From Cold Wars to an 11-Minute Voyage: Introducing the New Space Era

Make 'em go, "Oh, oh, oh"

As you shoot across the sky. 

Katy Perry really did manage to make the lyrics of her hit-song “Firework” become a reality as it set the internet ablaze when she literally shooted across the sky for eleven minutes. New Shepard Mission NS 31 was a commercial space flight by Jeff Bezos’s company, Blue Origin, that flew for 11 minutes and traveled more than 60 miles above earth. By no means was this the first commercial space trip enacted by the company, but it surely did become the one that gained the most traction and shed light on how much the space industry had changed through the years. 

Let us trace back the past to 1957, where a historical moment happened in terms of space exploration–a dog that went from the slums and soared to space, Laika. She was a dog from Moscow with a mission that was thrusted upon her by the Soviets. The mission was a success and she became the first living creature to orbit the Earth aboard the Sputnik 2. At that time, the moment not only served as a milestone in space exploration, but was also considered as the Soviets leading the ongoing Cold War disguised as Space Wars at that time. This serves the notion of how staggering the evolution of the space industry has been in less than a century. 

Shift of An Era

There was an elephant in the room between the Soviet Union and America’s geopolitical relationship for 44 years in the 20th century, this era was called the Cold War. This multifaceted war at that time would unknowingly launch the world to enter a new era: The Era of Space Exploration. The legendary space race will then lead to a series of milestones for mankind, Laika in Sputnik 2; Launch of the first US satellite, Explorer 1; Yuri Gagarin in Vostok 1; and many more until the 1969 Neil Armstrong in Apollo 11, landing on the moon. 

When the Americans became the first of humanity that left their traces on the moon, the Space Race hit its climax. But even after defeating the Soviets in the Space Race, NASA’s plans for space exploration did not stop at conquering the moon. NASA constructed "The Post-Apollo Space Program: Directions for the Future" for President Nixon in 1969. One of the options required more than a doubling of NASA's budget by the 1980s if they want to initiate manned missions to Mars (NASA, 2019). Ultimately, they did not pick that option because NASA’s budget was significantly depleted after the landing of the moon–it went from its peak of $53.3 billion in 1965 (adjusted for inflation in 2025)  to $19.7 billion in 1974 (O’Neil, 2024). 

As taxpayers’ interest in space exploration declined, future possibilities for government space expenditures went down with it. The government had to find a way to secure its budgets and reduce the financial burdens, without disrupting the continuity of its space mission. Not to mention, the contractors that helped the government with their projects were also facing a decline because they had all this new knowledge of space technologies, but the drop in space missions made it less likely to produce an output from it (Peeters, 2021). 

The crisis faced by the space industry led the government to no longer act as the sole agent responsible for all missions, budgets, and resources. It opened the possibility for market liberalization to happen. They released space technology from its monopoly hold and made it public, then continued seeking out private companies to do public-private partnerships. A win-win solution where the government would not be fully responsible for the financial burdens and the risks alone, while the private companies would lift the barrier to entry in the formerly monopolised market. These new entries to the market also gave opportunities to contractors that were previously on large-scale projects like Apollo to become able to evaluate market demand for space-based assets and act as a provider for hardware and services that corresponded to the demand (Peeters, 2021).  

Thus, the gate for space commercialization opened, with the first market explored being telecommunications. Private companies discovered that investing in satellites would lead to more innovations and cheaper solutions. When private telecom operators proved themselves to be profitable, commercialization of the space industry branched to other sectors, such as transportation and remote sensing (Peeters, 2021). We could see one of the examples of the space sector branching into commercial transportation being the now discontinued supersonic commercial airplane, the Concorde Jet. Though it announced its retirement in the 21st century, the airplane was the world’s first and only successful commercial airplane that was able to travel at the speed of sound, half the time of today’s average commercial flights. 

This brings us to the newest model of the industry’s evolution; The New Space Economy. Space becomes a free market where private companies no longer need to form partnerships with governmental institutions to contribute or enact on space exploration. In this day and age, the space race torch is passed on to the billionaires club, like Jeff Bezos with Blue Origin and Elon Musk with SpaceX.

Spillovers

The space industry is still at its growing stage. As the government's reign on the market loosened, the expansion of choice, enabling the free market to happen, is celebrated (Zupan, 2011). Free market environments promote innovation and consider it as one of the drivers for economic growth. The entry of private companies drives competition and so fosters innovation even more so than government-reigned markets (Baumol, 2010). Blue Origin and SpaceX’s need to stay competitive and relevant within the free market serves as an engine for them to create more innovations, thus driving economic growth and technological advancement 

Space infrastructure holds a critical position in the midst of the digitalisation of society and rising geopolitical tensions (Undesth and Jolly, 2022). Satellite networks have been deeply integrated with telecommunications, while launch facilities are becoming increasingly important within the transportation infrastructure. 

There are two main perimeters of the space economy, one being the upstream sector and the other being the downstream sector. The upstream space sector consists of launches, space manufacturing, and satellites. While the downstream sector is involved in the daily operations of space infrastructure on Earth, such as the activation of GPS. There are also space-derived activities in other sectors that have relied on space technology but are not dependent on it, like those in the medical sectors (OECD, 2022)

The New Space Economy upstream sector is synonymous with two things: smallsats and reduced costs. Satellites that used to weigh over 1000 kg experienced a decrease in weight. These smallsats, which were less than 500 kg, allow companies to lower their capital expenditure and achieve economies of scale. 

Joseph Schumpeter’s theory of creative destruction explains that dismantling old ideas to give light for new ones would lead to a higher possibility of innovation. This theory could be applied to the new space business, with private companies such as SpaceX, introducing the concept of reusable rockets to the industry, disrupting the status quo of fixed costs within the space industry. Elon Musk, owner of SpaceX, says that reusability in the space industry would be the key to unlocking a bigger potential in the commercialization of space. His opinion is that the problem of why commercial space flights are insanely expensive is because of the cost of making one rocket itself, and how it is not designed for more than one-time usage.

Figure 1. Launch costs to Low-earth orbit (inflation adjusted-dollars)

According to CitiResearch, NASA’s space launch costs were relatively stagnant for years after 1967, with an average of $16,000/kg for medium/heavy payloads and about $30,000/kg for light payloads. Then, SpaceX’s entry to the market introduced reusable rockets that would lower the launch costs with the Falcon 9 in 2010 ($2,500/kg) and Falcon Heavy in 2018 ($1,500/kg) that are 30 times lower than NASA’s Space Shuttle in 1981 and 11 times lower than the average launch costs from 1970 to 2010.

Based on the data presented in a seminar by NASA about “The State of Play US Space Systems Competitiveness: Prices, Productivity, and Other Measures of Launchers & Spacecraft.”, SpaceX was able to reach a state of economies of scale for its production. 

Figure 2.  Launch vehicles costs over time

With its innovation of cost lowering, a cycle could be operated for multiple companies, where lower costs imply a lower price, thus increasing demand in a limited-sized market. SpaceX’s success in lowering costs for the space industry caused a boom in the small satellite launches to low-Earth orbit, which is synonymous with the New Space Economy. A while after the Falcon 9 became operational, data from Euroconsult showed that the small satellite market had a compound annual growth rate of 23% from 2009 to 2018. 

Meanwhile, within the downstream sector, technological transfer serves as the main spillover. The space industry has opened doors to technological innovation, such as the integration of the GPS system that is used by corporations like Uber. It is able to create new industries, especially those in telecommunications, meaning that it is able to generate employment, multiplying its economic value. 

Negative Externalities Arise

Neil Armstrong once said, “That’s one small step for man, one giant leap for mankind.” The industry that stemmed from a rivalry between two nations is predicted to bring a positive outlook in the future, with a predicted value of $1.8 trillion by 2035 (World Economic Forum, 2024). Although, as it is an industry operating with high costs and highly oriented on profit, negative externalities are sure to follow. 

Within the last two decades, the innovations driven by New Space made the number of satellites launched to orbit see a steady rise, but that ultimately caused space debris to rapidly increase. In March 2022, the US Space Force tracked more than 25.000 identifiable debris objects varying in size, with untracked ones predicted to be hundreds of millions (ESA, 2021). It could produce a chain reaction of in-orbit collisions, which would make the supposedly finite space become limited. Other than that, the potential collisions could also crash into active satellites or even sabotage mission launches of spacecraft  (Weeden, 2012). There needs to be an even more advanced monitoring system by the government and private industries for space traffic management. 

Other than that, concerns about the environment are always raised when talking about aerospace. Rocket engines do not emit the same gas and particles into the atmosphere (e.g., Dallas et al., 2020; Ross & Sheaffer, 2014; Ross & Vedda, 2018; Ryan et al., 2022; The Aerospace Corporation, 2022). The Falcon 9 that was launched by SpaceX has potentially released greenhouse gases exceeding 28.000 tonnes.  In 2018, the amount of black carbon that rockets emit to the stratosphere was similar to those released by global aviation, even with rocket launches having a lower intensity of launches (Buchs, 2022). With these concerns raised, even if the government no longer acts as the only stakeholder of the industry, they need to become an active agent in implementing regulations to minimize the externalities caused by private actors and launch into a more sustainable space economy. 

Space: The Final Frontier 

The shift from government-led explorations into a free-market driven system has opened doors to huge spillovers and technological innovations. The new space economy marks a monumental shift for humanity’s technological progress and global economic opportunity.  The government not only collaborated with private companies, they arrived at a stage where their missions and satellite launches depend on private companies such as SpaceX. 

However, this rapid growth is not without consequences. Issues of negative externalities should be addressed and highlight the need for a more regulated industry. Nevertheless, the benefits and potential of the new space economy far outweigh its challenges. As humanity embraces the space economy, it no longer becomes the final frontier, but a dynamic and integral part of human-life.

Works Cited

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GUPTA, N. (2010). [Review of The Free-Market Innovation Machine, by W. J. Baumol]. Indian Economic Review, 45(1), 183–186. http://www.jstor.org/stable/29793959.

OECD (2022), OECD Handbook on Measuring the Space Economy, 2nd Edition, OECD Publishing, Paris, https://doi.org/10.1787/8bfef437-en.

OECD (2023), The Space Economy in Figures: Responding to Global Challenges, OECD Publishing, Paris, https://doi.org/10.1787/fa5494aa-en.

Ostovar, Michele. “The Post-Apollo Space Program: Directions for the Future.” NASA, 2000, https://www.nasa.gov/history/the-post-apollo-space-program-directions-for-the-future/.

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Pethokoukis, James. “Moore’s Law Meet Musk’s Law: The Underappreciated Story of SpaceX and the Stunning Decline in Launch Costs.” AEI, 26 March 2024, https://www.aei.org/articles/moores-law-meet-musks-law-the-underappreciated-story-of-spacex-and-the-stunning-decline-in-launch-costs/.

Punnala, M., Punnala, S., Ojala, A., Kuusniemi, H. (2024). The Space Economy: Review of the Current Status and Future Prospects. In: Ojala, A., Baber, W.W. (eds) Space Business. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-97-3430-6_2.

RSIS. “Public-Private Partnerships in Outer Space: Implications for the Defence and Security Sector.” 2025.

Weeden, Brian. “The Economics of Space Sustainability.” The Space Review, 4 June 2012, https://www.thespacereview.com/article/2093/1.

Weinzierl, Matthew C., Kylie Lucas, and Mehak Sarang. "SpaceX, Economies of Scale, and a Revolution in Space Access." Harvard Business School Case 720-027, April 2020. (Revised October 2021.).