Wednesday, February 17, 2010

Long Waves and Space Development

By Nader Elhefnawy
Originally published in the SPACE REVIEW, June 23, 2008

The idea that the world economy has followed a cyclical pattern of activity in “long waves” is not widely known outside the world of the social sciences. It rarely appears outside of books and articles written by and for academics, and even inside the academy, is outside mainstream, “orthodox” economics.

Nonetheless, over the eighty years since its introduction, the concept has attracted interest from highly respected economists all across the ideological spectrum, ranging from Austrian School economist Joseph Schumpeter to Marxist economist Ernest Mandel. It also continues to command attention from numerous reputable economists, economic historians, political scientists and futurists. (A considerable body of research, for instance, holds that there is a connection between the outbreak and intensity of wars and the various stages of the cycle. Professor Joshua Goldstein’s classic book on the subject is actually available online at his personal web site, and Heikki Patomaki offers a compelling study of the issue in this year's The Political Economy of Global Security.)

The theory of economic long waves posits that a forty- to sixty-year-long cycle is discernible in global economic activity.The interest is particularly strong among scholars interested in the relationship of technological innovation to economic booms and busts, and in fact, long wave theory has often been used to explain the effects of “clusters” of innovation on economic history. That being the case, long waves may offer a useful way of looking back at the last half-century of space development. Given the predictive power often attributed to these waves, the theory may also usefully inform considerations of the future prospects of that development. This article will, accordingly, describe the basics of long wave theory; take a look at how space development has reflected the movements of those waves; and consider what long waves suggest about space development in the present and foreseeable future.

A brief guide to economic long waves
The theory of economic long waves, first proposed by Russian economist Nikolai Kondratiev in the 1920s (for which reason they are sometimes also referred to as Kondratiev or K-waves), posits that a forty- to sixty-year-long cycle is discernible in global economic activity. The cycle begins with a generation-long upward wave, followed by a downward wave of similar length, which in its turn is succeeded by the upward wave beginning a new cycle. The upward wave is characterized by booms; the downward wave, by recessions and depressions, and slower overall growth (even if there may be rapid growth during part of the period, or in particular parts of the world economy).

Much about these long waves remains a subject of argument, even among those espousing the idea. There is wide disagreement on how far back such waves can actually be traced in history; the precise beginnings, endings and durations of particular waves; and of course, what exactly stimulates upward turns and provokes downward turns.

Nonetheless, a fairly conventional view is that the first wave began in the late eighteenth century, the second was ongoing by about 1850, the third took off in the 1890s, and the fourth in the 1940s.

Examining the fourth wave more closely, the argument typically goes that the upward wave that marked the end of the Depression constituted the very rapid worldwide growth of the postwar 1940s, 1950s, and 1960s. The turning point was the early 1970s, which saw the collapse of the Bretton Woods monetary system and the onset of the oil crisis of the 1970s, after which it grew much more slowly as a whole.

This may seem counterintuitive given the hype surrounding globalization, the rise of China and India, the boom of the 1990s, and the neoliberal conventional wisdom in general. However, after adjusting the statistics on world Gross Domestic Product published by the World Trade Organization in 2001 for US Census data on population growth, it seems that the world economy grew at a rate of over 3.2 percent per capita a year for the years 1950–1973. By contrast, it grew at a rate of 1.1 percent a year for 1973–2000, barely a third as fast. (Some suggest the disparity is even bigger than that. Economist Alan Freeman calculates that between 1988 and 2002, the planet’s per capita GDP may have actually shrunk.)

The numbers are much easier to account for than one might first assume. After all, there was not only the Asian boom, but also the Asian financial meltdown of 1997–1998, and it seems awfully likely that China’s performance has been overrated all along. According to a report issued by the Asian Development Bank last year, its exaggeration may have led to the overestimation of the size of China’s economy by forty percent. In line with this, the CIA quietly adjusted its estimate of the Chinese economy down from $10 trillion in the 2007 edition of its World Factbook to $7 trillion in the 2008 one—a difference equal to five percent of the world economy, or five years’ high-speed growth for China.

Meanwhile, despite occasional glimmers quickly seized on by the optimists, the prospects of Latin America remain dismaying, the situation of Africa and the Middle East dismal (despite the illusion of wealth created by oil revenues). There was the stagnation of Japan, and the mediocrity of American and European growth compared with their performance in the earlier period, and the total collapse of the Soviet bloc economies (from which many of them have not really recovered, for all the pain of their reforms).

Reexamining the history of spaceflight
Scholars generally regard the beginnings of long waves as multi-causal, but it is notable that each of these coincides with a burst of technological development. The first wave came with the beginning of the Industrial Revolution in Britain. Railroads and steel are widely believed to have played an important role in the second wave of the 1840s, the chemical and electrical industries in the wave beginning in the 1890s. The early 1940s, in turn, saw a rush of new technologies, including jet engines, nuclear energy, electronic computers—and crucial developments in modern rocketry.

It is universally accepted today that the rockets that came out of the early 1940s (in particular the German V-2) were the forerunners of today’s space launch vehicles. Such rockets also played an important role in the postwar economic boom.

Long-range missile programs comprised a large part of the defense spending of the superpowers, and stimulated a great deal of spending on associated systems, from early warning systems, to submarines designed to carry the weapons, to the research and development of lasers. The role of such expenditures in the postwar boom ought not to be trivialized: defense spending at the height of the Cold War often ran to a tenth of US GDP (a situation often described as "military Keynesianism"), and more than that in the Soviet Union.

The related space programs laid the foundations of a space industry that has emerged as a commercial heavyweight, a $250 billion-plus a year global business in 2007. And of course, there are the assorted technological spinoffs that came out of these programs in fields ranging from computing and materials science, to energy production and medicine.

It is also worth noting that the heyday of the space race came in the early, upward part of the cycle, the 1950s and 1960s, not least because of the stronger economic growth that made the major countries more willing to invest in space (the boom the technology helped drive, in turn, sustaining the development of the technology).

This was the period of famous “firsts”—the first space shot, the first man (and woman) in space, the first orbital flight, the first spacewalks and moonwalks, the first space station. There was also a widespread expectation that the development of space would continue at that seemingly rapid pace, epitomized by the writing of futurists like Gerard K. O'Neill in The High Frontier: Human Colonies in Space and G. Harry Stine's The Third Industrial Revolution.

That their visions did not come to pass is often attributed to underperforming technological programs like the space shuttle, typically blamed on bureaucratic mismanagement, or an underestimation of the technical challenges involved in them. While it is hard to dispute the role played by these factors, the receding of the financial resources to support such activity (and with them, enthusiasm for such endeavors) as growth shrank, tax revenues dried up and debt mounted is at least as important.

It is also worth noting that the heyday of the space race came in the early, upward part of the cycle, the 1950s and 1960s, not least because of the stronger economic growth that made the major countries more willing to invest in space.The history of the budget for the National Aeronautics and Space Administration makes the point. NASA’s budget in the mid-1960s, adjusted for inflation, comes to over $30 billion in current dollars. This did not last long, however, and cutbacks reduced it to about a third that level by the late 1970s. Measured as a percentage of GDP the difference is still more striking. The 1966 figure corresponds to about 0.75 percent of US Gross Domestic Product. The budget in 1979, though, was a little more than a fifth that, and the figure has continued to trend downward with the failure of civilian space spending to keep pace with economic growth. The $16.3 billion budget for 2007 represents just 0.12 percent of GDP for that year.

The collapse of the Soviet space program was even more dramatic, of course, and NASA’s shrunken budget is roughly equal to the entire Russian space agency ten-year budget for 2006 to 2015. Despite the proliferation of national space programs in that time (even impoverished Nigeria is planning to launch its own satellites in the next decade), none of these comes close to filling the gap. Even China's, after all, from its first manned space flight to its controversial anti-satellite weapon last year, is based on long-established technology.

Of course, one can point to the expansion of commercial space activity in that same time frame, but as with China’s program, these are essentially living off of 1960s-era technology, ranging from government-funded R&D to the abundance of boosters on the international market left by the end of the Cold War (many Soviet SS-18 intercontinental ballistic missiles, for instance, having found second life as satellite-launchers).

This behavior is not at all aberrant, but the standard operating procedure for business in circumstances defined by the kinds of high costs and prohibitive risks raised by space-related R&D. Indeed, where innovation is concerned, space service providers have had far more success reducing the payload sizes needed to perform a particular task (through miniaturization, and the construction of longer-lasting satellites) than at delivering really cheaper launch services. The goal of a $20–50 a pound orbital launch cost ($120–300 in today’s dollars) of which NASA administrator George Mueller spoke in 1969, on which Stine and others based their visions of space industrialization, remains almost as distant today as it was four decades earlier.

The fifth wave?
Given the expectation of a fifty- to sixty-year cycle, it was widely expected that the fourth long wave would have run its course by the late 1990s or early 2000s, following which a new upward wave would begin. Some observers believe that we are already living through one, but this does not seem to be a majority position. In the view of writers like Patomaki the evidence for a renewed, extended period of economic boom is somewhere between fitful and nonexistent. Accordingly, they argue that we remain mired in the long downward wave that began circa 1973.

Assuming that the theory of long waves has any predictive power, then what might get the world economy humming again like it used to remains unclear. New technologies are likely to be prominent in a new upward turn, but which ones?

It seems only reasonable to wonder if space technology as such will play a role. As Colonel Charles D. Lutes notes in his article "Spacepower in the Twenty-First Century" (which appeared in the Joint Forces Quarterly earlier this year), the primary product of the Cold War space race was prestige, and more recently, information flows. The next will be about wealth creation from space, “a boom in the economic value of space itself.”

Optimists certainly point to signs something is happening, amid heightened international interest in manned space flight and even Moon missions, a turn to space for energy resources in the form of helium-3 mining or solar power satellites, and the rising interest in space tourism.

However, it is too early to tell where all the talk will lead. Proposals are one thing, concrete results another, as longtime space policy watchers know only too well. The hype about space tourism seems particularly dubious. While the conventional wisdom in economics today is to treat tourism and high-tech manufacturing as activities of equal economic value, economic history dictates otherwise. Space tourism will not actually add to the world’s stock of resources, or use already accessible resources in new and more productive ways, as space-based energy production, new space-based manufacturing techniques, and asteroid mining all can. At best, it will simply encourage investment in things that will prove useful to more serious activity later on, like cheaper, more reliable space launch vehicles. Additionally, while entrepreneurs have already launched enterprises dedicated to space tourism (like Richard Branson’s Virgin Galactic), issues of cost, reliability, and safety are likely to constrain the size of their market for years to come (if not decades). Indeed, it is easy to picture a single, highly publicized accident crippling the entire industry.

Space tourism will not actually add to the world’s stock of resources, or use already accessible resources in new and more productive ways… At best, it will simply encourage investment in things that will prove useful to more serious activity later on, like cheaper, more reliable space launch vehicles.At the same time, the breakthroughs likely to make the extraction of significant resources from space economically viable do not appear imminent. Nor does a change in the larger background situation that might accelerate the development of those technologies appear likely in the near term. Where the Industrial Revolution’s steam engines were constructed by talented mechanics, the innovation curve has got steadily steeper, not only in terms of the need for highly specialized knowledge, but the sheer financial and industrial resources necessary to develop and use the technology.

Indeed, large-scale public support may have become more important from one wave to the next. The railroads that drove the circa 1840 upward wave, for instance, were the beneficiaries of land grants and other subsidies on a staggering scale. The naval arms race of the late nineteenth century has been viewed as playing a similar role. The aforementioned rush of technologies that came out of the 1940s was the result of government-funded efforts of World War 2 and the early Cold War period.

Nothing comparable seems plausible today. At the same time, other demands for R&D money appear more pressing (like energy and climate change), or more promising (like information technology or biotechnology). However, it could prove to be the case that investments in these other areas will give space development a shot in the arm. This would be due not only to their stimulating higher rates of economic growth, and so making more money available for such efforts, but direct consequences of those investments. Molecular engineering, for instance, may be the key to lighter space vehicle bodies and more efficient rocket fuel, space-based solar power schemes can only benefit from improvements in photovoltaic cell design, and so on; the list of potential cross-fertilizations is seemingly endless.

It is possible (and perhaps even likely) that the benefits of such advances may not seriously manifest themselves in space development for a long time to come, perhaps even the next upward wave. Nonetheless, technological development is rarely linear, and the greatest mistake of all may have been thinking that the road to the stars would be a straight one.

No comments:

Subscribe Now: Feed Icon