Private Rocket Launched Successfully,” Ergo, 9/15/82

2.   G. Harry Stine, Space Power, Ace, 1981.

3.   Alan Greenspan, “Antitrust,” in Ayn Rand, Capitalism: the Unknown Ideal, Signet, 1967.

4.   H. Keith Henson and Arel Lucas, “Star Laws,” Reason, August 1982; also see Stine, op.

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March 1983

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