A Place to Stand

spaceport Singapore

I recently blogged on the economic success of Dubai & have been sent this.

“The real boom in Dubai really only kicked off recently. After spending some time here and chatting with those who live here, I would boil down the more important ingredients to these:

Low regulations, low tax. This has probably been a Dubai advantage for a hundred years, but people here told us repeatedly how easy it is to set up shop in Dubai and how your privacy is protected. There are also no income, property or corporate taxes. Zero.

(The city funds itself with taxes on hotel occupancy, liquor sales and restaurant meals, as well as permits for roads and such. Part of the budget also comes from the Sheikh’s business interests – such as Emirates Airlines and the aluminum smelters.)

The introduction of freeholds. In 2002, Dubai allowed foreigners to own property in so-called freeholds. That was a big milestone that kicked off a wave of immigration. So now there are these freeholds where the Penthouse Gypsies live in high style and in very nice communities.

The backlash of 9/11. Before 9/11, Middle-Eastern exporting countries re-invested $25 billion a year in the US. After 9/11, that slowed to about $1.2 billion a year. Arabs no longer felt welcome and feared what might happen to their wealth. So guess where the money went?

Arab wealth started flowing back to their own countries. The economies of the eight states of the Gulf Coast grew 60% between 2001-08, compared to 18% for the US. ‘Cash poured into Dubai,’ Krane writes. And Dubai’s growth rate topped China’s, averaging 13% per year.

Essentially, the repatriation of Arab wealth in the US was a big driver and still continues to today. As the Middle East region gets wealthier, a good chunk of that wealth will flow through Dubai.

Finally, the UAE fixes the value of its currency to the dollar – at least for now. What this means is that as the US printed dollars the effects were exported to Dubai, too. That is where Dubai got into trouble. Lots of speculative capital flowed to building islands in the shape of date palms or creating residential communities with robotic dinosaurs from Japan. Now Dubai is suffering through a massive real estate bust as a result.
“Still, Dubai’s important position in world trade is many layered, like a wedding cake.”

In Britain 50% of our economy & 75% of the potential economy is sucked up by our government parasitism. This is a pretty good explanation of why they are doing better than us.

It may also be a pointer towards the future.

I have written on the Gulf Arabs having bought 1/3rd of Virgin Galactic & also on Abu Dhabi (beside Dubai) & Singapore both building commercial spaceports. Commercial space development does not need to be done by a large country. It only needs a country large enough to provide a base for commercial launches which should be near the equator. Such a base need not be larger than a current international airport so space is clearly not a problem even for Singapore. Small equatorial countries can very well become leaders in the new space race.

Indeed small countries have a major advantage. They often find it advantageous to adopt strongly free market policies to become international financial centres. Finance also requires small amounts of land. Indeed while once large size was a sign of technological leadership (eg the Titanic) nowadays small size is (eg nanotechnology) so small states can compete perfectly well. The way they compete is attracting the best & brightest with economic & other freedoms.

So once the first commercial space trips are being made will we see the business being developed in large current economies, even if there are massive regulatory hoops to jump through & a high proportion of their costs is paying taxes, or will they choose to set up in small states where their investment money all goes into investment? Will the first L5 settlement be the property of the US, paying US taxes & having US safety & environmental regulations or will it be an Abu Dhabian one paying no direct taxes & not restricted by over-regulation?

If we let them get an unassailable lead in space development we are also handing them the future of all related industries & since there are technological advantages to many processes in zero-G from creating new materials to separating viruses that is a lot of industries.

Well it is not quite as absolute as that - governments can do worse than be parasites & nobody is going to be attracted to a spaceport in a country subject to coups, crime or xenophobic fundamentalism & a lot of equatorial countries hit those buttons. Moreover people do want a certain level of safety, financial & otherwise & necessary regulation will attract. Pointless regulation which serves primarily to employ government employees, which makes up the overwhelming majority in Britain & the US, will drive them away.

The future generally but space development particularly looks like it will belong to libertarian societies because they can choose to avoid such parasitism. I have compared Dubai to a seastead in the desert & we may well see seatsteads as another way of getting out from under.

I did say previously that we would shortly see Dubai, by owning 1/3rd of Virgin Galactic, having a bigger role in space development than all the governments of the EU put together. ESA, though it has far more money, is further from being able to put somebody in space than Virgin. However I then thought that it would be likely the Europe would not fall further behind & with financial resources somewhat larger than Dubai/Abu Dhabi's could catch up. However looking at it further it seems that, if nothing is done, the advantage will continue to lie with these new states & their lead may actually increase.

At this point I would like to mention a suggestion I made a few years ago - for Britain to produce a regulatory & financial environment on Ascension Island in the equatorial Atlantic to turn it into a Spaceport. Since we do nothing there except help maintain a large airbase, cutting regulations & taxes there have no cost as there is currently nobody there to enforce them on & pay them. Probably we would have to spend a little money on port facilities & other infrastructure. Beyond that it would essentially be a matter of letting the free market develop the island as a commercial spaceport. With the Space X-Prize Foundation to push this technology the results should be spectacular. As will the long term benefits to Britain's economy.

The main problem such small nations run in developing a commercial space industry is security, both internal (violent change of leadership, crime, extremism) & external (small countries facing possibly unstable neighbours like Iran & Indonesia). A British mid-Atlantic spaceport would have an overwhelming advantage. But only if we allow it to exist.

Labels: economics, space, X-Prizes