‘Socialism didn’t work anywhere on Earth in the last hundred years. Why should it work on Mars?’
In June, SpaceX went public in the largest IPO in history. Three days earlier, a German historian published a book explaining why that moment had been 60 years in the making.
This week on The Capitalist, I sat down with Rainer Zitelmann to discuss ‘New Space Capitalism’, his account of how private enterprise took over the final frontier. We also discussed how SpaceX cut launch costs by 95%, why the space shuttle was a fiasco, what cost-plus contracting does to a defence budget and who will own the land beneath the first city on Mars.
Zitelmann argues that space is the one industry where the world has moved decisively towards markets rather than away from them – which makes it the clearest available demonstration of what capitalism can do. Of 324 rocket launches worldwide last year, 165 were SpaceX’s; if the company were a country it would rank first, well ahead of China. But he also warns that the next stage will stall unless someone settles the question the Outer Space Treaty left open in 1967: whether private companies and individuals can own property beyond Earth.
Below, you’ll find some short excerpts from our conversation.
Marc Sidwell
Editor, CapX
How SpaceX cut launch costs by 95%:
‘If you compare the launch costs of the space shuttle with SpaceX’s internal cost today for the Falcon 9, they have reduced it by 95%. There are a lot of reasons, but one is that they were the first to build a genuinely reusable rocket. It makes a difference whether you use a rocket once and throw it away, or whether you can use it several times – Musk has now used one Falcon 9 booster 36 times, and he will use it more. Think about aircraft. If I fly to London next time, it would cost seven or eight hundred thousand euros if they threw the plane away afterwards. No one else can do this today, with one exception: Jeff Bezos and Blue Origin. No government-led space agency – not in Russia, not in China, not in Europe, not in the United States – is able to do it. This year’s Artemis II rocket cost $4 billion, for a single use.’
On cost-plus contracts:
‘Even at the time of the first Moon landing, NASA didn’t build the rockets itself – private companies did. But the basis of the co-operation was completely different. It was so-called cost-plus contracts: the company had to show its costs, say $1 billion, and then add a profit of, say, 10%. Which means more cost, more profit. With $1 billion of costs you make $100 million; with $3 billion of costs you make $300 million. It was an incentive to increase costs. I spoke to one senior figure who worked for a contractor in those years and he told me: our best product was our overhead. Musk works on a totally different basis. He doesn’t sell NASA his rockets – they belong to him. He sells a service, like FedEx or UPS: I bring you something from A to B and I charge you this much. So if he reduces his costs, he increases his profit. It is exactly the opposite of what came before, so it comes as no surprise that costs are lower.’
The space shuttle’s record:
‘The space shuttle was a total disaster. They based their calculations on 140 flights every year; in the end it was 135 flights in 30 years. They calculated costs of about $10 million per flight; in the end it was more than $1 billion. Then there were two accidents, 14 astronauts died, and it was ended in 2011. The chapter heading in my book is “The end of the future”, because from that point the United States was no longer able to send its own astronauts from American soil on American rockets to the International Space Station. They had to rely on the Russians and old-fashioned Soyuz rockets.’
On NASA’s ‘Hail Mary’ bet on SpaceX:
‘Some people inside NASA called it the Hail Mary move – you know it from football: when nothing else is working, you try something that fails almost every time. They gave a little money to SpaceX. By a little I mean half a billion dollars, which sounds like a lot, but set against a Moon landing that cost around $300 billion in today’s money it was not so much. Most politicians, and plenty of people inside NASA, didn’t believe in it. The woman in charge of the co-operation with SpaceX reported that every week a colleague would come into her office and say: “I’m so sad for you that you have to work with this idiot. I don’t want to be in your shoes.” They didn’t believe in it. But it worked.’
Why Mars needs private property:
‘According to the Outer Space Treaty of 1967, countries are prohibited from claiming ownership of celestial bodies or of land on them. I have no problem with that where states are concerned – I think it’s not a bad idea. But how does it stand with private companies, with private individuals? There is nothing in the treaty, because in the 1960s almost nobody could imagine that some decades later there would be people like Elon Musk or Jeff Bezos. Now there is a legal dispute among space lawyers about whether private ownership is allowed. It has to be allowed. You cannot settle a million people – not even thousands – without private property, because that means socialism. Socialism didn’t work anywhere on Earth in the last hundred years. Why should it work on Mars? Why should it work on the Moon?’
Can space make the case for markets?:
‘The problem with people who are pro-capitalism is that their arguments are sometimes too abstract. It’s theory – here is a Hayek quote, here is a Mises quote, imagine an island and voluntary exchange. If you make it more concrete and ask why the government failed and why private enterprise was so much more successful, and you have a real example like space, that is a better way to convince people. We have so many left-leaning teenagers today. As a teenager I was fascinated by space – I was 12 at the time of the Moon landing, and I even produced my own newspaper. If children are fascinated by space and then by capitalism, that can make a huge difference.’
