Government space agencies in the 'G7' countries spend some $22 billion/year on a range of civilian space activities - USA $15 bn, Europe $5 bn, Japan $2 bn. About 20% of this expenditure is used for astronomy and other forms of space science. The remainder, approximately $18 billion/year, is used for a variety of purposes, notably development and operation of expendable launch vehicles and related technology development, development of the 'international space station' ISS, and other space 'applications'. These activities are not profitable in the normal sense of the word; if they were they would create new commercial space activities earning additional turnover of $18 billion/year, as shown in Figure 1. However, whereas the total turnover of commercial launch vehicle manufacture in 2000 was $2.9 billion, and satellite manufacture was some $15 billion [1], this activity is not growing significantly -- indeed it is in a crisis of inadequate demand and excess supply [2].

In addition to technology development, G7 countries' government space agencies also have responsibility for commercialisation. For example, Nasa is required by law to "..encourage to the maximum extent possible, the fullest commmercial use of space". Similarly, the leaders of the British National Space Centre (BNSC) state that their objective is to "..help industry maximise profitable space based business opportunities" [3]. The European Space Agency (ESA), the Japanese space agency (NASDA) and other government space agencies have similar responsibilities.

However, none of these agencies is fulfilling this responsibility, even approximately; they are all in fact deliberately acting to delay the development of what promises to become the most important commercial activity in space, namely passenger space travel, as Nasa, the AIAA and the Japanese 'Keidanren' all acknowledged in 1998 [4, 5, 6]. As described below and elsewhere, G7 government space agencies continually ignore the subject; they are starving the field of funding, thereby delaying its realisation; they are hiding valuable information about its potential; and they are making misleading and even untrue statements, thereby delaying public understanding of its economic potential.

Why are space agencies behaving in this way? It is because making them responsible for commercialisation gives them a conflict of interest. In his pioneering work on the economics of bureaucracy, Niskanen described that the economic interests of government organisations and their political 'overseers' are to obtain the maximum budget that they can [7]. Commercial-isation of an activity, of which privatisation is the ultimate form, reduces space agencies' activities, and therefore goes against their internal objective of expansion.

As Niskanen describes, the efficiency of government organisations is maintained not by the 'oversight' performed by politicians (who typically have a parallel interest in increasing public spending), but by 'continuous testing' by the public as consumers of the services they supply [7]. Government space agencies are anomalous in that they do not supply any significant service directly to the public, and so they face no such process of public 'testing'. As Niskanen explains further, in their workplaces government bureaucrats have no incentive "..either to know or seek out the public interest or to act in the public interest" [7]. In the absence of critical feedback from the general public, space agencies therefore experience little or no pressure to work for their benefit.

In order to avoid misunderstanding, and because the approach of 'public choice' economics is still not familiar to many people, it is perhaps worth quoting Niskanen's sentence that follows the above quotation. "My impression is that government employees include a large proportion of the most honest people -- and least selfish people -- in any society" [7]. That is, it is not bureaucrats' dishonesty that causes the economic inefficiency of bureaucracy, but the structure of incentives that they face. Likewise, it is because the development of space travel into a consumer service is against the interests of space agencies, whose staff face insufficient pressure to do what the public want, that they are delaying it, with the costly consequences described below.

It should also be noted that government space agencies are also effectively mono-polies, which invariably lead to high costs and inadequate innovation.

It is not logically disputable that space agencies responsible for commercialisation which are heavily loss-making should devote a substantial part of their budgets to investigating the feasibility of passenger space travel, as a possibly more economically valuable activity. That they are not doing this is profoundly against the public's economic interest.

The author has repeatedly criticised this behaviour, and the "double standard" that justifies spending $18 billion/year on space agency activities with a rate of return close to minus 100%, while refusing funds to aid the development of passenger space travel on the grounds that it is uncertain whether it will be sufficiently profitable to be commercially attractive [8, 9, 10]. Space agencies make no attempt to defend themselves against these charges -- indeed they cannot, because this behaviour is patently against the public's economic interest, and contrary to agencies' legal obligation to promote the commercial development of space -- instead they maintain what the author has called a 'conspiracy of silence' about the subject [11].

It seems reasonable to describe this as an Anti-Space Tourism Policy. Correcting it requires a change in paradigm from the cold war pattern of using taxpayers' money to perform government 'missions' in space, to aiding the growth of commercial passenger travel [12]. If this change in policy is made soon, it would be possible to realise the scenario shown in Figure 2, which is described elsewhere [13], and would be of great economic benefit, at far lower cost to taxpayers than the continuation of existing government space activities.

G7 governments' continuing refusal to allow even the smallest investment in the development of what is known to be the only promising field for commercial space development imposes four major costs on taxpayers:

The continuing expenditure of some $18 billion/year on non-science space activities which have little economic value is a serious cost to taxpayers -- amounting to $ 1/4 trillion since the end of the cold war alone. If invested commercially, this amount could have created assets of equal or greater economic value, together with the several million permanents jobs which these could have supported. Instead this capital has been lost, while the aerospace industry has been shrinking rapidly, leading to its present critical condition.

Taxpayers suffer the additional cost of the lost employment, lost revenues and lost profits that could have been earned by a commercial passenger space travel industry. This loss is caused not only by the refusal of initial government funding, but also by the strong negative influence of the public relations activities of government monopoly space agencies on popular opinion, the media, politicians and the investment world [14]. The present-day cost of the delay in earning profits from the commercial space travel industry has been estimated as several billion dollars/year [14], though it is not yet possible to estimate it accurately. The greater the scale to which the industry grows in future, the greater the present-day cost of this delay.

The global economy is in its most precarious state since 1929, with powerful deflationary forces spreading from Japan and China, and already high levels of unemployment in Europe, the USA, Russia, Asia and elsewhere. The only cure for this condition is the development of new industries, as the growth of new industries such as passenger air travel during the 20th century created employment for millions of people no longer needed in older industries such as agriculture and mining.

The scale of the costs arising from the continuing unnecessary deterioration of the world economic situation has yet to become clear, but if could be very high. What fraction of this cost should be attributed to governments' anti-space tourism policy is difficult to estimate yet. However, this too could be high: delaying the development of passenger space travel and the many new opportunities for economic growth to which it will lead, is not a trivial cost.

The fourth major cost is the social cost of delaying the opening of the 'frontier' of space, with all the beneficial effects this will have. This cost is borne particularly by young people and by the populations of many later-developing countries where unemployment is very high, partly due to the protectionist policies of the more advanced countries where unemployment is also high due to the lack of new industries. The cost to G7 taxpayers in terms of unemployment is illustrated in Figure 3.

These four costs are on the trillion-dollar scale, and are therefore very significant even at the 'macro-economic' level. Government space expenditure should therefore be directed by the needs of economic policy, not by the narrow self-interest of space agencies [13, 15].

In the following we briefly review the prospects for improvement in each country, updating an earlier year-2000 review [15]. Bureaucratic change in a direction against vested interests typically occurs only under strong outside pressure, such as budget cuts or stong public criticism of the public services supplied. The potential for improvement is shown by the recent moves of the Russian aerospace industry to offer a range of space tourism-related services in response to deep cuts in the Russian government's space budget. These changes are surely representative of the changes that will be seen with varying degrees of delay throughout the world space industry. The recent budgetary stringency for space agencies in France and Japan seems to be caused fundamentally by their failure to contribute to economic growth.

As head of the largest government space agency, 1992-2001 Nasa administrator Goldin made the most vigorous efforts to delay the development of passenger space travel -- including refusing to allow Nasa's own very positive report on space tourism to be published on the Nasa web-site [4]. A typical example of his policy was seen in an interview concerning space tourism by his deputy associate administrator Garver on December 31, 2000 on the popular 'Today show' with presenter Katie Couric. Garver did not even mention Nasa's very positive report on space tourism; if she had been acting in the public interest rather than Nasa's she would have used the opportunity to electrify the U.S. public with the exciting prospects for this new industry -- but Goldin considered that against Nasa's interest.

Goldin's efforts reached a climax in early 2001 with his campaign to prevent Dennis Tito from visiting the Russian sector of the international space station. His widely publicised failure triggered a series of events, including Nasa being questioned by the Congressional Science Committee on its work relating to space tourism; Nasa's 'space tourism report' being made accessible via Nasa's web-site; the drafting of a new Nasa policy towards commercialisation including support for tourist activities; and the end of Goldin's tenure being announced [14].

If newly appointed administrator O'Keefe is concerned to work for the public interest, and to fulfill Nasa's obligation under U.S. federal law -- as he certainly considered Nasa ought to when he was deputy director of the Office of Management and Budget (OMB) -- he will implement the recommendations in [4] such as supporting general public space travel and tourism in speeches; establish an office to promote it; and initiate collaboration with the aviation industry. If O'Keefe resists the pressures to put Nasa's interest ahead of the public interest, rapid progress could be made. However, after several months in his new post, the 'change of hats' may be exerting its almost inevitable influence: recent comments suggest a lack of enthusiasm for commercialisation of Nasa activities.

As in 2000, the main effort for space tourism in the U.S. government is that by the Associate Administrator for Commercial Space Transportation (AST) in the FAA. Although her budget was doubled in 2001, it is still just 1/1000 of Nasa, revealing seriously flawed thinking within the U.S. government about its priorities.

In 2001 President Bush established an independent Commission to provide advice on what is required to revive the U.S. aerospace industry. Although, as one of the Commissioners Dr Buzz Aldrin has urged the importance of space travel, it is not clear that the Commissioners have understood that Nasa's interest is against the public interest. Many submissions have recommended increasing Nasa's budget; but this would not improve its economic performance, it would further delay space commercialisation. This is because what is good for Nasa may be good for its client companies in the short term, but is not good for the growth of commercial passenger space travel.

There seems to be a considerable danger that the nominally independent 'Aerospace Commission' will produce a report that fails to stress that the basis for an economically healthy space industry is consumer demand rather than central government direction -- as it is in aviation and all industries other than defence. If it fails in this, but merely recommends increasing public funding of the special interests of Nasa and its client companies, this will be further striking confirmation of the extraordinary inefficiency of the political process in making economic decisions [7], of the intractable influence of vested interests on government policy-making, and of the damage caused by government monopoly.

Independent from government, the Space Tourism Society (STS) and the Space Transportation Association's Space Travel and Tourism Division are continuing their valuable work, but they are severely constrained, like independent companies working towards passenger space travel, by lack of funds. The prospects for improve-ment in the USA currently seem to depend on whether administrator O'Keefe and the Aerospace Commission can both perceive and bring themselves to support the public interest against entrenched vested interests.

The triumphant carriage of the first ever 'space tourist' Dennis Tito aboard the 1,657th Soyuz rocket on the 40th anniversary of Yuri Gagarin's historic space flight, is striking testimony to the depth of the U.S. space industry's failure. Despite having received almost $1 trillion of taxpayers' money, it has failed to improve on a 50-year old Russian rocket design; the half-century dominance of the Soyuz rocket is surely unique in the history of passenger transportation. Equally striking is the failure of the U.S. media to appreciate how badly the U.S. public are being served by Nasa and its client companies [17]. The reasons for the media's failure in this are discussed in [18].

Russian companies also offer a unique range of other space travel-related services, including high-altitude flights in jet fighters, 'zero-gravity' experience in airliners performing parabolic flights, cosmonaut training courses and others. Projects are also under way to develop an orbital 'Mini-station' dedicated to tourism and other commercial services, and the ' Cosmopolis 21' sub-orbital passenger vehicle. The potential for growth seems to be held back mainly by Russian companies' relative lack of experience in raising investment internationally.

Having taken the lead by holding the first two International Symposia on Space Tourism (ISST) in 1997 and 1999, German researchers have been held back by the familiar lack of funding. However, they continue to publish important contributions on many aspects of the subject, and the German government provides the largest share of ESA's budget for work on reusable launch vehicles, albeit still only for cargo.

As reported in 2000, French researchers have still published nothing contributing to progress towards space tourism. As the major sponsor of the Ariane satellite launcher, for which ESA funding is being sought to survive launch rates as low as 3 launches/year [19] the French government apparently continues to hold the 'cold war' view that space is the domain of government. While there may be important political objectives for space projects such as the 'Galileo' satellite navigation system which would provide an alternative to the U.S.-controlled GPS system, it is unclear that there is any need for a government space agency to act between the users and the makers of such a system. In addition, such a viewpoint ignores the potential economic benefits of space commercialisation, as illustrated in Figures 2 and 3 above.

The continuing bureaucratic evasions and dishonesty used by the British National Space Centre (BNSC) in order to hide the lack of justification for its decade-long refusal of any funding for work to realise passenger space travel are described at length elsewhere [11, 14]. In brief, the parliamentary Trade and Industry Committee criticised this behaviour in 2000, but its comments continue to be ignored by the BNSC. Since then the BNSC paid for a study of reusable launch vehicles for satellite launch, directing the authors to exclude the passenger travel market, but subsequently claimed that the study shows that: 'The case for investment in this area [a European reusable launcher] at this time is... not strategically sound or commercially attractive' [20]. As a result of the BNSC's continuing silence concerning passenger travel, most readers will assume that this conclusion applies to all reusable launch vehicles -- i.e. including passenger vehicles. Since that is untrue, this statement too is deceptive to the point of being dishonest.

Most recently the UK Department of Trade and Industry has performed a 'Review of the BNSC' which it was stated would '..review the evidence provided to the Trade and Industry Select Committee investigation into space policy.' That included five submissions concerning passenger travel [11]. However, the director of the review declines to answer the question whether this was done.

The BNSC's continuing starvation of work on passenger space travel, while investing approximately $1 billion in systems which the Trade & Industry criticised for being heavily loss-making, is contrary to the BNSC's own stated policy to "..help industry maximise profitable space based business opportunities" [3]. That the heads of the BNSC and their supervisors in the Depart-ment of Trade and Industry (DTI) can so easily avoid having to provide any justification for this economically damaging behaviour makes a mockery of the parliamentary Committee supposedly 'overseeing' the Trade and Industry Department.

The fact that the DTI and BNSC are not even required to provide any justification for allocating funds in ways that are so clearly against taxpayers' economic interests, is a good example of Niskanen's explanation of the extreme economic inefficiency of democratic government decision-making [7]. BNSC bureaucrats have no interest in doing what is good for taxpayers; until public pressure is imposed they will continue to waste taxpayers' money and prevent British companies exploiting the major commercial opportunity in space with impunity.

Despite a number of fundamentally beneficial policy-changes (such as progress towards requiring companies to comply with international accounting standards) the condition of the Japanese economy has continued to worsen over the past few years. The primary cause is the government's long-standing policy of spending trillions of Yen/year to support large and loss-making companies, while the rate of formation of new companies has continued its fifteen-year-long decline below the rate of company failures. As a predictable consequence, unemployment is at a 50-year record high, and deflation and negative economic growth are entering their fourth year.

The required counter-measures have been described as "From Bureaucracy to Democracy", because unelected government officials play a larger role in the Japanese government than they do in other G7 countries. While this was beneficial in the past in facilitating Japan's rapid growth based on copying other countries' most advanced industries, since the mid-1980s it has delayed the restructuring of the economy, and particularly the development of new industries. As Niskanen discussed, changing a bureaucratic system is very difficult, due to the resistance of both the bureaucrats themselves and the politicians who benefit by supporting their budgets [7].

On a cultural level it is sometimes said that Japanese bureaucrats consider themselves the inheritors of the tradition of 'samurai' whose status in Japanese society was higher than that of merchants, and that they are proud of doing work that "....is not merely to make money". The idea of working for the objective of satisfying the wishes of "mere consumers" is said to be beneath the dignity of these people. However, this attitude is largely responsible for the massive damage to the Japanese economy during the 1990s, because government bureaucrats do not know what the public wants, and they face strong incentives against risk-taking. Consequently they are unable to set up successful new industries, but they also do not want to reduce their traditional role of spending taxpayers' money.

Against this background, the accumulated losses of the Japanese space industry, similar to other G7 countries, are a particularly heavy burden. The first step towards correcting this unsatisfactory state is frank recognition of past mistakes. In the present profound economic crisis in Japan it is essential to be able to discuss the reality of the present situation without constraint. It should not be considered 'offensive' to refer to economic mistakes: it should be welcomed, as an essential step towards economic recovery.

It is therefore important to recognise that, despite receiving 90% of government space funding, and despite having developed a range of space technology systems, the National Space Development Agency (NASDA) established 30 years ago by the government's Science and Technology Agency (STA), has failed in its original objective -- which was to achieve economic benefits for Japan from space technology development. Cumulative investment of some 3 trillion Yen has generated a commercial space industry of about 100 billion Yen/year turnover -- about 1/30 of what commercial companies would achieve with the same investment.

By contrast, the Ministry of Education's Institute for Space and Astronautical Science (ISAS), established 50 years ago by the 'father of Japanese rocketry' Professor Hideo Itokawa, is widely recognised as the most cost-effective space research organisation in the world. (In much the same way, the university-managed Jet Propulsion Laboratory (JPL) in the USA is the most productive and cost-effective part of Nasa.) The reason for this difference is clear: ISAS is led by university professors, who are generally selected and promoted according to their success in original research -- that is, their ability at innovation -- whereas the STA's NASDA is directed by government bureaucrats following the traditional Japanese model of copying leading organisations in western countries in the expectation of subsequently winning a valuable share of the resulting markets. The STA has failed to earn a positive return on its cumulative investment of some \3 trillion to date, not because the technology that Nasda engineers have developed is inferior to that in Europe or the USA, but for more fundamental reasons:

1. The organisation which STA bureaucrats took as their model is the US government's Nasa, which is a government monopoly with economic interests that make it strongly averse to commercial development of space: as described briefly above and in greater detail elsewhere [13, 14, 18], Nasa has spent hundreds of $billions of U.S. taxpayers' money on activities with little or no economic value, and has greatly delayed the commercial development of space. Consequently, NASDA has done the same, though on a smaller scale.

2. The market which the STA targeted, that is expendable satellite launch vehicles and their satellite payloads, is very small -- some $3 billion/year for launch vehicles and $15 billion/year for satellites in 2000 (1). Furthermore, it is unprofitable and shows no realistic prospects for significant growth. Consequently, even obtaining a large share of the market would not be worth even 1 trillion Yen.

3. Due to the substantial rise in the international value of the Yen over the past 20 years, the vehicles planned by the STA are not cost-competitive, even though their development was successful according to their original plans.

4. For reasons that are well understood, bureaucracy is very poor at innovation. It has been clear for a decade that satellite launch is unprofitable, and that carrying passengers is potentially much more promising; this was acknowledged by the Japanese Keidanren in a report published in 1998 [6]. Despite this, STA officials have allocated no significant funding to investi-gate this potential new field further -- even out of the 1 trillion Yen spent since 1998.

The STA's second space research organisation, the National Aerospace Laboratory ( NAL) should have been leading the collaboration between the space and aviation industries which is essential to the development of passenger space travel [12]. However, the NAL has done no work on passenger space travel since 1996. During these five years the NAL has spent many tens of billions of Yen on loss-making space projects, while the Japanese Rocket Society ( JRS) and Japanese Aeronautical Association (JAA) have led the work on passenger space travel which has received world-wide recognition with no government funding at all. This major error of NAL direction has imposed further large costs on Japanese taxpayers.

By contrast to the STA, researchers at ISAS have already long been playing a leading role, recognised world-wide, in both of the fields with most promise for space commercialisation -- namely passenger space travel and power supply from space. In particular, ISAS researchers have made great progress towards developing the low-cost, passenger-carrying reusable launch vehicles that are essential for commercial space development, despite minimal funding [21]. Work has been under way for several years already on both SSTO VTOL and TSTO HTOL vehicles, which are the most appropriate vehicle types for passenger space travel, and many of the references in Nasa's historic report confirming the feasibility of passenger space travel are to work by ISAS staff [4]. ISAS engineers would have made far more progress if their budgets had not been just a tiny fraction (less than one ten-thousandth) of the funds used by the STA for developing loss-making vehicles [22].

Recently the apparently unique commercial potential of passenger space travel has been openly supported at the highest level of space policy-making in Japan: among others, Chairman Iguchi of the Space Activities Commission has stated that 'Space tourism shows great market promise' [23], and the ex-Deputy Director-General of NASDA, Dr Godai has argued publicly that Japan should aim to develop passenger space travel as the only means of remaining in competition with the Chinese space industry's plans for manned space activities (including a Moon flight) [24]. Now that the long-standing 'taboo' concerning discussion of passenger space travel has been overcome, after such clear statements about the most economically valuable direction for Japanese space development, this subject must not be allowed to be ignored and suppressed by government bureaucrats without public statements of their reasons -- as has occurred so damagingly in Britain.

At the start of 2001, as part of a broader restructuring of the Japanese government, the Ministry of Education was merged with the smaller STA. This was followed by the announcement that Nasda and the NAL would be merged with the ISAS. Niskanen has explained that "..competition in a bureaucracy is as important a condition for social efficiency as it is among profit-seeking firms" [7], and that government reforms nominally intended to 'rationalise' the bureaucracy by reducing duplication are '..usually a mistake and reflect a misconception about the conditions conducive to efficiency in a bureau' [7]. That is, both theory and research suggest that the economic result of such a merger would be likely to be bad.

Nevertheless, a fundamental review of the Japanese government's space activities brought on by its financial crisis provides a valuable opportunity to redirect its space expenditure in such a way as to contribute to economic growth rather than hindering it, ahead of other G7 countries. The overall policy needed to revive the Japanese economy is easy to state: it is to reduce loss-making activities and increase profitable ones. As in the 'turn-around' of a loss-making company, money-losing activities must be cut, and increased investment allocated to successful teams, without regard to 'vested interests'.

As applied to the Japanese space industry the implementation of this policy requires recognising that, when judged against their original objectives, ISAS has been successful and NASDA has failed. The failure of NASDA is not a failure of the staff in implementing plans; it is a failure of direction, since even though the main projects were carried out largely according to plan, they have been economically loss-making. Following the urgent needs of the Japanese economy, the new priority must be to achieve economic benefit for taxpayers, by stimulating and aiding the development of profitable commercial space activities.

It is worth noting that the concept of a government 'space agency' came from the Soviet Union, where it was claimed that government knows better than the public how their money should be spent. With the collapse of the Soviet Union at the end of the cold war this concept is completely discredited: there is no more need for a central government space agency than there is for a central government 'land agency', 'sea agency' or 'air agency'. In addition to being unnecessary, space agencies act against taxpayers economic interests because they delay commercialisation of space activities, as described above. A research organisation that plays a role in space similar to the role which governments have successfuly played in aviation -- namely aiding the growth of commercial passenger travel -- would be far more economically valuable than a 'space agency'.

Consequently, the most economically efficient pattern for reorganisation would be to announce the completion of the task of the space agency, and give leadership in allocating the Japanese government's combined space budget to ISAS, with one additional objective in its terms of reference -- to earn an economic return. An appropriate name for the combined space organisation would be ISASC, the 'Institute for Space and Astronautical Science and Commerce'.

In response to this suggestion, it may well be said that "ISAS does not have commercial expertise". However, the STA spent 3 trillion Yen without achieving any significant commercial success; continuation of the same arrangement would certainly lead to further losses since the space agencies which the STA used as a model are all commercial failures. By contrast, ISAS has shown itself to be excellent at achieving its objectives in the most cost-effective and flexible way; as an organisation it is a success. In view of this, ISASC could be relied upon to do whatever is necessary, including recruiting appropriate staff, to achieve its newly assigned objective, while continuing with its long-standing scientific research.

Most importantly, the Japanese government's long-standing policy that all manned space activities will use the U.S. 'space shuttle' must also be scrapped as being out-of-date. Instead, as the essential first step towards realising passenger space travel, a few percent of the overall space budget must be allocated to ISASC teams to build and operate piloted, prototype, sub-orbital vehicles -- both VTOL and HTOL -- capable of carrying passengers to 100 km altitude within 4 years. The successful development of sub-orbital prototype vehicles, if performed rapidly, could lead to the creation of profitable, commercial, sub-orbital passenger space flight services within 5 years -- possibly the first such services in the world.

In parallel with this work, ISASC should create a formal structure for collaboration with the aviation industry to continue the pioneering work of the JRS and the JAA, to which ISAS engineers have made key contributions. Together, space and aviation specialists should plan the optimal development of orbital passenger-carrying vehicles, involving both government and private sector organisations. NB like civil airliner development today, such development projects will almost certainly be performed through international collaboration. Investment of a moderate fraction of the current space budget could enable Japanese companies, both manufacturing and services, to play substantial roles in international projects to develop profitable orbital passenger travel services, using both SSTO VTOL and TSTO HTOL vehicles.

"Such a major change cannot be done"; "That is not how Japanese society operates"; "Japanese government bureaucrats will never admit past errors...." and other responses are likely to such a suggestion. However, the present government was elected by the Japanese people for the vital task of correcting the disastrous economic policies that are destroying the Japanese economy. If the Japanese government will not take steps to invest in profitable activities rather than unprofitable ones, then the Japanese economy will be destroyed entirely.

The space industry is no different from others: the government must reduce its spending on loss-making activities and increase spending on activities that promise to become profitable, and there is no other direction for commercialisation of space activities. If a newly formed space organisation continues to refuse the minimal funding that is necessary to realise at least the first steps of this new project of commercial space development, it would be to throw away any possibility of Japanese companies playing a significant role in the future commercial space industry in competition with Russia and China.

This is because Japan is no longer a low-cost country; it is one of the most expensive. In this situation Japanese industry must be the first into a new field; coming late it will not be able to grab a share by undercutting the leaders as it was able to do in the past. The economic failure of the H2 and H2-A rockets despite their fine technology is further recent proof of the end of the era in which Japan could catch up from behind and capture market share through low costs. Consequently, if the 'Anti-Space Tourism Policy' followed by the Japanese government to date were to continue for the next few years, Japan would be unlikely ever to be able to catch up -- as Japanese industry has been unable to 'catch up' in aircraft manufacturing.

In view of the rapid progress being made in Russia in commercial passenger space travel and in China in low cost space operations including crewed vehicles (albeit expendable), the next few years may represent a truly last chance for Japanese industry to gain a significant place in the future commercial space industry [25]. Japan's opportunity depends on two factors, Japanese manufacturers' world-wide reputation for high-quality precision engineering (which is essential for the success of a commercial space tourism industry), and its large, wealthy middle-class population who have a keen interest in space tourism. However, these advantages will not last much longer, and so Japan must at least take the risk of making some small investment in appropriate work before it is certain whether it will be profitable or not.

Because of the very low cost of developing sub-orbital passenger-carrying vehicles, it is clear that even within a falling overall budget for space activities it will be easy to provide funding equivalent to a few hundred million dollars for the development of what could become Japan's first commercially successful space vehicles -- sub-orbital, passenger-carrying rockets. In addition to their economic value, these projects would be enormously popular with the great majority of the Japanese people -- as shown by market research [26], thereby creating a new consumer service sector in the economy, in the same way as the unexpected enthusiasm for mobile phones -- unpredicted by government -- generated a major new industry employing tens of thousands of people.

In addition, the development of passenger space travel services will give young people an exciting new goal to aim at. The importance of this latter point should not be underestimated. The prospects for young Japanese today are the bleakest for many decades: not only is unemployment the highest for 50 years, but they can see that the economy is beset with bureaucratic interference and corruption, and with few signs of near-term improvement due to resistance to change from vested interests. Lack of motivation and declining educational achievement by Japanese children are recognised as major problems [27]. In this situation, it will be beneficial for young people to learn that the long-standing idea of traveling in space Ð which appears as a major theme in many parts of young people's culture Ð and the further commercial development of space are not distant 'dreams', but entirely realistic, near-term objectives that have been held back, like so many desirable changes in Japan, by government bureaucrats. The minimal cost of building prototype sub-orbital passenger vehicles is the best possible step towards changing the depressed mood in Japan to looking forward to a bright future.

Government space agencies, and the hierarchy of committees of politicians and bureaucrats who decide their budgets of some $22 billion/year, work in a narrow world insulated from the need either to perform activities with economic value, or to act for the benefit of taxpayers by supplying services that the public wish to purchase, and often with no need even to justify their activities economically.

As a result, out of space agencies' cumulative funding to date of some $1 trillion, almost nothing has been spent to promote the development of passenger space travel -- although they have acknowledged that this is the only activity that will lead to commercialisation of space activities and hence to economic growth in space. Although space agencies are formally responsible for the commercial development of space, in reality they do no more than try to sell systems they have developed for political reasons. This is entirely different, and economically it is a costly failure. G7 governments' claim thay they are working to commercialise space activities is untrue: they are in fact using taxpayers' money under false pretences.

Since the author's ISTS 2000 paper [15] G7 governments have spent a further $36 billion on a range of non-science 'space development' activities, centring on unprofitable expendable launch vehicles, unprofitable Ôinternational space station' development, and further unprofitable over-investment in remote sensing satellite systems. Over the same period they have once again spent almost nothing on work relevant to passenger travel.

As the world economy heads into a simultaneous recession due specifically to inadequate development of new industries in the leading countries, this glaring error of policy is imposing extremely large costs on taxpayers, both directly in misused taxes and indirectly in preventing the development of a major new industry with excellent growth prospects. It is vitally important that this policy error is corrected as soon as possible.

1. ( Anon), 2001, "World News Roundup", Aviation Week and Space Technology, Vol 154, No 15, p 22.
2. W Ferster, 2002, "Launch Providers Bemoan Stagnant Market", Space News, Vol 13, No 3, p 9.
3. ( Anon), 2000, Government Reply to Trade and Industry Committee Tenth Report, Appendix to Trade and Industry Committee Twelfth Special Report, www.parliament.the-stationery-office.co.uk/pa/cm199900/cmselect/cmtrdind/908/90804.htm
4. D O'Neil et al, 1998, "General Public Space Travel and Tourism - Volume 1 Executive Summary", NASA/STA, NP-1998-03-11- MSFC; also at www.spacefuture.com/archive/ general_public_space_travel_and_tourism.shtml
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6. ( Anon), 1998, " Space in Japan", Japan Federation of Economic Organisations.
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