Novel financial models may be needed to suport a “big push” for lunar industrialization. (credit: Alliance for Space Development)

Modern monetary theory and lunar development

by Vidvuds Beldavs
Monday, October 14, 2019

Lunar development has been paced to the hard budgetary constraints placed on NASA, ESA, and other space agencies that are subject to political approval. If funding could be made available based on the soundness of a plan from a long-term perspective, then lunar exploration and development as envisioned in the Bush-era Vision for Space Exploration would have been possible. Even the space colonies vision of Gerard K. O’Neill of millions of people living and working in outer space could be realized. What’s needed is a way to depoliticize spending for outer space. Given that long-term goals have been agreed to, then maintaining funding to achieve the goals could result in not only achieving the goals but doing so sooner. It would be less wasteful and, by implication, much less costly over the long haul. Multiyear budgeting can help but cannot prevent imposition of spending limits on space development as long as the spending is constrained by the national budget and competing near-term priorities of a sovereign state.

Development of the space economy calls for new approaches

Existing approaches to financing space development cannot succeed with a complex, multi-sectoral problem like lunar industrial development. While it would be remarkable, the NASA goal of landing the first woman on the Moon by 2024 is clouded by political uncertainties and weak public support. Vastly more uncertain are prospects for significant industrial development of the Moon in coming decades with current approaches. A Jeff Bezos could probably fund a lunar landing, given support from NASA and plenty of luck. But a human lunar landing would just be a tiny step towards creating sustainable industrial capacity on the Moon. Even a modern-day Apollo, augmented with significant coordinated private investment, would face the danger of funding stagnation if the Moon would lose political favor to other priorities.

Namrata Goswani raises the concern that America’s incoherent Moon strategy is weakening its space leadership (see “America’s incoherent Moon strategy is weakening its space leadership”, The Space Review, September 23, 2019). The challenge, however, cannot be effectively addressed with a nation-state solution regardless of the coherence of its Moon strategy. Industrial development of the Moon is a global challenge that calls for an international response that includes the US and China, together with the other major spacefaring powers and all of the G20 nations, and including vital roles for developing countries. A focus on national competition is likely to encourage greater militarization of outer space, increased risks, and lots of resources wasted on weapons systems that do not advance the goal of industrial development of the Moon.

This paper proposes a pathway towards sustained long-term funding to provide government budgets and coordinated private investment to meet lunar development milestones in a sufficiently large long-term lunar development plan to develop the enabling technologies, infrastructure, and industrial capacity to enable a sustainable Earth-Moon economy and space settlement. What is proposed is a framework for international cooperation, within which rules-based competition would drive development within an innovation ecosystem that engages a widening array of players across multiple sectors and technologies working towards the goal of industrial development of the Moon.

Lunar industrial development would create conditions for emergence of:

• Transportation/logistics infrastructure, including fuel depots at strategic locations (LEO, Earth-Moon L-1, lunar orbits); LEO assembly operations, in-space manufacturing, lunar launch facilities, shuttle operations between LEO and other near Earth orbits and lunar orbit.
• Energy infrastructure
• Infrastructure for life support, including space agriculture.
• Industries emerging on the Moon to meet demand for products in markets critical to the emergence of an Earth-Moon economy: water, oxygen, basalt and other structural materials, and metals

More broadly, lunar industrial development could:

• Strengthen expectations of long-term sufficiency of natural resources, reducing conflicts over terrestrial resources. Escape the trap of win-lose competition by embracing international cooperation with rules-based cooperation for sustainable development for centuries to come made possible through use of outer space resources.
• Safeguard the Earth’s biosphere while continuing development.
• Over time, help enable full employment in the economies of participating countries -- an increasing concern in the face of the expected negative impact of automation on overall employment.
• Develop new technologies, by way of the technical challenges to space development, which will help overcome problems (economic, environmental, and social) on Earth.

A “Big Push” to achieve sustainable lunar industrial development

At present, no lunar development project has a business case that does not depend on government financing. NASA can request, for example, that an Astrobotic deliver payloads to the lunar surface, or ESA can commission a lunar rover built by industry, but so far no projects exist which can generate profits without government payments. There is also no clear scenario for achieving economic feasibility of lunar development.

Industrial development of space shares many of the challenges that face economic development of developing countries that lacked infrastructure, had no industrial sectors that can generate surpluses for investment in further industrial development, and had an absence of trained managers and workers with the relevant knowledge and skills. The economist Paul Rosenstein-Rodan proposed the “Big Push Model”[1] to address this problem:

There is a minimum level of resources that must be devoted to a development program if it is to have any chance for success. Launching a country into self-sustaining growth is a little like getting an airplane off the ground. There is a critical ground speed which must be passed before the craft can become airborne. Proceeding bit by bit will not add up in its effects to the sum total of the single bits. A minimum quantum of investment is a necessary-though not sufficient-condition of success.

Or, in the case of space development, the above metaphor can be extended to spaceflight. This effort will require sufficient resources and coordination of them to achieve what a spacecraft must: deploying enough power to escape earth’s gravitational pull. What is proposed here is a “Big Push for lunar development” over the span of a decade to provide enough investment in key emerging space economy sectors that, by the end of the decade, feasibility and readiness for economic takeoff and self-sustaining growth will have been demonstrated. Economic takeoff is one of the five stages of economic development proposed by Walt Rostow outlining how a developing country could achieve self-sustaining industrial development. Considerable work will be needed to better understand the stages of the development of the space economy to focus public investment and attention on sectors and technologies key to enable achievement of economic take-off. This is a non-trivial problem because “Big Push” models for space development have not been considered. There is an absence of development economics research on this topic.

At the top-level a Big Push to achieve sustainable lunar industrial development requires three mutually dependent aspects:

• A stable source of sufficient long-term financing to achieve milestones,
• a long-term plan,
• framework for international cooperation that drives innovation encouraged by rules-based competition and discourages wasteful spending on militarization of outer space.

Key to the possibility of success is commitment by governments to the goal of industrial development of the Moon. Commitment is achievable in a step-by-step process starting with affirmation of the goal as well as basic principles towards its realization.

A stable source of long-term financing for lunar development

During the Apollo era, when reaching the Moon was a high national priority, NASA’s budget reached a maximum of 4.4 percent of the Federal budget. After space exploration was removed as a national priority in 1972, NASA’s budget has steadily declined to 0.47% (2019) with a nominal increase in 2020. Barring a new space race with China or a major shift in public attitudes, it will not increase much more. Despite the pro-space rhetoric of the Trump Administration and enthusiasm from space advocates such as Elon Musk, US budgets for space are driven by the political clout of members of Congress serving districts with space facilities. To drive industrial development of the Moon there needs to be a stable source of funds dedicated to achieve industrial development goals that is not subject to biannual election politics. This would be possible with private investment, but there is no business case for investments in Moon that are not dependent on government funding.

A common understanding is that taxes are the primary source of government revenue with government borrowing augmenting tax revenue. Politicians loathe to increase taxes to fund discretionary activities, including NASA budgets, which are always weighted against other priorities. Borrowing funds to pay for space development could be attractive, if in the long term borrowed money could be repaid. However, so far no scenario of economic sustainability of lunar development has been presented.

Modern Monetary Theory

Modern Monetary Theory (MMT) is emerging as a response to failed austerity policies pursued by countries in Europe and elsewhere marked by strict limits on government spending, balanced budgets, and minimalization of government debt after the 2007–2008 global economic crisis. Many governments viewed that economies had experienced a financial bubble and that reforms were needed to rein in out-of-control economies. The massive spending cuts of the reforms resulted in large unemployment and cancellation of space initiatives like the Vision for Space Exploration. MMT offers an approach to increase spending to meet social and economic goals rather than pursuing economic austerity. As a result of austerity policies, many countries faced high unemployment. MMT injects new money directly into the economy to put people back to work without increasing taxes or government borrowing.

In this paper I make the case that MMT can be used to create as much money as needed to fund a long-term lunar development plan, much as an MMT type of scheme, quantitative easing, has been used by the US Federal Reserve to inject upwards of $10 trillion dollars in the US economy following the economic crisis of 2008 to enable sustained economic recovery marked by low inflation and strong job growth.

MMT is an economic theory that treats sovereign governments as different from households and other economic agents in that governments, unlike households, can emit (create) money to pay for government obligations.[3] The value of the dollar or any other currency that is internationally traded with floating exchange rates is a function of the expectations of the market about the economy of the country, taking into consideration economic trends, political climate, government actions like tax policy, level of corruption, investments in infrastructure and science and innovation, and other factors. In conventional practice expectations can be shaped by the decisions of the central bank (for the US, the Federal Reserve) to set underlying interest rates to control money supply.

According to MMT, as long as inflation is bounded to enable sustainable development of the economy, the government can create fresh money to cover identified expenses, including growth-promoting investments. Money emitted by the central bank in such a system does not have to be based on tax receipts or other payments to the government or on financial reserves in the form of gold or other assets held by the government. The sovereign authority does not have to borrow money, it can create as much money as needed simply by changing account values digitally without printing money. Such money can be used to make any government payments, including those needed to achieve an overriding economic goal, which has been generally stated as full employment.

The only limit to this money creation, in principle, is the underlying capacity of the economy to produce goods and services. Insufficient capacity drives up prices, resulting in rising inflation. Inflation that is excessive erodes capacity of money as a store of value and can lead to hyperinflation and economic collapse. In contrast, deflation, which is the reduction of the value of units of money, reduces the value of assets. Whether the economy is MMT or a conventional economy where government budgets are dependent on tax receipts inflation must be controlled to maintain sustainable growth. Taxes dampen economic growth and price escalation.

MMT is made possible thru the emergence of fiat money whose value is based on the expectations of performance of the economy. The US exited the gold standard in 1934 and, after a series of gyrations that increasingly decoupled creation of money from the value of gold, the US adopted a pure fiat currency in 1976. Fiat money, as commonly defined, “does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value.”

MMT is coming into favor as a counter to austerity policies of sovereign countries that view that national budgets cannot sustainably operate in the red but must either cut spending or increase taxes or both. In contrast, MMT sets the goal not of balancing budgets or limiting federal indebtedness but rather to strive for full employment. An MMT type of approach appears to have been working with the quantitative easing employed by the US Federal Reserve to facilitate recovery from the 2007–2008 economic crisis. At the time, the federal funds rate had been reduced to near zero, which reduced the value of conventional lending by banks. Huge quantities of money were injected while inflation was closely monitored to control the rate. MMT has been proposed as an approach to address climate change with schemes like the Green New Deal. MMT is controversial and not seen as a panacea. Mario Draghi, the head of the European Central Bank, sees MMT as a question to be addressed but that it is more a tool for national governments to control the distribution of money rather than the quantity of its creation. MMT is resisted by central bank governors in Europe and faces political and institutional opposition in the US.

Establishing the analog of sovereign state authority for Space Money

MMT can work for sovereign states with their own currency that control their own money supply. There are no sovereign states beyond the Earth and, since an economy based on space resources does not yet exist, there is no political or institutional opposition to an MMT approach for the outer space economy. Article II of the Outer Space Treaty even raises questions about claims to rights to territory on the Moon and other celestial bodies based on sovereignty:

Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.

The essential function of sovereign authority in an MMT economic system is to issue money and control money supply such that the money that is issued is recognized by agents in the economy as being a stable store of value and that inflation can be controlled to a determined value. Such an authority can be established by a treaty among sovereign states. No sovereign state would surrender its sovereignty to a treaty-based authority without gaining substantial value from this decision. This is the basis of the Eurozone with participating states forgoing their sovereign authority to issue and control money supply to the European Central Bank (ECB).

The Space Bank would have a different purpose from the ECB in the Eurozone. Rather than surrendering their sovereign authority to emit money and to control its supply, the states participating in the Space Bank would grant authority to the Space Bank to issue “Space Money” to be used for space-related investments and development and in activities on the Moon and in cislunar space that would operate under the international regime authority that also establishes the Space Bank. In addition to mining and manufacturing and energy production, such activities could include hotels and resorts in cislunar space with visitors from many countries who would pay for services in Space Money rather than in the currency of the state of origin. Space Money would maintain a flexible exchange rate with terrestrial currencies such as the dollar, euro, pound sterling, ruble, and others, enabling purchases to be made by organizations operating in space that purchase goods from terrestrial suppliers.

Rather than the goal being full employment, as in conventional MMT, the goal becomes generating maximum benefits to the participating sovereign states and their people thru achievement of industrial development of the Moon. If large-scale workforce reduction takes place on Earth in oil, gas, and other extractive industries as well as the automotive industry, all developed economies will be faced with the challenge of what to do with tens of millions of people with advanced technical educations but with diminished roles on Earth. Lunar industrial development on the scale of the Big Push can be a driver that generates employment across many sectors in emerging industries, made possible by lunar industrial development. Space resorts serving the needs of tourists from Earth have the potential to evolve to large space habitats that can ultimately house millions. The participating states and their central banks could define their national goals as full employment or other national goals without limiting the capacity of the Space Bank to emit additional funds to meet lunar development goals.

What’s needed is the commitment by spacefaring countries to lunar industrial development. This commitment to the overall goal would provide confidence that, if technical milestones can be met, governments will work to fulfill the successive milestones to achieve the potential of lunar industrial development for all mankind.

Convertibility of Space Money

Space Money is a form of stablecoin pegged to the value of major currency transactions in Space Money. It should be interconvertible with dollars, euros, and other sovereign economy currencies.

Since space resources have no competitors on Earth there would be no inflationary impact on Earth from their development. If lunar development can also be also viewed as a form of jobs creation program, and if full employment is the goal of the sovereign economies on Earth, policy makers will need to make large investments in those economies to generate demand for work. For some economies, such as China and its need to develop its interior where much of the population is still in poverty, these and other priorities are likely to take precedence over lunar industrial development.

Quantitative Easing injected as much as $27 trillion into the US economy since the 2008 economic crisis with inflation kept at moderate levels. Kim Stanley Robinson in his article “There Is No Planet B” has proposed using a similar mechanism to fund a Green New Deal. Why not use such a process to create the possibility of planets B, C, D, and beyond, and save the biosphere of the Earth in the process? This process can work to the point where inflationary pressure bids up costs for resources (including labor) beyond inflation targets.

How lunar development can be financed with Space Money

The natural resources of the solar system are assumed to be boundless relative to the anticipated needs of Earth’s industrial civilization for centuries to come given that technologies to extract, process, and transport products produced from outer space to the point of use can be developed and social stability can be maintained to make use of resources possible. At present, the expectations for the success of developing and deploying technologies is relatively limited as evidenced in the modest levels of space financing and the high levels of risk associated with space ventures. As expectations about the future become firmer, and perceptions of risk decrease, the cost of financing can be expected to decline and the rate and quantity of space investments to increase. A benefit to companies already serving space markets would be that their market capitalization would increase by this effect more than would be justified by their direct market successes and innovative new products.

In Depression-era America, Congress chartered the Tennessee Valley Authority (TVA) to develop a series of hydropower projects for the economic development of the southeastern US. There was no data-based forecast of demand for electricity in the region that drove construction of the generating facilities but the resource was known: hydropower could be generated from the water in the Tennessee River basin. Space resources are known to be essentially boundless. Low-cost launch and space energy systems can unlock large scale use of space resources much as World War II demand for the war effort: aluminum for aircraft and power for Oak Ridge benefited from the prior development of hydropower.

The Space Bank will play a role in the process by providing guarantees for financing projects that increase confidence in the development of technologies for use of space resources as well as of the markets for purchasing and trading space resources and products developed from space resources.

Even very-high-potential projects, where benefits may take decades to be fully realized, get gummed up in government budget processes driven by short-term considerations and the politics of balancing unrelated priorities. Guarantees could be factored by expected downside risks and upside impact. Projects that would have a high upside impact factor could be highly rated even if risks are also high.

Technology R&D outside of megaprojects like space-based solar powersupported can be financed thru financing extended by financial intermediaries authorized to lend Space Money or to leverage their authorized holdings of Space Money with other private and public investments that could include making equity investments. The European Investment Fund provides a model how a regional or sectoral investment program serving SMEs can be structured.

The Lunar Big Push can be effected through the Space Bank over the decade. For the Big Push to be effective in achieving takeoff of the Space Economy two primary requirements need to be met: acommitment to lunar development as a global goal affirmed by UN General Assembly (a UN Committee on the Peaceful Uses of Outer Space initiative), and a financial commitment to the Space Bank by the leading economies in the world. (a G20 initiative.)

Given that economic feasibility of lunar development was established, then business cases for numerous projects could close. Thereafter private investment would dominate rather than money created on the basis of expectations about the long-term future in outer space.

Use of MMT to generate funds to finance the Big Push for lunar development

MMT is an approach proposed to work towards full employment with money injected in the economy as needed to achieve this goal. An economy operating under MMT would not require tax receipts to cover all government costs and investments. The government would simply issue money as needed and use taxes, interest rates, and other tools to maintain economic stability.

MMT can work in an economy where the sovereign authority can control the money supply. Economic goals that involve cooperation between multiple sovereign states, as with the proposed Big Push for lunar development, do not lend themselves to an instrument like MMT within a sovereign state because the sovereign authorities of the participating states could not control the money supply determined by factors outside of the control of the sovereign authority. What’s needed is an international institution with the authority to create money, and instruments to control the quantity of money in circulation and to maintain the stable value of the money that is created as the economic systems strives to achieve the overriding goal for which purpose it has been created.

The expectations of the performance of the economy determines the value of money circulating in a sovereign economic system. In economic systems operating under MMT the economic goal is full employment. In the Big Push, money is created to fund achievement of milestones in lunar development that can include the completion of infrastructure, development of key enabling technologies, and creation of competitors to serve a market need such as lunar water for fuel depots LEO, space farms to raise food, and other applications. Space Money that will be created needs to serve as a means of exchange between operations in space and suppliers and customers that may be operating in one of the terrestrial economies raising the need for convertibility of Space Money to other currencies. In the Proposed space resources economy in which agents from multiple sovereign economies are participating the value of the money in circulation will be determined by expectations regarding progress towards the economic use of space resources. The quantity of space resources within the Solar System is boundless relative to the needs of an Earth-Moon economy. The existence of these resources establishes a potential value much like resources on Earth as discussed below.

In an earlier article (see “The asteroid mining bank”, The Space Review, January 28, 2013), I proposed use of resource assays performed according to specified rules to define mining claims that would give the claimant a level of rights to the use of the assayed resource. The standards to use, as well as the manner of making the claim, would need to be defined by internationally agreed to rules. For simplicity in establishing rules for use of lunar resources I suggest use of the international regime called for in Article 11 of the Moon Treaty.[3] The estimated value of resources in the claim could then be used to seek financing to develop the claim from the Asteroid Mining Bank that would have rights to emit a currency to cover transactions in outer space. These ideas were further developed in another essay (see “Blockchains and the emerging space economy”, The Space Review, October 10, 2016), where I proposed that development of a space economy involving asteroid or other space resources requires both spacecraft technology as well as financial technology. Financial technology envisioned the creation of Space Money based on verified outer space resources that could be exploited under international law.

With plans firming up for the first woman on the Moon to be launched by the US in 2024 there is no doubt about the advancements in spacecraft technology. However, there has been little progress to advance requisite financial technology or the policy underpinnings of such technology. In this article I propose a process based on Modern Monetary Theory (MMT) using the open source Libra Blockchain linked to verified outer space resources defined by rules agreed to in an international regime negotiated by the parties to the Moon Treaty with financing guaranteed through a Space Bank in which the central banks of all states parties to the Moon Treaty have the right to become members.

Advocates of asteroid mining and lunar development speak of boundless resources in the solar system that could multiply the wealth of all people on Earth and enable sustainable development for centuries to come. However, not one penny has been earned from the use of space resources. It even remains to be established how space resources could be technically processed. Even how they could be valued and how markets could be created for such resources are unknown. There are solid indicative studies that point to the possible feasibility of use of lunar water, such as “Commercial Lunar Propellant Architecture” that was prepared by a large team of experts from academia, business, and NASA.[4] However, the business case for lunar water cannot close because significantly lower costs of launch to LEO as promised by Elon Musk could result in water launched from Earth being more competitively priced than lunar water. The argument for lunar water ultimately depends on a commitment to develop an Earth-Moon economy where the Moon would become a platform for expansion into the solar system.

Much as terrestrial resources are valued based on their use within the economies of sovereign nation states, initial uses of space resources will be limited to use in space, such as lunar water for fuel or life support. No national market will have the absorption capacity to absorb space resources which will be vastly more expensive than analogous materials mined or harvested on Earth. An exception might come with the development of fusion power using helium-3. While helium-3 is far more abundant in lunar regolith than on Earth, the relative abundance of 20–30 parts per billion would require processing of perhaps 200 tons of regolith to retrieve 1 gram of helium-3. This would call for a massive mining and processing operation for a form of fusion power possibly decades in the future. New markets need to be created for space resources that are not bound by the needs and constraints of sovereign states on Earth and their monetary systems.

A monetary system for outer space can be created not bound by the limits of sovereign states on Earth and not plagued by the costs of military development. Such a monetary system can be backed by the commitment of sovereign states to develop a robust space economy within defined rules agreed to by those states. This can enable the creation of a space economy based on the use of lunar, asteroid, and other outer space resources. A space economy that is not integrated by shared rules and by a common currency and governance of the money supply will carry the inconsistencies and incoherence of competing sovereign nation states into the outer space environment. A major strength of the US economy is that it is a single market. The creation of a single market is an aspirational goal of the 28-member European Union. The European single market is expected to drive greater innovation and the creation of more companies that can compete in global markets. Ideally, the economy that emerges in outer space will be a single market from the outset with rules-based competition that drives innovation.

The importance of space settlement

It is often argued that robotics can eliminate the need for human spaceflight because space exploration and planetary science can be done as well or better and far cheaper using robots, starting with teleoperation and ranging to fully autonomous robotic systems. While this is a strong point when arguing for budgets for space missions within national space programs with hard budget constraints, it is inadequate if the goal is to develop a self-sustaining space economy.

The needs of people is the primary driver of consumption-driven advanced economies with a global average of 62 percent of GDP and, in the US, 82.4 percent.To achieve a self-sustaining space economy after demonstrating the capacity to extract and use lunar and other space resources, the next priority is to create opportunities for people to live and work in space and consume space resources. Robots by themselves consume few resources required to fulfill their function: energy, spare parts, connectivity, and maintenance services. The needs of people, however, are bounded only by the imagination.

To develop a self-sustaining population in space people that have developed their wealth within the bounds of national economies on Earth will need to have some form of mortgage financing. As the cost of housing in space settlements begins to approach the affordability and desirability of housing in communities on Earth, people will increasingly opt for space settlements. The number of people choosing to live in space would depend on the financed cost of space housing contrasted with the cost of housing on Earth. The use 50-year or longer mortgages, or similar financing tools, could open space settlement to larger numbers of people and become a primary source of funding to develop housing facilities in outer space.

As an example, consider a $10 million home (including travel from Earth) with a 50-year mortgage at 2 percent annual interest. Monthly payments would be in the range of $25,000 with annual payments in the range of $300,000. With a $2 million home, annual payments would be in the range of $60,000, affordable for a large enough population that mortgage financing could become an attractive way to finance space settlements. If 100,000 homes could be sold at $2 million each, that would raise $200 billion, with investment from the businesses to serve the needs of the space community that could easily double the total money raised. The key would be the creation of the mortgage financing vehicle plus the insurance coverage and taxes to make the scheme attractive. Is it thinkable that $400 billion in 2019 dollars could finance a space settlement for half a million people by 2050?

The International Lunar Decade

The proposed International Lunar Decade (ILD) from 2021 to 2030 can provide a framework to coordinate international action, shaping an innovation ecosystem to accelerate technology developments as well as technical and non-technical innovations working towards the goal of sustainable development in space enabling sustainable development on Earth. One measure of achieving that goal would be that, by 2030, more than one major project such as lunar water and fuel depots at LEO or an space-based solar power installation could be achievable.

The ILD framework can be structured to organize the work to negotiate the International Regime including policies for use of lunar materials as well as to take steps to establish the institutional structures that would enable the system to operate including the Space Bank.

Roles of the Moon Treaty and Outer Space Treaty

The Moon Treaty, specifically the international regime called for in Article 11, can provide the policy framework and rules to enable such a process to work. The foundation of the credibility and authority of the Space Bank would be based on the credibility of the States Parties to the Treaty and their commitment to goals for the long-term development of the Moon and a robust Earth-Moon economy. The rules defined in the International Regime would not only define how space resources could be used and how the use of space resources would be governed but would also establish the role of the Space Bank to maintain sustainable development and stability of the space economy. This will be increasingly needed as more and more transactions are executed with Space Money independent of national economies of Earth. However, the participation of states in the governance of the Space Bank would continue to provide channels for assuring benefits to sovereign states and their people on Earth. If sovereign powers emerge in outer space that are not dependencies of sovereign states on Earth, the international regime will need to address this eventuality.

At present there are 18 states parties to the Moon Treaty and an additional four signatories that include France and India. Of those, India has the capacity to reach the Moon and France is also a credible power in outer space. For the Moon Treaty and the associated international regime to play a foundational role for the Space Economy, all spacefaring countries would need to become parties to the treaty. While no alternative to the Moon Treaty exists and there is not even an internationally recognized forum where rules for the use of outer space resources could be negotiated, a prevailing opinion in the US is that the Moon Treaty is a failed treaty because no major spacefaring country is a party to the Treaty. Dennis O’Brien has proposed an Implementation Agreement for the Moon Treaty. If major countries like China would agree to such an implementation agreement, this would open a pathway towards expansion of the number of parties to the Treaty.

As Article 1 of the Outer Space Treaty states:

The exploration and use of outer space, including the moon and other celestial bodies, shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development, and shall be the province of all mankind.

The Space Bank is conceived to fulfill the mandate of Article I of the Outer Space Treaty to enable all states, regardless of their degree of economic or scientific development, to benefit from exploration and use of outer space. This could be achieved directly by enabling residents of all participating states to have accounts with the Space Bank. As the total quantity of Space Money emitted by the Space Bank increases, every person or legal entity holding Space Money could have their holdings expanded proportionally to the increase in money emitted by the Space Bank. Such a money system could be managed thru digital money issued by a system like Libra. It is assumed that the value of units of Space Money would remain highly stable. As money supply would be expanded, individual accounts could be indexed such that over time an initial quantity of, say, 100 could expand reflecting the aggregate increase in the value of the space economy.

Distributed ownership with distributed governance

Given the creation of a Space Bank that is owned by the central banks of participating states as presented earlier, Space Bank can emit Space Money according to an algorithm designed to promote sustainable growth in space development. Even though blockchain technology is a building block of the system, Space Money is not a cryptocurrency like Bitcoin but could be more like Libra, a digital currency being advanced by the Libra Association, where the value of the money that is emitted is backed by a reserve of assets as described in the Libra White Paper. Below is a comparison of Libra and Space Money:

Conclusions

Outer space development is similar to development of countries lacking industrial infrastructure, modern financial systems, and a suitably trained workforce. Numerous studies have addressed the problem how large flows of developmental assistance to developing countries often have had little incremental impact in advancing these countries towards sustainable economic development. Similarly, large investments in space exploration since the Apollo lunar landings 50 years ago have seen little progress towards industrial development in space. There is compelling evidence that outer space resources could enable sustainable development for humankind for centuries to come while safeguarding the biosphere of Earth. Incremental development, particularly if it is largely driven by nation-state governments, is unlikely to lead to breakout. Such space development is likely to lead to increased militarization of space, chewing up vital resources while threatening the survival of industrial civilization. International cooperation within a rules-based order that permits vigorous competition within a stable framework can lead to breakthrough to a self-sustaining space economy.

This paper presents an outline of an approach to make a Big Push to achieve industrial development of the Moon. While there are numerous studies of space-based solar power, lunar water, oxygen extraction from regolith, design of lunar bases, and other topics, there is a paucity of research and writing on the process of space development and of the nature of the space economy. I present the idea of a Big Push for lunar development, although the necessary elements for a Big Push—how investment can be generated, analysis of alternative pathways for development, critical building blocks, and other issues—remain to be defined.

Most attempts at development of emerging economies have not succeeded in achieving sustainable industrial development. There have been a few successes like South Korea. In many countries, development languished even for decades before takeoff. With a few exceptions, takeoff to industrial development has not led to sustainable industrial development and escape from the “middle income trap” to a wealthy economy. There appears to be as much risk in choosing the wrong development model for lunar industrial development as in choosing a successful model for industrial development on Earth. Outstanding technical and performance by itself cannot assure success in industrial development of the Moon even with Apollo-level investments.

I close with a response to a draft of this article by Professor Jeffrey Sommers[5] :

1. That space not only contains needed resources, but that overcoming the technological challenges to getting them will produce innovations that might help solve many problems on Earth.
2. That any economy operating below full capacity (full employment) is an economy possessing resources available for use, whether it be development of space, or something else. That printing money to the level of full employment is preferable to borrowing it, as borrowed money has to be paid back to investors. That represents an unnecessary cost.
3. That tax policy can be a helpful complement to MMT (money creation). Activities deemed wasteful, frivolous, or simply non-capital forming, can be stopped through simply taxing them. This will then free resources for more productive activities, e.g., development of space.
4. That investments needed for developing space cannot be paid from taxes alone. The amounts are too big and the time horizons to pay off too risky or far off. Moreover, referencing point 2, that money to pay for this, if borrowed (government debt) would create an unnecessary rent to wealthy bondholders that will reduce the size of investment in space. The money will simply have to be created.

Endnotes

1. See an overview of the Big Push model, also see Rosenstein-Rodan’s notes.
2. MMT advocates argue that the government should use fiscal policy to achieve full employment, creating new money to fund government purchases. According to advocates, the primary risk once the economy reaches full employment is inflation, which can be addressed by halting the creation of money, raising taxes and issuing bonds to remove excess money from the system
3. The Moon Treaty defines a process to establish the rules governing use of lunar and other celestial resources. No other internationally accepted process exists. Article 11, par. 5 “States Parties to this Agreement hereby undertake to establish an international regime, including appropriate procedures, to govern the exploitation of the natural resources of the moon as such exploitation is about to become feasible. This provision shall be implemented in accordance with article 18 of this Agreement.…”
4. See this paper and this paper
5. Private communication. Jeffrey Sommers is Professor of Political Economy & Public Policy, Senior Fellow, Institute of World Affairs at the University of Wisconsin-Milwaukee & Visiting Professor at Stockholm School of Economics in Riga

Vidvuds Beldavs serves as the strategist for FOTONIKA-LV, the photonics research platform of the University of Latvia. He is also a founding member of the International Lunar Decade Working Group formed in November 2014 to advance the idea of the International Lunar Decade.

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