Great Powers Compete in Space
Today's race is about economics.
Ever since the Sputnik scare of 1957, space has been front and center on the U.S. national security agenda. Successive administrations have highlighted the essential role of space-based capabilities such as GPS, satellite imagery and real-time global communications in undergirding U.S. military power.
But increasingly, space is becoming critical not only to the U.S. military but also to the United States and wider global economy. Those same space-based capabilities that have for decades fueled U.S. military dominance now power global businesses as well. One estimate cited by then-U.S. Commerce Secretary Wilbur Ross at Davos in January put the value of those capabilities to the world economy at $5 trillion a year.
More conservative estimates, which look at revenue for the space sector itself rather than the value it adds to other sectors, put the global space economy at $423 billion a year. Ross noted subsequently that commercial entities generate more than 80 percent of that amount, such as the new low-earth-orbit Starlink constellation being launched by SpaceX, as opposed to government activities such as NASA’s plans to return to the moon by 2024.
And that changing market composition is accompanied by a growing number of players. Fewer than a dozen countries have ever launched satellites themselves, but more than 80 nations and multinational organizations currently have functioning satellites in orbit, according to the Organisation for Economic Co-operation and Development (OECD).
As space transforms from a theater of national security confrontation into one of economic competition, the United States needs a new policy approach to win, argue Stanford Scholar Bruce Cahan and former senior White House National Security official Mir Sadat, authors of a new study, “Space Policies for the New Space Age: Competing on the Final Economic Frontier.”
The document digs deep into the next 40 years of space exploration and economic activity. The authors paint space as a key theater in what they term the “Great Game” of competition for economic and strategic dominance between the United States and China.
They launched their report with a series of webinars hosted by NewSpace New Mexico, a U.S. Air Force-supported technology accelerator in Albuquerque.
One clear advantage China has at the moment that speakers at the first virtual event highlighted: The country can plan for the long run and direct commercial entities to play their assigned roles. “The one thing that China has that the United States and Western democracies don’t have typically is the ability to plan and program over the long term,” notes Brendan Mulvaney, director of the China Aerospace Studies Institute at the U.S. Air Force Air University, Maxwell Air Force Base. “Why is that?” he asked. “Because they don’t have elections.”
The Chinese Communist Party, through parallel government organizations such as party committees in major commercial entities, and through stock ownership by party organizations, effectively controls China’s private space sector, Mulvaney notes.
Centralized control can have drawbacks, he adds. “When they make big bets, they can bet wrong,” he states. The distributed wisdom of the market could be a plus, even as it makes Beijing-style central planning an impossibility, Mulvaney argues. “There’s a lot of good flexibility in the ability to have really free markets and private companies that really are private … and so that’s one of the strengths that the Western democracies and our companies bring.”
“The Chinese, despite what you’ve probably read in the press, are not 10 feet tall,” Mulvaney notes. “They’re not coming to take over.”
But their ability to plan strategically and implement a whole-of-nation approach to the commercial exploitation of space is an approach the United States needs to match, authors Cahan and Sadat argue.
U.S. adversaries like China “really use economics as a major tool, and we haven’t been harnessing that tool,” Sadat says. “Our space economy policymaking is not adequate to enable us to compete.”
Part of the problem, he adds, is bureaucratic competition. “The U.S. doesn’t have a strong, national-level interagency executive agent for space; we have multiple different agencies,” Sadat states.
Sadat and Cahan draw on the proceedings of last year’s State of the Space Industrial Base 2020 conference and report, co-authored by senior officials from the Defense Innovation Unit, U.S. Space Force and the Air Force Research Laboratory’s Space Vehicles Directorate. They echo the call of that earlier document for a “North Star” vision—a strategic whole-of-nation approach to competing in space drawn up by a presidential task force.
In the meantime, notes Kevin O’Connell, who was the director of the Office of Space Commerce under Ross at the U.S. Department of Commerce, a broad bipartisan consensus was reflected in the Trump administration’s National Space Policy.
“We’ve always known space as being a venue for critical national security capabilities,” O’Connell says, “but I think we’re finally recognizing the economic value of space.
“We have enjoyed seeing space as a bipartisan matter,” he adds. “So I hope to see continuity in that [space policy], not any dramatic change, or maybe change at the margins.” In addition, O’Connell says he hopes the National Space Policy and other Trump administration policy documents would be “great foundations going forward” for the new administration.
One bipartisan issue the report’s authors are working toward harnessing is the need to reshape U.S. capital markets to make them friendlier to space entrepreneurship and ensure government support to help the sector recover from the effects of the coronavirus pandemic.
To combat the anti-competitive practices of China, U.S. policymakers need to utilize “the full range of tools in the tool shed we have,” Cahan says. “I don’t hear enough about financial engineering to enable the aspirations and technologies of the commercial space industry.”
Historically, the United States provided both capital and revenue support to providers of vital services such as the electricity grid or the telephone and Internet networks, he notes, yet space was not considered “critical infrastructure.”
Critical infrastructure finance joins tax incentives and other measures to promote longer-term venture capital investments atop the list of those financial tools the report recommends. But the rapid pace of developments in the sector means any measures would have to be agile, O’Connell relates. “Those developments are going to have to continue to take place at the same speed. And it’s a very quick speed of developments in the space sector,” he says.
He touts special purpose acquisition corporations and other novel investment vehicles as “exciting ... new innovations in the financial sector.” Some have warned, however, that if early investors in these novel ventures get burned, it may damage the credibility of the sector as a whole with investors.
After all, government support for the space economy is needed for a reason, reminds Keith Crane, an economist with the Science and Technology Policy Institute. The U.S. Department of Commerce’s new figures showed the space economy was worth about $177 billion to U.S. gross domestic product in 2018—just about half a percent of the whole economy. Moreover, it had grown between 2012 and 2018 at a rate of only 1.5 percent, less than half the 3.9 percent growth the economy as a whole enjoyed.
“So the bottom line is, currently the sector is a pretty small part of our economy, and it hasn’t been growing rapidly,” Crane concludes. In part, this situation is because the big drivers of legacy space technology, including telecommunications satellites and direct broadcast TV, were established, mature markets without the opportunity for big growth. At the same time, new market segments, such as the Internet or Internet of Things connectivity, the big low-earth-orbit satellite constellations, have yet to come online, and next-generation revenue streams like space tourism or asteroid mining are as yet only a twinkle in investors’ eyes.
But, points out Carissa Bryce Christensen, the CEO and founder of Bryce Space Technology, a flat growth bottom line could tell a different story when examining “underlying productivity gains.”
The cost of data throughput has fallen every year for the past decade, and launch costs have dropped about a third, she says. “So while revenue may be flat, if you’re delivering significantly more value [as the big satellite providers have], or achieving dominant market share, which the U.S. has in commercial launch, for example, ... that’s a very different and important part of the story of what is going on in the space economy.”
And to support that burgeoning economy, the United States needs a workforce, notes Sadat. “If we’re complaining that the world’s populations are coming to the U.S. to work here, then we better be ready to make investments in our nation and in our population … to cultivate Americans and U.S. nationals … to fulfill those roles. If we can’t do that, then we must invite the world’s talent here to come build our enterprises in this space [sector] and other [science and technology] fields,” he says.