During the last two decades, the benefits of satellite systems have become an integral part of the lives of most individuals living in the industrialized countries of the world. Determining one's position and communicating from and to virtually anywhere on, or above the earth are two of the major satellite applications currently available. As a direct participant in the design of part of the US government's Global Positioning System (GPS) implementation and an interested inside observer of the private-sector Iridium (communication) system, both projects of Motorola, I (Kitty Antonik Wakfer) have been in a position to make pertinent observations comparing the two. This information is used here to elucidate how government intervention distorts what would otherwise be a smooth running mechanism - the free market.
Recently I received news from the project leader of a program on which I worked while employed at Motorola for 16 years in the Space and Systems Technology Group, that the first "ship set" (first production units for actual use in space) for the newest generation of GPS hardware called the Crosslink Transponder and Data Unit (CTDU) had finally been delivered to the customer. This unit is a vital part of the networking between satellites of the GPS, for which I was the Mechanical Engineering Task Leader, from its initiation in 1987 until I left Motorola in August 2000. Despite having put in years of effort into that program, the email announcement of the project having finally reached this long sought stage left me with none of the project leader's excitement - "Gloria Halleluiah!!! Yippee!!!! Heehaw!!!! Awesome!!! Stupendous!!!! Fantastic!!! Wonderful!!! Fabulous!!! Cool!! Terrific!!! Worth-waiting-for???" Not unnoticed was the hint of doubt, showing that, perhaps even for this gung-ho project leader, there was a glimmer of reality beneath all the elation.
Technologically the CTDU (and related GPS hardware) is all those superlatives, but is it truly worth the more than $1 million (my rough estimation) that each of the approximately 50 of these delivered boxes will have cost - only one of dozens of components which constitute only the spaceborne portion of GPS?
Of course, there is actually no way to determine the real worth of anything that is not part of a free market of exchange. How many people would be willing to invest in a company for the purpose of producing a satellite system to enable people virtually anywhere on earth to accurately determine their position at any time of the day or night? Initially the investors would be only those individuals who had taken the time to study the market for viability of the idea and had money to invest on a high risk venture. But it would be their money, and they alone would gain or lose with the undertaking.
In a free market, the company (via the individuals operating it) would be interacting with investors, employees, suppliers, sub-contractors, and customers solely by the method of voluntary exchange to the expectation of mutual advantage. This means that each exchange participant has agreed to what he or she has estimated to have a high probability of being in his or her best interest. No one could be compelled to invest in the company or to purchase a product/service from the company; the company's credibility by way of previous and ongoing research, management efficiency, schedule achievement and product quality would be among the criteria used by other individuals to determine whether to interact with the company by way of value exchange, and to what degree.
Little of the above description for investment applies to the portion of Motorola for which I worked for over 16 years, before I met my partner Paul Wakfer who helped me to understand that any such job was supporting the state and, thus, contradictory to my life's goal of personal happiness. True, this very large company is a private firm, but many of its major customers are government departments, either directly or through a general contractor (such as Lockheed-Martin or Boeing). As such, the development and production of the CTDU, and the other spaceborne electronic boxes for which I performed mechanical engineering leadership or support tasks, was part of a vastly distorted arrangement that grows larger and worse with every decade. There was no voluntary exchange of value at this level - the very basis of the project. Instead, the money used to pay for all the expenses related to this project (and will be the source for the many still under development) came from the federal government via taxation, a process that is no different than any other kind of theft, except that this particular kind of theft has been designated as legal by the state.
Governments with their monopoly on legalized initiation of force (again precisely the same kinds of actions that are deemed to be highly immoral and are punishable for anyone else) take money from their residents (visitors too, and even those at a distance who they have managed to "tap") and spend it on whatever those in power determine suits their purposes.
The GPS project began when some one or group of government employees decided that having a satellite system that provided global positioning (for military purposes) was a nifty idea. And since government has a virtually unlimited source of stolen money from its residents, the overseeing government entity (US Air Force in this case) could fairly easily arrange that it be part of their budget without even a cost-benefit analysis, let alone an analysis of its potential value to the tax paying consumer. In passing, it is worthwhile to note, as Mises has made very clear, the essential impossibility of such government assessments of market value without having a market to make the determination. Yes, the original proponents had to assure a few Congressmen that the idea was not a total pipedream, but this bore almost no resemblance to a businessman convincing stockholders or venture capitalists that his or her idea would be profitable (ie. that its voluntary creation would cause a net gain in total human value).
The US taxpayers have been forced to pay for the GPS system for many years - long before any had the ability to purchase a receiver themselves to determine their own position on land, water or in the air. Now that its benefits are becoming available to people everywhere, it can be more clearly seen that the idea had great merit and eventually would have been implemented by some means.
Many people argue that this is just the sort of project that would not have happened if the government had not funded it. Not true. It probably would not have happened when it did, but it would almost certainly have eventually occurred, likely differently and even better technically - perhaps coordinated with private communication satellites.
In any case, if a GPS system would never have come into being this simply means that its cost/benefit ratio was too high for it to be funded, and thus its creation would be unprofitable, which in turn means that its creation would cause a net loss of total human value. The printing press, light bulb, airplane, and numerous other scientific and/or technological electronic advances did not come into existence because stolen (government) money was used for their invention and production.
The most long term prosperous business ventures in the heyday of capitalism in the US were those with the least amount of government "support" via subsidies or protection. And the worst examples of "Robber Barons" were those who sought and obtained government money and privilege to operate rather than compete in a straightforward manner in the market.
Everywhere it exists, government intervention creates a distortion of the profile of the free market production of goods and services (imagine a bar chart). Government actions in the marketplace of ideas, products and services, while bringing certain events into existence, prevent the creation of others or cause a reduced amount of others (alter the relative bar heights). Government officials (whether elected, appointed or hired as "civil servants") and their regulations are like grit in the smooth mechanism of the marketplace. These officials and regulations do nothing, either as individuals or as a system, to improve the interactions of people, which other voluntary participants in the market could not provide - if they were not prevented from doing so by various legal prohibitions. The result of this coercive interference is not only a distortion of the shape of the production profile, but a vast decrease in total goods and services (average bar height) from what a free market system would produce.
Even some who call themselves libertarians still excuse this expenditure for the GPS system as military hardware necessary to protect the country from attack. All during the time I was employed at Motorola I agreed with this view - I considered the military as one of the few legitimate functions of the state. Even here though, government creates more problems than it claims to solve, and is ultimately unnecessary since protection from force, both internal and external, and settlement of disputes can be obtained within a self-ordering, fully voluntary market-based system.
While I did not knowingly waste money from my mechanical engineering budget on any of the projects I worked on, I cannot say how much more efficient my portion of the design, at least, would have been had the project been funded and developed within a free market. The existing yardstick by which to measure was one that could be changed in ways that would likely not happen when all the players are using resources for which they are solely responsible, as was the case with the Iridium program, another concurrent major Motorola project with which it is instructive to compare GPS.
I will not pretend that I know all the history and factors behind the creation and demise of the Iridium satellite system as initially conceived and begun by Motorola upper management. However, I do think that the choices of individuals not to purchase and use the large telephones (and other cumbersome equipment) at a very high price (compared to cell phones at the time) sent a strong message to Iridium LLC (the consortium of companies of which Motorola was the major part) that the system contained perceived weaknesses by a major portion of the intended market. The result was a major business reduction and realignment in the Motorola portion that was devoted to Iridium. Iridium LLC filed bankruptcy but assets were finally sold to another consortium that currently goes under the name of Iridium Satellite LLC. Products and services for worldwide line-of-sight satellite communication are available using the 66 low-earth orbiting Iridium satellites.
However, it is important to note that the business decisions made by Motorola and other companies involved with the original Iridium system were done in a marketplace heavily distorted by government interventions. In this case, I see two major negative effects on Iridium. First, if individuals had decision making ability over the spending of all their income, it is quite possible that more would have chosen this globally usable communication system, even at a significantly higher price than only locally usable cell phones. Second, without the numerous government regulations at all levels, the products and services of Iridium LLC would have been lower priced, more varied and more competitive with cell phones. But the major point about the Iridium system's relationship to the marketplace is that it was not subsidized either as an investment or a product, by individuals most of whom wanted no part of it. Such has never been the case for the GPS system.
For the creators and developers involved, a major result of these differences is that for a thoroughly "unreal" project such as GPS, it is impossible to tell whether or not any real value has been produced and thus, to feel any true pride in one's work. This is as opposed to Iridium whose creators and developers can correctly be proud of their accomplishment, even if it has not yet turned a profit.
For me, the result of this is that, in a narrow technical sense, I am still proud of the work I performed on Motorola's part of the GPS system and I certainly have fond memories of the people and many of the activities involved in its creation when I look at a picture of the box. However, even though I took no part in Iridium, I much prefer the framed "Spirit of Iridium" print by Robert T McCall that I have on the wall of my Arizona home office.
The publication of this essay has a history itself which is worth sharing for the ideas that it demonstrates. A separate page exists for the earlier version sent to Mises.org including the brief initial correspondence, the edited version by Jeffrey Tucker editor of Mises.org, the response to that by me and Paul, and the reply by Tucker that resulted in our publication here instead.