How Mars Can Make You Rich
Current Economic Conditions and the Goldilocks Moment For a Manned Mars Program
As the looming threat of nuclear war gave way to alarmist fears across the US and Russian populations during the 1960s, the excitement of the space race to put a man on the moon gave some escape and a glimmer of hope. The more scarce discussion regarding that episode in recent history was the economic impact of such a large investment committed by government leaders. The conditions were ripe for JFK to make this investment in the early 1960s on a number of levels from supremacy to economic policy. While the political atmosphere of today is much different, the conditions are just as suitable now. Large government spending on a manned mission to Mars will create economic growth in an otherwise stagnating economic climate that is just as scary as an atom bomb, but sneakier.
Indeed, the Cold War is over and just a couple of weeks ago the International Space Station peacefully changed command from an American to a Russian. So, if competition with the Russians isn’t driving the need for a space race, what is? It just so happens that many macro-economic investors and academics believe that we are currently in a period of prolonged stagnation. This is evidenced by over six years of a near-zero interest rates in the US, negative interest rates in parts of Europe and Japan, reduced investment, increased savings, crashing commodity prices, and forward-looking 10-year treasury rates still at just two percent. This is not simply a cyclical effect of the markets, but rather a lasting manifestation of policy practices that our governments have employed to steer us away from economic downturn. We can no longer rely on the central banks to bail us out. As Lawrence Summers of Harvard University wrote in the most recent Foreign Affairs, “An expansionary fiscal policy can reduce national savings, raise real interest rates, and stimulate growth.”
Historically speaking, he’s right. Large public projects often have a lasting and significant impact on the entire population in ways that are not necessarily immediately apparent. Public works projects during the great depression and competition for Olympic hosting sponsorship are a couple of examples. In addition to the obvious beneficial results of new bridges, roads, or tourism created by these endeavors, the spending itself can also provide unseen remunerations. Such spending utilizes idle savings, creates new markets and demand for raw materials, provides jobs, and drives overall growth. Under the right circumstances, these impacts can provide just the right fuel mixture to send the economy soaring.
Those conditions exist now. Despite the Federal Reserve’s focus on interest rate targeting through monetary policy there is an imbalance between G-7 savings increases of $5 trillion and reduced investments globally. Major corporations are stockpiling instead of investing the same way as the government. Some investors even buy negative interest rate bonds to diversify against stocks that could plummet. Deflation is a real risk. Commodity prices are down so materials are cheap. While overall unemployment is low at 4.9%, the unemployment in key areas like construction is high at 7.5%. “Shadow unemployment” is also high in the US, with 20 million working age people that are no longer trying to find work skewing the overall employment statistics. If the US government or a multi-lateral grouping of governments were to invest heavily in expanding a space program, they would find cheap materials and widely available talent.
President Obama believes the US could have a man on Mars during the 2030s, but the rhetoric is imprecise at best. JFK’s “We chose to go to the moon” speech delivered in September 1962 set a time limit of about seven years, which was accomplished. At the height of the space race, the NASA budget was nearly 4.5% of the US national budget. Currently, it is 0.4%. President Obama’s timing goal is unspecific, relies on the combination of an inefficient government satellite launching program plagued by cost overruns, reduced funding at NASA, and a private space industry limited by commercial market constraints and government regulation. A large, targeted Mars program with a realistic measurable timeline would put billions of dollars to work in the market immediately.
It is estimated that every dollar of NASA spending translates to $10 of overall economic growth. Researchers base this on the compounding benefits of R&D at smaller companies that NASA works alongside as well as the many new technologies that result from research like heart defibrillators and GPS. Beyond these estimates, a surge in spending would increase demand for raw materials and talent in an economy that is ripe for both. This particular type of spending would also be less of a drain on the national deficit than many others such as public works. The already multi-national, cooperative nature of the space program will continue to involve partner countries, many of whom the US owes money — i.e. Japan, Luxembourg, and Belgium. The US already pays Russia to put our own astronauts in Space, and many of the top foreign debt providers are co-participants in multi-lateral space programs. By reaching for Mars, the common cause for Mars and its many benefits will transcend not just generations but also financial trepidations.
The relatively immediate and significant domestic economic growth compounds the more often sited peripheral technological advancements, the excitement of a new frontier outside of a largely colonized world, and the potential to create an insurance policy for mankind. Beyond the large contractors like Boeing, many smaller companies would enjoy profits as well. Capable middle-class workers would have new employment opportunities, decreasing the divide between rich and poor. Increased and efficient government spending on a focused manned Mars space program would have a positive impact on yields/ interest rates, opportunities for the middle class, and ultimately float the overall economy. In turn, the average citizen would see an increased variety of investment openings, and might even be able to joyously participate in the greatest frontier of our time.