When SpaceX’s share price fell last week, Elon Musk lost another vast slice of his fortune. That hardly qualifies as a national tragedy. But it is a reminder that one of the richest men in history owes much of his wealth to a company routinely presented as the ultimate triumph of private enterprise.
The reality is rather more complicated.
SpaceX makes money in three main ways. It launches satellites and spacecraft. It carries out work for NASA and the US military. Most importantly today, it operates Starlink, whose thousands of satellites provide broadband internet to millions of customers around the world.
It is a remarkable company. But it was never simply the product of one brilliant entrepreneur operating in a free market.
In its early years SpaceX survived because the United States government decided it wanted an American commercial space industry. Through NASA’s Commercial Orbital Transportation Services programme, development contracts, milestone payments, defence procurement and access to government expertise, the American state helped create the technological foundations on which SpaceX was built.
This wasn’t a handout. NASA bought services, paid against agreed milestones and transferred enormous technical knowledge.
But neither was it laissez-faire capitalism.
The American right often presents itself as the champion of small government and free markets. Yet when it comes to strategically important industries, the United States has long practised one of the world’s most sophisticated forms of industrial policy.
The internet emerged from DARPA.
GPS emerged from military spending.
Modern biotechnology grew from publicly funded research.
Tesla benefited from federal loans and tax credits.
SpaceX benefited from NASA and Pentagon contracts.
The state repeatedly creates markets into which private entrepreneurs step.
Critics of Europe often argue that EU state aid rules prevented the continent from creating its own SpaceX. The reality is more complicated than that.
Europe also created Airbus, itself built through substantial government backing. The difference was never simply one of law. It was also about political culture, risk appetite, fragmented capital markets and whether governments were prepared to tolerate failure in pursuit of creating globally dominant companies.
That debate has become more urgent with the publication of Europe 2031, a widely circulated work of speculative fiction produced by AI researchers, venture capitalists and technology advocates.
It presents itself as a warning from the future.
Europe, the authors argue, risks becoming economically irrelevant unless it deregulates, accelerates AI development and gets out of the way of innovators.
Some of those criticisms have merit. Europe has often struggled to scale technology companies. Its capital markets remain fragmented. Regulation can certainly become cumbersome.
But the report largely overlooks something fundamental; Many of America’s greatest technology companies did not emerge despite the state. They emerged with the active participation of the state.
The United States has consistently used procurement, defence spending, research funding and industrial policy to create national champions, while simultaneously celebrating the resulting companies as triumphs of private enterprise.
That makes the American model rather closer to China’s than either side often admits.
China identified strategic industries such as electric vehicles, batteries, telecommunications and solar energy, then directed enormous state resources towards them. The result was the creation of companies like BYD and CATL, whose founders became billionaires inside a system explicitly guided by government policy.
America has traditionally done much the same thing through different mechanisms.
Rather than owning companies directly, it uses procurement, defence contracts, tax incentives and research funding to create markets in which private firms flourish.
Both systems create enormously successful companies.
Both systems create billionaires.
Both systems involve governments picking winners.
The difference is largely one of presentation.
China openly acknowledges that the state guides development. The United States often prefers to describe the outcome as the natural result of free markets.
Artificial intelligence may now push that model even further. Much discussion assumes that whoever leads AI will inevitably dominate the global economy. History offers little reason for such certainty.
Britain pioneered the Industrial Revolution but lost leadership in many later industries.
Japan dominated consumer electronics without dominating software.
Germany remains a manufacturing giant without controlling the internet.
The more interesting question is not who develops the most capable AI models. It is who owns the industries that AI transforms.
America currently dominates AI models, cloud computing, software platforms and venture capital.
China dominates much of the manufacturing ecosystem: factories, supply chains, battery technology, industrial robotics and engineering capacity.
If artificial intelligence dramatically improves manufacturing productivity, China’s existing industrial base may become even more valuable. AI can design products, optimise factories and automate production, but somebody still has to build millions of physical objects.
That could produce a surprisingly stable equilibrium.
American companies may own much of the world’s AI infrastructure. Chinese companies may manufacture many of the products that AI helps design.
The winners would not necessarily be the same people.
This matters politically.
Many Americans voted for Donald Trump believing he would bring manufacturing back to the United States and weaken China’s economic position. But AI may strengthen America’s position in software, platforms and intellectual property while leaving much of advanced manufacturing exactly where it already is. Trump is bringing yet more riches to highly skilled and productive workers in diverse multicultural democrat cities, and big profits to businessmen in his orbit. Hard to see what this does for struggling rural and suburban workers and retirees who voted for him.
Which brings us back to the ARC conference.
The politicians, technology investors and AI companies gathered there were not simply celebrating innovation. They were advancing a particular vision of political economy. One in which governments actively support strategically important industries, defence contractors and technology companies while simultaneously arguing that governments should regulate markets, labour and capital much less.
That is not the disappearance of the state. It is the emergence of a different kind of state.
One that intervenes selectively to create national champions while allowing the resulting fortunes to be presented as the inevitable triumph of the free market. That, perhaps, is the real lesson of the SpaceX story. It is simultaneously one of the greatest entrepreneurial successes of modern times and one of the clearest demonstrations that governments remain indispensable in creating world-leading industries.
The argument has never really been about whether governments should shape markets.
It has always been about whose markets they shape, and for whose benefit.
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