Without warning the Soviet Union announced the successful launch of Sputnik into earth orbit, it was the world's first man made satellite.  Immediately the United States was put on the defensive from both a technology and political perspective.  Premier Khrushchev announced that "the United States now sleeps under a Soviet moon".  Headlines complained that the US had fallen behind and had lost its technology leadership.   In fact, the United was behind but Sputnik was like adrenalin to the system.  The sleeping giant woke up, but it would be years before the leadership crown could be reclaimed.  This is s synopsis of that struggle.

Both the Soviet Union and the United States had publicly announced plans to launch research satellites as part of the International Geophysical Year of research from June, 1957 to December, 1958.  The American satellite, the Vanguard, was still in development and not targeted for launch until sometime in 1998.  Now the Vanguard, a 3.1 pound grapefruit sized sphere, was dwarfed and totally outclassed by the now visible 184 pound Sputnik.  The pressure was now on to accelerate the Vanguard.  The Army Ballistic Missile team under Werner Von Braun at Huntsville, Alabama came forward with a plan utilizing the Redstone medium range ballistic missile as a launch vehicle and a larger satellite, designed by the Jet Propulsion Laboratory that could be launched within 3 months. That plan was approved. The satellite was named Explorer and all stops were pulled to get it into orbit as soon as possible.

Why so much concern with the Soviet accomplishment?  To fully understand the impact of Sputnik on the world it is necessary to understand the geopolitical situation existing at that time.  Since the end of World War II the Soviets embarked on a strategic mission to counter the influence of the United States and western capitalism.  It was a mission to establish the Soviet Union as a super power that would be a counterweight to the United States and communism as the political system of choice.  It used technology, arms, foreign relations, support of the Communist party in countries such as France and Italy, espionage, intimidation and its veto power in the Security Council of the UN.  The Cold War was under way and would last over 40 years.

In Europe, the Soviets had strengthened their hold on Eastern Europe and Eastern Germany.  Using a disagreement as an excuse, the Soviets cut off all land access to Berlin which was divided into 4 zones, British, French, US and Russian, for almost a year precipitating the allied Berlin Air Lift.  The Communist Party was a powerful political block in both France and Italy and threatened to take control.  The Korean War, while not directly involving the Soviets, was a proving ground for their weapons and fighter aircraft and came very close to being a lost cause for the allies.  By 1949 the Soviets had developed and detonated the atomic bomb.  By the time of Sputnik the hydrogen bomb had successfully developed and the first Intercontinental Ballistic Missile had set a new standard for range.  Third world countries such as Egypt, Syria, Iraq and Cuba were increasingly coming under the influence of the Soviet Union.

To make matters worse, on November 3rd the Russians announced Sputnik 2, an 1100 pound satellite with a dog named Laika on board.  It was timed to coincide with the 40th anniversary celebration of the Bolshevik revolution.  December 6th saw the first attempt to launch the Vanguard.  It exploded after only a few seconds of flight as would be repeated many more times...
It wasn't until January 31st, 1958 that there was any good news.  The crash program satellite 'Explorer' was successfully launched on the first try.  Even though Explorer was only a 30 pound satellite its instrumentation was instrumental in discovering the Van Allen Radiation Belt.  This provided the US with the first space discovery, by satellite, for the IGY.  Unfortunately the Vanguard test a week later was another let down.  It was followed on March 5th by the first Explorer failure.  However, on March 26th Explorer III succeeded.  For all of 1958 Explorer would achieve 3 successes in 5 attempts while the Vanguard project would only see 1 success in 5 launches.

On May 15th Russia set a new benchmark as it launched Sputnik 3, a 2900 pound, a heavily instrumented research satellite.  This would be the only announced Sputnik launch of 1958 but, given its size raised questions about size of the booster rocket and the direction of the soviet program including speculation about a possible manned satellite.

All of this caused grave concern about the structure, direction and funding of the US space program.  As a result Capitol Hill demanded an agency that could coordinate and manage American efforts to overtake the Russians.  NASA was created and given the responsibility for all non military space programs including the development of a manned space platform.

On October 5th, 1958 the New York Times summarized the events of the past year:

Needless to say, the first year after Sputnik I was not one of crowning achievement.

NASA saw the Moon as a possible first in the space race.  The first 4 Moon probe attempts late in 1958 failed as did 3 Russian attempts.  The Russians, again, won the race with a Luna fly by in January 1959 followed by a lunar impact probe and then a Luna circumnavigation probe later in the year for taking photographs of the unseen far side of the Moon.  The 29 photographs taken were transmitted from the probe as it approached earth on its return.  While not of great quality, the photos gave mankind its first glimpse of the unseen side of the Moon.  The probe was believed to have burned up in the Earth's atmosphere.

Again 1959 was another year of frustration and found the US still following in the Russians footsteps.  Looking further downstream, NASA put together the plan for the Mercury project.  It would e two years before the first results would be visible.

A summit meeting was held on May 15th 1960 between Nikita Khrushchev and Dwight D. Eisenhower.  The Soviets used this occasion to launch their first man rated satellite designed to be recoverable.  The political intent of this timing was clear but while the launch went well the recovery system failed and, instead of de-orbiting, the Sputnik was boosted into a higher orbit and was lost thereby taking away some of the impact.  On July 28th another attempt was made, this time with two dogs on board, Chayka and Lisicha.  This time the recovery system worked and the dogs were recovered in good physical condition.  Another successful test with two dogs, Belka and Strelka, was conducted on August 19th.  The last launch of 1960, also with two dogs, Zhemchuzhnaya and Zhulka, was not so successful and failed to orbit but the recovery system worked and the dogs were saved.

In January, 1961 I was assigned by IBM to the IBM German Development Laboratory outside Stuttgart for the purpose of developing the next generation computer.  Among the German engineers the US space program was the subject of much laughter and joking because of all of the highly visible failures that were so visible to the world.  "Why don't you keep your plans a secret until you have success?"  I would be asked.  While I never doubted that the US would ultimately prevail it the failures were, nevertheless, embarrassing.  Our source for news was the American Forces Network radio.  I had a radio in my office so that I could stay in touch with the news.

The Russian program continued with several more tests flights and then on April 12th Yuri Gagarin successfully completed one earth orbit to become the first human into space.  On April 12th NASA had scheduled the first manned sub-orbital Mercury flight with Alan Shepard as the astronaut.  As the time for launch approached my office was filled with German engineers who wanted to listen to the real time coverage of the launch.  As the capsule landed and was recovered a cheer went up and from that time on there were no more jokes about the NASA space program.  The openness of the communication and the willingness to share in the exciting moments of the event won my colleagues over.  However, it would not be until almost a year later that John Glenn would become the first American astronaut to orbit the earth.

By this time the effect of the new NASA organization and increased funding was being felt.  Reliability and performance had improved dramatically but the impact of being behind the Soviet accomplishments for over three years was reflected in worldwide public opinion.  It had been three years of Nikita Khrushchev gloating and joking about the "grapefruit satellite" and Alan Shepherds' "flea hop".  Something was needed that would clearly take the initiative away from the Soviet Union. It required a new and challenging plan that would far transcend anything accomplished to date.  Such a plan would involve considerable risk but, if successful, would reestablish the United States as the leader of the free world.

On September 12th, 1962 President John F. Kennedy, at Rice University, issued that challenge:
"Yet the vows of this Nation can only be fulfilled if we in this Nation are first, and, therefore, we intend to be first. In short, our leadership in science and in industry, our hopes for peace and security, our obligations to ourselves as well as others, all require us to make this effort, to solve these mysteries, to solve them for the good of all men, and to become the world's leading space-faring nation.

We set sail on this new sea because there is new knowledge to be gained, and new rights to be won, and they must be won and used for the progress of all people. For space science, like nuclear science and all technology, has no conscience of its own. Whether it will become a force for good or ill depends on man, and only if the United States occupies a position of pre-eminence can we help decide whether this new ocean will be a sea of peace or a new terrifying theater of war. I do not say the we should or will go unprotected against the hostile misuse of space any more than we go unprotected against the hostile use of land or sea, but I do say that space can be explored and mastered without feeding the fires of war, without repeating the mistakes that man has made in extending his writ around this globe of ours.

There is no strife, no prejudice, and no national conflict in outer space as yet. Its hazards are hostile to us all. Its conquest deserves the best of all mankind, and its opportunity for peaceful cooperation many never come again. But why, some say, the moon? Why choose this as our goal? And they may well ask why climb the highest mountain? Why, 35 years ago, fly the Atlantic? Why does Rice play Texas?

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too."

On July 16th 1969 Neil Alden Armstrong and Edwin Eugene Aldrin, Jr. became the first humans to land on the Moon thus fulfilling President Kennedy's challenge. 

The tide had turned.

References:
Kennedy speech text:  http://www1.jsc.nasa.gov/er/seh/ricetalk.htm includes links to video and audio recordings.
Kennedy speech audio and PowerPoint slides:  http://www1.jsc.nasa.gov/er/seh/jfkslide.asf
List of US and USSR satellite launchings by year:  http://claudelafleur.qc.ca/Spacecrafts-master.html
New York Times Looks Back: http://www.nytimes.com/partners/aol/special/sputnik/
New York Times Looks Back, Investors buying missile stocks: http://www.nytimes.com/partners/aol/special/sputnik/sput-14.html
Soviet Lunar Missions:  http://nssdc.gsfc.nasa.gov/planetary/lunar/lunarussr.html
Space History Notes:  http://www.svengrahn.pp.se/histind/histind1.htm
Mercury Project Details:  http://www-pao.ksc.nasa.gov/history/mercury/mercury.htm