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Space Future has been on something of a hiatus of late. With the concept of Space Tourism steadily increasing in acceptance, and the advances of commercial space, much of our purpose could be said to be achieved. But this industry is still nascent, and there's much to do. this space.
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P Collins, 2002, "Meeting the Needs of the New Millennium: Passenger Space Travel and World Economic Growth", Space Policy, Vol 18, No 3, pp 183-97.
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Meeting the Needs of the New Millennium: Passenger Space Travel and World Economic Growth
Without doubt, humans' most urgent need at the start of the new millennium is the continuation of economic growth, which is the only means by which the great majority of the world population can lift themselves out of the poverty in which they live. A sine qua non for continuing economic growth is for the rich countries to continue to develop new industries - as they did throughout the 20th century, thereby creating high-productivity employment for hundreds of millions of people around the world. Arguably the most significant of these thus far is the development of passenger air travel from zero in 1900 to 1.5 billion passengers per year by 2000. It is becoming clear that passenger space travel could grow to reach a similar economic scale-and that no other space activity has comparable potential. The paper describes the potential contribution to world economic growth of passenger space travel; the failure of government space agencies either to aid its development or to make a contribution to economic growth commensurate to their cost; and the value for economic policy of prioritising the realisation of passenger space travel. The faster passenger space travel services grow, the more the space industry will contribute to ''Meeting the Needs of the New Millennium''.
1. Introduction: Need for Global Economic Development

The theme of the 2001 IAF Congress was ''Meeting the Needs of the New Millennium'', reflecting the fact that humans' most urgent need at the start of the 21st century is undoubtedly the continuation of economic growth. This is the only means by which the great majority of the world population can lift themselves out of the poverty in which they live.

The conventional definition of economic growth has been justly criticised. In order to be more useful it needs to be improved by including the preparation of national balance sheets and government accounts according to standard accounting principles, the use of factors to measure 'quality of life', the valuation of unpaid domestic and child-rearing work, accounting for environmental destruction, adjustment of market exchange rates to allow for 'purchasing power parity', and other improvements. New measures such as the "Genuine Progress Indicator" (GPI) are being developed, but they require further work before they can be relied upon.

Although economic measures may not yet be a satisfactorily precise definition of the standard of living, large-scale differences such as that between 'G7' countries with average incomes of about $20 000/yr and developing countries with average incomes of $1000 or less per year are undeniable. As a result of world-wide economic growth to date, more people live at higher standards of living than ever before; middle-class populations in many previously impoverished countries are growing rapidly; and average life spans have grown rapidly in every country in the world over the past two decades [1]. However, this is not a cause for complacency since, thanks to unequal distribution of income and population growth, very large numbers of people still live in poverty.

The long-term effects of economic growth are impressive: in round figures, growth at 2 3% per year raises incomes by 100% in 25 - 35 yr, and by 1000% per century. Poorer countries growing at 7% per year can double their average incomes in just 10 yr, and grow by nearly 1000% in a single generation. However, achieving continuing economic growth in the world economy requires appropriate policies in both poorer and richer countries. Unfortunately, governments in both democratic and non-democratic countries are continually tempted to follow policies that hinder economic growth, as analysed in depth in recent decades in the field of 'Public Choice' economics [2]. In particular, politicians in democratic countries can often win electoral popularity by implementing policies to 'protect' companies in difficulties. The economic effect of such policies is strongly negative: instead of flowing to new activities with good growth prospects, resources are wasted preserving economically incompetent companies that should be reorganized-thereby delaying needed re-structuring of the economy.

This problem has been particularly notable in Japan where, during the 1990s, the government borrowed more than $1 trillion to support a large number of unprofi-table companies. As a result there is substantial over-capacity in 'mature' industries such as construction, department stores, real estate, retail banking, car-making, steel-making, ship-building, distribution and others, while the number of new companies has declined substantially since 1990. Predictably, this has aggravated the recession caused by the bursting of the economic 'bubble' of the late 1980s to become the worst recession in 50 yr-with continuing deflation, shrinking of the economy and ever-rising unemployment. In order to understand what policies would be more effective in sustaining economic growth, it is useful to understand the pattern of global economic development.

2. Pattern of Global Economic Development

While there are many details that are the subjects of ongoing research, the large-scale pattern of business and economic development through the 20th century is not the subject of significant dispute. One of the most fundamental underlying trends is that as poorer countries develop economically they progressively 'take over' industries in which low labour costs are a significant advantage, and export their products to richer countries. Employment in these relatively low-productivity activities is thereby lost from the rich countries. In parallel, the familiar processes of automation and improving business practices continually reduce the number of employees needed to produce a given quantity of goods and services. However, these trends have not caused rising unemployment overall because the displaced employees are reemployed in new industries which are continually being created.

The process of global economic development is thus one of continuous change, involving the decline and failure of companies as well as the birth and growth of new ones. As a consequence, for most people it is not possible to improve their standard of living without accepting change in their working lives. In addition, the timing of economic booms and recessions depends on many factors including chance discoveries leading to innovation, the whims of entrepreneurs and the vagaries of political decisions. Although economic growth can be hindered by government policies, the underlying process cannot be stopped-at least not without preventing people from trying to improve their standard of living which is not desirable. In the simplest terms, some people use their heads to work out ways of achieving the same results with less effort. This human creativity, specifically in inventing machines improving business practices (including expanding trade), and developing new popular services makes the productivity of work grow continuously, decade after decade, enabling everyone's incomes and standards of living to rise progressively.

World economic growth also requires international flexibility and agreement on rules of 'fair play'. For example, the rapid economic growth achieved by Japan from the 1960s until the 1980s caused considerable trade friction with the then more advanced countries as it changed the pattern of global specialisation - even leading the French Prime Minister Cresson to describe Japan as ''France's number one enemy''. Thus Japan's rapid growth depended on the richer countries' will-ingness to make adjustments to facilitate it, which Japan in turn is now required to show towards later developing countries.

However, as a measure of how much more adjustment in the structure of the world economy is going to be required, note that the combined populations of India and China are 20 times the population of Japan, and their average wages are just a small percentage of Japanese wages today. Consequently the adjustments in the pattern of global specialisation that will be required to accommodate the growth in these countries' shares of world trade will be proportionately many times larger than was required for Japan. The recent rapid growth of exports of clothing from both countries, and of food products, light manufactured goods and motorcycles from China, and bicycles and software from India, is just the beginning of this long process of adjustment. In principle the growth of exports resulting from such differences in labour costs will not end until average incomes in these countries reach broadly the same level as in the richer countries. (The current loss of competitiveness of certain industries in Korea Taiwan and other southeast Asian countries, as their average incomes rise relative to those in China, are examples of this process.)

For humanitarian reasons, as well as from the wish to reduce friction between richer and poorer countries, we must hope that poorer countries' economic development continues successfully. But, as an inescapable corollary, to the extent that these countries' participation in the world economy grows through the 21st century, proportionately greater innovation of new industries will be required in the currently more advanced countries. If this is insufficient, unemployment will increase very substantially, and/or average incomes will fall proportionately because of inexorable competition from countries with lower average incomes.

Overall, as the human effort needed to produce the same output of goods and services becomes less and less through technical and managerial progress, and unless humans generate more total output and consume more goods and services, the total amount of work needed will fall. In this case, unless the remaining work is shared out through shortening average working hours (and reducing wages proportionately), more and more people will become unemployed. During the 20th century demand did not reach such a limit; instead, although employment in many older industries shrank drastically in the richer countries, the continuation of economic growth was stimulated by the creation of new industries.

3. Creation of New Industries

During the 20th century, as the number of people in economically more advanced countries who worked in such fields as agriculture, horse-drawn transport, steam-engines, mining, textiles, clothing and many other traditional activities declined, a wide range of new industries arose which re-employed those displaced. These included car manufacturing and associated activities (such as oil production, refining and distribution and road construction and maintenance), electricity generation and distribution, the film, radio, television and video industries, aircraft manufacturing and operation and associated activities (such as airport construction and operation and air traffic management), telecommunications, computers, tourism and an ever-growing range of leisure industries, including many sports activities.

During the 20th century also, government activities expanded from <10% of GNP to some 40% - though this trend has more-or-less stopped or even begun to reverse in most countries with the recent moves towards privatisation. This new trend has been stimulated by work in the field of 'Public Choice' economics, which has provided the theoretical explanation for the fact that, in general, government activities are economically very inefficient, as outlined for instance in [2].

It is a sine qua non for continuing economic growth in the 21st century that the rich countries continue this process of creating new industries which will employ people displaced from older industries as they progressively automate and migrate to lower-cost countries. During the 20th century this process created high-productivity employment for hundreds of millions of people around the world, and enabled many more people in developing countries to gain employment in exporting and importing businesses, thereby facilitating their economic growth. It is a key desire of companies in poorer countries today to be allowed to increase their exports to richer countries, but these are restricted by international treaties designed to protect relatively uncompetitive activities in the richer countries, in order to reduce local unemployment. For example the governments of the USA and the EU subsidise the production of many agricultural products, thereby reducing the market for imports from cheaper countries, and they also subsidise the export of agricultural surpluses, providing a second blow to poorer countries' price-competitive agricultural industries [3]. The G7 countries also limit clothing and textile imports from poorer countries.

The development of new industries has another important aspect, namely the 'leading sector' effect: as investors anticipate the future profits that they expect to be earned in new industries, market prices of relevant companies' shares rise. This attracts more investment to these companies, helping them to grow faster, while the 'wealth effect', whereby shareholders spend their new (anticipated) wealth, spreads the benefits of expansion to other sectors of the economy.

This process was seen particularly clearly in the late 1990s in the USA, when share prices of many companies related to the major innovations of the Internet and World Wide Web grew by hundreds and even thousands of percent. As shareholders became wealthy, at least 'on paper', they increased their spending on a wide range of goods and services including houses, cars, restaurants, travel and leisure, thereby greatly stimulating the general economy. Unfortunately, in this particular case, much of the rise in share prices of 'new economy' companies (i.e. internet, computing, software and communications companies) was distorted in an economic 'bubble' in which investors had become unrealistically optimistic. Consequently the companies in question did not achieve the high level of profits that stockbrokers' analysts were predicting, and their share prices have since fallen steeply to date, destroying several trillion dollars of the 'wealth' that had been anticipated. (Controversy continues over the relative blame attributable to failures of business ethics, stock-brokers' conflicts of interest, auditors' standards, market regulation, media reporting, economic policy and investor caution.)

Today the need for new industries is particularly urgent because of the serious imbalances in the world economy. These include the decade-long recession that has led to the highest unemployment in Japan for 50 years, with continuing deflation and negative economic 'growth'; continuing double-digit unemployment in much of continental Europe - as well as in Russia, Southeast Asia, South America and many other countries; and a deepening recession combined with an unsustainably high trade deficit and private indebtedness in the USA.

The fundamental reason for this deflationary condition of the world economy is the excess capacity in many older industries and insufficient investment in the establishment and growth of profitable new industries, which alone can create new employment for those no longer needed in mature industries. The record US trade deficit of more than $1 billion per day, first reached during the 'Clinton bubble', is a measure of many US industries' lack of economic competitiveness: toys, clothing, electrical goods, steel, televisions, personal computers and mobile telephones are just some of the industries in which fewer and fewer US-based manufacturers can match global competition.

The only way in which the currently richer countries can maintain higher average incomes than currently less-developed countries is through working with higher productivity: people earning higher incomes cannot compete with people using the same technology and know-how but working at significantly lower incomes. The solution to enabling those in already rich countries to maintain or increase their standards of living while also enabling poorer countries to grow rapidly, is for companies in G7 countries to work at newer activities that poorer countries cannot yet perform. The need for this was explicitly recognised in a 2001 article in the Washington Post: ''What this country needs is a really good $500 billion technology - something to reignite popular enthusiasm and the economy'' [4].

What, then, are the new industries that are expected to generate new fields of large-scale high-productivity employment? It is important to note first that commentators' inability to predict future industries is no evidence that they will not arise: almost no-one in 1902 could even imagine, let alone predict, the rise of passenger air travel, nor a fortiori its growth to its current world-changing scale. Economic commentators today predict growth in employment in many areas of the information industry (although it is important to recognise that the growth of the Internet is also eliminating work in many related fields); in bio-technology, including the use of genetic information in agriculture and medicine; and in activities aimed at environmental preservation.

Many new opportunities could also arise through restructuring the incentives created by the government-imposed pattern of taxation and subsidies. For example, in many countries employment is heavily taxed and large companies are subsidised, while the use of non-renewable resources and environmentally damaging activities are lightly taxed or even subsidised. Reversing these undesirable distortions could increase the quantity of employment in many different fields, including particularly recycling activities [5].

An important clue to the identity of other fields in which new jobs will arise in rich countries can be found in the 'Engel coefficient', which is defined as the proportion of peoples' income spent on food (although alternative definitions based on expenditure on 'necessities' are also used). The average Engel coefficient in any country falls progressively as it develops economically; in G7 countries it is now typically <25%. Further economic growth in such rich countries depends less on providing for consumers' real 'needs' and more on satisfying their 'wants'. Broadly speaking, this explains the relatively rapid growth of leisure-related industries. Although many people feel that there are more 'important' things in which to invest than leisure industries, once average productivity reaches the level in the G7 countries, most basic needs of the society can be satisfied by a fraction of the workforce - for example agriculture typically employs <5% of the workforce. Thus there is no longer enough 'essential' work to employ more than a fraction of the population in richer countries.

One problem that arises in low-Engel-coefficient societies is that the demand for non-essential goods and services is relatively unstable, since by definition their consumption can readily be cut if necessary. This inherent instability is seen clearly in the demand for tourist air travel which periodically falls sharply as a result of heightened concern about the risk of terrorism. Another example of this instability is that as the number of two-, three- and four-car families increases, sales of used cars can grow rapidly at times of recession, leading to dramatic falls in the demand for new cars.

The truth of the 'human condition' at the start of the 21st century is that economic development has progressed so far in the G7 countries that, if the average standard of living is to continue to rise, there is an urgent need for the growth of major new industries, most of which will probably be leisure services broadly defined (for example, to include 'second homes'). The reason for this is that in order for a new industry to grow to large scale it must provide services that will be purchased by a large proportion of the middle-class population - most of whom already possess most of the goods they 'need'.

Arguably the most significant industrial development of the 20th century was the development of passenger air travel from zero in 1900 to 1.5 billion passengers per year in 2000 [6]. Among other effects, this development has helped the hotel and restaurant industries to reach their present scale, employing some 60 million people or 3% of the world's total labour-force, and some 6% in Europe [7]. As a pointer to the future growth potential, a survey performed in 2001 showed that the majority of middle-aged and older Japanese do not wish to purchase any more goods; the main service they wish to buy is foreign travel-which has notably been booming even during the current recession.

Until 2001 the aviation industry was predicting 100% growth over the next 20 years, although airlines' increased costs for security and customers' fears of terrorism may reduce this. However, it should be noted that tourism is already having damaging environmental impacts as a result of ever-growing numbers of tourists visiting popular destinations. It is not clear that this activity can reasonably grow by a factor of 1000% as would be necessary by the time - perhaps 2100? - when most of the world population attains a middle-class lifestyle which includes foreign travel.

Some commentators, mostly in the richer countries, take the view that most of those living in the presently poorer countries will remain poor forever. However, living standards are rising in every country, and the desire for material comfort is strong everywhere that living standards are low. While attaining a 'middle-class lifestyle' in the same form as seen today in G7 countries for a world population of perhaps 10 billion people would cause many industries - energy, construction, cars, agriculture, waste disposal - to degrade the environment severely, it must be anticipated that technological progress will greatly ease currently foreseeable problems. The application of even only presently foreseeable advances in already existing fields - such as genetic engineering and hydroponics in agriculture, energy efficiency and non-fossil (solar) energy, city planning, and Internet-based tele-commuting, to name but a few - holds such clear promise that simple extrapolations based on multiplying existing economic activity by increased population numbers without allowing for technological improvements are unrealistically pessimistic [1, 5, 8]. As a result it may be that the main limits to the potential for terrestrial economic growth are political ones. It is clearly in the self-interest of the already-rich countries to try harder to help overcome these in order to reduce the friction that would be inevitable in a globalised world with continuing gross inequalities in living standards.

Whatever the longer term future, assuming that economic growth will continue for at least a few more decades, the popularity of leisure travel in low-Engel-coefficient societies raises the question of what other newer destinations people could travel to. Tourist destination development is proceeding rapidly around the world, but a new possibility which has received ever-increasing attention is passenger travel to space, or 'space tourism'. It is now clear that this idea is not only not fantasy, but it is a promising candidate to grow into a major new activity as economically valuable and socially significant as passenger air travel.

4. Economic Potential of Passenger Space Travel

On the 'demand side' of passenger space travel, market research performed in Japan, Canada, the USA, Germany and the UK, and summarised in [9, 10] has shown that there is enormous pent-up consumer demand. It is sometimes suggested that this demand is fictitious; for example a recent letter to Aviation Week & Space Technology stated: ''People were already travelling in the early days of aviation - by trains boat and car. They had a reason for travelling and infrastructure to support them when they reached their destination. The airplane became another mode of transportation. The reasons for travelling do not exist for space. No one is visiting relatives, emigrating nor going to business meetings. And there is no infrastructure in space..'' [11].

However, it is a mistake to have preconceived ideas about people's reasons for wishing to travel to space, which are obviously different from reasons for travelling on Earth. The market research referred to above shows consistently that a large proportion of the middle class population of the richer countries does want to go to space, and that their major reason for wanting to do so is to be able to look back at the Earth. The fact that all of the 400 people who have been to space to date say that it was the greatest experience of their lives probably has some connection with this immense popularity. While there is a great need for more market research, and it will remain uncertain how many people will actually travel to space until the service becomes widely available, there is no justification for denying facts shown by market research.

Furthermore, contrary to what the above letter states, there is infrastructure to support travellers - a partly assembled space station which was sufficient for the first customer, Dennis Tito, to describe the Russian section as "paradise". The second piece of infrastructure for space travellers, MirCorp's 'Mini-Station', is due to become operational for an investment of $100 million [12]. And as launch costs fall to a few hundred dollars/kg as passenger traffic grows, it will be possible to assemble even very large accommodation facilities in orbit at a cost acceptable to hotel companies.

On the 'supply side' of passenger space travel technical studies by the Japanese Rocket Society ( JRS) [13, 14], Dietrich Koelle [15], Ivan Bekey [9], Bristol Spaceplanes [16], Buzz Aldrin [17] and others have shown that the cost of developing the required vehicles and infrastructure would be a small fraction of the $25 billion that G7 taxpayers already pay every year for government space activities. The great potential of passenger space travel for 'space commercialisation' has also been acknowledged in reports published by Nasa [18]; the American Institute of Aeronautics and Astronautics ( AIAA) which concluded: ''In light of its great potential public space travel should be viewed as the next large new area of commercial space activity'' [19]; and the Japan Federation of Economic Organisations (Keidanren) [20], among other organisations.

One particularly interesting conclusion of the Nasa report namely that "..generally available trips to orbit and week-long stays in low Earth orbit hotels now can be seen as certainly feasible" [18] gives a further indication of how large the economic impact of space tourism may become. This is because in all market research to date most people say they would like to spend several days or a week or more in orbit, rather than only a few hours or a day. Thus in addition to economical launch vehicles the demand for space tourism will also drive the construction and operation of accommodation in orbit - that is space hotels [21].

The only detailed professional study of the potential development of passenger space travel published to date is that of the Japanese Rocket Society ( JRS) briefly reviewed in [13, 14]. (A large number of other papers from the pioneering JRS study are available in the library of but the six major JRS reports published as of 2002 are available only in Japanese.) According to the JRS scenario, the number of customers would reach 700,000 per year 17 years after starting the development of the ' Kankoh-maru' passenger vehicle, with a return flight price of some $20,000 per passenger. The JRS cost estimates are in line with those of Koelle [15] and Bekey [9]. Extrapolating from this, when the number of guests reaches one million per year after perhaps 20 years, there will need to be accommodation for more than 10,000 people in orbit, and several thousand staff will work in orbit. Since no one has identified any other space activity that offers anything approaching this level of demand, we reach a conclusion that is still not widely appreciated - the hotel industry will probably become the largest employer in space.

From the economic point of view it is very significant that the development of orbital accommodation will lead to the participation of a wide range of associated industries, thereby greatly expanding the number of different industries involved in space activities including particularly such consumer-oriented activities as construction, interior design, hotel management, catering, fashion, entertainment and sports [21]. This will have the effect of bringing the economic energy of the consumer economy to bear on space activities, which are cut-off from this source of economic growth, except for certain information services.

In addition to stimulating innovation in these many different fields, the growth of space tourism in this way could also exert a 'leading sector' effect, whereby an expansionary economic influence will diffuse through the economy as direct investment and optimism lead to increased shareholder wealth. Furthermore, the increase in employment and economic growth which the development of passenger space travel causes directly in more advanced economies will in turn reduce the pressure for protection against imports from less developed economies. Such a scenario is strikingly different from the effect of existing governments' non-science space activities which, sadly, contribute very little to the economy or employment, despite the very large financial resources they consume.

5. Low Economic Value of Space Agencies' Activities

The desirability of initiating passenger space travel might be less if space agencies were engaged in work that was of great economic value or urgency - but they are not. Some 20% of their budgets are typically used for scientific research, including astronomy and Earth observation, which can be assumed to have value per se. However, the remaining 80%, some $20 billion per year, is used for the development of technological systems and technologies for such purposes as ''space infrastructure development''. The economic value of the results of this expenditure can be considered in two parts, direct and indirect.

5.1. Direct economic value

The definition of economic value is the present value of future profits to which an activity gives rise. Since space agencies' investment mostly does not lead to commercially profitable activities, it has far less economic value than normal business investment. The difference between commercial activities and space agencies' activities is shown in Figure 1. In round figures when a company invests $1 billion it typically generates commercial sales revenues of some $1 billion per year, from which the cumulative profits over several years exceed the initial investment by a sufficient margin to satisfy investors and increase the assets of the company. (For example, $1 billion investment might generate profits of $3 billion over 10 years, from which $2 billion would be repaid to investors, and $1 billion would add to the company's assets.) By contrast, the expenditure of some $20 billion per year by government space agencies on non-science activities generates little or no increase in commercial space activities: employment in space activities is currently shrinking, rather than growing cumulatively, as would result from commercial investment on this scale.

Figure 1. Contrast between Business and Space Agency Activities.

For example, the development and operation of expendable launch vehicle systems are heavily loss making; such launchers never repay their development costs, and depend in many cases on continuing government funding of periodic 'upgrades'. At the time of writing, the most recent of many articles describing the lack of demand for satellite launch services states that, of the three main launch vehicle manufacturers: ''Arianespace, the only company that discloses its annual earnings, posted a loss in 2001 for the second straight year...'' and predicts that because ''...the market could remain flat for the next 10-20 years...'' one of the three companies may disappear in the anticipated 'shake-out' [22].

Following the conventional definition of economic value given above, the ' International Space Station' ( ISS) project has very little economic value: almost no companies want to pay to use its facilities, and their total contribution will represent a small fraction of its running costs alone, let alone repaying taxpayers' investment of some $50 billion. The probability of researchers on board the station making a valuable scientific discovery must also be judged to be low: research in microgravity has been underway for more than 30 years, and there is little expectation of any major discoveries in the near term, particularly since the microgravity environment on board the station will be of low quality. This and the station's very high cost led many science research bodies, including the US National Science Foundation and the British Science Research Council, not to support the project. In 2001, as the latest step in the ISS's ever-growing cost and ever-shrinking capabilities, Nasa's announcement of further 'cost growth' of $5 billion led to it becoming the subject of a special investigation by the US government's General Accounting Office [23]. Upon the departure of its then administrator it was decided to appoint the deputy director of the Office of Management and Budget (OMB) as his replacement.

(It is perhaps worth noting that accounting is not a mysterious activity. When the managers of a $15 billion per year organisation choose to use accounting systems that allow them to be 'surprised' by cost over-runs as large as $5 billion, this is surely not accidental - it is done because it is in their economic interest to obscure the truth. In this, space agency managers' behaviour is entirely consistent with the economic analysis of government bureaucracy pioneered by Niskanen [24]. Because of the incentives which a bureaucratic organisation creates for its staff, they are motivated primarily to increase their budget; they have no motivation ''either to know or seek out the public interest or to act in the public interest'' [24]. Until the 'crisis' of 2001, successive Nasa administrators' policy of having such inadequate accounting information was successful in preserving its budget; and it seems very unlikely that Nasa or its management will suffer any significant cost - certainly nothing approaching that experienced in commercial companies when their accounts are revealed to be untrustworthy, such as the 'carnage' among 'new economy' companies in the USA in 2001-2002.)

5.2. Indirect economic value

Advocates of larger budgets for government space agencies frequently argue that government spending on space is much more beneficial for the economy than other forms of economic activity, thanks to the useful inventions arising from the development of space-related technology. The original source of this idea was a study performed during the 1970s by Chase Econometrics, which claimed to find such an effect [25]. In a recent citation members of the US Congressional Research Service in 1998 wrote: ''Studies by Chase Econometrics Inc., and the Midwest Research Institute in the late 1980s determined that every Nasa R&D dollar produced $5-$9 in economic activity'' [26].

However, it is rarely reported that when Chase Econometrics tried to reproduce their work in 1980 they concluded that: ''productivity changes from Nasa R&D spending proved not to be statistically different from zero'' [27]. Hertzfeld studied the issue in detail and concluded: ''..due to theoretical and data problems with the macro-economic model and data sets available, this approach to finding aggregate economic returns to R&D expenditure is difficult at best, and probably impossible'' [27]. Other studies of particular technologies developed at Nasa which have subsequently been used in new products are said to have shown reasonable rates of return. However, such studies do not enable any conclusions to be drawn concerning the relative value of alternative innovations that would have arisen if the same funding had been applied in other fields, such as marine engineering, electrical engineering etc.

In this context the bar chart presented to the US Congressional Science Committee by Sean O'Keefe, when Deputy Director of the OMB during 2001, is of interest (see Table 1). This shows that Nasa's budget of $15 billion per year is twice the combined research budgets of the US National Science Foundation (NSF) and the US National Cancer Institute (NCI). Since scientific research funded by these organisations has contributed to many of the Nobel prizes and scientific advances which US researchers generate, the lack of Nobel prizes or major technological advances arising from Nasa's work - let alone twice the annual output of the NSF and NCI combined - is striking.

Table 1: Major U.S. Federal R&D Program Areas

Seen in this light, the claim that US government spending on Nasa projects (including the $5 billion cost-growth during 2001) is particularly valuable for the economy is not credible. It appears rather to be a convenient myth that serves the economic interests of the government-funded space industry. Much more credible is the 'common sense' view that Nasa's expenditure of more than $100 billion during administrator Goldin's 1992 2001 tenure, during which employment in the space industry grew not at all and passenger space travel was starved of research funding (as discussed below), was a serious misuse of economic resources which could have been used much more productively on other activities.

5.3. Economically valuable space activities

Commercially profitable space activities today include communications, broadcasting and, on a much smaller scale, Earth observation, but little of the space agencies' $25 billion per year expenditure is justified by these activities. The agencies maintain that further 'commercialisation' of space activities is so difficult that it will require several more decades of public funding - specifically of the ISS and other vehicles based on expendable launch vehicles. In the meantime, space agencies' existing activities are said to be so valuable that none of their funding should be used in ways relevant to making space accessible to the public. This, however, is false: as described above space agencies' existing activities have very little economic value and so it would be greatly to taxpayers' economic advantage if most of these loss-making activities were reduced. A significant proportion of the agencies' non-science budgets of some $20 billion per year should be devoted to making space accessible to the public, which shows every prospect of becoming the most economically valuable activity in space.

In this context it is also worth noting space agencies' advocacy of a crewed mission to Mars as the centrepiece of future space activities. Such an activity could have scientific value, and some social value if it had wide and spontaneous popular support. However, it would have very little economic value, and if carried out before the development of low-cost launch vehicles, it would burden taxpayers with a cost of hundreds of billions of dollars while further delaying the commercial development of space. Space agencies' preference for such a project also fits Niskanen's analysis closely [24]. It would be economically far more valuable to develop passenger space travel first; the low cost of access to space that this would bring about would greatly reduce the cost of all future activities such as Mars exploration.

6. Space agencies' anti-space tourism policy

In view of the low economic value of space agencies' current activities, it is very unsatisfactory that they are making no attempt to realise or even evaluate passenger space travel. In this the agencies do not simply show a lack of enthusiasm - they appear to have deliberately delayed progress towards this economically valuable objective, and even to have concealed valuable information from the public.

For example, the largest government space agency, Nasa, is required by US federal law to "..encourage, to the maximum extent possible, the fullest commercial use of space". In its 1998 report, 'General Public Space Travel and Tourism' [18], Nasa confirmed that space tourism is a realistic objective; that most people will be able to take a trip to space; that sub-orbital space travel (similar to that experienced by the first American to travel to space, Alan Shepard) is easily feasible using long-available technology; and that passenger space travel is likely to grow into a major commercial use of space. The report also included a long list of recommendations as to how to encourage this commercial use of space. However none of the recommendations in this report have been implemented, and no funding at all was allocated to advance the possibility - out of the $56 billion that Nasa has spent between that report's publication and time of writing. This behaviour is clearly contrary to Nasa's obligation to "..encourage, to the maximum extent possible, the fullest commercial use of space".

It is worth noting that Nasa's 'space tourism report' (NP-1998-03-11-MSFC) can be judged the most economically valuable report Nasa has ever published, since it describes what is likely to become the largest commercial activity in space, and steps to realise it. It is therefore of particular interest that the then Nasa administrator Goldin refused to allow the report to be made available via Nasa's website for over 3 years. The author spoke to both Goldin in 1999 and then deputy associate administrator Garver in 2000 at public meetings at which they both stated (in recorded sessions) that NP-1998-03-11-MSFC would be put upon the Nasa website. However, this simple step did not take place until 2002.

Early in 2001 Nasa administrator Goldin attempted unsuccessfully to prevent the US citizen Dennis Tito visiting the international space station; his high-profile campaign was widely reported in the media. Yet the 80% popular support shown for Dennis Tito in US opinion polls provides a good indication of the great popularity of passenger travel and the misguidedness of Nasa's stance on this matter.

Subsequent events during 2001 included the announcement that Goldin would not continue as Nasa administrator; testimony requested by the Subcommittee on Space and Aeronautics of the Congressional Science Committee from Nasa deputy associate administrator W. Michael Hawes on 26 June concerning Nasa's work relating to space tourism; and the appearance on Nasa's internet website of its space tourism report [18] after over 3 years delay (see above). Also during 2001 newly appointed Nasa Chief of Staff Courtney Stadd drafted a plan for the agency under which it was proposed that Nasa would "..provide commercial projects with engineering support for private-sector development of commercial manned spaceflight vehicles ..for commercial space tourism" [28]. (It is perhaps worth noting that the main supporter of space tourism in the US government today is the associate administrator for Commercial Space Transportation in the FAA. As the first head of the then Office of Commercial Space Transportation within the Department of Transportation Stadd could be expected to take a more commercial approach.)

The selection of Nasa during 2001 as the fourth-worst-managed activity within the US government [29], and the recently initiated probe into its extraordinary mismanagement of the ISS project [23] provide further testimony to the very poor value-for-money that US taxpayers receive in return for $15 billion per year - over and above Nasa's deliberate delaying of the development of passenger space travel services. The growing political disenchantment with this behaviour is reflected in the recent comment that " spending is moving from the back burner to completely off the stove" [30].

6.1. Other countries' activities

Other countries' government space agencies also have responsibility for commercialisation of space activities, but they take a similar stance towards passenger space travel. For example the European Space Agency (Esa) joined Nasa's unsuccessful attempt to prevent Dennis Tito visiting the international space station [31], and has likewise provided almost no funding whatsoever for research on the economic potential of passenger space travel. The senior staff of Esa and their political paymasters do not want to know about the commercial potential of passenger space travel, any more than their counterparts in Nasa and the US Congress, exactly as Niskanen's work describes [24].

Uniquely among G7 countries' space agencies, the British National Space Centre (BNSC) invests in neither expendable launch vehicles (such as the European Ariane) nor the international space station, since it is required to focus on space science research and activities with potential to be commercialised. However, in 2000 it was criticised by the UK Parliamentary Trade and Industry Committee for investing some 1 billion Sterling over the past decade in remote sensing systems that have generated far less commercial revenue than planned, and for actively discouraging any British government investment in research aimed at realising passenger space travel [32]. The BNSC staff responsible for this stance, Director-General Colin Hicks, Deputy Director-General David Leadbeater and Director of Policy and Finance Alan Cooper, ignored the Committee's suggestion to perform some analysis of its feasibility. They have still provided no justification for their decade-long prevention of funding of work towards passenger space travel - which is clearly contrary to the BNSC's stated objective " help [British] industry maximise profitable space-based business opportunities" [33].

Space agencies' negative behaviour towards the largest commercial opportunity in space can be termed a 'Conspiracy of Silence'. The economic reasons for their acting so strongly against the public interest in this matter are discussed in [34, 35], and some of the 'cultural' reasons why the heads of space agencies unanimously refuse to permit any work to facilitate passenger space travel are discussed in the appendix to [36]. Because of government space agencies' organisational structure making them responsible for commercialisation presents a conflict of interest with their own economic interest in survival and expansion, since it would mean handing over some of their operations to private companies. They resolve this conflict, predictably, in their own interests by suppressing the most promising commercial application, which is ipso facto also the most threatening to their own interests. Nasa, Esa and other countries' national space agencies also exert a strong influence on the news media, being a near-monopoly source of information about space activities. This has helped to delay, though not to prevent, the growth of interest in passenger space travel in the mass media.

By contrast, Russian companies have now already profitably carried two space tourists to orbit, and are currently planning an orbiting 'mini-station' for tourism accommodation at a cost of $100 million [12]. This is particularly noteworthy since, at the time of writing, Nasa's mobile exhibition 'Starship 2040' is publicising the idea of a small module being feasible for space tourism in 2040. 'Starship' is smaller than the first US space station 'Skylab' that operated 70 years before this date. Together with the suppression of the 1998 Nasa space tourism report until July 2001, this can only be seen as deliberate 'disinformation' designed to mislead the US public, media, government and others about the potential for space tourism. In view of the potential for passenger space travel described above, it is clearly greatly against the public interest that space agencies are knowingly resisting progress in these ways in favour of continuing their existing activities despite their low economic value.

7. Future Scale of Space Tourism Industry

As discussed above, meeting the needs of the new Millenium, or at least of the early 21st century, requires the development of major new industries in the more advanced countries. Failure in this would lead to a further rise in the already high levels of unemployment worldwide, with corresponding undesirable social effects. In view of this need for new industries to facilitate continuing global economic growth, it is interesting to consider how large a scale passenger space travel might eventually reach and how much it might ultimately contribute to world economic growth.

As described above, the unique potential of passenger space travel was acknowledged by Nasa, the AIAA and the Keidanren as long ago as 1998 [18, 20]. Since none of these organisations has made any further attempt to investigate or assess the scale of this opportunity during the four years since these reports were published (during which time government space agencies have spent a further $100 billion on economically unprofitable activities), the author outlines a simple estimate in this section.

Although some critics have claimed that space tourism will be no more than a pastime of the very rich, the basic scenario of the Japanese Rocket Society is aimed firmly at serving the middle-class market, and leads to some 700,000 passengers paying a little more than $20,000 each for return flights to orbit in the 17th year [14]. Further growth to reach, say, 5 million passengers in the 30th year as discussed in [37] would require an annual growth rate of some 16% which is not unrealistic by comparison with growth rates seen in other popular services. This would give a scenario like that shown in Figure 2.

Figure 2: Feasible Space Tourism Scenario

Several comments are worth making about this figure.

(1) On this scenario, some 40 million people would have visited space by 2030, that is perhaps 2% of the middle class of that time - yet market research has shown that most middle class people (that is, more than 50%) would like to make a 'space trip'. Consequently this scenario certainly does not seem over-optimistic in relation to the potential market.

(2) The cost to taxpayers to realise this scenario would be far less than the $750 billion that they would have to pay through 2030 for space agency activities on their existing budgets, since most of the investment would come from the private sector. The economic value of the scenario, based on the difference in expected profits, would be about $1 trillion higher.

(3) Several million people would be directly and indirectly employed in related activities, and tens of thousands of people would work part-time in space as hotel staff.

(4) Such a scenario makes some people uneasy as they think that leisure industries are not 'important', and that people should be doing more 'serious' work, like making machines or buildings. But, as described above, the G7 countries have made such progress that producing necessities does not keep many people busy: a smaller and smaller proportion of the population can produce all that is needed, and a growing proportion work to provide services that are 'wants' rather than true 'needs'. The growth of service industries in turn creates demand for manufactured products - as the demand for tourist air travel creates a massive market for the aerospace manufacturing industry. Thus the growth of passenger space travel as shown would stimulate a genuine 'renaissance' of the space industry, after the post-cold-war period of stagnation and shrinkage.

In addition to its economic value as a popular consumer service, making space travel available to the general public would have great social value. Thanks to its well-known inspiring and educational value it would seem highly desirable in comparison with many other 'unnecessary' activities that are proliferating in rich countries, such as the use of recreational but often addictive drugs, gambling and pornography, to mention a few. For some years there has also been talk of a ''crisis in aerospace'' because of the sustained decline in interest among young people in working in the industry. The author's proposal that the development of passenger space travel would also resolve this problem by putting work in space engineering at the forefront of a popular new industry was published as a 2001 editorial in Aviation Week & Space Technology [38].

For simplicity, if it is assumed that the progressive fall in service price thanks to increasing scale of operation is balanced by growth in demand for more expensive services, average expenditure of $20,000 per passenger would give a turnover of some $100 billion in 2030. How much further passenger space travel services might grow depends on many factors; however it does not seem likely to be limited by a lack of demand in the foreseeable future. In addition to the great popularity of the activity itself, there is enormous scope for provision of even more interesting experiences in space with the development of progressively more advanced hotels, orbiting sports centres, lunar hotels and other facilities, as discussed in the references in [21]. As an example, growth of 8% per year after 2030 would lead to a turnover of $1 trillion per year in 2060, that is some 50 million passengers per year (less than two weeks' of air travel passengers today). As a different way of looking at the potential, Table 2 shows a rough estimate of the potential cumulative market.

Cumulative revenue of $40 trillion is equivalent to some 2 billion people travelling to space once each (e.g. by about 2080). Although this may seem a large number, we note again that aviation has already reached 1.5 billion passengers - i.e. equivalent to one quarter of the world population every year [6]. Criticism of this suggestion by staff from government space agencies, by those indirectly funded by space agencies or by others in such terms as that it is "unconvincing" or "pure guesswork" could of course be readily answered if agencies were to devote even as little as 1/10 000 of their annual budgets to study the possibility.

Table 2: Potential space tourism revenues

Rich countries' population 1 billion
10% of rich countries' population 100 million
1 flight each @ $20,000 = $2 trillion cumulative revenue


> 50% of people want a space flight > 5 x
Most people want 2 or more flights > 2 x
Middle-class population is growing rapidly worldwide* > 2 x

Total market > $40 trillion cumulative revenue
+ limitless potential for newer and better offerings

It is also interesting to consider how a correct prediction made in 1902 about the future scale of passenger air travel during the following century might have been received, at a time when the main form of transport was still horse-carriage, and no one had even flown in an aeroplane. Talk of ''millions of passengers per day'' and ''one billion passengers per year'' would surely have been dismissed not as ''guesswork'' but as sheer madness. Yet, by contrast to the non-existence of aviation in 1902, crewed space travel has been under way in 2002 for more than 40 years already, making the projection of future passenger space travel services - based on known technology and market research data - far less uncertain.

The low cost of access to space that would be brought about by such large-scale space tourism would also lead to other forms of economic development in space which are not possible at present high launch costs. Many writers of both fiction and non-fiction have described futures in which human activities spread far beyond Earth - a genuine 'Space Age'. The fundamental reasons why this has not happened yet are because the cost of access to space is too high, and there is very little demand for the services utilising space that are currently being offered [22]. By bringing costs down by providing services for which there is known to be a very large consumer demand, space tourism uniquely offers the promise of realising these long-term possibilities. Even if the possibility of realising this scenario was estimated to be only 1%, space agencies should still be investing tens of millions of dollars/year to investigate it. The fact that they devote nothing to this work is proof that they are not trying to maximise the growth of commercial space activities, despite their legal responsibility to do so.

'Opening the space frontier' is a phrase used in the literature published by government space agencies - but despite spending $25 billion per year they offer taxpayers no such prospect. The research-oriented activities funded by government space agencies are of little value for commercialisation, which is the key to enabling space activities to contribute to economic growth. The fact that the development of consumer-oriented commercial services in space is likely to be far more effective than government 'space development' activities at bringing about economic development in space should not be surprising - and it should be particularly obvious to economic policy makers.

8. Imperative for Economic Policy

Space activities generally receive little or no attention from economic policy makers for a number of reasons: they are very small-scale by comparison with commercial industries; they are largely government-funded; and they show little prospect of significant growth - at least according to government space agencies' forecasts. In truth, economists should know better than to rely on the views of government monopoly organisations concerning either costs or future prospects, since they have a well-understood tendency to have excessively high costs, to avoid risks, and to resist innovation, in pursuit of their own economic interests [2, 24]. However, although these problems of government organisations are well-known within both business and the economics profession, it is easy for government organisations that use large budgets for public relations to appear impressive and authoritative to non-specialist members of the public, including many journalists and politicians. And it is notable that both journalists and politicians - and indeed most of the general public - tend to accept the statements of space agencies as definitive even in matters of cost.

Sadly, government space agencies have avoided proposing that space activities could have economic value commensurate with their costs. On the contrary, the way in which they are structured and funded gives them a strong economic interest in exaggerating the difficulty of space activities, playing down future prospects, avoiding risks, and minimising the public's expectations by such means as ignoring proposals for passenger space travel, in line with Niskanen's description [24]. Before being appointed Nasa Administrator, O'Keefe himself drew attention to the unsatisfactory form of many of Nasa's stated objectives, such as to "..chart our destiny in the solar system" which do not allow the measurement of success or failure [39]. In this way, by reducing the likelihood that they will receive criticism for having 'failed' in their work, space agencies thereby maximise the likelihood of continuing to receive funding.

To date, government space agencies have spent some $1 trillion of taxpayers' money. But whereas commercial investment on that scale would have created businesses earning revenues of some $1 trillion per year, commercial space activities today are roughly one 50th of this. Even allowing for the fact that 10-20% of this funding is for scientific research, and perhaps $1/2 trillion spent in the early decades was explicitly for political purposes, the return on investment is still < 10% of what commercial activities would achieve. If space agencies were genuinely motivated to achieve economic benefit for taxpayers, then in view of this extremely poor economic performance they would be urgently investigating potentially promising new commercial opportunities. Since passenger space travel is recognised to have the potential to grow into a major new service industry similar to passenger air travel [18, 20] space agencies' unanimous refusal to investigate it, despite being required by law to promote commercial space activities, shows that space agency leaders do not want to know about the potential of passenger space travel, and moreover that they do not want the public to know about it either.

In view of space agencies' economic interest in maintaining government funding of their existing activities, it seems likely that they will continue to refuse to do anything to help the development of passenger space travel until they are compelled to do so. Unfortunately the interests of the politicians who control their budgets are very similar to those of the agencies themselves, as Niskanen explains [24]. Consequently reform will require intervention from outside existing arrangements, which will take time.

From the economic point of view, a particularly damaging effect of the present situation is that, until such change occurs, it will remain very difficult for private companies to raise funding to develop passenger space travel services. Major aerospace companies are 'captives' of space agencies, in the sense that they cannot do any independent work that might jeopardise their chances of continuing to receive large, low-risk contracts from them, while small companies lack the credibility to raise the funding they need in financial markets, since financiers tend to accept the 'conventional wisdom' about space which comes from government space agencies. This problem has been documented in such cases as Beal Aerospace Inc. stopping their project to develop a low-cost satellite launch vehicle in 2001 because of competition from Nasa [40], and difficulties caused for other companies trying to raise funding for similar projects by public comments from space agencies [41].

8.1. Macro-economic viewpoint

From the macro-economic point of view, in the absence of detailed analyses demonstrating errors in the Nasa report [18] and similar published work, it is clearly desirable that passenger space travel services should be developed as soon as possible. This is because in 2002 the major blocs of the global economy are sinking into recession simultaneously, and the severe over-capacity in many older industries, combined with a serious lack of profitable new industries creates a real risk of a prolonged depression.

Historians and economic policy makers must not forget that the slide towards the second world war gathered pace through the depression of the 1930s when unemployment reached 20% in many countries. If current high levels of unemployment rise even higher in the coming years, they may lead to dangerous impatience in many regions of the world. It is already clear that in some of the poorest countries religious extremism can seem attractive by comparison with a life of impoverished unemployment, from which escape is hampered by G7 countries' protectionist trade barriers against their cheap exports [3]. These trade barriers are motivated by the high unemployment in richer countries caused by the lack of new industries (as discussed above).

It would be economically beneficial to taxpayers if economic policy makers insist that our accumulated space engineering capabilities be used for activities with greater economic value than government space agencies' current unprofitable ones. As they operate today, instead of contributing to economic growth, government space activities are a hindrance to it - by using $20 billion per year of taxpayers' funds on activities which have an annual rate of return close to minus 100%; by indirectly preventing companies from developing lower-cost launch vehicles; and by deliberately hindering the growth of the activity which they have themselves confirmed is the most economically promising use of space-passenger space travel.

As described above, if present budgets continued and passenger space travel services were not developed as proposed in Figure 2 above, the net loss to taxpayers from continuing the present pattern of government space activities for several more decades would be around $1 trillion. This would be a terrible misallocation of economic resources - particularly at a time of inadequate economic growth - and the quicker it is remedied by prioritising the development of passenger space travel the more the space industry will contribute to world economic growth, and thereby to 'Meeting the Needs of the New Millennium'.

In addition to this economic cost, there would also be an incalculable human cost: in unnecessarily prolonging the poverty of hundreds of millions of people in late-developing countries; in postponing the development of an exciting new goal for the young in the currently richer countries; and in aggravating the risk of global conflicts through high unemployment. If government space agencies were genuinely trying to "..encourage, to the maximum extent possible, the fullest commercial use of space" they would obviously investigate this potentially major new business opportunity in depth. But instead, they are currently suppressing discussion of this possibility by refusing to provide even the smallest funding to study it, despite having endorsed it in print [18]. Economic policy makers should act to correct this serious policy failure as soon as possible.

Another cost of this policy of deliberate neglect is that it ensures that there will inevitably be a further delay before passenger space travel grows to a large scale. Although it seems possible that passenger space travel could grow to reach a scale of $1 trillion per year later in the 21st century, turnover during the next 10 years will clearly be limited, and even with vigorous growth it seems unlikely to be measured in more than tens of billions of dollars by the 2020s.

How best to stimulate the development of passenger space travel services is a separate question, which has been discussed elsewhere [18, 34, 37, 42, 43]. Some preliminary actions can be simply described: following the first recommendation in [18] senior staff of space agencies should speak formally, positively and often about the economic importance and social value of developing a vigorous, commercial passenger space travel industry; they should also establish well-resourced offices tasked with encouraging the development of passenger space travel; and they should collaborate closely with the aviation industry in realising this goal [44]. The latter action will require significant restructuring since government space activities have little relevant contact with aviation. Yet the vast experience of the airline industry is essential to realising passenger space travel.

To the extent that space agencies do not participate effectively in implementing these and other economically beneficial changes to their existing activities, taxpayers will benefit economically if space agencies' budgets are cut - both directly by making large savings in subsidies to high-cost activities with little economic value, and indirectly by reducing misinformation about the potential for space commercialisation in general and passenger space travel in particular.

9. Conclusions

The paper has described the potential economic benefits from developing passenger space travel services, which could contribute greatly to the continuation of peaceful world economic growth. By contrast, the vision of the future offered by government space agencies, based on continuing government domination of space activities centred on a crewed mission to Mars, is tragically narrow-minded and would merely preserve space agencies' near-monopoly status rather than contribute to economic growth.

In view of the potential economic importance of passenger space travel in creating a major new field for economic expansion it is most unfortunate that little progress is being made today in developing this promising new consumer service industry, mainly because governments spend some $20 billion per year on a range of unprofitable 'space development' activities and nothing at all on work that would help to realise passenger travel. Claims by space agency leaders that they are fulfilling their legal responsibility to encourage space commercialisation are disingenuous at best.

The sooner that policies are implemented to accelerate the development of passenger space travel, the sooner the space industry will be able to claim honestly that it is contributing to meeting the needs of the 21st century - rather than holding back world economic growth by suppressing a new field with great business potential. For government space agencies and the politicians responsible for their budgets to continue to remain silent concerning their potential contribution in this area at a time of growing economic difficulty worldwide would be a shamefully wasted opportunity.

It is highly desirable that economic policy makers should be informed of the opportunity for economic growth that is being wasted by government space agencies. They will then be in a position to implement policies to bring about the attractive future shown in Figure 2, thereby creating a wealth of new business opportunities for the innovative leaders who are so sadly lacking in space agencies.

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Also downloadable from the needs of the new millennium passenger space travel and world economic growth.shtml

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