Financial History 25th Anniversary Special Edition (104, Fall 2012) - Page 25

Apollo 13 was a near disaster but was touted as a huge success because the astronauts returned home alive. Apollo 13 was, if nothing else, an excellent demonstration of how human ingenuity and determination can overcome even Murphy’s Law. For the private companies who were not caught up in the spotlight of the Apollo 13 rescue, however, the mission brought relatively minor trouble. During the week of the disaster (April 14–18, 1970) each of the three big companies posted losses, with Boeing losing 5.5% of its value, TRW’s value dropping by about 2% and Grumman’s value sinking 1.3%. The companies which designed some of the equipment associated with the failed mission took hits too, though not catastrophic ones. North American Aviation, which built the Command Module that suffered the malfunction, lost only 3.5%. In September 1970, the final three Apollo missions were cancelled, leaving only two more scheduled. The cancellation indicated that the mission objectives of Apollo (to put humans on the moon and to discover more about our celestial neighbor) had been accomplished, and also that the space program was preparing to move on to different projects, including Skylab and the Space Shuttle. Skylab was already in the works and helped to carry the space program from the close of the Apollo missions in 1972 to the 1981 launch of the Space Shuttle, the re-usable orbiter that remained the defining feature of the American space program for the next 30 years. During the week of the Apollo cancellation, Boeing’s stock jumped 10%, and TRW’s and Grumman’s stocks rose 7.3% and 8%, respectively. The companies apparently benefitted from the revelation that NASA and the government would be turning their sights (and dollars) on other programs in which the companies would vie to play large roles. Investors were not disappointed. Since the days of the Space Race, the big aerospace companies have continued to thrive on government contracts. Boeing is still a major player in the aeronautics field and acquired North American Aviation. Grumman Corporation was acquired by Northrop to form Northrop Grumman Corp., one of the largest defense contractors in the world today. TRW Inc. was acquired in part by Northrop Grumman, which wanted its defense industries. The non-defense side of the business was spun off into TRW Automotive, which primarily works to make cars safer through the development of new technologies. The major events of the Space Race and the stock value of the companies involved in the aerospace industry were deeply intertwined. While unanticipated events such as Sputnik or the announcement of the cancellation of the remainder of the Apollo program had the anticipated positive and negative effects on the markets and on the aerospace firms, events such as the Apollo missions that had been scheduled and anticipated by investors had already been taken into account in the valuation of Boeing, Grumman and TRW and, therefore, did not affect the companies’ stock prices with nearly the same punch that geopolitical surprises packed. The Space Race and the Apollo program had a major effect on the American economy by harnessing the talents of hundreds of thousands of Americans, thousands of companies and hundreds of universities. Although some of the Space Race’s most gripping moments were surprises, a majority of the Race was a planned, dedicated effort of which the public and investors were kept well aware. Markets fluctuated as new information became available, but they were rarely shaken to the core. As a result, investors continued to pour their savings into the market and, thereby, finance the big companies whose engineers won the Space Race. America’s foe, despite its early lead in the race, lived under a very different set of rules that in the end could not command the resources necessary to win the Space Race or the Cold War of which it was a part. Although it achieved a few successes, including Sputnik and Gagarin’s flight, the Soviet government wasted precious resources, manpower and ingenuity on projects with more political appeal than practical military or economic sense. In the 1930s, for example, it expended a substantial part of its R&D budget in a failed attempt to develop aircraft powered by steam turbines. During the Space Race, America quickly drew even with the Soviets scientifically and militarily, while the Soviets were content to trounce the US only in the propaganda department. By January 1960, seven of 15 satellites launched by America were still orbiting Earth, while only one of three Soviet devices still roamed the skies, a fact that should have dispelled some of the abundant American discomfort about the Soviet “lead” in the Space Race. The American focus on scientific and technological value, even if that meant smaller satellites and lower lift capacity rockets, clearly turned out in the long run to be a much better tactic than the Soviet’s emphasis on larger but less useful technologies. The financial crisis of 2007–9 — and subsequent recession and attendant human suffering — revealed that capitalism, that complex and ever-evolving mix of free markets, democracy and big government, is far from perfect. The Space Race reminds us, however, that it was superior to communism, its main 20th century rival. Despite its warts, perhaps capitalism is still the best system available.  Peter “Sander” Kline is an undergraduate student at Augustana College in Sioux Falls, SD. The Thomas Willing In