Space: More than meets the eye

How big is space really? The industry is relatively small, but its economic and strategic importance may be as boundless as space itself.
OECD Observer

©David Rooney

When Russia launched the first-ever satellite into space 50 years ago on 4 October 1957, it was an event that won worldwide admiration. There was some trepidation too. With the Second World War barely over a decade earlier and the Cold War in deep freeze, West Europeans were understandably a little nervous at the thought of Soviet “Sputnik” satellites floating over their territories.
As an article in the French daily Le Monde pointed out on 6-7 October 1957, Sputnik-1 had been launched without prior warning, and that despite the reasonably large distance in terms of kilometres, a space satellite was never really very far away. However, the paper urged calm, saying that the exploit deserved everyone’s admiration, and “only a pessimistic writer of fiction would imagine this inoffensive flying object could possibly be a spying robot or that it carried a nuclear warhead”.              Less than five years later Russia put the first man into orbit, and some eight years later again, the US astronaut Neil Armstrong became the first man to walk on the moon. People from several different countries, including France, Japan and the UK, have been into orbit on board Russian or US craft, but apart from Russia and the US, no other country had sent their own manned flight into orbit, until China in 2003. However, that is not to say there has been a lack of interest in space.            On the contrary, space is a thriving strategic business. Apart from Russia, the US and Europe, and more recently Japan, China and India, there has been a wave of new interest from the likes of Korea, Turkey and Nigeria. Several countries have stakes in satellites now in orbit that carry scientific, broadcasting and observation technology. And there have been a few wealthy space tourists too.                Why all this attention to space? Is it a quest for new resources and wealth, or human instinct to explore the final frontier? To judge from a new OECD report, The Space Economy at a Glance, the short answer is both.                People are drawn by the unique promise of space technologies themselves, from information dissemination and broadcasting to planet surveillance technology, as well as the prospect of building skills and know-how. There is also the fact that space is already becoming an essential dimension of the world economy. Space activities have reached such a maturity that many applications are now fully pervasive in citizens’ daily lives.
Consider telecommunications, bank cash machines, meteorology, stock markets, transport control and shipping, etc. In this context, the requirements of the final users, many of whom have no direct connection with the space community as such, increasingly drive new systems and innovation, giving rise to a new utilitarian or pragmatic vision of space activity.              Though space applications are increasingly important in everyday life, the space industry itself is small compared to other manufacturing sectors. However, its dynamism in terms of innovation and R&D, and its strategic significance, give it importance beyond its size. The orbital infrastructure of communications, precision timing, earth observation and navigation satellites that is the fruit of decades of civilian and military research and development would never have developed were it not for the efficient infrastructure on the ground. From manufacturing to satellite relays, space and earth are stitched together in the same whole infrastructure. In other words, if policymakers are serious about being in space, they must also look after research and development.                According to The Space Economy at a Glance, the total OECD public space budget came to about US$45 billion in 2005, and has been growing: the US budget in 2006 was five times higher than in 2001 and accounted for 81% of the total. In Europe, France, Italy and Germany accounted for three-quarters of the European space budget of some $6 billion in 2005. Next came China’s with an estimated $1.5 billion. Russia’s budget of $647 million actually trailed that of India, whose budget stood at $714 million in PPP dollars.                Indeed, R&D is one of the main users of public budgets, for which government appropriations and outlays came to some $16.4 billion in 2004. The US accounted for some $10.6 billion, while non-G7 countries such as the Netherlands and Spain contributed as much as, say, the UK.                All that R&D makes the space sector labour intensive, though it is not a huge employer in absolute terms: less than 30,000 jobs for the European manufacturing sector in 2006, compared with about twice that figure for the US, or some 0.5% of total manufacturing employment there. So is there a return on all that investment in grey matter, technology and deployment in space? That depends. First of all, satellites are assets with strategic and economic value. There are some 940 satellites operating in orbit, two-thirds of which are for communications. These have a replacement value of about $170-230 billion; the stock value of earthobservation satellites launched in 2006 alone–considered to be a busy year–was at least $3.2 billion.

StatLink:Click graph or here to go to background data.
All of this has several direct policy implications, such as how to manage traffic and debris as satellites come to the end of their relatively short lives. Over 10,000 objects, including launch parts, demonstrators and probes, have found their way into space since the year Sputnik-1 was launched in 1957. The traffic will go on rising, as more satellites are launched by new space players, often taking advantage of smaller more affordable satellites on the market. Standard western satellites can cost in the $200-400 million range, whereas these cheaper models can cost as little as $20 million.                Beyond asset values however, revenue from space industries per se have not been astronomical of late, given high costs and intense competition at the margin. Worldwide satellite and launchers manufacturing industry revenues, for instance, came to some $35 billion in 2005. Launch and satellite lines of business have not fared well, with highest productivity being in the manufacture of ground-based equipment. On the services side, earnings in broadcasting and telecommunications have been strong, with broadcasting in particular making some $49 billion in 2006. Other space-related services, particularly earth observation, have fared less well. 
Another aspect is international trade in space products, of which G7 countries account for 90% of exports. A full picture is not easy to compile, given that many components of space systems are considered sensitive, such as missile technologies, and are either not exported or exchanged under strict technology transfer regimes. What we do know shows that in 2004 exports were valued at $3.7 billion. Most of this ($2.4 billion) was in balloons, dirigibles and other spacecraft widgets, with $1.3 billion in satellites, suborbital and spacecraft launch vehicles. What also seems clear is that exports have fallen sharply since 1998, reflecting the mood of the business overall in recent years.                 Still, there are signs of renewed interest in space, including at high political level. Countries tend to develop their space programmes to pursue their own strategic, economic and prestige interests. But in this early 21st century, national space efforts are increasingly being co-ordinated internationally. High cost is one reason for this, which adds to the need to avoid duplicating resources. Another is the growing demand for data covering several countries and populations, such as meteorological and security observation. Investment in space relies on partnership between the public and private sectors. Governments tend to set the parameters and submit orders, while businesses invest in everything from launchers to technological components. They are the key innovators.                
The fusion of information technologies, nanotechnologies and computing power is in fact a driver behind the renewed interest in the space business, opening up promising opportunities and the prospect of more affordable, accessible “next generation” space equipment. Family space cars may still be science fiction, but this wave of interest from new players is driving up competition and opening up the industry.
But ultimately, space is also about science and exploration too–whether to obtain deep space images from the Hubble telescope, or to land spacecrafts on the surface of Titan, Saturn’s moon, or on asteroids as the spacecraft NEAR (Near Earth Asteroid Rendezvous) did on Eros, or whether to send probes to Pluto and Jupiter. The goal of most space agencies is knowledge itself. Scientists and the public are driven by a yearning to understand our planet, the universe, about how life has evolved and can be sustained. The human craving for space exploration and scientific pursuit that characterised expeditions in the aftermath of Sputnik-1 four decades ago will never go away, but it is the mundane economic imperative of having to supply and manage efficient space-based utilities that will also drive thinking and budgets over the coming years. With the right mix of policies, the space industry will continue to look forward to a bright future. RJC                  

AFTERWORD
To boldly go: In 2002 an OECD International Futures Programme (IFP) project took off to explore the economic importance of space technologies. Some 25 organisations from both public and private sectors participated, using a broad socio-economic approach to identify trends, policies, and so on. Since then, the OECD has acted on requests from several governmental agencies and industry players for better, more accessible data, and in February 2006 launched a three-year enterprise called the Global Forum on Space Economics. The Space Economy at a Glance, the firstever OECD statistical overview of the emerging space economy released in autumn 2007, is the fruit of this collaboration.                  
  References                
  • OECD (2007), The Space Economy at a Glance, Paris.              
  • OECD (2005), Space 2030: Tackling Society’s Challenges, Paris.                
  • OECD (2003), Space 2030: Exploring the Future of Space Applications, Paris.           
  • “Les Russes lancent Spoutnik-1” in Le Monde, 6-7 October 1957, quoted in “Il y a 50 ans”, Le Monde, 6 October 2007, OECD Observer translation.      
See www.oecd.org/futures/space
For more commentary, contact the lead author, Claire.Jolly@oecd.org

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©OECD Observer No 263 October 2007



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