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© 1994 by Donald F. Robertson.



This article may be distributed at will, but only if it is not changed in any way, and only if the author's name, the copyright notice, the name of the journal it first appeared in, and this notice remain attached. In addition, this article may not be sold for money, or published for sale in any way, without the author's prior written permission.

This letter originally appeared in International Space Industry Review (ISIR).

Do we Really want to Forgo Loan Guarantees?


In his argument against loan guarantees for new re-usable launch vehicles, Jeff Krukin of ProSpace presents a very one-sided view of how new commercial technology gets developed in the United States. ("Just Say 'No' to Loan Guarantees," ISIR, 7th December 1988.)

I actually agree with much of what he says about loan guarantees. Unless some way is found to apply them fairly to smaller companies, loan guarantees may well be a poor way to subsidize the development of innovative launch vehicles. But, in his enthusiastic defense of free markets, Krukin's position becomes much broader than that, and he appears to be arguing that no development subsidies of any kind are needed to deploy new commercial launch technologies. If so, he, and what might be called the other "free market radicals," are almost certainly wrong.

Krukin states that our free market economic system "created all of the different computers, communications devices, automobiles, ships, and airplanes that sustain the global economy." In fact the free market, by itself, did not create a single one of those technologies. Some of them were invented by private individuals, but, for the most part, computers and advanced communications technologies were developed in government labs and universities, or by "Soviet style" monopolies like Ma Bell. The free market's vital contribution was to diversify the government-developed technologies, and to make them cheap and ubiquitous. Likewise, modern airplanes and ships [and diesel-electric train engines] were military developments. Even that bastion of free enterprise, the Internet, was created by the government to provide guaranteed communications during a nuclear war.

Krukin says, "We did not need a National Automobile and Street Administration," but that is exactly what we do have. A private company did invent the automobile production line, but otherwise the American myth of the "private automobile" is entirely fictional.

There nothing in the world more socialist than the United States' system of major roads and freeways, without which the modern auto industry would not be possible. It was planned almost entirely by the government, for government purposes. Its creators and administrators ruthlessly and willfully destroyed most competing forms of ground transportation, in anything but a free market. The private sector may build and maintain parts of the road network, but only as subcontractors. Essentially all of the planning and organization is done by Federal, State, and local governments. Even today, with construction essentially complete, the forced users fee -- the gas tax -- only pays about two-thirds of the current freeway infrastructure and maintenance costs.

While private enterprise had little to do with the major roads that make the "private automobile" possible, the United States' freeway system is humanity's largest work of engineering to date. By any measure, it is also one of the most successful at achieving its goals.

Krukin's space history is just as suspect. Lockheed's Iridium production line developed little new technology. The networking and inter-satellite communications that made Iridium possible were developed for secret military projects. In fact, Iridium is not even the first satellite production line. That was Rockwell's line for producing Global Positioning System satellites -- for the Air Force. (Nor was Iridium the first commercial production line: that was Orbital Sciences' Orbcomm line.) Iridium's singular achievement was to assemble all of these government-developed technologies, and combine them with a key commercial insight to create a new market, and then to raise the private money to finance it.

Likewise, few of the new entrepreneurial launch vehicle companies that we all want to encourage are developing much new technology. They are commercializing technology developed by the government for ballistic missiles, Apollo, the Shuttle and National Aerospace Plane projects, and by the Soviet Union. 

The way entrepreneurs are applying those technologies is new and exciting and innovative, but the free market radicals are dead wrong if they think the free market can finance new launch technology all by itself. Without the Shuttle and NASP, the new thermal protection systems, the light-weight tankage and structures, fuel management systems, the operational concepts, and especially the aerodynamic knowledge that entrepreneurs are applying would not have been there. No private company of any size -- let alone an entrepreneur -- could have paid for all of that. Without the Soviet Union, many of the rocket engines that entrepreneurs are commercializing would not have been available.

I think we can all agree that the United States has been one of the most successful countries in history at creating new large-scale technologies and commercializing them. But the free market is only half of that story. The United States' historic achievement was to successfully integrate "Soviet-style" technocratic development (ICBMs, Spacelab, Mars Surveyor, the freeway network) with commercial deployment of parts of those technologies and projects (the commercial Delta, Spacehab, Kistler's airbag landing system, the automobile industry).

In letting their ideology blind them to half the story, the free market radicals risk killing the goose that lays the golden eggs. Yes, the X-33 and other new systems probably should not be subsidized by loan guarantees, but with these experimental launchers the government is developing and demonstrating the technologies that the next generation of entrepreneurs will need. In our defense of entrepreneurial launch vehicles, we must not starve (or outlaw) new NASA projects -- as long as they stay at least one technological generation ahead of the entrepreneurs. That is a test the current X-33 clearly passes.

In the same way that the government provides the road infrastructure, and defends the oil supplies, that the otherwise uneconomic automobile industry rides on top of, it is possible that transportation to orbit may always require some form of subsidy. I hope that is not the case, but if it is, I would hate to give up humanity's future expansion into the Solar System just because its value cannot be measured strictly in dollars and cents.

Even if an entirely commercial space program does prove possible some day, in the short term, we need the government to try impossibly expensive projects and build uneconomic infrastructure. Then, entrepreneurs can make them available and cheap for everyone.


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