New 'rocket men' may show the way for more privatization

If you want to go to space, call the Russians, Chinese or the Indians but not the U.S. government, as it is out of that business. Or instead, call one of the three rocket men who can actually deliver. And "Little Rocket Man," North Korea's Kim Jong Un, is not one of them.

Three multibillionaires -- two Americans and one Brit -- are the current space pioneers. Jeff Bezos, founder of Amazon and worth well over $100 billion, started his Blue Origin space company in 2000. Richard Branson, knighted by Queen Elizabeth in 2000 for entrepreneurship, started his space company Virgin Galactic, an extension of his Virgin Records, Airlines and Rail four years later. And Elon Musk, founder and owner of Tesla cars, started Space X in 2004.

Of the three, Branson was the first in space with Unity 22, a rocket launched from a mother ship reaching some 50 miles above Earth last week. Bezos lifted off Tuesday and traveled 60 miles above Earth in his craft, named New Shepard for astronaut Alan Shepard. Presumably, Musk will follow suit.

All three have invested at least $100 million. Each company has received private equity investment and substantial support from NASA. Bezos has seeded some $500 million and has pledged to put up a billion dollars a year from his Amazon stock. Each of the rocket men is betting that commercial space travel, even for a few minutes, will attract sufficient passengers to be successful.

Musk has developed four designs: Falcon; Falcon 9, which is the world's heaviest rocket with the power equal to 18 747s with payloads of sufficient capacity both for building in space and transporting back whatever raw materials space exploration may find; Dragon; and Starship.

Bezos and Branson, likewise, are developing follow-on space vehicles. While no comparisons exist, and clearly these three companies were totally dependent on the prior work done by NASA in the race to the moon, it would appear that private capital has been more efficient and less costly than the money spent by the U.S. government on space.

The success to date of these rocket men raises a number of questions. Can these endeavors replace government in space? Will these companies be financially viable, or -- as with other fads, from the tulip frenzy in the early 17th century to the dot.com bust 400 years later -- will this turn out to be billionaires' whimsies? Perhaps more importantly, if at least one of these companies succeeds, does this suggest that government might turn over more responsibilities to the private sector? If yes, what might be future candidates?

Privatizing many aspects of government has been tried, including "hybrid" organizations such as the Federal National Mortgage Association (FannieMae) and the Federal Home Loan Mortgage Corporation (FreddieMac). According to the law, Fannie was created in 1938 and Freddie in 1970 by the U.S. government "to help ensure a reliable and affordable supply of mortgage funds throughout the country." Both are shareholder-owned companies operating under a federal charter. But each has often been criticized for shortcomings.

Likewise, a number of penitentiaries have been privatized with very mixed success. Each department of government has attempted to privatize certain functions in efforts to reduce costs and improve efficiency. The record here has not always been good.

But with the success so far of these space companies, perhaps privatizing research and development might prove fruitful. Operation Warp Speed produced three vaccines for COVID-19 in the extraordinarily short time of less than a year because of the private sector. Given the revolution in military technologies, perhaps privatizing the Defense Advanced Research Projects Agency might be one such idea.

Government would "sell" or assign the rights to this new company and provide the R and D funding, as well as priority lists for research. Here, the entity could acquire shares in the companies being funded, acting as a de facto private equity firm but with the U.S. government being an equal partner. If the technologies were successful, in essence the government would be rewarded if the companies went public, were in turn acquired by a larger entity or were profitable, meaning costs to the taxpayer would be reduced. And the entity "owning" DARPA would pay an annual fee for the rights.

Indeed, perhaps the only way to close the huge gap between defense needs and budgets may be to emulate the success of these rocket men in privatizing space.

Harlan Ullman is senior adviser at Washington, D.C.'s Atlantic Council and the prime author of "shock and awe." His latest book is "The Fifth Horseman and the New MAD: How Massive Attacks of Disruption Became the Looming Existential Danger to a Divided Nation and the World at Large."

The views and opinions expressed in this commentary are solely those of the author.