Friday, September 15, 2017

Space Capitalism - Luxemburg Earth's Farengi

A tax haven is leading the race to privatise space. Luxembourg has shown how far a tiny country can go by serving the needs of global capitalism. Now it has set its sights on outer space.Space is becoming a testing ground for these thorny ethical and legal questions, and Luxembourg – a tiny country that has sustained itself off of regulatory intricacies and tax loopholes for decades – is positioning itself to help find the answers. While major nations such as China and India plough increasing sums of money into developing space programmes to rival Nasa, Luxembourg is making a different bet: that it can become home to a multinational cast of entrepreneurs who want to go into space not for just the sake of scientific progress or to strengthen their nation’s geopolitical hand, but also to make money.

Space entrepreneurs speak of a new “gold rush” and compare their mission to that of the frontiersmen, or the early industrialists. While planet Earth’s limited stock of natural resources is rapidly being depleted, asteroid miners see a solution in the vast quantities of untapped water, minerals and metals in outer space. And the fledgling “NewSpace” industry – an umbrella term for commercial spaceflight, asteroid mining and other private ventures – has found eager supporters in the investor class. In April, Goldman Sachs sent a note to clients claiming that asteroid mining “could be more realistic than perceived”, thanks to the falling cost of launching rockets and the vast quantities of platinum sitting on space rocks, just waiting to be exploited

The grand duchy has earmarked €200m to fund NewSpace companies that join its new space sector; to date, six have taken it up on the offer. It has sent officials to Japan, China and the UAE to talk about space exploration partnerships, and appointed space industry veterans, including the ex-head of the European Space Agency, to advise them. In May, it took out a glossy supplement in Scientific American magazine to signal it is committed not just to helping businesses, but to advancing research as well.
And in July, the parliament passed its law – the first of its kind in Europe, and the most far-reaching in the world – asserting that if a Luxembourgish company launches a spacecraft that obtains water, silver, gold or any other valuable substance on a celestial body, the extracted materials will be considered the company’s legitimate private property by a legitimate sovereign nation.
According to Gabriel Zucman, assistant professor of economics at UC Berkeley, the country is hard to miss in the financial world. “Luxembourg has private banks like Switzerland, it has a big mutual fund industry like Ireland’s, it’s used for corporate tax avoidance like Bermuda or the Netherlands, and it also hosts one of the two international central depositories for securities, so it’s active in euro bonds,” he says. “It’s the tax haven of tax havens, present at all stages of the financial industry.” Tony Norfield, a former banker in the City of London who now writes on global finance, has described Luxembourg as “a paragon of parasitism”.
 The statistics Zucman dug up while researching his book, The Hidden Wealth of Nations, took him aback: in 2015, national data showed $3.5tn worth of shares in Luxembourgish mutual funds were domiciled in the grand duchy, while data from other countries accounted for only two of those trillions. The missing $1.5tn suggested to him that the money – which, he notes, was probably accumulating interest by the day – had no identifiable owner. That meant the countries to whom tax was owed on these ungodly sums were unaware of their existence.
Globally, Zucman calculated almost $8tn in financial wealth – which does not include real estate, luxury goods, gold or other commodities – has been stolen from countries and taxpayers in this fashion thanks to “secrecy jurisdictions” such as Luxembourg, the Virgin Islands or Panama working “in symbiosis”. In his book, Zucman described Luxembourg as an “economic colony of the international financial industry” and challenged its right to its greatest asset: its sovereignty.
 Companies want assurances that the fruits of their extraterrestrial labour would be recognised here on Earth. This is not a given. Unlike on Earth, where a country can grant a company a mining concession, or a person can sell the right to exploit their land, no one has an obvious legal claim to what’s outside our atmosphere. In fact, the Outer Space Treaty, signed by 107 countries at the UN in 1967, explicitly prohibits countries from claiming sovereignty over celestial bodies. The question now is: if nobody owns or governs the great unknown, who is to say who gets to own a little piece of it?
Since the emergence of the NewSpace sector, individual countries have attempted to lend some clarity to eager entrepreneurs, reasoning that the prospect of private property in space will encourage hard work and innovation. The American Space Act, passed in 2015, is the first “finders, keepers” law that recognises ownership of space resources, but it only does so for companies owned by US citizens.
While legal uncertainty remains, under the current legal and regulatory framework, space mining activities are (at least) not prohibited  Luxembourg could pass legislation that gives miners the right to keep the extraterrestrial bounty they extract. Such a law was drafted shortly after the study’s completion, and on 1 August 2017, it went into effect. Luxembourg’s bill does not discriminate by nationality, or even by the location of a company’s headquarters. In fact, the law indicates the country’s willingness to serve as a sort of flag of convenience for spacecrafts.
Luxembourg could do for the space-resource trade what it had done for the eurodollar market, international holding companies and multinationals: provide a safe, reliable base where they could operate in tandem with a keen and cooperative – or, by his detractors’ assessment, pliable and sycophantic – state. Schneider announced that after passing its law, Luxembourg would create its own space agency. This would not be a copy of Nasa, but would instead focus only on commercial space resources.  Luxembourg would solicit private funding to capitalise NewSpace companies, and seek the advice of venture capitalists to decide what companies to invest in. If asteroid mining does, in fact, take off, Luxembourg  might be called an “early adopter”

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