On August 26, SpaceX’s Starship rocket completed its tenth test flight. This time, the only explosions were planned. In the unforgiving realm of space exploration—three recent Starship tests had ended in spectacular failures—this milestone represents something profound: the power of market-driven innovation to transform what was once the exclusive domain of governments.
Starship isn’t just another rocket. If SpaceX can make it work reliably, it will drop the cost of reaching low-Earth orbit to roughly $100 per kilogram. Elon Musk thinks it could get as low as $10 per kilogram. Even if this latter figure is unduly optimistic, Starship is poised to deliver a 99 percent cost reduction from the Space Shuttle era just 20 years ago. Starship’s development illustrates how America can maintain its edge in the new space race: by empowering commercial actors while focusing the government on its basic oversight functions.
Until the early twenty-first century, governments dominated space. NASA’s programs were engineering marvels but economic disasters. Projects routinely ran years behind schedule and billions over budget. The private sector was relegated to building components for government-designed systems under cost-plus contracts that rewarded inefficiency.
The transformation began with a handful of space policy reformers and entrepreneurs. Spearheaded by NASA deputy administrator Lori Garver, who recognized that America’s traditional approach to space was unsustainable, these “space pirates” confronted fierce resistance from the defense-industrial complex and their political watchdogs. The reformers’ radical idea: Instead of NASA owning and operating every piece of hardware, why not purchase services from private companies?
This shift required more than just getting the government out of the way. It demanded getting the government’s role right. Starting with the Commercial Orbital Transportation Services program in 2006, NASA began offering milestone-based contracts to private companies for delivering cargo to the International Space Station (ISS). The agency became a customer rather than a manufacturer, creating market incentives for innovation and cost reduction.
SpaceX emerged as the biggest winner under this new approach. Musk’s company achieved its first successful Falcon 1 launch in 2008, docked its Dragon spacecraft with the ISS in 2012, and began carrying astronauts in 2020. Each milestone proved that private companies could deliver space services faster, cheaper, and often more reliably than government programs.
The results speak for themselves. Launch costs have plummeted from $18,000 per kilogram during the Shuttle era to roughly $2,700 for SpaceX’s reusable Falcon 9 today. As we’ve seen, Starship could lower them even more. These are order-of-magnitude changes that make entirely new business models viable.
Private capital has responded exactly as economic theory predicts. Investment in space companies has exploded from hundreds of millions annually in the early 2000s to roughly $10 billion in recent years. The global space economy, valued at more than $600 billion today, is projected to reach $1.8 trillion by 2035.
Starship’s potential extends far beyond NASA missions. By making orbital access so cheap, it will enable small- and medium-size companies to integrate space services directly into their production processes. Instead of contracting with satellite operators, manufacturers might find it economical to launch and operate their own space-based assets. The potential complementarities are enormous: cheaper launches make small satellites more viable, which creates demand for specialized manufacturing, which drives further cost reductions.
SpaceX isn’t alone in this transformation. Several other firms helmed by ambitious space entrepreneurs have responded to the commercial incentives.
Planet Labs operates the world’s largest fleet of Earth-imaging satellites, providing daily snapshots of every location on Earth—capabilities that were the province of science fiction just a few decades ago. Rocket Lab has carved out a niche launching small payloads with remarkable precision and reliability. Firefly Aerospace focuses on responsive launch and orbital maneuvering services with national security applications. Each company represents a different approach to capturing space-based wealth while complementing essential public-sector objectives, most obviously national defense.
Commercial space developments affect the geopolitical landscape. China and Russia are formidable space powers, and China’s capabilities especially are growing rapidly. Beijing’s ascendant space program represents more than technological competition—it’s a struggle over who gets to define the rules, standards, and governance models for humanity’s expansion beyond Earth.
Does it matter if China beats America back to the moon? In one sense, it’s not so impressive if a Communist dictatorship manages to replicate our success from 60 years ago using copied (perhaps stolen) technologies.
But it matters enormously if China establishes the first permanent lunar infrastructure, sets technical standards for cislunar operations, or creates the foundational platforms for space-based commerce. We cannot allow authoritarian governance models to define humanity’s future in space.
America possesses something no rival can match: the world’s most dynamic commercial space sector. This asymmetric advantage—market-driven innovation combined with smart public policy—offers our best path to maintaining space leadership while creating new wealth.
The lesson of SpaceX’s tenth test flight isn’t just that persistence pays off in rocket development. It’s that finding the right boundary between public and private sectors can revolutionize entire industries. Government shouldn’t try to pick winners, but it should create market conditions that reward innovation over incumbency. NASA’s transformation from space manufacturer to space customer shows how public agencies can catalyze private innovation instead of stifling it.
Top Photo by RONALDO SCHEMIDT/AFP via Getty Images
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