Governments alone fail at space

[Mark W. McElroy Junior, 9-18-22, “The Space Industry of the Future: Capitalism and Sustainability in Outer Space”, Routledge Publishing, ] WL

Stakeholder intrinsic value creation in the space industry necessarily involves commercialization. In this approach, value creation is maximized through familiar features of capitalism such as efficiency, innovation, profit- seeking, and provision of value to the greatest number of people possible. However, some types of goods and services are most efficiently produced by markets and some are not. Reasons that markets may not be ideal in certain cases include low demand, high production costs, risk, technical gaps, or the very nature of a particular product or service. Stakeholder intrinsic value is proposed as merely the best means to create value, not the only means. If a commercial approach is not an option but the good or service under consideration is desired by society nonetheless, provision by government or some other not-for-profit organization is required. This chapter explores the history of space system commercialization along with an analysis and set of guidelines related to what can and cannot be commercialized in space. Government versus Commercial Governments have demonstrated that they are fully capable of developing and operating space systems. Why not continue with this proven approach to creating value in space versus shifting toward commercial means? There are three reasons: (1) governments have limited resources and so a cap on value creation is eventually reached; (2) government-funded projects and initiatives are subject to inconsistencies and cancellation from politics, optics, and national budget cycles; and (3) government projects often struggle with efficiency. Capitalism on the other hand is only capable of producing value that is in demand and it is only capable of doing this in ways that are self-sustaining and efficient. This occurs through profit-seeking and competition and is less restricted in terms of a cap on total value creation. Consider an example. Tremendous value was created by the US government through sending people to the Moon in the Apollo program. However, as Ozgur Gurtuna points out, Apollo was canceled in the end 5 Commercialization of Space Systems DOI: 10.4324/9781003268734-5 Commercialization of Space Systems 67 because the primary forms of value, prestige and political power, had already been obtained, and “without an economic basis for sustained flight to the Moon, there was little reason to keep the Apollo program running” [120]. One can conclude that for a given value creation activity in space (landing a human on the Moon in this example) if it were executed in the context of stakeholder intrinsic value creation (i.e., using the profit-seeking motive), more net value would be created and it would be created consistently over a longer period of time compared to if it were executed by the government. The catch is that only certain types of things are suitable for commercialization. Examples highlighting these points were described in Chapter 1, namely, NASA’s commercial crew and commercial cargo programs. The result of these programs which transitioned provision of low Earth orbit flights to a commercial market resulted in flights that are both cheaper and available to more customers beyond just the government. Here, commercialization was successful in creating more value overall, but this is not to be expected universally in every instance of value creation in space. How can one identify and understand systematically which activities in the space industry are suitable for stakeholder intrinsic value creation and which are best left to governments? Also, which existing government-led activities can reasonably be expected to become commercialized in the near future? Basic principles of economics can help to begin to answer these questions.