The Economic Development of the Solar System: Lessons from 1961


Introduction

People give me stuff.  Not extremely good stuff like money or airplanes, but still to me very good stuff.  My friend Brad Blair, who was at that time a grad student at the Colorado School of mines in space mining gave me something very valuable.  It was a printed article, scanned from a book.  The Article was Competitive Free Enterprise In Space, written by Ralph J. Cordiner, Chairman of the Board of General Electric and published in 1961.  After Brad gave me this, probably 15 years ago, I never read it as I put it away with other documents and forgot about it.  With a recent move of the last of my stuff from storage to my house, I found it again and was astonished by its clarity, vision, and warnings about the future of space.

A link to the full online version is provided here cordiner-article-1961. I would like to dissect this article in detail to delve into the thoughts of Mr. Cordiner.  Mr. Cordiner is not just any ordinary CEO.  He was the Vice Chairman of the War Production Board in WWII, the all powerful allocator of American industrial resources toward the war effort.  Now the article is couched in the terms of the deepest part of the cold war, but his points are still completely valid and interestingly he foresaw some of the problems we have today in getting away from our free enterprise roots.  Here goes..

General Principles in the Article–Free Enterprise Vs Regimentation

It was a fundamental premise in Cordiner’s article that ultimately free enterprise must be the foundation for the economic development of space.

A distinguishing feature of the free societies, as opposed to communistand other socialist systems, is the use of competitive private enterprise as the primary means of economic development. The citizens of the Unitecl States have both philosophical and practical reasons for preferring business enterprise to government enterprise. Philosophically, the competitive private-enterprise approach is more appropriate to a free society than government-owned or government-controlled industry, which is one of the characteristic features of a regimented society. And practically speaking, the system of competitive private enterprise has enabled this country to produce a level of living that is unmatched anywhere, anytime.

In setting the foundational premise that free enterprise should be the means whereby the economic development of space is ultimately undertaken, Cordiner put together a set of questions based upon that premise and its counter premise of development by a regimented society.  These questions are:

How can we utilize our dynamic system of competitive private enterprise in space, as on earth, to make newly discovered resources useful to man? 

How can private enterprise and private capital make their maximum contribution? What projects will necessarily require government chairmanship and support for their execution? 

What must be done to preserve a free society while competing in an international race for space? How can we assure that when the space frontier is developed, it will be an area of freedom rather than regimentation?

These are darn good questions that today, 53 years later, we still have not fully answered.

Cordiner begins with a historical recap explaining how economic development has always followed exploration.  He begins by recounting economic development of the far flung empire of the Phoenicians a development underpinned by exploration and trade.  Most traders stayed in the safe waters of the Mediterranean sea, content with their profits on known routes.  However, some bold adventurers cast a wider net, and the Phoenician trade routes expanding to the Atlantic and to the Black sea, bringing larger economic benefits, trade, and expanding the resources available to civilization.  The next sentence is the key money quote…

Every new frontier presents the same problem of vision and risk.

Cordiner contrasted the Phoenicians with the Egyptians, who sent ships sailing all the way around Africa in the year 600 B.C.  Africa is rich with resources and if the Pharaoh Necho had followed up the exploration with trade, how much different might the world be today?  He follows with Napoleon’s sale of the Louisiana purchase to the U.S. when France needed money as another example of selling a French vision of tomorrow to Americans to exploit.  President Jefferson did not know what he had bought, but he sent exploration parties, many more than just Lewis and Clark, followed by private traders, homesteaders, and businessmen turning the wilderness into the American heartland.

Cordiner makes the point that in all of these adventures and explorations that technology and human endurance were initially taxed to the limit and that many failed through bad planning or timing, but some succeeded fabulously and thus the world was transformed.  Cordiner continues:

It takes an immense effort of imagination for the citizens to see beyond these initial difficulties of opening a new frontier. No one would pretend to foresee all the economic, political, social, and cultural changes that will follow in the wake of the first exploratory shots into space, any more than the people in the days of Columbus could foresee the twentieth-century world. But such an effort at prophetic imagination is what is required of us as citizens, so that we will not, like Leif Ericson, leave the making of the future to others.

The most important long-term impact of the new space capabilities, therefore, is that they open up a new frontier for exploration · and economic development. From the businessman’s viewpoint, this spells isk and opportunity. But there will be other effects on the nation’s business life.

Imagination, vision, risk, these are the three fundamentals in turning fiction into reality, ideas in to dollars, unexplored worlds into homes for mankind.  Cordiner goes into a section that to us is old history now, how the space race was transforming businesses by accelerating technical progress (Silicon Valley would not be what it is today without the investment to miniaturize components for satellites, think Fairchild, HP, Varian, and other early stalwarts).  Fuel cells, solar cells, and batteries all had their development advanced by the space program of that era.  He also discussed changes in business thinking and the development of satellites, which now just in GEO orbit is a $300 billion dollar a year business.

He also went into the dangers of the dominance by the government of industry.  His prophetic remarks have played out to our national detriment especially in aerospace.  He talked about the danger of the dependence of industry and academia on federal dollars to support research.  His fear that research and development would substantially be under the control of government agencies.  Those of us who follow the aerospace industry know that this has absolutely happened at the big aerospace companies like Boeing, Lockheed, Northrup, ATK, and Raytheon.  He goes into the problem of the “Government Purpose License” something that I have had to deal with directly.  Most of my compatriots don’t even know that when they sign a contract with a government purpose license clause that you are signing away your intellectual property rights to the government and anyone that the government wants to license that IP.

Other areas time has shown to be not as much of a problem, such as government facilities, though the aerospace industry in its draw down due to cuts in government space projects has been closing and selling off much of its own infrastructure.  Following is his most prescient observation:

…we must recognize that there are growth tendencies in these government agencies that could overexpand under the pressures of the space program, unless proper safeguards are established. As we step up our activities on the space frontier, many companies, universities, and individual citizens will become increasingly dependent on the political whims and necessities of the Federal government. And if that drift continues without check, the United States may find itself becoming the very kind of society that it is· struggling against-a regimented society whose people and institutions are dominated by a central government…

Not only did this happen to the space program and aerospace industry, it infected the rest of our society through the meme “if we can send man to the moon then surely we can do, x, y, or z”.  That is playing itself out today in our headlines about healthcare as well as space.

To keep this from getting too long, lets jump to the really visionary part of his exposition.

“Three Stages of Development on the Space Frontier”

When I read this section (the above is Cordiners title), I was blown away, especially as he agrees with me! (sic).  Cordiner explains that by his reasoning developing space will have three main stages, and these stages are the same as with our historical development of frontiers:

  • Exploration
  • Economic Development
  • Mature Economic Operation

The graphics for this are self explanatory and incredibly visionary.

The First Stage of Solar System Economic Development

The First Stage of Solar System Economic Development

This graphic is self explanatory, the first stage of economic development begins in Earth orbit following the trail blazed by the first satellites (this was written 8 years before the moon landings)

The Second Stage of the Economic Development of the Solar System

The Second Stage of the Economic Development of the Solar System

This is where the visionary nature of his writing begins to shine forth.  In his reasoning as mankind (NASA) extends itself through exploration, it is private free enterprise that develops first the near Earth system (including the Moon).  Stage three is truly expansive:

Stage 3 of the Economic Development of the Solar System

Stage 3 of the Economic Development of the Solar System

With the free market principles espoused by Cordiner there is no doubt whatsoever that he means that the Moon, Mars, and beyond should be the province of free enterprise, governed and regulated by governments, but free enterprise none the less.  Even in the exploration phases he had this to say:

…On the space frontier, the scientific voyages of exploration will also be government-sponsored and financed.  However, the management and operation of these exploratory operations should be done primarily through government contract by private firms, with competitive incentives for superior performance and penalties for failure. Private firms and private universities should design and produce most of the apparatus required to get there and do the exploratory work.

This approach will not only utilize the most experienced scientific and technical organizations in the country, but will also accomplish the objective faster and more economically, and will help prepare the companies for the day when commercial businesses can be conducted utilizing space technologies….

It sounds like he is singing Elon Musk’s song.  Cordiner is not some wild eyed dreamer, he was the second in command of our entire WWII industrial production effort and the president and chairman of the board of one of the largest corporations of its time.  He talks about the eventuality of private launch vehicle companies, satellite construction, commercial space ports, commercial space stations, and more.  It is interesting to note that after Mr. Cordiner’s retirement GE invested more in the aero portion of aerospace and today is still a leading global manufacturer of jet engines.

One of the things Cordiner discussed in detail was the extreme cost of exploration at the time and private monopolies.  He uses the example of Pan Am and that this was an instance of a short term government monopoly that operated through private enterprise, rather than a government flagged airline.  This argument is as new as today’s controversy between the NASA flagged Orion and the private Dragon space vehicles from SpaceX and exactly for the reasons stated in the bold italic text above.  Musk and SpaceX are developing a vehicle for a fraction of the cost of the government directed alternative.  Thus, these are not new ideas, some of the titans of U.S. industry understood these principles  over five decades ago!  Here is his prophetic statement on the subject:

In these areas with commercial potential, the government should avoid the temptation to build operating facilities (under the guise of demonstration units) that will tend to pre-empt the field for tax-subsidized government enterprise and prevent the establishment of private facilities. For example, if in the 1930s the United States had established a nationalized airline instead of helping Pan American to lay the ground work for international air travel, it is likely that international air travel would still be a government monopoly as far as the United States is concerned. The public then would not have the advantage of manyprivate airlines competing for their transoceanic business.

Private industry should move as fast as possible to establish these early space businesses, so that the government can shift its efforts to the many other areas of exploratory work.

This….is….exactly…..what…..happened.  We are over five decades into the space age and still space travel by humans is a government monopoly, because it began that way.  I remember in the early 1980’s when the Willard Rockwell, the CEO of Rockwell International, the company that built the Space Shuttle, wanted to build and extra one with private capital and fly it to deliver satellites.  His proposal was met with fear and loathing by the NASA management of that time.  It has only been very recently that NASA has started to change the way it does business, first with cargo flights to the ISS and hopefully soon with human spaceflight systems designed, built, and operated by private entities to carry humans to the station.

Cordiner continues his missive with several concrete proposals, many of which have been adopted over time but one of them echoes just about all of us who write on this subject and is just as pertinent today as in 1961:

Policy Direction (Cordiners title)

The need for speed and efficiency in the exploration of space requires more coherent policy direction from the Federal government. The individuals who hold responsibility in the various agencies appear to be doing their best to bring order out of chaos, but their efforts in some areas of the space program seem to be frustrated by a confused and top-heavy administrative arrangement.

The next is very good and is just as needed today:

Congressional Statement of Intent

Finally, to assure that the public and the government agencies involved have no misconceptions of national policy, it would be worthwhile to have a Congressional statement of intent to use competitive private enterprise to the maximum in the management and execution of government technical projects; and to encourage private investment in space-oriented technologies and businesses wherever possible.

Though many of these fine words are in the NASA Act but have never really been adhered to in practice.

His final words are both a promise and a warning to our generation:

Our Children’s World

To sum up, then, the world is extending its boundaries out from the planet into space: a tremendous enlargement of the area in which man will find resources for living. To explore and tame the new space frontier will require a great technological effort. The very effort will force many new inventions that will not only be useful to us in space, but can greatly advance industrial productivity and levels of living in the United States and the rest of the world.

Yet the ultimate question that faces the citizens at the threshold ofthe Space Age is not whether the technical achievements will be made, but how they will affect human life. Will the drive for space push mankind into a steel trap of regimentation, or will it open up new vistas of creativity and freedom? Will the new, larger world of the future, with its boundaries moving out to the other planets and beyond, be a free world or a regimented world?

The answer to this question, the heritage we leave our children, will be determined to a large degree by how the United States-the world’s leading industrial nation-goes about the exploration and development of space. If we go at it by the route of regimentation and government  enterprise, if we allow the communist powers to establish our course, patterns will be set that will be almost impossible to break. On the other hand, if we use the strength of competitive private enterprise, we will not only advance faster, but will help to assure that the world of our children will be a free world, honoring the dignity and creativity of man.

The above wrap up from Mr. Cordiner is extraordinary and should have resonance today. Since his missive on this subject there is no doubt that the United States has become more regimented and that the federal government, through the power of the purse, has diluted the spirit of private enterprise in the nation.  If you look just at the aerospace industry this is quite evident.  There is almost no entrepreneurial spark left in the major companies who build products for space.  Boeing, Lockheed, ATK, Northrup Grumman, and Raytheon are almost indistinguishable from the design bureaus of Energia, Lavochkin, and other Russian space contractors.  Indeed after the collapse of the Soviet Union the joke in the business has been that the Russians have learned capitalism far better than their American competitors.  You need look no farther than the cost to carry crews to the International Space Station.  To see what happens when a state flagged space vehicle is the only solution you need look no farther than the Space Shuttle or the Orion and SLS vehicles.  How much different might the world be if Rockwell had been allowed to build a privately operated Space Shuttle.

There is hope today that things might change somewhat in the efforts of SpaceX, Sierra Nevada, Blue Origin and even Boeing to provide commercial crew.  However, this effort is under continual assault by congressional interests who are being heavily lobbied by aerospace contractors to force commercial crew into a contract construct centered around traditional cost plus contracts.  This is suicide for any hope of a commercially operated space vehicle, the type that Mr. Cordiner said was essential for a private enterprise approach to space.  The rot, the stench of the corruption of power that has come from 50 years worth of state directed space has left us to where we still have no private human spaceflight.  Within 30 years of the airmail act that enabled private companies to leverage government contracts to develop air travel, we had a global enterprise of competitive companies carrying first thousands and today tens of millions of people around the world at a very low cost in historical terms.

Mr. Cordiner foresaw the worst aspects of the power of federal control and funding for space.  He also saw the promise of space if free enterprise was able to take hold.  His first graphic above has at least for communications and remote sensing, come true.  Today the GEO comsat business, that started out with a government owned company called COMSAT, is a $300 billion dollar a year commercial enterprise with COMSAT now sold off to be Intelsat, a public company.  If we want to open the space frontier, we have a model, we have many models for both failure and success.  It is clear that a federalized program of state designed and controlled vehicles cannot be cost effectively implemented.  It is also clear that with the appropriate support, private enterprise, bringing the discipline of the market to bear like SpaceX and others have, can move America forward in space, and in the finest spirit of America, that of our free enterprise system led by visionaries and capitalists.

Democrats and Republicans in this area are no more than opposite sides of the same corrupt coin, and if we want to change this failure into success we must harken to the wise words of this American titan of business.  We as citizens must also play our role, through the power of the vote, the power of the pen, and the power of our voices.  Our history provides the template for us to save the future….

 

 

About denniswingo

I am here now on wordpress to further discuss the ways and means for the economic development of the solar system, to the benefit of the Earth.
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7 Responses to The Economic Development of the Solar System: Lessons from 1961

  1. Pingback: Space-for-All at HobbySpace » Space policy roundup – April.2.14

  2. Pingback: The Economic Development of the Solar System: Lessons from 1961 | The Newspace Daily

  3. Robert Clark says:

    Thanks for the informative article. Always look forward to reading your blog posts.

    Bob Clark

  4. DIO says:

    Irrelevant; but when you see the quote from the 1961, I never cease to remember that it is the year that began publishing the series Perry Rhodan…

  5. Derek Tweedy says:

    Great read Dennis, thank you. Your blends of past present analysis always help clarify the now.

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