Maj. Chet Kinsman of the US Aerospace Force is aboard a space station, chatting with industrialist Ted Dreyer, whose tech corporation has built lots of space hardware on government contract. Kinsman is interested in the Aerospace Force plan to get a permanent manned base built on the moon – but funding it is proving a formidable challenge.
The long-range project of building a vast network of solar power satellites to be orbited around Earth, built from materials economically mined on the moon, controlled from orbital stations seems like a way to justify the enormous price tag; but Dreyer balks, pointing out that it would be many years before the project would go into the black, as his companies poured $10 billion a year or more into it. The risk would be too great; his board of directors would never go for it.
“Suppose the government was willing to sink a few billion dollars per year into building lunar mining facilities and orbital factories,” Kinsman asks. “Would your board of directors be interested then?”
“Sure!” Dreyer answers. “If Uncle Sugar’s taking the risk, why the hell not? With the government providing the investment money and the Aerospace Force behind it, that would be a project we could depend on. We’d put a helluva lot of our own discretionary risk money into it.”
This scene, from Ben Bova’s Kinsman (itself a prequel to his prescient novel Millennium), gives us much to think about. Kinsman gets his moonbase, which he ends up commanding, and the space program moves forward. But only because he arranged for government and private industry to work together.
This crucial factor seldom if ever surfaces in the equations of capitalism and neoliberalism. Those equations credit capitalism as the great creator/innovator, and government as its antithesis – a parasite that holds it back. Binary thinking.
But that’s not the reality. The truth is that government can do things capitalism can’t - things which not only stimulate the economy, but move technology and the economy forward, kicking down doors to allow capitalism to move ahead faster and flourish more fully, all while improving the quality of life for all. It doesn’t get talked about by the ideologues, but we’ve seen it happen over and over.
Here are three big examples.
The Interstate Highway System
In the mid-Fifties, the Eisenhower Administration undertook the greatest public works project in US history – to build a network of highways across the nation, connecting major city to major city, state to state.
This massive undertaking would create 50,000 miles of roadways, two lanes in each direction, infrastructure that would revolutionize interstate transportation for the public and for business. It would generate an entirely new layer of roadside industry – service stations, restaurants, hotels – to accommodate travelers and truckers. It would bolster the economy by lowering the cost of transportation across the board while also generating new tax revenue from increased business.
At the same time, it was considered a prudent move for national defense – an important consideration, post-World War II, when the US had actually dreaded the prospect of foreign invasion – by opening up faster, more efficient avenues for troop deployment and the movement of artillery.
The idea was a winner. There was some haggling in Congress over how to pay for it – bond issues vs. gasoline taxes, and so on – but no one thought it was a bad idea.
Eisenhower signed the Federal Aid Highway Act of 1956 in June, and the first paving commenced in September, under a plan that would have the work completed, nationwide, in a decade – at a cost of around $100 billion over that period. Under the act, the federal government would cover 90% of the costs of construction, with states chipping in the other 10%.
In fact, the system ended up costing over $400 billion, and wasn’t completed until 1992 – 35 years after the work began. Maintenance and modification persist to this day.
Interstate shipping was revolutionized. The cost and efficiency of transporting goods cross-country plummeted, in turn lowering the cost of those goods and increasing their accessibility. Suburbanization of major cities was greatly stimulated, and tourism exploded. The only loser was passenger rail, which dropped off for awhile but eventually reasserted itself.
Put simply, everybody won in the end: citizens, business, the economy, the federal coffers.
The Communication Satellite Network
Eisenhower’s successor, John Kennedy, touted his moon program as a great adventure, a gesture of world leadership that would inspire the nation and stimulate technological progress. In fact, it was more a Trojan horse.
Rock collecting on the moon was all well and good – and certainly as inspiring as Kennedy made it out to be! - but the real result of the US space program was the network of communication satellites that supported the space effort. Those satellites were part of an altogether different agenda: to give the private sector its biggest-ever boost in global communications.
The idea was to have the federal government partner with private industry to develop and deploy satellites that would receive signals from the surface and pass them to other satellites, then beam them back down to some location far afield of the origin point. In the long term, such a system was far more efficient, fault-tolerant redundant than the trans-oceanic cable systems that had enabled intercontinental signal traffic before.
The deal was simple: an informal consortium of US communication companies, led by AT&T, would replatform that industry on the satellite system, sharing in the cost of developing and building the satellites, while NASA and supporting agencies would develop, own, and operate the infrastructure for launching and monitoring the satellites. The Federal Communications Commission, which had regulatory authority over the program, initially proposed joint ownership, but Congress squashed that proposal, citing antitrust legislation.
Kennedy signed the Communications Satellite Act of 1962 in August, and the program was officially in motion. Things did not progress quickly; it was years before a true network existed, and by that time it was no longer strictly a US venture; 17 other nations (and eventually 55) joined the consortium, making the system truly global.
The key to the system was not the satellites themselves, but the technology and infrastructure that enabled them – financed by the federal government, rather than private industry. The satellites themselves were expensive to manufacture, but the development of the technology behind them and the launch systems to put them into orbit were the real bottlenecks. Uncle Sugar, to use Ted Dreyer’s term, put up that money: $28 billion of it, counting the manned missions the program included. The launch facilities and supporting systems exist to this day.
That satellite network has been with us ever since. Tens of thousands of satellites have been orbited, many by other nations. They enable global communications across the board. They support our official communications, our personal communications, the transfer of data. They enable the Internet. They are the nervous system of the modern world.
The Internet
Interstate highways changed the landscape of the nation. The satellite network changed global communication. But the Internet – well, the Internet changed Western society.
Unlike the other two, the Internet was actually around long before anyone thought to open it to the US public. It was ARPANET, a closed network facilitating the transfer of data between public and private research entities performing work for the US government. It was large, but narrowly focused; and its real value was in the technology that enabled it – packet switching, a data transfer technique that allows for accurate and fault-tolerant transmission of information through complex networks.
It was not the network itself, but the technology it was built on that enabled the society-changing opportunity. And, to the chagrin of Rush Limbaugh fans everywhere, it really was Al Gore who made it happen.
While still in Congress, Gore had authored the High Performance Computing and Communications Act of 1991, after he’d read the 1988 report on ARPANET by UCLA Professor Leonard Kleinrock, one of its creators. It dawned on Gore that what ARPANET was doing to streamline and accelerate US research could be put to work streamlining and accelerating US business. (Kleinrock would later declare Gore’s insight and bill to be the defining moment of the Internet.)
Gore’s bill committed $600 million in federal funds to the next stage of the network’s development, and united federal resources, private industry and academia in planning that next stage. The bill passed in December, enabling what became the National Information Infrastructure – which Gore dubbed “the Information Superhighway”, a nickname that stuck. Then-President George H. W. Bush praised the bill, declaring that it would open foreign markets for free trade and enhance cooperation between government and industry – all of which happened.
Limbaugh’s mockery of Gore aside, the now-Vice President Gore was praised by ARPANET tech gurus Vint Cerf and Bob Kahn, who said, “No one in public life has been more intellectually engaged in helping to create the climate for a thriving Internet than the Vice President.” Even Newt Gingrich defended Gore, saying, “In all fairness, it’s something Gore had worked on a long time. Gore is not the Father of the Internet, but in all fairness, Gore is the person who, in the Congress, most systematically worked to make sure that we got to an Internet, and the truth is – and I worked with him starting in 1978 when I got [to Congress], we were both part of a ‘futures group’ – the fact is, in the Clinton administration, the world we had talked about in the ’80s began to actually happen.”
The initial costs of ARPANET, prior to Gore’s initiative to annex it, totaled about $125 million over almost two decades. Beyond the $600 million provided by Gore’s bill, the investment to open the Internet up to commercial traffic and expand it globally have cost the federal government in excess of $42 billion (though other nations have also invested). The Biden Administration has already committed another $65 billion to an expansion program to provide Internet access to all of the nation’s most rural locations.
It scarcely needs to be pointed out that the Internet has changed industry completely, replatforming commerce in the digital universe, rather than the physical world. It has devastated the retail industry, with its overwhelming economies of scale and reduced costs of marketing and processing. And the societal impact, beyond the economy, is likewise breathtaking and obvious: social media, all Internet-based, has redefined the way we get our news, the way we arrange our daily lives – and even how we relate to one another.
What are the actual numbers here? What’s the return on the US taxpayers’ investment in the Internet?
The Internet Association, which keeps track, published a 2019 study stating that the Internet accounts for $2.1 trillion of the US’s $20.5 trillion annual GDP.
The overall point is that all three of these world-changing innovations were not the product of capitalism, but of government. Capitalism played a role, to be sure, but as follower, not leader. Like Ted Dreyer in the Kinsman story above, capitalist decision-makers would never have risked hundreds of billions building an interstate highway system, or invested to build out the vast infrastructure needed to get us into space, or even the much-smaller investment that gave us packet-switching technology and a nationwide digital network to run it (though AT&T’s R&D budget was comparable, there was no promise of return on the ARPANET investment). It was the vision of US lawmakers and the investment of US taxpayers that got those projects rolling.
So capitalism got its leg up from government in the 20th century, not the other way around. Again, in Ted Dreyer’s formulation, it was “Uncle Sugar” assuming the risk, which capitalist decision-makers are loathe to do. With the US public choosing lawmakers and public servants willing to assess those risks and make prudent investments for the good of the nation, a safe path for private industry was constructed, a path that is now heavily traveled, to the benefit of all. To say nothing of the government’s role in creating the federal/private/academic powerhouse alliances that made these grand ventures work.
So let’s hear no more of the old formula. The neoliberals are wrong: capitalism is not the great creator/innovator; it follows the innovations pioneered by the federal government. Not always, but often enough, as evidenced above. And government is not a parasite, leeching off capitalism and sapping its potential; it is bolder and more public-spirited than industry, and enables it, rather than feeding on it.
So much for binary thinking!
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