Billionaires, State-Capitalism, and Space Utopia

Billionaires, State-Capitalism, and Space Utopia

Many self-proclaimed capitalists and free marketeers see recent advances in space exploration as an opportunity to hail the kinds of fruit borne from markets and competition. In this way, one sees rockets soaring away from their launchpads as heartwarming symbols of entrepreneurship—a display of technological progress and human capability that emerges only when the most liberal-spirited sentiments of risk-taking, experimentation, and savvy business practiced manifest themselves in the glorious system of free enterprise, away from the meddling hands of the state. This is the excitement the “titans of industry” mythology provides.

However, this superficial sentiment needs to be pushed aside to understand today’s space adventurism in its proper context—especially in the United States. It is certainly not the newest wave in an industry set off solely thanks to billionaires and their business savvy. Nor is it the result of science meeting commerce in a spontaneous Hayekian order, proving that outside of government bureaus is the only place where innovation happens. Rather, today we are seeing the next chapter in the continuing story of state spending and industrial planning, corporate privilege and support through financial funneling, the fulfillment of government procurements that aim at military supremacy, and government funding that boosts the output of high technology industries. 

Just as many market liberals too quickly point to really-existing “free trade” agreements as great examples of the fulfillment of fundamental market principles and the ideals of competition, they also view the modern space race in awe, lacking similar consideration of the past and present context of the state-capitalist privilege, decision making, and planning that surround the industry. Ultimately, it is an error to associate today’s space adventurism with free market principles. The facts of the industry demonstrate that those principles are partly or completely cast aside by the ambitions of politicians and the vested interests of business. Anyone who is serious about market fundamentals who wants others to see it as a serious stance rather than just fairytale apologism, or motte-and-bailey grandstanding, must grapple with this fact.

Even a cursory look at the inception and development of the air and space industries sheds light on how state-capitalist threads—not the fundamentals of laissez-faire economics—were crucial to shaping the industry and carefully watching over its growth. And much of the same still holds true today, supporting the modern space cowboys.

Before the race to space

Even if we grant that the earliest innovations along the aviation technology timeline were based purely in scientific interest and the spirit of progress, or were the result of market-based tendencies driven by the truest bourgeois values of revenue, profit, and competition, its connections to the American state-capitalist regime starting forming shortly after its birth. The state understood that the success or failure of the industry would have economic implications that would contribute to national superiority.

Familiar high-level storytelling for the aviation industry tends to trace technological innovations and industry milestones narrowly. One usually starts with the Wright brothers and their first successful flight in 1903, perhaps tracing some important initial milestones in commercial passenger flights, push forward to World War I as the first global conflict with mass use of aircraft, note how much technology changed in the interwar years, jump to World War II and express awe at how much was accelerated by this second global conflict, and so on. 

However, this approach confines us to a kind of niche-interest history that leaves one with the impression that the trajectory of aircraft technology and innovation would have always more or less started and continued on the same path whether government or corporate interests were involved or not. In other words, this lens doesn’t allow for a better understanding of the different interests and institutions that would eventually influence and/or control air and space innovation and exploration in the United States.

Indeed, one can’t leave the interest and influence of the “state” and “capitalists” in this state-capitalist story off to the side, ignore how they played off and supported each other, and merely focus on the technological output of “private enterprise.” Like much of the economic progress of the 20th century, the facts are more subtle than the kind of one-man-on-a-mission, hero-of-the-market stories one tends to hear about in pop culture. 

Consider one example: the formation of the National Advisory Committee for Aeronautics (NACA) in 1915. Enabled, incentivized, and justified by the urgency of World War I, this federal agency acted as a coordinator between industry, academia, and government. In doing so, the NACA would begin to serve the function similar agencies would: appropriate public funds and direct academic and scientific research in a way to “[generate] the essential data and research industry could not, or would not, generate on its own” Of course, that same private industry would then profit from this dynamic while also serving state aims.

The kind of bridges created between private industry, researchers, and different state interests (e.g., military) by agencies like the NACA should not be treated as sidebars to technological progress and industrial growth. Rather, they should be seen as playing a part in actively guiding, shaping, and incentivizing new, growing, and established industries in ways crucial to technological development and the success of certain private players. Furthermore, they often enforce the clout and entrench the position and influence of the key industrial, governmental, military, academic, and scientific interests by securing them a place at the right tables at the right times. That an organization like the NACA would so quickly go from an “advisory institution” at its founding to a “huge driver for aeronautical innovation in the United States,” and “by the early 1920s [adopt] a new and more ambitious mission: to promote military and civilian aviation through applied research that looked beyond current needs” [italics mine] is well reflected by not only having members like Orville Wright (a member  appointed by Woodrow Wilson that would “serve for 28 years, until his death”) involved, but also by the list of the agency’s Charimen that rotate between those with military, university, and corporate ties. All of which necessarily operated in a way that served to coordinate and support certain interests rather than leave them to truly compete in markets.

So, the early aviation industry got some state-capitalist guardrails and fertilizer. With industry coordination and oversight of this kind, naturally this cooperation and interfacing would go beyond initial training wheels and continue straight through World War II. As a NASA fact sheet says, “the story of military aviation and the American aircraft industry during [World War II] is well-known [but] the story of research conducted by the NACA has received less attention.” And, as mentioned earlier, although the agency’s earliest days saw relatively lower funding, 

[the] urgent demands of [World War II] necessitated a different relationship. A unique partnership was formed by NACA researchers with industry designers and military planners. One journalist characterized the NACA’s role in this partnership as “the research midwife at the birth of … better American planes.”

Indeed, “a leading aviation publication” in 1944 points to the state-capitalist dynamic as crucial to the inception and growth of the industry by noting “the story of the NACA [was] the story of American aviation. Neither could well exist without the other. If either fails, the other cannot live.” Although the NASA fact sheet notes that NACA’s role in the aviation industry “was recognized later as exaggerated praise,” the claim itself nevertheless highlights that industry observers at the time understood the power merging state, corporate, scientific, and other interests had, and what might be at risk not doing so.

The state-capitalist dynamic would give birth to, and accelerate, many technological innovations that would shape the industry while substantially benefitting both the private interests and the public aims that guided it. Many achievements and milestones—like Boeing’s 707 commercial jetliner—can trace direct and indirect roots to the publicly-funded military research and development that preceded it, not to mention state investment, protection, and the hiring of trained experts coming from government programs taking from the public purse.

Aviation experts, military historians, and the like, will get into debates about which ideas came out of whose heads or which corporation’s labs. These facts are important in and of themselves. Nonetheless, falling back to a line-drawing conversation that credits one organization or another with a specific innovation in engines, propellers, and so on to sort between “private” or “public” victories would be to miss the higher point: the state and the capitalists in the early days of aeronautics were able to cooperate in, and mutually enforce, a framework that one could hardly say was strongly, or primarily, incentivized or constrained by free markets. This reality would set the trajectory of the technology, the tone, and expectations of interests within the industry, and fuel aspects of the economy tied to both.

The space race

The NACA was folded into NASA in 1958. Just as early aviation history has a mythology based on the glories of specific men of innovation and experimentation, the “space race” is framed around two governments and societies competing for glory through research and development—NASA representing the cause for greater good against an evil empire.

During the Cold War, military and technological supremacy continued to be a key concern for the United States, and so were efforts to pull off acts of symbolism—like putting pressure on NASA to sink time and resources into nationalist displays of scientific ability and strength such as moon landings rather than more fruitful, endeavors. 

Many of the activities and milestones performed under the NASA brand filled citizens with nationalist pride while filling the pockets of particular interests. In this way, NASA, like the NACA before, acted (and still acts) as a state-capitalist bridge and coordinator between the military and different civilian spheres, influencing the trajectory of industry and technology. The hefty yearly budgets NASA would begin to enjoy demonstrates how the funneling of public funds was not only key to the livelihood of the agency itself, but also private industrial, academic, scientific, and military interests that enjoyed the trickle-down from the public purse.

Indeed, a report on the Apollo era credits multiple factors as contributing to NASA’s success during the time, including “the ability of the agency to draw on the scientific community for advisors, principal investigators, and consultants; …the ability of the agency to draw on the capabilities of the Department of Defense for launch support, contract administration, program managers, and astronauts.” And, last but not least, one of “the key internal decision[s] in the history of NASA[:]…The decision to rely on private industry, rather than in-house staff, for development of NASA programs.” 

In other words, NASA acted as the center of a multi-billion-dollar ecosystem of public funding and economic activity that would pad the pockets of subcontracted corporations, their employees, their subcontractors, and so on—whether they were directly involved in building and launching rockets, or one of the industries that would supply those doing so. Naturally, all of which would have a vested interest in continuing the programs and activities of the agency, regardless of the merit, efficiency, legitimacy of what was being undertaken, much less a thought about market principles. Indeed, as “the nation’s scientific and engineering research activities expanded exponentially after World War II, so also did researchers and their institutions become more dependent on public funding.”

A job-search company correctly outlines how gifts from the general public’s pocket get passed on to particular coffers through programs of Keynesian stimulus that make their way down chains of interest, and, in this case, into individual pieces of rubber:

Armstrong’s small step was the culmination of the efforts of those 377,000 contractors working for such well-known aerospace companies as North American Rockwell Corp.’s Space Division; Grumman Aircraft Engineering Corp.; and Boeing Co., Aerospace Division; but also firms such as International Latex Corporation (ILC) of Dover, DE. That particular firm was a division of a company that manufactured Playtex bras and girdles, but ILC was called upon because its engineers clearly understood rubber garments.

The flag planted on the surface of the Moon was perhaps a symbol of many things, including decades of continuing stimulus to private industry, academics, and scientific researchers. Furthermore, private industry definitely enjoyed (and still enjoys) its “”pay-off” from NASA R&D investment” in ways that go beyond the direct open-and-shut cycle of one project or another, and into strengthening the foundational knowledge and market power of particular private interests. Indeed, “beyond the completion of the aerospace programs for which NASA funds were originally appropriated [the] pay-off is not primarily in the consumer marketplace of popularly recognizable products and services, but in the capital goods marketplace, where one acquires instrumentation for research, development, and manufacturing; biochemical and other chemical processes; new ways of harnessing energy; and in medicine, where we seek sophisticated new substances, mechanisms, and instruments.” 

In other words, gifts from the public purse keep giving beyond their initial spending. For example, foundational research adopted and toyed with for state-directed projects not only narrowly contribute to a company’s bottom line, but also drive technology and private profits in certain directions. As a bonus, all of this so-called private enterprise and initiative goes on to be protected by intellectual property laws, the corporate law regime, and can even attract a new cycle of state investment for more and different applications.

Making all the connections necessary between agencies like NASA and their state-capitalist effects would be a tough project. So would assigning credit to the public purse for directly and indirectly fueling technology the modern economy relies upon. Luckily for the reader interested in this, NASA has been happily tracking this kind of inventory since 1976, and proudly defines the word “spinoff” in a way that makes making this point of the essay unfairly easy:

1. A commercialized product incorporating NASA technology or expertise that benefits the public. These include products or processes that: 

•were designed for NASA use, to NASA specifications, and then commercialized;

•are developed as a result of a NASA-funded agreement or know-how gained during collaboration with NASA;

•are through Small Business Innovation Research (SBIR) or Small Business technology Transfer (STTR) contracts with NASA

•incorporate NASA technology in their manufacturing process;

•receive significant contributions in design or testing from NASA laboratory personnel or facilities;

•are successful entrepreneurial endeavours by ex-NASA employees whose technical expertise was developed while employed by the agency;

•are commercialized as a result of a NASA patent license or waiver;

•are developed using data or software made available by NASA

Today’s “market” mavericks

At what point can we say that the careers of people like Jeff Bezos and Elon Musk should be credited to sheer entrepreneurial and market-driven talent, or to the fact their activities play within—and are often supported by—the greater beast of a state-capitalist framework that draws much of its life from rent-seeking, privilege enforcement, particular forms of ownership that aids capital and grows it (e.g., the corporate form, intellectual property, etc.), and stimulus from the government? The answer doesn’t always come with a clear line for every initiative in every industry, yet when it comes to their air and space adventures it very much does.

These industrialists and the ecosystem of corporations, subcontractors, offshoot industries, and consultants, enjoy being the center of attention in the new chapter of space adventurism, yet they are all deeply connected to—and have a vested interest in—what can be legitimately characterized as the “spinoffs” and “pay-offs” of state-capitalist, private-public coordination, and cooperation of the past, present, and, future. Much of their current successes are based on the funneling of public funds, and the technological and economic progress that provide them a foundation are based on the same cycle that’s been turning since before they were born. Even if “shifting power and regulatory authority away from the federal government and increasing the freedom of American companies to act as they see fit to meet the demands of the market” happens over the next few decades for industrialists in space, future success stories in this area will always trace their roots back to the kind of state-capitalist dynamics and profits we can hardly consider market-driven. 

Ultimately, the current chapter of air and space is a prime example of state-capitalism. Serious proponents of markets must ask themselves whether the kind of incentives, structures, and pressures they claim to be in favor of are truly at work in the current dynamic, or if it is simply the newest chapter of a tired story that will primarily benefit “a specific set of wealthy entrepreneurs…who strategically deploy humanist tropes to engender enthusiasm for their activities,” and various state objectives that have been determined to “require a prosperous U.S. aerospace industry” such as increasing “military strength,” controlling “natural resources,” fostering “economic growth,” and “national prestige.”

The reality is this industry would not look like it does, or perhaps even exist, if it weren’t for the state and it’s dynamic with various private interests and parties that function in the particular way they do. Market-based activity and spontaneous order cannot be symbolized with rockets and the distraction of a business corporation sending a celebrity into the sky to tug on our heart strings, just as the USSR’s initial technological achievements in the same domain can’t be either. Winners and losers don’t spontaneously form, and the richest of the bunch don’t get there through pure gumption, steady accumulation, and business savvy detached from privilege by design.

Being serious about market principles means looking at what’s happening in air and space and asking whether it’s good to celebrate an order that keeps the majority of the public detached from highly-centralized decision making and economic planning, and the funneling of money to vested economic interests by their political counterparts. All while presenting it as the natural workings of the free market and a competitive order, and most of us get used as funders (voluntarily or not)while being told to marvel at the awe-inspiring technological output that comes from “freedom” and “capitalism.”

Featured Image is Retro Scifi Spaceman