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Back to the Future

by VIVUDS BALDAVS and JEFFREY SOMMERS

We have arrived at a historical moment of economic crisis where no exit appears visible. The limits of financialization and the “service” economy have been reached.  The way forward is through a return to developing the real economy. However, we are also at the limits of globalization and technological advances and their commercialization with new products though necessary, will not solve the problem.

Most countries plan to produce more engineers and PhDs in the sciences to innovate out of the morass. Yet, globally, we are already producing more people with high levels of education for which they will find no meaningful roles.  In the US many science postdocs can’t get tenure and seek out alternative opportunities. Others supplement adjunct salaries with poverty relief programs like Food Stamps in the US.  While scores more abandon their chosen disciplines seeking alternative lines of work.  China, which is producing vastly more technical specialists than the US, is finding it hard to generate jobs that match the skills and expertise that are being acquired.  This problem will be compounded as universities around the world disgorge increasing numbers of highly trained specialists.

Meanwhile, states with few natural resources and little manufacturing are pursuing austerity policies in an attempt to escape the present crisis.  The result has often been a further deepening of economic problems.  Energy rich countries are temporarily in better financial shape, but not as good as assumed just a few short years back.  Advances in extraction technologies for gas and oil mean energy prices will be lower than previously forecast. In short, we are moving towards energy price declines as reserves for oil and gas have risen over earlier forecasts which will slow the growth of “green economy” jobs.

Most countries are developing innovation centers and technology parks linked to research universities.  Countries like Russia have made major “bets” on future high technology development. Russia’s $33 billion gamble on nano-technology has reputedly generated rent-seeking, but relatively few competitive industries.  Thousands of scientists must be matched to real problems that result in globally competitive products.  Their solutions must find financing and entrepreneurial talent to create new industries. Yet, what is uncertain is whether in light of the kind of technological challenges to overcome, that competitive products will be developed and that successful enterprises will emerge that can compete in the global environment.

The crisis we face is much deeper than the end of globalization.  Humanity is reaching the limits of its ecological niche on this planet.  The financialization of the economy that led to the present crisis is a symptom of the deeper crisis.  Finding opportunities in the real economy limited, clever people created a virtual financial world with seemingly limitless opportunity.  Yet this virtual world is dependent on the real economy. For the virtual financial economy to continue to deliver real rewards the real economy must ultimately see real development.  However, we no longer have a frontier to conquer and, thankfully, we are running out of low income countries where goods can be produced ever cheaper through factor accumulation (cheap labor).  Limited to the environment of the Earth, there is no known economic model that can deliver high income jobs globally.  While arguments for exploration of space have not been a priority for two generations, it is time we reconsider a return to this frontier.

Arguments for expansion beyond the Earth that look to address existential threats to human survival such as nuclear war, plague, climate change and asteroid impact are not compelling, because such threats are mere possibilities with varying probabilities of occurrence.  The compelling argument for space industrialization is that we are near the limits of our ecological niche on Earth and as a species must expand our territory much as territorial expansions have occurred many times before.  The most powerful historical example is the American frontier with its extraordinary global impact.  Moreover, in the medium term, the technologies needed to make space exploration a reality will likely deliver innovations that will make life on Earth more livable going forward.   Space industrialization is the next industrial revolution that Robert J. Gordon could not find in his National Bureau of Economic Research article “Is US Economic Growth Over?”

In this context the recent announcement by Dimitry Rogozin, Deputy Prime Minister of Russia, to develop a large base on the Moon is a most welcome step.  Russia has traditionally demonstrated success in large-scale, top down projects with clear goals.  Such goals can marshal national resources across many industries and scientific disciplines.  It is more than the moral equivalent of war. By building a large base on the Moon, technology will be developed to utilize lunar resources to build industries in space to serve the needs of Earth.  Space-based solar energy will be a key technological leap that comes with such a project.  Space-based solar energy can deliver electricity to remote areas of the Earth enabling rapid development across India, Africa, and the Asian hinterland.  Keeping a large contingent of people alive on the Moon for prolonged periods will require significant advances in life support and medical technologies plus the development of entirely new fields such as ecological engineering to create large scale, closed cycle ecosystems.  Advances in life support – space agriculture to keep people alive indefinitely on the Moon and other bodies in the Solar System – can contribute to increased food security on the Earth.  Humankind will be taking steps to emerge out of the limited environment of its home planet to build a Solar System wide civilization with challenges to absorb humanity’s energies for centuries to come.

Large-scale concrete projects, such as establishing a lunar base, mining the Moon and asteroids for minerals, developing networks of space based power plants to generate clean power for the Earth, and developing a space elevator to reduce launch costs to Earth orbit are major technical challenges.  The technologies to solve these challenges will spawn new industries and numerous new products that will also have spinoffs and applications in the terrestrial economy.

Russia’s desire to supersede reliance on its commodity sector is indeed smart.  Yet, the means for getting there needs to be rethought in ways that are simultaneously backward and forward looking.  Looking back, the last major wave of high technology that was successfully commercialized was the development of microprocessors and the related Information Technology networks.  Neither the free market nor public sector efforts to spur innovation such as technology incubators, however, developed the core technologies that launched this last wave of computer based consumer products.  The core technologies making this last technology wave possible were driven by large-scale government programs, particularly the American space program.  NASA required the development of small, lightweight computing power, for which the silicon chip based microprocessor was developed as the solution.  Many other technologies in materials and electronics had to be produced, which also found commercial application.  Only later did these technologies find commercial realization in the personal computer and other electronics.  Only many years later still when matched by the commercial application of data transmission networks developed for the US military, did the personal computer market exponentially expand yet again with the internet-based worldwide web.  The personal computer and internet industries have created value thousands of times over the original development costs in the US space program.

Russia can start but it will take Europe to launch a successful global program

Today, and tomorrow, Russia is best placed to advance their economy through the development of new technologies rooted in solutions to technological challenges for concrete projects for space industrialization.  The commercial application of these technologies can then transform Russia’s own economy and help lead the global economy out of the present stagnation.  Russia is still a leader in space development.  Russia’s space program would be the historically validated way forward.  Instead of investing money only in basic research with uncertain payoffs, an ambitious space program designed to mine the natural wealth of space would require the development of new technologies that would find promising future commercial applications on Earth.  This, in turn, could create the next round of challenge –innovation dyads to spur the economic growth required to deliver us from the current stagnation.

Only Russia rivals the United States in the experience and infrastructure required to launch an ambitious space program.  In some ways, Russia has an even deeper bench of expertise with more scientists with the appropriate training.  Also, Russia does not have the same political limitations as the US where a significant expansion of the space program could not be sold to voters already frightened of budget deficits.

Would space projects be expensive?  Of course.  Yet, investments in space industrialization unlike investments in military technology, can generate large commercial benefits.  The payoffs could be huge with better results likely than from funding more and more technology parks and tech business start ups alone without a clear, national technology goal.  Moreover, Russia’s comparative advantage in space permits it to move ahead of others lacking the scientific infrastructure required to quickly realize this path toward technological innovation and economic growth.  In short, the answer is for Russia to lead the world out of the crisis of this era by going “back to the future.”

How space industrialization can be launched

The project of European unity and peace was best advanced during the Cold War, when European states worked to construct economic cooperation predicated on development of the real economy rather than a currency union.  This same spirit could be re-animated through a serious European/Russian space program by advancing the mission of the European Space Agency (ESA), which also includes Canada as a cooperating member.  The ESA in turn can provide leadership for the development of global cooperation in space exploration. The EU has also championed the International Code of Conduct for Outer Space (CoC).  Industrial development of space will require agreements on the use of space resources and on scores of other issues.  EU participation would be invaluable in building the level of international cooperation needed to enable the creation of infrastructure for space industrialization that will enable broad use of the technologies that will be developed in the coming decades.

Russia proposes a grand project to build a large-scale base on the Moon as a joint project with the European Union with the door open to the US and all other nations on Earth.  This would create another “Sputnik moment” that led to an extraordinary advance in technology development in the US and globally.  But, unlike the Cold War struggle between the US and the USSR, the “Moon-base moment” would give the American President a mandate to lead the US out of the crisis in a way that simultaneously accelerates China, India and others to follow.  The joint project could be framed similar to the original treaties that led to the formation of the EU centered on economic cooperation.  Accession rules would govern how other nations, commercial partners, NGOs and individuals can take part in the Moon-Base Project.  The US would be invited to immediately join the project to launch the Space Industrial Revolution.

Vidvuds Beldavs is President of Kaija Consulting, Ltd, a Riga, Latvia based consultancy that has advised the Latvian government on technology commercialization and economic development strategies. He served as Business Trends Advisor to Cummins, Inc., and served as the Executive Director of the Technology Transfer Society.  He was the Hudson Institute’s initiator of the International Baltic Economic Commission for the governments of Estonia, Latvia and Lithuania. He can be reached at: vidbeldavs@gmail.com.

Jeffrey Sommers is Associate Professor of Political Economy & Public Policy and Global Studies Fellow at the University of Wisconsin-Milwaukee; and Visiting Faculty, Stockholm School of Economics in Riga. He can be reached at: sommerjw@uwm.edu.

Jeffrey Sommers is Associate Professor of Political Economy & Public and Senior Fellow, Institute of World Affairs of the University of Wisconsin-Milwaukee and Visiting Faculty at the Stockholm School of Economics in Riga. His new book new book (with Charles Woolfson), is The Contradictions of Austerity: The Socio-economic Costs of the Neoliberal Baltic Model

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