As my flight approached Sheremetyevo Airport in the spring of 1999, I was depressed over the devastating reports about developments in Russia. Deaths were outpacing births, and the population was shrinking by 800,000 each year. Thirty-five percent of the population had incomes below the poverty level. Many science teachers who were supposed to receive $20 per month had not been paid for a year. The portion of the economy that was still operating on a monetary basis and not relying on barter and deferred credits was one-half the size of the Dutch economy. Exports had declined by 16 percent in 1998 and imports by 19 percent while Russian production of goods continued to tumble. And the fate of the most progressive voice in the Duma, Galina Staravoitova, who had been assassinated in St. Petersburgh a few months earlier, was a warning sign of a political U-turn in Russia's future.
A week in the Urals buoyed my spirits somewhat. Life didn't seem so bad there. Despite all the ominous predictions, Russia had survived the winter. Banks were slowly reopening. Paychecks were gradually reappearing. While the ruble had plummeted in value internationally, inflation was not as severe as predicted. To be sure, the prices of bread and milk had increased dramatically; but the costs of gasoline, housing, and clothing were only modestly higher than during the fall of
1998. Russian colleagues were not nearly as concerned about their future as I had anticipated. They have learned to adjust to economic shocks of all sizes.
Returning to Moscow, I began to sense that, over the long haul, the financial crisis in August 1998 was simply another bump in the road. While economists pointed to unpaid debts and to terrible economic indicators, four of my colleagues revived my optimism that Russian technology can again become a force in economic growth—but patience and persistence must replace any past illusions of near-term payoff from technological innovation.
The management of the new state enterprise, Russian Technologies, had put behind them the hundreds of failures of other organizations to market technologies developed for the Soviet military machine. The firm, selected by the Russian government as the focal point for promoting exports of dual-use technologies, had just claimed its first success in Europe and the United States—the marketing of a pilot ejection seat. Other products in the electronics field were being declassified and would soon also be available, according to the management. Why were they apparently succeeding when others had failed? The new leaders understand both Russian and western profit motivations. They price items at a sufficiently low level to capture buyers skeptical of items made in Russia but at a high enough level to ensure that the return to Russia will provide incentives for manufacturers to increase their interest in producing quality products. Also, they only promote technologies that have been approved for sale by government officials responsible for protecting Russian industrial secrets, thus heading off bureaucratic delays once customers indicate interest in possible purchases. They are attempting to demonstrate that, while Russia is open to all types of offers, the nation is no longer a technology flea market that bites you when you try to take items out of the country.
My next stop was the Innovation Agency, established in 1994. Its mission sounds similar to that of several other organizations—promoting small innovative businesses. But, in practice, its approach has two important differences. First, it does not rush the commercialization of technology since a few sustained successes that take several years to
launch are better than many short-lived immediate successes. Second, small firms that feed technologies to large firms are the targets, with the important multiplier effect. Often the small firms are absorbed by large firms, and immediate multiplication based on larger workforces and new market opportunities may result.
Then, at the Ministry of Science and Technology, a small group of specialists was busily preparing reports on the state of innovation in Russia. While the national statistics indicate that the downward slide of Russian industry continues, there were two bright spots. These specialists could point to many examples—in the enterprises, in the research institutes, and in the small firms—of new Russian technologies finding paying customers at home and abroad. Secondly, the specialists clearly understand those factors that encourage innovation and those that hold back efforts to upgrade industrial performance. And their diagnoses provide an important point of departure for developing policies for economic revitalization.
Finally, even my concerns over the unchecked rampage of corruption were assuaged. A colleague from a Russian organization that was selected to receive a $50,000 grant from a western foundation asked me to help him have the money sent to an American institution that could administer the grant and keep tabs on expenditures. He was worried that, if the money came directly to him and his colleagues, the temptations to divert some of the funds would be very great. He simply did not want to be a party to misuse of funds.
These unanticipated encounters highlight the determination of some Russians to press for changes that will pave the way for another chance for technology. Of course, appropriate macroeconomic and security policies are critical to the promotion of technology. But, unless modern technology is available in the first place and is aimed in the right direction, even the best such policies will have little meaning.
In the 1930s, the Soviet Union organized its engineers to industrialize the country after the flirtation with free market economics fizzled. Now the engineers, the economists, and the security experts must work hand in glove in a new political environment if yet another industrial revolution in Russia is to become reality. And, as in the 1930s, foreign specialists can lend a helping hand.