§ 7.1 Overview of Economic and Political Issues
The overwhelming barrier to space development has been the cost of getting there. Of course, that is why we are looking at near Earth asteroids and lunar materials -- using materials already in space instead of expensively launching it all up from Earth. It's an issue of both cost and volume of material.
This overview presents a conservative view towards private sector space development vs. an initial government seed investment. It is quite debatable whether we need government financial help, as the front end investment is not too large and the payback time not too long, especially given the innovative early payback mechanisms along the way. Many people think that the only thing needed is outreach to the right kind of investors, hence a primary purpose of this book. Nonetheless, I will hereafter present the consensus perspective of government vs. private sector funding which still seems to prevail in the space community.
Historically, the space program was started by governments, which paid for the expensive, risky and long-term use of rocket technology for purely military applications. Civilian applications of rockets came later, and commercial launchers emerged from the companies who had successfully developed rockets under contract to the military. Later, other government and commercial launchers started to emerge, based on the same old chemical rocketry methods for lifting material off of Earth. (However, a variety of interorbital vehicles based on different technologies are now emerging independent of military applications.)
Upon the end of the Cold War, the space program is no longer pushed by government spending as in the 1950s to 1980s era. Further, governments are now much more cost conscious in order to reduce government deficits and to keep taxes low, which means more reliance on the private sector for funding new projects. Worldwide, there is an increasing trend towards relying on the private sector rather than government for progress, a result of the successes of capitalist countries relative to communist and socialist countries on average.
As much as possible, PERMANENT must be performed by private enterprises for reasons of public benefit via the sale of products and services, economic efficiency, self-sustainability, rapid growth, and international (multinational) benefit.
Government agencies such as NASA are not set up to sell products and services to people or companies. Even if NASA tried, it is programmatically unable to build cost-competitive systems. Nonetheless, NASA could support the work of leading researchers, making the results public domain, thereby reducing the startup costs of all industry players. However, NASA would do this in a major way in the space resources field only if so directed by Congress. Funding for space resources would come by a reduction in the budget of competing interests unless NASA funding is increased.
For private sector utilization of space resources, the front-end investment is high, the payback time long, and the risk is high, relative to most other non-space ventures looking for money. Notably -- there are high interest rates for committing money to high risk ventures; you don't get two points above prime. Investing entities with deep pockets are needed.
The initial quantity required until payback, breakeven, and then decent profits of investment is not too great - less than for the Alaska oil pipeline, less than for Teledesic, and around the same as for a large offshore oil exploration and production project. The time before money starts coming in, as well as payback breakeven, is shorter in time than other projects the private sector has performed successfully. Yet, you will find precious few large investment entities who have even heard of asteroidal or lunar materials utilization for space development.
Some of us believe that there are private entities in the world who would embark on this venture if it were introduced and understood. That is the purpose of the website and book. Refer your associates to us as well!
All that's necessary is a minimal amount of initial, reusable infrastructure to be designed in coordination, manufactured, launched and emplaced in the remote reaches of space to bring the first asteroidal and/or lunar materials to high Earth orbit. From that point on, more than sufficient revenues will come in, the infrastructure can be expanded, risks are lowered, and the payback times shorten dramatically for additional ventures.
The key is getting the first "seed" industry going.
There is a lot of debate on whether the government should get involved, and if so, how much should the government be involved. Few think that the government should do the whole thing. Some think that government needs to help pay for this seed infrastructure and then let the private sector take over. Some think that the government should not fund any development but simply provide a guaranteed minimum market for the end products, i.e., guaranteed prices for materials for defense applications -- dollars per pound for shielding, fuel propellant, and other products and services from asteroidal or lunar materials. A guaranteed market would reduce perceived risk to investors, and would be even sweeter if the government allowed the provider to sell to alternative markets offering higher prices. Some think the government should fund basic R&D and making it available to all competing private companies, to reduce startup costs by the private sector, but not emplace any seed infrastructure. Some talk about tax incentives and loans at lower interest than high risk loans. Some think the government should not do anything at all, but leave it all up to the private sector. (There are some people who radically despise government work but haven't been able to get anything going themselves.)
There is no denying that government investments have improved our lives and economies where the private sector would not have for decades later. This includes launch rockets (and hence communications satellites), large airplanes (e.g., the Boeing 747 and other large economy-of-scale commercial aircraft, a result of war airplane technology), and even the internet itself (initially a U.S. government defense project). The private sector will not invest much into technologies or products whose payback exceeds 5 years, especially if the front end cost is large or the risk is perceived as high. The larger the company, the more conservative it becomes. Some governments are more willing than others to cooperate with the private sector for developing new products for the world economy (e.g., Japan and MITI).
The money required to seed PERMANENT space development is small by government standards, e.g., the cost of a couple of submarines or aircraft carriers, a few stealth bombers, or a medium size weapon system.
However, it's preferable that the private sector set up and manage such a project. The government shouldn't be selling products and services to consumers. Further, government products cost more than private sector products due to the nature of the government bureaucracy. For example, to quote Ralph Nansen in his book Sun Power (referenced in the Solar Power Satellite section):
"Let me give you a real example … The [Boeing] 747 [jumbo jet aircraft] initial design was developed by Boeing in response to an Air Force competition for a large military transport to be called the C-5A. Boeing lost the competition to Lockheed, who signed a contract for the C-5A in August of 1965. Instead of totally discarding the work they had done in preparation for the competition, Boeing decided to modify the design from a military airplane to a commercial transport of the same size. [The 747 was the world's first jumbo jet]. Boeing presented the preliminary design to the airlines and on April 1, 1966, received a letter of commitment from Pan Am that justified the start of commercial development. Boeing developed the 747 under commercial requirements in three years and eight months from the start of development to the inaugural passenger service flight, while Lockheed developed the C-5A under restrictive government requirements that took four years and four months before the first airplane was delivered to the Air Force. The 747 flies faster, carries more cargo weight, has nearly twice the range, and costs less to buy and operate than the C-5A." (Emphasis added.)
Some initial revenues could be generated along the way by selling the video transmissions of the initial operation (i.e., a movie like from Hollywood, but with real life effects), royalties for marketing rights to use the name (much as superstars sell their names), naming a newly discovered mission asteroid after a major sponsor, product endorsements (e.g., for manufacturers of components on the flights), toys, etc., and of course selling scientific data on the asteroidal and/or lunar materials. This approach would require a major public relations campaign. This idea has been best publicized by Artemis and its related company, The Lunar Resources Company, both founded by Mr. Gregory Bennett, and as covered in web section and book chapter 8. (Both are small organizations run by just a few people in their spare time, not a major professional effort, and push a strictly lunar initiative.)
Mid-term revenues will be made by selling services using some of the in-space products listed elsewhere in this website (as well as feedstocks to the initial industries), patent rights from the research and development in this sector, and in-space services by the newly established infrastructure for entities venturing to join "the gold rush" and live in space -- the space colony economy itself.
The most successful companies will be the ones which manufacture the next generation of factories (based on patents from experimenting in the space environment) and products in high Earth orbit. Value will be driven by the products, and there will be competing mining and manufacturing companies in space.
It is the intent of PERMANENT to initially provide a clearinghouse of information for potential investors and analysts, including technical and objective financial information from the open literature, as well as references to other organizations and individuals with common interests, and consulting services.
The founder of PERMANENT, Mark Prado, has worked on a diversity of large scale projects, from 100% government funded to 100% private. The government projects include two years in advanced planning in the U.S. Department of Defense space program, including SDI (aka "Star Wars") working directly for the Pentagon's top SDI program managers. Mr. Prado's last major assignment in Washington DC was consulting to ARPA (1993-94) in a program to convert targetted major U.S. defense operations and technologies into commercially viable peacetime industries, with emphasis on exports. Mr. Prado is currently engaged in 100% private projects by multinational engineering and financing organizations involved in constructing skyscraper buildings and industrial facilities in the remote reaches of the world (sometimes not unlike the remote reaches of outer space), and currently lives in Thailand.
It's a fact that the general concepts presented in this book have been around for quite some time, yet only a tiny percentage of people are aware of them and so many major institutions and influential individuals still see Mars as the main objective of the manned space program, without being sufficiently aware of the PERMANENT concepts, if at all.
The late Dr. Gerard K. O'Neill, the person most responsible for promoting these concepts in both government and private circles, founder of the Space Studies Institute (SSI), and one of the best all around persons I have ever met, summed it up well in a statement that his followers and subordinates should live up to: At the last board meeting that he attended one month before he succumbed to a seven year bout with leukemia, Dr. O'Neill firmly stated, "Our mission is not complete until people are living and working in space."
To date, the only community which has progressed the PERMANENT field in substantial ways is the scientific and technical community, which has worked with remarkable harmony and cooperation among diverse elements. I believe that this is due to the scientific training of the individuals, as well as solid character by many of the technical leaders in this field. However, these people tend to be apolitical, and there have been precious few who have been interested in promoting the PERMANENT concepts to venture capitalists.