Swords into Market Shares: Technology, Economics and Security in the New Russia by Glenn E. s> Schweitzer (review)

Abstract

REVIEWS I89 instrumentsof 'financialrepression',like high reserve requirements,may be conditional on the bankreformand successfuldisinflation. School ofSlavonic andEastEuropean Studies T. M. MICKIEWICZ University College London Schweitzer, Glenn E. Swords intoMarket Shares: Technology, Economics andSecurity in the New Russia. Joseph Henry Press, Washington, DC, 2000. xx + 307pp. Notes. Tables. Figures.Appendices. Index. ?2 I.95. WILL economic historians of the future decide the planned economies collapsed because of the failureto innovate?An economic systembuilt on the premiseof incrementsof quantitativeinputsprovedincapableof incorporating qualitative shifts derived from technology. Despite the massive size of the Soviet researchbase, science-pushproved an ineffectivesubstituteformarketpullin encouraginginnovationexcept wherethe Statedeemed itsfundamental interests at stake. Thus, world-class rocketry, space missions and lasers, but the microcomputer remained as distant as communism. That was then, however. The issue now is the relationshipbetween innovation and economic renewal. Can Russia's technological capability, in sharp decline but still considerable, play its part in the revival of economy and society?Or will the transitionalcrisisdrageverythingof value in post-Soviet society down with it? This is the theme of Glenn Schweitzer's book, though given that he is an American and that the book, both in style and content, is written largely for an American audience, it is also concerned with what America should 'do' about the innovation-transition relationship in Russia. That is, there is an assumption that America can and should be involved; though the actual motives and outcomes, as Schweitzer himself describes,may prove problematic and controversial. The book is structuredin ten chapters. Chapters one to three look at the implicationsof the economic crisis;the prospectsfor innovation;and the role of the military-industrialcomplex (MIC).Chaptersfourto sixexamine specific dimensions of the innovation-transitionrelationship:the search for finance; problems of patents, copyrights and fiscal incentives; and the loss of human capital. Chapters seven and eight examine the potential of the sixty-five science cities and three of the ten nuclear cities. Chapter nine looks at American policy options and chapter ten the prospects for the future. Six appendicesprovide detailson the Russianscience and technology base. Schweitzer outlines the contraction of what had been one of the world's largest research sectors. The number of research scientists has halved to around 45o,ooo but with perhaps only I00,000 of these research active. Less than one per cent of those who have left the sector have emigrated, mostly to the West, though necessarilythese have tended to be the best and brightest. State funding for research has contracted twenty-fold in ten years and now provides only half of finance, the remainder coming from self-funding and domestic and foreign private sources. As this suggeststhe private sector has been largely unable or unwilling to fill the gap left by the collapse of public support.42,000 small enterpriseswere classed as innovative in I999 but only I90 SEER, 8o, I, 2002 2,000 were doing real R&D. Innovation expenditures of Russian large enterpriseswere only 2 per cent of US equivalents,and even thisdisguisedthe factthat much of what was definedas researchwas actuallytechnical support. The reasonsfor the lack of privatesupportfor innovation arewell known:the investment, legal and tax environments. But arguablyas significanthas been the reformstrategy,and in particularthe monetaryorthodoxy imposed in the 9gosto combat inflation. Innovation cannot be conducted on the basis of barter or promissorynotes and thus has been relentlesslysqueezed between the demonetarizationof the economy and the collapsingfiscalyield. With perhaps three-quartersof basic researchin Soviet times takingplace within the MIC, it has been impossibleto separatethe questionsof renewalof the researchbase and demilitarizationof the economy. Schweitzerarguesthat there has been a fundamental difference of interpretationbetween Russian managers and Western advisers as to what conversion means: the former viewing it as a supplement to militaryproduction, the latter as an alternative (p. 77). In the event neitherhasproven realistic.The largeamountsof civilian goods thatthe Soviet-eraMIC producedbecame unmarketableafterliberalization of trade, and significant investment to produce new goods has been absent. This has led to furtherconfrontation of interestsand interpretations between Russia and the West on related issues of non-proliferation,conventional arms sales, and dual-use technology. Schweitzer deals with these in a balanced way but behind this debate lurksan unavoidable question:has US interventionbeen designed to help Russia or itself? Ultimately Schweitzer is forced to concede that 'veryfew...