Friday, May 18, 2012

The SpaceX Launch

Tomorrow, the Space Exploration Technologies Corporation, better known as SpaceX, will, if all goes well, launch the first private cargo ship to the International Space Station. Many, including me, are hailing the upcoming launch as a triumph for the private space industry. To be fair, however, it's not exactly an entirely private enterprise. SpaceX has, to date, received $381 million in taxpayer money from NASA. Success tomorrow means another $15 million from NASA in their current contract, as well as another contract worth about $1,600 million to deliver future NASA payloads to the ISS.

Given the costs involved, and the public-private nature of what SpaceX is doing, some on the right have begun to criticize the company and even the NASA program under which they're operating. The Republican-led US House Appropriations Committee recently released a report comparing SpaceX and other NASA-funded private space companies to Solyndra, the failed, government-backed solar power company.

As someone who leans libertarian yet also supports the NASA-SpaceX partnership, I think it's important to confront this criticism. While SpaceX is, effectively, a government-sponsored enterprise, it's important to remember the direction of movement here. Compare space exploration to other government-dominated industries, and you'll see what I mean.

Prior to government spending on renewable energy in the past few years, solar power got some government help in the form of individual tax credits, but it was primarily a private industry. In the last few years, solar production has been growing exponentially, driven almost entirely by government subsidies. Solyndra was just one example of a general move from a small, private industry to a large, government-supported industry.

Housing finance through mortgages was a private industry from America's founding until the New Deal created Fannie Mae in 1938. Freddie Mac came along later in 1970, and both remained government-backed privately-owned companies until the 2008 financial crisis. The current federal government conservatorship of Fannie and Freddie completes a decades-long move from a wholly private to a government-run mortgage industry.

Despite licensing requirements and safety regulations, auto companies have been wholly private enterprises for many decades. That came to an end with the 2008 financial crisis and the GM and Chrysler bankruptcies, in which the US and Canadian governments became minority stockholders of both companies. Since there have been efforts to back these governments out of ownership roles since then, and since Ford and indeed the Asian auto companies never went bankrupt in the first place, this is hopefully not part of a general movement from private to public. However, it is at least a temporarily public ownership of a typically private industry.

In contrast to the solar, mortgage and auto industries, space has never been a private industry. The first launch into space was done by the Soviet government. Until 2004, every human being who had ever gone to space had been sent by one government or another. Far from taking over a previously private industry, NASA's partnership with SpaceX is part of a general move from public to private.

While conservatives and libertarians are right to criticize the movements from private to public in the solar, mortgage and auto industries, it's a mistake to lump in with those the space industry's movement from public to private. It's true that the space industry continues to be almost entirely public, and it will be years or possibly even decades before private sources of revenue outpace public sources in space. However, the NASA-SpaceX partnership is the next, necessary step down the road to an independently profitable private space industry. It is in this context that we should view SpaceX-- not as a private contractor feasting on government largesse, or a crony capitalist waste of taxpayer dollars, but as a necessary step in the privatization of space.

EDIT: I just came across this quote from Phil McAlister, NASA Commercial Spaceflight Development Director, that I think is appropriate to add: "Once we get the private sector out there, there will be no turning back. [Spaceflight] will no longer be subject to the prevailing political winds. It will just push further and further out, no more looking backwards, only looking forwards."


  1. Awesome point about the difference in the transitions from private to public and vice versa. Hadn't thought of it like that.

  2. AnonymousJune 29, 2012

    Will it be such a good deal for tax payers in the long run though? My understanding is that Space X will eventually go public. What is going to stop a public company from raising its launch prices in an industry that lends itself to few if any competitors?

    I am also interested to know how much IP NASA transferred to Space X and what if any consideration was paid in return.