How could increase in government investment in space exploration revolutionise the UK’s economy?
Triolovsky, a Russian scientist, said, ‘Earth is the cradle of humanity, but one cannot live in the cradle for ever’ . This holds true for economics, which no longer lives in the bounds of earth but has extended to the great cosmos.
The space industry today is unrecognisable to that which existed at the time of the 1969 moon landings. It has shifted from a way of conferring political status to an untapped limitless resource to be exploited by those who dare, most notably private entities. While investment in the space industry by the private sector has rocketed, government expenditure has not kept pace. The UK government had approximately 5.1% of the global space economy in 2016/17 (AGENCY, 2017), with a measly annual budget of c.£469 million, equivalent to 0.16% of its GDP. To contextualise this is, the UK government has just spent an immense £106 billion (BBC, 2020) on the HS2 railway, which cuts a meagre 29 minutes off the trip from Birmingham to London. This reluctance to invest in space is likely caused by a view that space exploration is a waste of taxpayers’ money as it does not yield any return, with the only impact being an increase in the (already large) fiscal deficit. However, if this uninformed view is to inhibit government spending for the foreseeable future, the UK will miss out on both direct and indirect benefits that could revolutionise the UK’s economy.
Obvious, ultimate direct potential benefits
The direct, potential benefits of space exploration can be broadly categorised as mining and the communications sector.
To understand the mining opportunities, it is important to appreciate the value of rare earth metals to the modern, global economy. In a nutshell, they are central to the production of much of electronics/high-tech. However, China currently controls c.80% of the world’s supply of rare earth metals (News, 2019). As such, it is able to – and does – exercise its (effectively) monopoly power by reducing supply and increasing price (Yu, 2021). This leaves the UK (along with much of the rest of earth) in a highly vulnerable position economically.
A potential solution to this comes from mining asteroids and Mars. On the asteroid front, several candidates for mining have already been identified such as 16 Psyche which has been estimated to be worth $10,000 quadrillion – more than the entire economy of Earth. As to Mars, while its composition has not been conclusively determined, it is highly probable that it contains mineable rare earths. Studies of Mars’ geological activity indicate great prospects for mining as the presence of volcanoes has pushed heavy elements (i.e. metals) at the core and mantle closer to the surface. The closer to the surface the elements are, the less energy is required to mine and obtain them. When compared with earth, even after taking into account transport costs, it is thought that mining on Mars could be highly profitable.
The second primary direct source of actual and potential profit lies in the satellite industry; this has become increasingly central to the functioning of the world’s economy, satellites being critical to communication and data/information transfer in the modern age. It is correspondingly unsurprising that satellite technology is extremely important from a geopolitical perspective; no state would want another state to have the power to stop communications systems from working – leading to, for example, a complete breakdown in supply chains and even a state’s electricity grid failing. Therefore, since the Apollo missions, shifts in geopolitics and security-driven competition have caused many states to develop counter-space capabilities, further accelerating the growth of the space industry.
In view of these factors, it is entirely logical that the massive growth already observed in the satellite industry is highly likely to continue.
Indirect benefits
However, the benefits to the economy do not end there. There are very significant, indirect benefits to space exploration, the most important of which, from the UK’s perspective are developments in technology, the opportunity to the legal sector and the improvements to the labour force.
In part, this is founded on UK’s key competitive advantages: a brilliant scientific pedigree with world class universities and research (most notably, Oxford, Cambridge, Imperial); a common law system that is highly regarded in multiple jurisdictions, a sophisticated legal sector and a judiciary that is renowned the world over for its independence and high calibre, and; following Brexit, fewer constraints on the laws the UK can enact and international treaties it can enter.
Technology
Plato said that ‘necessity is the mother of invention’, and nothing holds truer than when it comes to the space industry. Investment in the space industry signals technological innovation which is likely to boost the productivity in other sectors across the economy. While solving (for example) issues relating to space travel and communications, likely by-products are the creation of inventions and technologies that would not otherwise materialise.
We saw this in the advancement of satellite technologies that came about as a result of the demands of the Apollo mission. Such innovations have significantly aided the efficiency of the economy; in the UK, it is estimated that wider UK industrial activities representing over £250 billion (Parliament, 2017) of the UK’s non-financial business economy (13.8% of GDP) is supported by satellite services. This has resulted in the Britain Space Economy report of 2014/5 estimating a type 2 multiplier of the space industry in Britain being around 1.97 (Government, 2014). In other words, £1 of space industry GVA generates £0.97 worth of GVA in the supply chain and supporting sectors, largely due to the technologies that are borne out of the sector’s investment.
This drive for new technology is also particularly potent in the energy sector, due to the need to find ways of storing energy in space. For example, great effort is being applied to innovating battery technology to enable long-haul missions. Such developments will encourage people to switch to electronic vehicles and instal solar panels as the energy can be stored for longer periods of time. With tackling the climate crisis being an increasingly pressing macroeconomic objective, investment in space has yet another positive impact.
Legal
The Outer Space Treaty, signed in 1967 by all major space-faring nations, is undoubtedly outdated. It was created in the context of the Apollo missions – largely political projects. Crucially, the commercial aspects of space were not the focus of the Outer Space Treaty (or even a factor at all). This means that many commercial aspects that are now taking centre-stage were not addressed. For example, property rights in space remain unclear. The question of how to deal with space junk was not resolved (since the Apollo missions, outer space has become somewhat crowded, with over eighty countries owning or operating satellites and around 6,000 junk satellites floating in space, potentially causing extreme danger to live and future missions and satellites). Further, the private sector has largely been left to address considerable the commercial complexities of satellite/rocket launches; not only are figures involved in a single rocket launch huge (hundreds of millions of £), but parties involved (including insurers) are typically from multiple jurisdictions. To give a simple example, a launch fails, and the rocket which was launched in Siberia crashes in India. Who is liable for the loss, and what law and method of dispute resolution should determine this?
The short point is that a jurisdiction with clear laws and regulations and even tax regimes tailored to the unique issues posed by the space industry, a dispute resolution forum to cater for such disputes and strong domestic legal skills is likely to establish itself as a space hub and therefore attract a significant revenue. It follows that even if that jurisdiction does not itself have the means or inclination to invest directly in huge space programmes, it could nonetheless reap significant economic benefits.
This has been borne out by developments in Luxembourg. In 2017, Luxembourg created a licensing and supervisory regime addressing the ownership of resources acquired in space, allowing commercial companies (from Luxembourg or not) to legally appropriate resources acquired in space from celestial bodies (Ogier, 2017). Further, at the end of 2020, Luxembourg adopted the Space Act. This applies to space activities, including the use of satellites and activities carried out from the Luxembourg territory or by means of installations that fall under Luxembourg’s control and jurisdiction, regardless of the operator’s nationality. Such initiatives, which bring legal clarity and therefore commercial benefit to space industry players have resulted in Luxembourg, a tiny country, becoming a world-recognised hub for the space industry.
A further example is the establishment of the Dubai international Financial Centre (“DIFC”) Space Court to settle commercial, space disputes. This is based at an arbitration centre based on English, common law principles (Spacewatchglobal, 2019), and is part of the UAE’s focus on securing its economic future. Like Luxembourg, the DIFC is positioning itself to become a space hub. Neither Luxembourg nor the UAE are in the top three highest investing countries for space, yet they are both set to benefit significantly from their innovation in the legal sector. It would be somewhat regrettable if the source of English law – England – did not do the same.
The Labour Force
Finally, investment in the space industry leads to a more productive economy, whilst also supporting and creating jobs in other sectors.
The space industry has the potential to make great improvements to the labour force due to the high-skilled workers required, like engineers and physicists. According to Oxford’s paper on Space Economics, the space industry in the UK had a GDP per worker of around £145,000 in 2006/07 (Economics, 2009), with productivity more than four times the UK average. This is a highly productively efficient use of labour, and if the government encourages more to enter this industry then the LRAS has the potential to shift right as productivity per worker increases.
A growing Space Sector also encourages people to train in STEM. With a higher median salary, a STEM graduate will have a greater overall contribution to the economy, be it through increase in tax revenue or the individual’s consumption multiplying money in the economy, as ‘one man’s expenditure is another man’s income’ (How the Economic Machine Works, 2016).
However, more low-skilled workers are not left behind in the process. This is because in building the rockets, satellites and rovers there is demand for transporters, manufacturers and more.
Thus, due to the breadth of the economy reached there is an estimated employment multiplier of 2.96 (Comittee, 2017) , meaning that the activity of 100 employees in the space industry supports 196 additional employees among suppliers in the economic sectors. When compared with other industries, such as the 1.83 multiplier (ONS, 2015) of the fishing and aquaculture industry that almost cost Britain the Brexit deal, it ranks favourably. For example, this could be particularly potent in the manufacturing industry (which employs 8% of the UK’s population) as there is a demand for the production of parts required for satellite (and launch services) for future missions. Therefore, the industry could have an opportunity to specialise in this upcoming area, becoming a hub which can export to other countries and private companies in the sector as well. The implication of becoming such a hub being that jobs for the UK labour force are created.
Thus, investment in the space industry emerges as an excellent policy in growing offering long-term solutions to reducing the natural rate of unemployment ( now estimated to be at 5%, the highest figure for five years), by creating jobs both within the sector and in other sectors and boosting the productive potential of the economy.
Conclusion
Johannes Kepler, a 17th century astronomer, wrote to Galileo Galilei; “with ships or sails built for heavenly breezes, some will venture into that great vastness.” The government must ensure the UK is aboard that ship before it is light years away. A failure to get involved now will cost us more than 29 minutes.
Stamp’s Post 