Affordable Housing Institute : US

If land ownership spurs investment, as Hernando De Soto and numerous others (including me) believe, can we use the promise of a future rights grant to spur investment?  That’s the premise behind an entertaining and provocative little concept story in The Boston Globe about how we can revive human space exploration:

 

If we really want to explore space, maybe we should sell it off to the highest bidders

By Drake Bennett

 

If the past few years have taught us anything, it is to not underestimate the intoxicating allure of property. Real estate, it turns out, brings out the adventurer in all of us.

 

And we’ll put the airtight swimming pool right over here …

 

It’s unsurprising, then, that a few enterprising thinkers are hoping to harness that power in a more exotic neighborhood: space.

 

Long way from the driveway to the front door, isn’t it?

 

No one, of course, owns space – not even the relatively tiny portion of it within humankind’s reach.

 

The legal concept is terra nullus, land that is empty and unclaimed, hence available for the first valid claimant.  It was first used, erroneously as all the citations note, in the context of Australia and earlier in America:

 

 

Leaving aside the diminishing possibility that Gidney and Cloyd will come to reclaim their ancestral lands,

 

… we were just in reruns, waiting for values to rise

 

Who does own the Moon?  Or said in reverse, who could grant valid title to a piece of the Lunar landscape, and would such a grant of title stimulate not only investment but also exploration to perfect the claim?

 

While the space race may have been kicked off by Cold War politics, its rhetoric has always been fastidiously communal, eschewing talk of ownership.  “We set sail on this new sea because there is new knowledge to be gained and new rights to be won, and they must be won and used for the progress of all people,” President Kennedy intoned in a famous 1962 speech laying out the rationale for putting a man on the moon.

 

President Kennedy’s carefully non-territorial statements weren’t just idealism; at the time, the United States was facing a ‘missile gap’ as well as being behind in the space race, with the Soviets’ having put up Sputnik in 1957 and still leading the US, with extended orbital flights compared to our popgun Redstone sub-orbitals. 

 

Do you want your children to sleep by the light of a Communist Moon?

 

Nor had confrontation enabled the President to defuse Cold War tensions, what with first the Bay of Pigs and then the Cuban Missile Crisis. 

 

Ruing the day he approved the mission?

 

With the US number two in the space race, downplaying territoriality was simple prudence.

 

In other words, while exploring space has been a race, a mission, and an adventure, it has never been a business.

 

Recently, however, there’s been growing interest in changing that. In the small community of people who think seriously about space exploration, a few are arguing that exporting the idea of private property into space is exactly what we need to do to launch a bold new space race.

 

In The Man Who Sold the Moon, his most exuberant celebration of good old American capitalism, Robert A. Heinlein argued that you could acquire the Moon without even setting foot on it, by buying all the fractional or potential rights of all other claimants. 

 

Heinlein, 1950: “Some day, Virginia, all this could be yours.”

 

Space exploration remains a very risky, complex, and expensive endeavor.  

 

To Arthur C. Clarke, it may have been risky, but it was feasible

 

And while the number of at least nominal space nations looks to grow in coming years, here in the United States there’s a sense among space exploration enthusiasts that the government just isn’t willing to spend the money necessary to make projects like a permanent moon base or manned Mars expeditions succeed.

 

The reason is simple – to a government, establishment of a distant colony is not intrinsically revenue-producing.  Unless substantial benefits flow back to the homeland, it’s a revenue drain, and on the face of it, there’s nothing of sufficient economic value on the Moon to justify the expenditure of permanently setting up shop there. 

 

Better, some suggest, to rely on individual avarice to spur exploration, by allowing private explorers to stake a claim, like celestial Sooners, to the lands they reach.

 

From a private-investment perspective, there is all that luscious land, and billionaires keen to claim it.  And if the Moon were habitable, people would live there, for the view, for the peace and quiet, and for the one-sixth gravity (think of the relief on arthritic knees or hardened arteries).

 

From 1940 …

 

… through 1995 …

 

… to 2005, the imaginings get more practical

 

So if it costs a ton of money, and the government won’t pay for it, but some people will, to a banker, that spells:

 

Heavy long-term capital investment

Equity-type yields

 

I think you can get big yields out of that

 

For a banker, therefore, high-cost risky adventures are fertile territory for structured finance, and the creation and deployment of suitable structured-finance vehicles becomes a nationally strategic asset. 

 

Lest you think I’m merely daydreaming, history has faced precisely this challenge before, with the nautical exploration of the aqueous globe.  Columbus set off to explore the New World not for the glory of science, but to give Spain an alternative to the Portuguese stranglehold going the other way (Cape Town and Goa).  Then, once Magellan and others proved it was possible to circumnavigate the world, vast new unknown continents opened up for exploration, exploitation, and colonization, and among the Western European naval powers, mainly Portugal, Holland, and England, there ensued the seventeenth-century equivalent of the space race – a strategic contest to outfit the largest and most daring fleets, to sail the seven seas and plant the royal or republican flag in hot verdant places. 

 

National power was at stake, to be expanded by harnessing private enterprise, hence it is no surprise that in 1602 the Dutch East India Company was formed:

 

Vereinigte Ostindische Compagnie: United East-India Company

 

In financial terms, the Dutch East India Company is very significant, because:

 

1.  To protect the private capital to be invested, it was granted a government monopoly on the trade.

 

2.  It soon became a huge issuer or long-term bonds.

 

Dutch East India Company bond

 

3.  Because the ventures were extremely risky, the Company sold equity shares in the outgoing vessels, and the investors reaped speculative equity-type yields upon a successful return.

 

In fact, the process of assembling these ‘investment syndicates’ led to the development of the limited partnership as a legal form, and the emergence of the first public and quasi-public companies. 

 

In fact, the first years of the seventeenth century saw the financial equivalent of an arms race, as the English government commissioned the Honourable East India Company:

 

For King and country and profit

 

For two and a half centuries, the Company planted the flag of king and commerce around the world:

 

Great uniform: swap it for a crown?

 

What precisely does this have to do with housing, slums, and urbanization? 

 

Did I just read this post for nothing?

 

It depends on whether you can effectively sell a future right to property you don’t own – like the Moon, or like urban slum homesteading where the title is clouded.

 

[Continued tomorrow in Part 2.]

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