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TlIE STATE OF PERESTROIKA AND ITS RELATIONSHIP TO WESTERN TECHNOLOGY EXPORT CONTROLS: A S1JR VET OF SPECIALISTS OR I~ SOYS UNION A Wc~r~c~ng Paper Prepared for The Panet on the Future Design and Implementation of U.S. National Security Export Controls, National Academy of Sciences by Joel S. Bellman Harriman Institute for the Advanced Study of the Soviet Union Columbia University April 15. 1990
This paper is based on interviews and/or written correspondence with the following specialists on the Soviet Union: Severyn Beater, Columbia University 3utian Cooper, University of Birmingham Richard Ericson, Columbia University Seymour Goodman' University of Arizona Thane (;ustafson, Georgetown University Philip Hanson, University of Birmingham John BardI. impressional Research Service Ed Hewett. The Brook~ngs Institution Robert Legvold, Columbia University Stephen Meyer. Massachusetts Institute of Technology ]aclc Snyder, Plumbs University Edward Warner, The RAND Corporation
The creation of COCOM and the post-war Western export control regime was based on a clear policy rationale: Soviet military strength should not benefit from the commercial transfer of Western technology. This rationale was itself based on empirical evidence and certain widely held assumptions about the nature of the Soviet military threats We structure and goals of its political system, and the organization of and links between its civilian and military-industrial economies. The current wave of reforms in the Soviet Union, embodied In the broad policies of perestroika and glasnost, has introduced a range of conceptual innovations and structural changes that has begun to affect an these areas. Though the direction and permanence of the course of change is still a matter for debate among specialists on the Soviet Union, an agree that the fundamental assumptions about the Soviet system upon which Western post-war policy has been bunt warrant a comprehensive reezammation. This working paper win present the results of an interview survey of 1 2 leading specialists on the Soviet system conducted ~ M=ch 1990. The specialists were asked to provide general assessments of the course of perestrai[a In their areas of expertise as well as a more specific analysis of the effects of reform on the Soviet demand for high technology and on the mechanisms of acquisition and assimilation of Western technology transfers. In addition, they were asked to speculate about the influence that alternative Western export control policies might have on the course of reform. This paper will summarize the points of agreement among the specialists while focusing more closely on the key debates among them through the presentation of individual views. OFFER VIE' 1
- : Before analyzing specific questions ancl viewpom~s, it might be useful to list a set of recurrent themes and observations that were pro mment throughout ~ the interviews: -The reforms ~ every sector of the Soviet system have undermined standard operating patterns without adequately replacing them with new mechanisms and procedures resuming In extreme instability and Elusion ~ almost every area. -The Soviet economy is on the brink of collapse with no hope of improvement In the near term, even if a comprehensive market- type reform is effectively implemented -There is an Increasing radicalization of positions within the Swiet political system with deterioration of support for the centrist view -The Soviet military and defense-~ndustrial sector are "under siege" from a combination of the collapse of the Warsaw Pact, a series of bold strategic and Format Dives from the top political leadership, the nationalities crisis within Soviet borders, a rapid growth of domestic anti-militarism, budget reductions, and pressures to merease the proportion of civilian consumer and producer goods manufactured by defense plants. -The Soviet economy has not yet reached the stage of development ~ which it could s~g~ficantly Agree and benefit from the most advanced high technologies. Rather, it requires a large dose of 1960s-1970s lease] technology. -There has been ~ huge epsilon of the technology franker interface between the Soviet Umon and the West as new, institutions, rules, and economic incentives here widened the mechanisms of technology transfer, but the initial results ~ terms of economic development have been marginal. -Technology transfer, while a key element of the original reform program, has [aced to an issue of seconciary importance as the leadership's focus has shifted to the provision of basic consumer durables in an effort to assuage growing popular ~discontent. 2
Within these parameters of agreement, debates among the specialists developed around a series of specific issues, mclud~ng: -the potential for success of economic reform ~ the medium term and a set of criteria with which to analyze the progress of reform; -the potential for a return to the stylus quo ante, eepeciaBy a recentralization of economic authority; -the effects of refo£ m -an the coherence and performance of the military-industrial sector and its priority status ~ relation to the civilian economy; -the effects of reform on the acquisition and assimilation capabilities of different sectors of the Soviet economy, melud~g the new cooperatives and joint ventures; -the potential beneficiaries, both ~ the Soviet Umon arid in the West of active engagement In technology transfer In the near term; -the role that technology transfer and COCOM restrictions have played and might play ~ Soviet technological development, and; -the extent to which policy action in the West oouicl affect the course of reform ~ the Soviet Union. The positions that different specialists took within these debates became the basis [or their competing policy recommendations on the issue of aller~g Western export controls. As a result, this paper is organized thematically around the debates. exploring the different viewers that emerged on each question and linking them In a broader chain of argument about how the demand side of technology transfer between the Soviet Union and West has changed or might change in the course of economic, political, and social reform. 3
Economic ~~u There is a high degree of uncertainty In the analysis of the course of economic reform ~ the Soviet Umoo, not only because of the conflicting signals provided by the reformers themselves, but also because the path of transition from a cer~traDy planned to a market-type economy (in its many different forms) is a radically new phenomenon that has not been Worked out theoretically in the East or the West. How one evaluates the progress of economic reform depends upon one's projection of the endpoint of reform, which is still a matter of controversy among Western specialists. AD the specialists interviewed agreed that a reformed Soviet economy should include a considerable decentralization of decision-making power to actors who have sufficient information to make rational economic choices, a radically reformed price-setting mechanism to link prices to the forces of supply and demand, a well-defined set of property rights that transfers ownership to independent groups or individuals, a monetary reform that can restore value to the ruble, and measures to foster both entry into and exit from the market in order to expand competition. But how such a reformed economy might be structured is still an open question. Do one point there was unanimity among the specialists: the Soviet economy is currently in crisis. The root of the problem is that the economy has been built on a highly irrational economic structure held together his toricaDy by discipline and command. As the reform process begins to disrupt the traditional patterns of command, economic activity has begun to collapse. Though the economy has not yet reached a state of chaos, the economists have observed some dangerous trends. According to Ed Hewett of The Brook~gs Institution, ~ndustriat output has been declining steadily 4
since mid-~89. Soviet statistics have reported a one percent dec ine ~ industrial output for each of the first two months of this year, which Hewett believes is probably higher given the level of inflation. Hewett indicated that the Soviet Union is "flirting with a decompression in industry similar to the situation In Poland ~ the winter of ~ 980-S I." Richard Ericson of Columbia University has observed a growth of autarky at the city level aIld within economic branches as supply networks have broken down. He also claimed that the ruble has lost much of its [unction as a store of value. Seweryn Dialer, also of Columbia University, provided a stark picture of the current economic situation: The economy is totally destabilized and resistant to traditional guidance. The supply system has collapsed. The market imbalance has reached staggering proportions.... The wage and medic discipline has been broken. The enormous resources frozen ~ unfinished ~nvesiments ooze growing at a more rapid pace than the value of goods from finished investments. Unpredictabilities and shortages have become a way of life for the consumer to the extent that he yearns for the predicable shortages and minimal certainties of the past. If no decisive action is taken to address these problems, Bialer =d Ericson both mentioned the possibility of "economic collapse" in the near term. Such a scenario might include a plunge ~ industrial output by up to 30 percent in a span of 12-l 8 months, widespread closings of factories due to lack of supplies, reductions ~ basic services such as heating and electricity, regional autarky, soaring black market prices with few available goods in state stores, and the collapse of the ruble. Hewett was not quite as pessimistic, but agreed that 1 990 will be a "terrible year, no matter what they do." 5
The economists agreed that the economic effects of a truly radical, market-type reform would make the current economic situation far worse In the short term. A reform program that cut off ad state subsidies, freed the price system from central control, anct established a system of market competition ~ which inefficient firms went bankrupt would lead to soaring prices especially for essential items, a freeze ~ wage growth, sharp declines ~ industrial output, and widespread, sustained unemployment. Thus, the potential for extreme mstabiDly ~ the Sorrier economy, whether the political leaders pursue truly radii reform or simply continue to implement half- measures, seems rather high. The basic problem, according to Ericson, is that an overwhelming portion of the Soviet capital stock is "simply useless," having been built up over the course of 70 years "with no economic rhyme or reason." He pointed to the steel works In the city of Magm~agorsk as a prime example of a massive complex that wastes resources and pollutes the environment in the process of producing low quality goods that are unmarketable in the conditions of oversupply ~ international steel maricets. 'You would do better to shut down 30x of Soviet industry and save the wasted resources, but you can't," he argued. In the case of Magm~agorsk, entire cities have been built around and depend upon the steel works. As Ericson asked, '~hat do you do if this is over half your economy?" Hewett was sightly more optimistic. Though he recognized the nevitabdity of economic instability, he argued that 1990 is a critical year to see if the Soviets wid take the measures necessary to turn the economy around in ~ g9 ~ . "We must distinguish," he said, "between ins tab city that comes from an inability to do anything (as in the current sieuseion) and instability from measures that actuary do something (as ~ Poland)." He 6
claimed that there might be the beg Or log of a turnaround in the economy by the fourth quarter of this year, but that will very much depend on the character of the presidential decrees on the economy.1 He pointed to some encouraging signs in the Polish case that the original burst of inflation that accompamed radical market reform is now berg to stabilize. The criteria for evaluating Soviet economic reforms ~ this condition of instability can be misleading. Hewett claimed that the most difficult task is identifying those half-measures that seem to push the reform process forward, while having built into them a logic that win lead ~ the reverse direction. One example would be the introduction of flexible price formation without accompanying reforms ~ the financial structure and ~ the opportunities for market entry that would foster competition. This would lead to disastrous inflation ~ a monopoly-dominated economy without creating the competition that would stabilize prices and bring more goods on the market. Ericson warned about potential illusory effects of a stabilization program. By cutting down state expenditures, reducing money creation, towering wages and controlling consumer goods, the situation could appear to improve by putting more goods on consumer markets, but at the cost of undercutting the thrust of the market reform and, as he said, "putting them back at square one." A list of benchmarks that would indicate progress In the course of reform includes the fodow~ measures: -the abolition of industrial ministries; ~ Included In the recently established post of president Is the right to issue decrees, similar ~ executive Avers. Reportedly, Gorbachev has been working on a set of radical economic decrees Cat win oudine major transformations in the financial system. the price-setting mechanism. the planning administrative structure, and the introduction of market mechanisms. The decrees should be presenWd by Sepelmber 199O. 7
- l -the creation of a well-def~ed set of property rights that gives independent groups or individuals control over the management and disposal of their assets (~nclud~g fug resaleabitity of assets)2; -a monetary reform that would make the money "real" as a generalized command for goods and services in a non-inflationary economic environment; -1be recognition and legalization of inter mediation "d speculation as legitimate and vital economic activities, and; -the creation of a set of social guarantees that would provide protection agamst the imlial dislocations of the transition to market forms, but that would not be so attractive as to provide a disincentive to work. The signs of regression ~ the reform process would include the setting of high growth and investment targets by the Gentry leadership, as weD as attempts to increase production efficiency through administrative techniques. Hewett argued that any attempt to rely primarily on increasing state orders (gos~)3 to individual firms as a method of increasing the output of consumer goods or "to order" industry from above to innovate and improve quality would indicate a step backwards. Yet John Hardt of the Congressional Research Service offered a different viewpoint on this issue. He suggested that a highly oentr~ized economic crisis management program 2 A new Law on Property was recently adopted by the Supreme Soviet, but it is seriously [[awed on the issue of full control over the disposal of assets, according to Ericson. The cam stiU forbids the resale of capital bets, severely restricting free equity transferability. In addition, the cre~ion of " jo1nt-stock companies" does not offer stockholders equity rights of control over the firm and its mangement 3 State orders have been used ~ pie of ply output begets as a method far ms~ntain~g some cent control over the production decisions of m~ividual enterprises. Instead of requiring a given {eve! of output through the plan, the state now places orders, supposedly subject to competitive bidding. There has been widespread complaints ~ the Soviet press that Me system of state orders is simply centralized plannLn g under another guise. 8
which substituted the old administrative control system with a new transitional central bureaucracy of monetary, [mancial, and business controllers ~ place of the old production engmeers4 might constitute an advance ~ the course of economic reform. "Given current economic and political realities In the USSR and the enormity of charges necessary for integration mto a world market," he argued, "preparatory measures utilizing the central economic powers of the Sorrier state may be prudent." He held out the possibility that the new Presidency and the Presidential Council could be seen as a Vehicle for effective central economic administration. Given the difficulty ~ defining the criteria for progress, it should not be surprising that the specialists have conflicting views on the potential for the success of economic reform. Biater put forth the boldest approach: "In these conditions of mstabitity, the reform of the economic mechanism is pure illusion. Whatever the numerous laws and edicts on new ruses of work and management proclaim they are not put into practice or are irrelevant during the state of acute economic crisis that persists. Moreover, the Soviet Umon is not preparing the essential conditions and prerequisites for the conduct of a radical reform ~ the future." Ericson argued that the problem with the reform program already introduced and the basis for his skepticism about its future success lies ~ the basic conceptual [laws of the economic reform as whole. "There is no halfway house of market soc£atism that Gorbachev seems to believe tn." he claimed. "It is a contradiction ~ terms that is leading him to put mto place half-measures that are bound to fail." The economics profession ~ the Soviet Union is tied down with the Martian idea 4 Planners In the adminis~ve his~chy have Sedition ally been ~am" as engineers, not as economists. 9
that an income must be somehow labor-based and therefore cannot see through to such basic economic ideas as how a capital asset is valued or the role of capital markets in distributing resources to the most efficient uses. As a result, Ericson claimed, "each of the new laws is fundamentaDy flawed In the same direction: they do not put sufficient control In the hands of those with sufficient information necessary to perform qualitatively better.~- Ericson said that the oIlly cause for optimism would be if someone educated the Soviet economists and did it quickly. Hewett agreed that Soviet economists have not yet achieved the level of conceptual progress necessary for the formulation and implementation of a comprehensive market reform, but he pointed to three factors which leave room for optimism. First, he noted the remarkably rapid progress that Soviet economists made ~ the first two years of p~restroi~a, though the pace of progress has siowect Considerably since then. Consequently, the possibilities for rapidly educating at least a portion of the Soviet economics profession do not seem completely far-fetched. Second, those few Soviet economists who do seem to understand the basic elements of market-type systems are now close advisers to Gorbachev. He pouted ~ particular to Nikolai Petrako~r, Gorbachev's special assistant on economics, and Leonard Abandon, the head of the Commission on Economic Reform ~ the Council of Misters, as two prime examples. Petrakov, widely regarded as one of the best Soviet economists, has been working daily with Gorbachev on the upoom~g set of presidential economic decrees. Abalk~n has already drafted a comprehensive program for market~zation of the Soviet economy which was presented ~ December 1989. Third, Hewett argued that the current economic difficulties may push the Soviet economists off the plateau of the tr conceptual progress. As half- ~0
Within these parameters of agreement, debates among the specialists developed around a series of specific issues, mclud~ng: -the potential for success of economic reform ~ the medium term and a set of criteria with which to analyze the progress of reform; -the potential for a return to the stylus quo ante, eepeciaBy a recentralization of economic authority; -the effects of refo£ m -an the coherence and performance of the military-industrial sector and its priority status ~ relation to the civilian economy; -the effects of reform on the acquisition and assimilation capabilities of different sectors of the Soviet economy, melud~g the new cooperatives and joint ventures; -the potential beneficiaries, both ~ the Soviet Umon arid In the West of active engagement In technology transfer In the near term; -the role that technology transfer and COCOM restrictions have played and might play ~ Soviet technological development, and; -the extent to which policy action in the West oouicl affect the course of reform ~ the Soviet Union. The positions that different specialists took within these debates became the basis for their competing poncy recommendations on the issue of aller~g Western export controls. As a result, this paper is organized thematically around the debates. exploring the different viewers that emerged on each question and linking them In a broader chain of argument about how the demand side of technology transfer between the Soviet Union and West has changed or might change in the course of economic, political, and social reform. 3
resort to decisive administrative action ~ response to the threat of economic breakdown. He said, Every cell In the bureaucracy is ready to revert back to central control of the economy. The only mug that keeps them from doing that already is the top political leadership, who are pushing towards a shining illusion of market socialism." Once again, Hewett offered an opposing viewpoml, claiming that the recentralization option has been largely discredited due to the [allures of the pre-reform system. He also suggested that any supporter of recentralization would attempt to couch his program terms of the reform, making it difficult to determine who the real recentralizers are. To those who claim that recentralization win be the most ikely response of the central leadership under the threat of economic chaos, Hewett responded, "As the crisis gets worse, any option looks better mclud~g market reform." These disagreements over the prospects for the reform's success =d the potential for economic recentralization were an important foundation for the specialists' contending analyses of the likely beneficiaries of more active economic and technological engagement with the Soviet Umon ~ the short term. Their views on the extent of economic instability and on the ability of economic reform to produce a viable set of economic institutions =d pro&eases to replace the command-adm~n~strative system underfed their projections regarding the capacity of civilian economic actors to take fun advantage of the new opportunities that would be available in a more active engagement between the Soviet Umon and the West. Before moving to a more detailed analysis of this question, it is necessary to ezamme the specialists analysis of the effects of reform on another crucial actor ~ the Soviet system -- the military. 12
TEE MILIT"~-INDUS"I~ SECTOR Traditionally, the mititary-mdustrial sector has been seen as ~ island within the general Soviet economy isolated by a dense set of privileges and priorities-that enabled it to produce world-standard goods while the rest of the economy faltered. Though ad the specialists surveyed agreed that this analysis of the military-industrial sector has been overstated, they disagreed on the extent of the sector's comparative advantages and the effects of perestroi~a on its remaining privileges. Their differences on the varying effects of economic instability In the military-~ndustrial sector and the general economy played a crucial role in their analysis of the potential beneficiaries of a more active engagement In technology transfer and, as a result, on their overall evaluation of alternative export control regimes. Therefore, the specialists' views on this sub ject are worth examining In some detail. Richard Ericson claimed that "the military-industrial sector still has a carte Blanche on what it can preempt from the general economy: the best minds, the best resources, and first choice on Western technology transfers and indigenous technologies." Its comparative advantage in attracting the most qualified personnel lies not only on its higher salary scale, but on its established network of apartments, special stores, arid preferences ~ the distribution of consumer goods --a system of priorities that has not yet been dismantled. Regarding Western technology, Ericson argued that "the entire hierarchical structure is designed for bringing in technology and making it usable for the military sector." Though he admitted uncertainty on this question, he has not seen any evidence that this administrative structure has 1 d2
changed. These structural advantages could provide a certain degree of protection from the instabilities of the general economy. Ed Hewett argued that the mititary-~ndustrial sector maintained its privileges during the first phase of peresiroi~a ~ 1985-87. At Ibis stage, the reform was packaged as a modernization program that would brag Soviet industry up to current world technological standards. The defense sector, whose strong research and design bureaus and quality control system produced ~nternationaDy competitive goods, was held up as a model for the civilian economy. But as the modernization program was abandoned in favor of the more immediate task of providing more consumer goods, the protection and privileges of the mil~tary-~dustrial sector began to erode. The pressure to take on the burden of producing more civilian goods further integrated the sector into the cite an economy, with ad its attendant problems. Moreover, the change to "self-f~nancing," in which defense enterprises are required to fmance their operations from their own sales and profits, has raised the price of supplies and decreased the level of state subsidies. Hewett said, "The umbrella of protection that the military- ~ndustrial sector lived under is fast disappearing." Yet he die! recognize that defense sector enterprises have a greater inherited capital stock, more reserves and stockpiles, and can expect a looser public purse than civilian enterprises, giving them an important buffer against short-term shocks in the general economy. Specialists on the defense economy gave a much more pessimistic evaluation of the state of that sector and its relationship to the crvi fan economy. Stephen Meyer of MIT argued, "The barriers that may have isolated the defense sector have completely come down. There are some priorities left, but they are so shot through with holes from other priorities 14
that they are no longer effective." It has been getting increasingly hard for the military to preempt resources and technology from other sectors of the economy. The conversion and diversification programs, which win be discussed ~ further detail below, have integrated the defense industries more fully into the general economy. In addition, the move towards self- [~nanc~ng throughout the economy has eroded the special price structures and budgetary overruns that defense industries have traditionally enjoyed. Through these measures, the defense sector has been drawn into the general economy, making the defense-civilian distinction increasingly insignificant as a meaningful segmentation of the Soviet economy. As a result, the defense sector has been plagued with the same mstabdity and potential for breakdown as the general economy. Meyer went even further to claim that the sector is "simply fading apart." The defense specialists, including 3utian Cooper of the University of Birmingham, Robert l~egvold of Columbia University, and Edwa£ ~ Warner of the RAND Corporation pointed to a number of reasons for these developments. First, the shift to self-fmanc~g combined with budget cuts In the defense mbustr~es have placed serious financial strams on the entire military- industrial sector. In ~e past, the price of supplies ~ this sector were kept artificially tow reflecting its priority status and the desire to mamram the appearance of a low military budget. As suppliers ~ this sector have been forced to earn ~ profit, prices have gone way up causing a high level of inflation ~ the sector. Defense enterprises that never had to be concerned about the price of their supplies or their ferret of profit have been forced to alter their supply patterns and reconsider their production profiles. In the midst of these rising prices and new supply lines, defense enterprises have been hit with budgetary cutbacks. Military R 8` D mst~tutes, which had 15
grown accustomed to cost overruns, have been forced to take a 151 cut In their budgets; procurement programs have been cut by 5x. Ad the specialists agreed that the new political leadership is firmly committed to decreasing the mihtary's share of the national taco met Second, the conversion program and the diversification of defense output for consumer uses has introduced a high level of uncertam~y, if not chaos, the military-~ustri~ sector. The conversion program is a plan to transform entire enterprises which had been engaged entirely ~ defense production into producers of civilian goods. The plan, which was supposed to have been In place by ~ 989, has been postponed for another year amidst numerous press reports of haphazard and chaotic conversions. Defense enterprises have been ordered by the central authorities to produce civilian goods for which they have neither the supplies, the machinery, nor the proper experience. The Soviet press is fun of stories reporting outrageous conversions from the production of missiles to chocolate-in agog machines. Warner claimed that the conversion program has 'spurred massive confusion." Meyer went even further to argue that the program "is destroying everything in ifs place. It's undoing mechanisms that have worked in the past and not replacing them with anything. Less radical than the conversion program has been the effort to diversify the produnion profiles of defense pl=ts that were always engaged In production for civilian uses. The goal has been to change the standard product ma of defense enterprises (60x military to 40x civilian use) to the reverse ratio by ~ 995. This diversification program has been less dramatic and far-fetched than the conversions reported ~ the press and may have the potential to increase the output and quality of some high technology goods in the civilian ecooo my. 16
Third, the defense sector has been losing some of its most talented researchers, design engineers, and production workers to the newly formed cooperatives. Warner suggested that this migration of highly qualified personnel began in the late 1 970s as a response to the secrecy restrictions placed on defense sector workers and the generalized anti-militarism developing in Soviet society. The creation of cooperatives has accelerated the pace of this out-migration. The best cooperatives have tended to be in science and technology. They offer salaries that the defense sector win not be able to compete with, especially within the budgetary restrictions of self- f~nancing. As Hewett said, 'The coops win suck people out of defense like a vacuum cleaner." The combined effects of these changes on the performance of the defense sector has already been significant, according to some analysts. Meyer has noticed a decreased level of output, breakdown of supply patterns, decreased capacity, and a general demoralization and rising level of frustration among defense sector workers and researchers. Most significantly, he predicts that the pace of technological innovation Will come to a halt over the next several years, while the conversion and diversification programs win lead to a technological regression. Under the pressures of self-financing and unreliable supply lines, defense enterprises will seek to minimize their risks by moving away from the production of limited quantity goods that require special, high quality supplies and switch to the production of low technology goods from supplies that are more easily obtainable from the supply network. These changes will be reflected up the line to designers and researchers who will not be pressured to produce highly innovative items, but more standard civilian goods. Meyer claimed that development and experimental design bureaus are already scrambling ~7
to protect themselves from Gosplan's orders to convert their designs for irrelevant and unrelated civilian goods. He said, "The defense sector is hemorrhaging with regards to the loss of technological competence." Seymour Goodman of the University of Arizona, who specializes in computer technologies, had a different impression of the potential for technological regression, at least in the technologies that he has been focusing on. He agreed that if the rest of the economy is faring apart, the high technology sectors within defense win collapse as wed. Yet rather than technological regression, be has identified a process whereby dual use technologies are being promoted for genuine dual use, rather than pure military use as had been common in the rather isolated defense sector. In his view, the military-industrial sector will not necessarily lose competence, but may transfer its energies to producing and improving the quality of high technology goods for an expanded range of civilian uses. Ed Hewett argued that there has been a tendency to exaggerate the claims about technological regression which has resulted from the inflated assessments of factory managers who are simply complaining about having to produce more consumer goods. Though they may have questioned the degree of technological regression In the defense sector, they did agree with Meyer that the cohesion, privileges and stability of the sector has been and win continue to be severely threatened by the tendencies within the general economy and the more specific reform measures implemented within the defense Industries. The extent to which these changes In the military-~dustrial sphere should be "permanent" is the sub ject of current debate ~ the Soviet Union, according to Julian Cooper. Some Voices withm the military are pushing for the retention of an option to convert back to military production ~ the event 18
of perceived need. They have backed up the* arguments for a "reverse- conversion" option with claims that the U.S. has not been responsive to Soviet initiatives regarding defense cuts. In opposition are those who have been arguing for a decisive, comprehensive demilitarization of the Soviet economy, involving the transfer of production and R&D capacities out of the defense sector on a permanent basis. "There is no doubt," Cooper stated, "that the outcome of this debate win depend to some extent on Western responses during the coming months." Philip Hanson, also of the University of Birmingham, argued that, though nothing is permanent in the long run, the evidence that investment ~ defense plants has been used to re-equip them for civilian production indicates that it would at least take time for these plants to return to military production. Meyer went even further to claim that regardless of Soviet intentions, the changes already implemented in the military-~ndustrial sector win continue to have a significant impact on military production through the end of this decade, at least. TI1E lIILr[~! UNDER SIEGE These convulsions ~ the defense production sector are only one In ~ increasing accumulation of crises that is now confronting the Soviet military. The pressures have been so significant that aD the specialists described the military as under "a state of siege." In the midst of an economic crunch, an erosion of military privileges, and a destructive restructuring of defense production, the military has been forced by the political leadership, by new civilian critics, and by the sheer pressure of events to rethink its entire doctrine, strategy, and role in Soviet society. The result has been, as Robert Leopold emplaced, ''an identity crisis in v~rtuady ever aspect you can think 19
of -- in terms of what resources they're going to get, what to do with those resources and even their very existence, given the way in which the society is being torn apart. I can't imagme a military under greater siege." The specialists concurred on an outline of the problems: crisis calf Force Posture Id Strategy. This crisis has two immediate sources: the initiatives of the political leadership and the revolutionary changes In Eastern Europe. Regarding the initiatives, Gorbachev introduced the notion of unilateral cuts without negotiated reciprocal agreements, which the military would have demanded. This process began with the testing moratorium and was given great force with the December 1988 declaration that the Soviets would cut 500,000 troops ~ Europe. In addition to the unilateral moves, the Soviets went to the CFE Cams ~ Vienna prepared, according to Edward Warner, to negotiate away over the next five years their enormous advantage in ground for ee armaments. The plan among the military reformers is to change the size and character of the Soviet army by perhaps as much as half by the end of the decade, or even sooner according to some. On top of these initiatives arid negotiations, the events us Eastern Europe have confronted the Soviet miLtary with the dissolution of the Warsaw Pact armies and accelerated pressure for Soviet troop withdrawals from the region. In the face of these combined pressures, LegYold argued that Soviet force posture is simply codaps~g and they entire military strategy has been undermined. "It is not a redesign," he said, 'Tut a disintegration of the old In every area except nuclear weapons." This has forced the Soviet military to reconsider how they do their most basic business: their ability to wage war and to defend Soviet borders. Crisis of A~li-Mi~il~rism. The policy of g~s~os' has exacerbated the development of a generalized civilian criticism of the excessively militarized 20
nature of Soviet society that began during the war in Afghanistan. Among the reformers within the political leadership, this has been manifest not only assumptions about the wastefulness of the defense sector and its role ~ bankrupl~g the economy, but also ~ a broader mmdset that considers the military machine overdeveloped both within Soviet society and as an instrument of foreign policy. As Warner emplaced, these reformers are In favor of "radical surgery" on the armed forces bringing levels down from five to two minion men and pu sing back the military to within its own frontiers. This pressure from the top has been compounded by a broad array of cultural figures and civilian specialists who have used the open ng of the public discussion to undeash an "unprecedented torrent of very direct criticism of every aspect of the mi itary institution." Charges of gross corruption, inefficiency, incompetence, and brutality in the military are levered daily in the Soviet press. Warner ceded this loss of the military's "untouchability" along with the reformers' radical vision of a seated down military "a le that combination" for the domestic position of the military. crisis of `~e~iio~ali~ies. The resurgence of nationalism and the growth of independence movements in the republics has posed two broad challenges to the military. First, it has led to a serious erosion of military discipline. The number of desertions has risen dramatically and an active draft resistance movement has developed In the Baltic republics and In the Transcaucasus. Inter-ethnic rivalries among the soldiers have intensified leading to charges of extreme brutality and to cans for the stationing of ethnic soldiers within their own republic's territory. Second, the nationalities crisis has forced the armed forces to am as a domestic gendarme, an uncomfortable position for any military. These challenges are threaten ng the Soviet military with disintegration along national lines. 21
Crises ad Mate. The combined effect of the above crises has been a serious erosion of morale from the lowest regrets through to the top mi itary leadership. The deteriorating quality of life for conscripts has become a frequent theme of articles in the popular press, white the military press has featured more and more revelations of the poor living conditions of the officer corps. These problems will be significantly exacerbated with the demobilization of thousands of officers =d possibly up to 2.5 million troops from Eastern Europe. Nationality problems are making it mcreas~gly hard to get new conscripts into service and deferments for high school graduates are diminishing the quality of those who do come in. This crisis of morale has had a noticeable effect on military performance, according to Stephen Meyer. Beyond these crises and policy changes, p~restroi~a has not had a significant impact on the institutional structure of the Soviet military. There has been no substanttal reorganization of the Mimstry of Defense, the General Staff, or the Defense Council. Some mbications have been given that the responsibilities of the Defense Council wiD be shifted to the state apparatus within the move to a new presidential system, which might substantially alter the roles of the executive and legislature in the citrit- mititary relationship. At this pout, the real changes have been in the legitimation of a wide range of civilian participants ~ military debates, a new expectation of transparency ~ mi itary affairs, and the prospects of civilian oversight. Civilian specialists on military affairs and arms control have been given ~ mandate by the political leadership to provide new ideas and widen the range of discussion on previously restricted military issues. The press has become a vehicle for debate and discussion on issues of strategy, doctrine, and the military's role In society, as weD as a persistent 22
investigator of abuses In military management roll of the dark side of domestic and foreign military service. As Legvold explained, "The military is under to pressure to lay out their cards to a larger public view than ever before." Yet genume civi fan oversight is still "struggling to be born." The Committee on Defense and State Security in the Supreme Soviet has not yet become a serious mechanism for oversight. The Committee is dominated by personnel from the military- ~ndustrial sector and stib has little ability to extract information from the military bureaucracy. The specialists agreed that the Committee's future is linked to the larger course of political reform and democratization. especially to the further development of the legislative branch. The combination of these vises and changes has had a devastating effect on the Soviet military. Warner claimed that the military is In a "vulnerable position that is unprecedented." Meyer argued that the Red Army "is coming apart." But Legvold warned that this is not the Russian army of 1 9 17 Which was literally disintegrating IS the soldiers voted with their feet. This is still a military In tact, which can act as a potent force when required. Yet in combination with other factors -- the economic crisis, nationalities crisis, or erosion of leadership authority -- the situation ~ the military has the potential to be highly destabilizing within the Soviet Union. The military leadership has not formulated any decisive, coherent reaction to the onslaught. The response so far has been an intensification of expressions of dissatisfaction by mi itary spokesmen or, as Leopold described it, "a great howl by everyone from Iazov {the Minsiter of Defense] on down about the fundamental crisis of morale." Gorbachev has acknowledged this howl, but without giving any reassurances in terms of additional resources. The mihtary is now simply trying to keep its head above water. 'The events 23
have burst like a dam overflowing they capacity to adjust, Leopold explained. An of the analysts expressed a similar position. There was some debate among the specialists over the military s potential to take a more decisive poetical course of action In response to the destabuiz~ng tendencies. Jack Snyder of Columbia University took a broad, historical approach. "These are the classic conditions that poLticue militaries," he emplaced. 'Everything we know about civil-military relations would lead us to expect the military to become politicked In new and destabi Ming ways." He elaborated further on the basic conditions: If the Soviet mihtary thinks that the basic fabric of the state is unravelling In a way that ore ate s fundamental security threats and undercuts the base of military power and that the civilians power are utterly capricious in the security policies they adopt, then you need to worry about military coups or coalitions with other authoritarian forges. The military is not looking to get involved ~ politics, but because the state is fad' jng to buffer the military organization from politics, the ponties gets forged upon them. He admitted that the Soviet military has no historical tradition of political activism beyond very narrowly defied military interests, nor has it ever a~d as a competitor for political power. Yet he added, "it may take them a while to learn how to do that." At present though' he has seen no evidence of coalition-building between the officer corps and nationalist groups beyond 'limited feelers." Warner agreed that the military at the highest levels would appear to be "potentiaDy recruitable" ~ an anti-Gorbachev coalition, though this should be tempered by the fact that both lazov and Gen. Moiseev, the chief of the General Staff, were h=~-picked by Gorbachev. Regardless of the potential for a military coup or affiance with conservative nat~onatists, which most of the specialists viewed as by 24
unlikely, the basic consensus among the group was that the nature of the Soviet military threat, at least beyond its own borders, has changed considerably and irreversibly. They identified a series of fundamental changes ~ the miernational system and within the Soviet Umon that have undermined the standard Soviet conception of national security and altered the geo-strategic position upon which the Soviet threat has been based. Leg~old argued that aD the basic premises that have underlied Soviet geo- strategic thinking even though the introduction of Gorbachev's "new thinking" -- forward defense, two opposed blocs, superpower status -- are under question now. The poetical revolutions ~ Eastern Europe, the withdrawal and retrenchment of Soviet troops from the Warsaw Pact countries, the potential reunification of Germany and the further integration of Europe are an ~ the process of creating a new international strategic landscape, which has forced a new "security paradigm" on to the Soviets. This does not mean that the Soviet military does not remain a potent force, but that it simply cannot fulfill its mission, for example In the event of a European conflict, on the basis of the old assumptions. As Legvold explained, "The Soviets have to think through the implications of these changes and defer mme what national security is all about In these new conditions." This new strategic landscape combined with the overwhelming domestic problems facing the Soviet Union as a whole and the military in particular have virtually precluded the reemergence of the old Soviet military threat. AH the defense specialists agreed that these conditions also make it highly unlikely that a new cohesive, aggressive, expansionist military threat will emerge out of the current instability. As Stephen Meyer said, "The Soviets have no geo-strategic position to launch an attack on anyone but themselves. The best they can do is a devastating nuclear first strike on the U.S. which 25
would bring a retaliatory strike -- that would not help the economy at ad. Jack Sayder once again placed the Soviet situation ~ a larger historical content to argue against the possibility of a revival of expansionism. "! can t think of an example of an empire which has gone this far in dissolving itself, then changed its mind," he emplaced. "The Soviets have already made their choice to go mto retrenchment." The classic attempts of outward e~pansiomsm to reverse internal decline have cone not when empires are moving mto retrenchment, but when their e~pansiomst attempts have provoked encirclement and resistance leading aggressive powers to see expansion or decline as their only available options. Snyder argued that even the nationalist-~onservatives are not In favor of ' one last military grab for glory" to reverse domestic disintegration. They tend to claim that the source of Soviet domestic problems has been its "tnternationalis m." Consequently, the nationalists, according to Snyder, "are just as isolationist as everybody else ~ the Soviet Umon." Of course, this does not mean that a new, more conservative Soviet leadership, faced with the same internal imperatives, would Inevitably continue on the path of dramatic reform and drastic reduction of the size and character of the Soviet Armed Forces. The specialists agreed that this is still an open question. Yet Edward Warner argued, "The idea that the military would beam to build back up is absolutely ruled out. The idea that they might slow or halt the process of reduction seems more reasonable. The choices for any Soviet leadership are really: the rate of contraction and hour low do you go." Clearly, the military and the defense-industrial sector have neither been shielded from the pressure to reform nor insulated from the instabilities that are threatening the economy and the Soviet system as a whole. 26
Consequently, ~ policy of active engagement with the Soviets wi t not only encounter new economic actors with different needs and interests than their predecessors, but mi itary actors working under a whole new system of pressures and constraints. COCOM was founded partially upon assumptions about how these actors related to each other arid how these ooDective actors threatened the interests of the West. The specialists have outlined these new interests and pressures affecting both civilian and military institutions and actors. Now it is necessary to examine how these changes have affected and win affect the ezist~g mechanisms of technology transfer between the Soviet Union and the West. TECENOLOGIC1LL DEVELOPMENT AND TEcl~oLoG! TO - Sow The key questions of technology transfer -- what the Soviets need, how they attempt to acquire it, and how it is assimilated into the system -- are embedded ~ the larger issues of the stability of the economy, the potential for successful economic reform, the relationship between the civilian and military sectors, the internal changes In the defense sector, and the nature of the Soviet threat that the specialists addressed above. This section suggests that while the basic elements of technology transfer may not have changed s~n~ficantly, the transformation of the broader environment ~ which this transfer takes place has created the need for a comprehensive review of this issue from the 'demand side." The central topics of debate among the specialists were not focused on how the mechanisms of technology transfer have been altered under perestroi~a, but on who would benefit from the increased availability of Western technology ~ this new economic anc! poetical context and how this might affect the general course of reform. 27
AD the analysts concurred that there has been a tendency to exaggerate the extent to which the technological {eye t of Soviet industry and the military has increased from the transfer of Western technology in the past. They drew a similar picture of a technology-hungry Soviet Union which has had a rather effective acquisition network, but a poor record of assimilating acquired Western technologies into its own indigenous production process. OD the question of acquisition, Ericson claimed that the Soviet Union can produce in small numbers anything that is produced anywhere in the world. While not completely disagreeing with this view, other specialists claimed that the Soviets have not been able to acquire some of the most advanced technologies (e.g., supercomputers and certain types of semi-conductors), which have been tightly controlled by a combination of COCOM guidelines and state controls, as wed as by the manufacturers themselves. Yet Goodman warned that "the number of products faring mto this highly controDable category is shrinking." The Soviets have acquired Western technology primarily through passive mechanisms6 -- Western scientific literature and commercial catalogues (the largest source), attendance at international conferences and trade exhibitions, license purchases, and industrial and mi itary espionage. By forcing the Soviets to rely on such mechanisms, COCOM restrictions have substantially raised the costs of acquisition and limited the quantities of the technologies that have been acquired. John Hardt explained that the technology transfer process is fragile and complex; there are aD sorts of 6 Passive mechanisms are those ~ which Me provider/preducer of Me technology does not participam in the sale, msts~lation, 3~struct~ion, and servicing of the technology at the point of its end use Active transfer mechanisms would include commercial visits, transfer of equipment with know-how, consulting, and continuous provision of engineering and technical data. 28
ways that the process could break down during the phases of ~nstaDation, testing, operation, and quality control. As a result, the Soviets have gamed less from the technologies they have been able to acquire than is often estimated. Moreover, the high costs and lengthy period of the acquisition process has had detrimental effects on the civi fan economy. Et~cson arguer! that the acquisition hierarchy has been designed, first and foremost, to obtain technologies and make them usable for military purposes. The costly process has preempted resources (especially hard currency) from the civilian economy and then isolated the benefits of the technology transfer within the highly secretive defense sector. The most significant effect of the COCOM restrictions on the acquisition process has been the prevention of large-scale transfers. The Soviets have not been able to get the Western technologies in the quantities that would have been requires! to make a genuine impact on the overall level of technological development. Instead, they have been forced to reverse engineer single prototypes of acquired goods and then learn how to produce the goods themselves. The success of this assimilation of Western technology has been highly uneven. Goodman claimed that the most successful assimilation has occurred "I little, dirty clumps." When a small number of mdiv~duals have been involved ~ the process and the tasks could be localized, then assimilation has been fairly effective. But this has only occurred at the high and low ends ' of the spectrum of technology users. For example, Good marl said that small research and design groups in the mititary-mdustria1 sphere and the Institutes have been capable of assimilating the most sophisticated Western computer technology that has become available, while individual scientists and engineers have been able to integrate PCs into their own work. "But this leaves a huge middle gap," he 29
emplaced. "Assimnation that has a much greater interface with the larger Soviet economy, such as a nationally viable software network, has been much more difficult. Though it still goes on, the process has left them far short." Meyer and Erieson concurred that the real bottlenecks In the assimilation of Western technology have not been at the research and design bureaus, but at the production facilities. These problems in the acquisition and assimilation of Western technology, combined with the problems of ir~digenous technology, have had devastating consequences for Soviet technological development. As Meyer said, "The Soviets are generations behind where we were generations ago." Despite the intensified fears of the effects of Soviet acquisition efforts In the West ~ the early 1980s, Meyer claims that the long-term gains from such transfers has been "incredibly small." Though COCOM restrictions may have been effective in restricting the quantity of technology transfer and forcing the Soviets to face the risks of breakdown inherent ~ passive mechanisms of acquisition, the most significant obstacle to successful technology transfer has been the Soviet economy itself. The economists interviewed were unanimous ~ their view that both technology transfer and the development of indigenous technology have been crippled in the translation from relatively effective research and design sectors to a seriously deficient production process. This view led Meyer to argue that 'it has not been COCOM restrictions that have retarded the level of the Soviet industrial and military base." While Goodman agreed that the key problem in technology transfer lies in deficiencies within the Soviet economy' his analysis of the role of transfers ~ Soviet technological development differed from Meyer's view ~ an interesting way. On the one hand, he placed more emphasis on the role of COCOM restrictions ~ siow~g the pace of Soviet technological development. JO
Especially at the high end of the technology scale, COCOM and other restrictions have prevented the Soviets from gaming important technologies that could have been assimilated by some of the privileged islands ~ various sectors of the Soviet economy. On the other hand, he argued that the transfer of Western technology has played an important role In the growth of Soviet technological capacity. In the computer sphere, Goodman claimed that "the Soviets have used Western technology transfer as a surrogate for their own innovative ability." Similarly, Leopold cited the work of Mark Kuchmont to argue that, while the U.S. has tended to define liberally the gains from technology transfer it did seem to make a difference in Soviet capabilities when they knew exactly what they were looking for and were able to acquire it from the West (e.g., a missing technological link in a process whose parameters were already defied and ~ which research was already underway). Whatever the impact of technology transfer may have been on Soviet economic and military development, it is clear that the hunger for Western technology has been and remams an issue of primary importance to Soviet leaders. One of the earnest driving forces of pere~traita was a desire to restructure the economy so it could benefit from technology and develop more mbigenous capabilities that would bring the Soviet economy up to world technological standards. "Perestroi~fa Ore," as several specialists referred to the origmat reform strategy, was a modernization program that caned for an merease ~ investment ~ the economic infrastructure and techrologicat base, along with a Iarge-scate infusion of high technology goods through joint ventures and increased integration into the world market. In presenting the program, Abe! Aganbegian, the economist and early adviser to Gorbachev, boasted that the Soviet Union would be able to skip over 2 t
inter mediate technological stages and achieve world standards in a relatively short period of time. Hewett described the spirit of the original 1986-87 strategy: 'They had no notion of what you have to go through to absorb technology. To them, technology was like a new Buick -- park it in front, take the keys and off you go, even if you don't even know what an automobile is." This modernization program quickly broke down as the economy began to drift mto ~isis. The origmat mYestment priorities shifted from infrastructure to the rapid provision of consumer goods in order to satisfy an increasingly restive consumer population. Yet this shift has not lessened the Soviet leadership's "technological snobbery," as Hewett described it. They still regard high technology as a key to their success in making the Soviet Union a major economic force. The specialists could not disagree more with the leadership's view. S ewe ryn Bialer summed up a unanimous opinion: "The Soviets' priority problems are not the futuristic technology of the Third Industrial Revolution of today, but the unfulfilled 'normal' tasks of the First and Second Industrial Revolutions -- infrastructure, abundant and nourishing foot cheap durable consumer goods, labor discipline and organization, a financial and service net, etc." The Soviet view that it is possible to Jump to Japanese techniques in a single leap ignores both the basic needs "d present capacities of the Soviet economy. AD the analysts agreed that what the Soviets need is a large dose of inexpensive ~ 960s-70s level Western technology. More advanced technologies are not only too expensive for the Soviets in relation to the productivity gains they would bring at this stage of the reform, but they could not be effectively assimilated into the existing economic infrastructure. The kind of advantages that high technology can bring depend on a basic 2O
infrastructure rartg~g from the physical plant and power capacities to run a supercomputer to the telecommu~catior~s network necessary for most advance information technologies to the skin levels of workers required to operate and service advanced mbustrial machinery. These basic prerequisites for advanced technology do not exist In the Soviet t7mon, making the issue of high technology a decidedly secondary question in the course of reform, at least on the basis of oh jective considerations. As Hewett put it, "They need to {earn how to waBc, before they can run." The definition of what the Soviets need ~ terms of technological development differs at the various levels of decision-making. As already noted, the Soviet leadership stil places a primary emphasis on high technology even as perestroi~a has been redirected towards consumer demands. This leads to a danger, as Hewett described, that Soviet hard currency reserves, as weD as any proceeds from Western loans and credits, win be spent on ads ced technologies that wid have little impact on the basic deficiencies of the economy. Yet if redivide firms are given autonomy and sufficient capital ~ a competitive environment, managers would soon realize that the most advanced technologies are too expensive and would opt for cheaper, more suitable technologies that might have a real impact on production. If decision-making power is genuinely transferred to this level and basic changes are made In the broader economic environment ~ which technology assimilation takes place, then the issue of technology transfer could become extremely important In generating Soviet economic development. The extent to which perestroi~a has implemented permanent institutional changes ~ the mechanisms of technology acquisition "d assimilation is stiD uncertain; the specialists offered contending positions on 2~
this question. It has generally been regarded in the West that the process of covert, passive technology transfer and the distribution of such technology withm the Soviet Umon has been centrally coordinated by the Mititary- Industrial Commission (VPE) under the USSR CouncH of Misters and the All-Union Institute of InterBranch Information (VIMI). This administrative hierarchy exists, according to Ericson, to acquire Western technology and channel it towards military uses. Hewett and Meyer claimed that its role In high technology transfer has generally been overstated by Western analysts.7 Regardless of their understanding of the role of the YPK-VIM1 structure, none of the specialists could offer concrete evidence that it has been substantially altered in the course of reform. Several pointed to a set of GOB documents obtained ~ France (known as the "Farewell" papers) which provided information on Soviet technology acquisition efforts from 1979-1981. Thane Gustafson of Georgetown Um~ersity analyzed the documents and came to the conclusion that "it's business as usual" for the VPL-VIMI network. Yet Hewett argued that the documents read "like a classic bureaucracy-generated report, overstating achievements and hiding weaknesses" and therefore gives an exaggerated picture of the network's activity. While he admitted that the YPL-VIM! system is probably slid In use, he claimed that it might be transformed into a simple mbustrial espionage network. The most significant institutional change ~ technology transfer under perestroi~a has been the vast expansion of overt, active technological relationships between new Soviet actors and the West. As Seymour 7 It was the lIPE-YIM! network tom became the focus of increasing concern in the early years of Me Reagan adminis~ion primarily for its covers acquisition efforts 34
Goodman emplaced, "There has been a huge expansion in the interface between our two systems. A broader spectrum of people and institutions are looking for Western technology and scrambling to put together some form of technological relationship." The monopoly of the centralized Foreign Trade Organizations In dealing with the West has been broken giving a new range of Soviet actors -- cooperatives, jolt ventures, self-f~nanc~g state firms -- the opportunity to make independent contacts with Western firms. Julian Cooper has observed a parallel opening up of the defense sector, include the possibi ity of greater contact between foreign firms and hitherto secret mi itary- related establishments. For many of these new actors, the search for Western partners and Western know-how has come to be considered the only hope for maintain ng the viability of their organizations ~ the new conditions proposed by economic reform. Jomt venture opportum~ies have become the most visible aspect of this widening technology transfer orifice. Though many high profile deals have been announced, few have act uaDy been put into operation and, therefore, the specialists could only discuss their potential influence on Soviet technological development. There was substantial debate on this issue. Hewett argued that jomt ventures have the potential to become the most effective route to Soviet technological development. He thought that defense sector plants would offer the most promising sites for successful partnerships. Joint ventures could add some developmental capacities to the existing first class research operations within the defense sector to produce In the pre-reform Soviet economy, aU relationships between Soviet enterprises and Western firms were ch=neDed though the Foreign Trade Organizations (FrOs), whose personnel and budget were independent from the enterprises themselves. Individual Soviet enterprises could not shop bung for Western goods ~emseives or mate independent contacts to potential Western suppliers or trading partners. he
~- advanced technology or to introduce Western technology of the 1970s-8Os into the Soviet Union. Ericson also believed that joint ventures that take advantage of low cost Soviet research resources have significant potential, if foreigners could have proprietary control over these ventures.9 Such combinations would require only a small commitment of Western capital, have a relatively short gestation period, and take advantage of the strengths of the existing Soviet economy. Under pressure to make profits and, possibly, to pay world prices for their inputs' defense plants will actively seek out Western partners to provide innovation, to raise capital and hard currency, and to prevent Gosplan from forcing far-fetched conversions to the production of consumer goods on them. Cooper claimed that joint ventures between defense sector enterprises and research organizations and Western firms are already growing at a rapid pace. Though mostly West European firms have been involved to date, he pomted to the Guffstream/Sukhoi jomt project for the development of ~ supersonic executive jet as one example with U.S. involvement that seems to be moving ~ the direction that Hewett described. Meyer agreed that the most promising jomt ventures would mvolve the transfer of manufacturing processes to the defense sector, but he argued that it is slid an open question whether She Soviet firms win be able to assimilate these processes. The same problems that have undermined technology transfer ~ the past could stiD have a strong impact on the effectiveness of joint ventures in furthering Soviet technological progress. Meyer was also less Legume that the Soviets have much to offer Western firms, thus 9 The Abalkin program, mentioned above, would give foreigners such proprietary control. 36
limiting the real opportunities for font ventures ~ high technology areas. He said, "in the end, jomt ventures win have only spot impact In preserving and protecting the technological {eve! ~ some areas and not ~ others.'' Goodman once again pomted to the infrastructure problems ~ the Soviet economy to argue that "there are very few organizations of any kind that are in a position to be good partners with Western firms." The quality of Soviet personnel, training problems, and the obstacles to introducing modern equipment In an antiquated economic infrastructure win make adjustment difficult. Cowman was not surprised that the initial enthusiasm surrounding joint ventures has been moving towards discouragement as Soviet overtures to the West are, [or the most part, not taken up. Western companies are reluctant to commit money and negotiate non-standard deals in an economic environment that they do not understand. Thus, he concluded that the potential effect of joint ventures on the development of Soviet technology must stiD be considered an open question. The specialists concurred that, ~ the short term' the jomt ventures win not have much of an impact. The same could be said about the new cooperatives. While science and technology cooperatives may have significant potential to affect Soviet economic development, the most effective cooperatives at the moment have been dealing at a more rudimentary level, fining gaps In the provision of basic consumer goods. Until joint ventures and cooperatives develop further, the bulk of technology transfer will come through large, state-owned enterprises. One key ditlerence in the short term, according to lIewett, is that defense plants, spurred by the pressures of self-financing and conversions, win take a more active role in foreign economic relations purchasing turn-key operations and technology licenses and developing them for the rest of the economy. Philip
Hanson argued lbal it is also pIzus~le lbal we might see an immedlae scat din ~ Spiel Jerseys lecbnol~y acquisition efforts reflected the degrade ~ both ~eslment and defense pros. He lbougb1 Bat there would be a Dew empbash on the acqulshion ~ rectory for the consumer sector and lo some extent on 1be acqul~tion ~ k~-b~ related 1be =-erslon ~ military production f=~11es to Cowan outpuL In addition to 1~ cues OD 1~ "demand side" ~ levy transfer {l.e, S-~1 lec~o~lca1 weds Ed 1~ Vernal mecb~sms ~ acquisil~ and assimballon), the speciaUsls also fooled Sig~]fiCOu11 developments in the 1~ ~~ab~ 'supply" ~ 1e_.l° TV most obvious Fables He relied lo the uansform~lon ~ economy relations wh~ 1~ Wasp Pap. ~_ _~_ ~a~ ID~S-1e~,= Meyer explabed1 the Souls bye ~S1 the secure 1ec~1c~ Ed du~i~ base ~ Used Europe ~ ~ bad come ~ depend on pr~ls~n ~ elects (Human' mac^e parts (~cbosl-~ls)$ optics ~~ ~m~11 Ed ~ Adage ~ _ _ ~u~ ~ presses. Thumb 1be East BuropeaDs my s1m be willing 10 trade 1bese gems gab the 1be S-el USA, 1be prigs w~ rise subs Ed Be m pe e mild ollber W estern m e gets for iluose good ~ es Baslern Europe beglos prod using for ltua m ore ~ m pelllize W esL ID Tbls peer oat dews ~~ cages ~ Me "guppy side" ~~ ~ baked ~ We reams Lumens udders ~ Me Soviet Ualoo ad _= Europe. May of Me -~ ~~ ~ gem cage ~ ~~= ~ =~ ad ~d~1~ ~~e ecbook~ ad Me ~c=^g up ~ cent ecboo~g~ A ~D desc~pOon of ~e. obiec~e chases quad be beyond Me scope of ibis per 38
In addition, the political revolutions In Eastern Europe have deprived the Soviets of an important source of they covert acquisition of Western technology. Espionage networks that relied on East European contacts and personnel have broken down. The ability that the Soviets once had to mspect ad technologies acquired, through covert or overt channels, by the East Europeans has been eRectively undermined. Meyer argued that the breakdown of this crucial source of technology flows win contribute to the technological regression that he has predicted ~ the short term. With a broader perspective, Hewett stated that the consequences of restructuring the Warsaw Pact's economic ties may eventually result ~ a technology boon for the Soviets. Though he admitted that the "doDarization- of trade between the Soviets and East Europeans 1 I wid lead to an initial plunge ~ trade, he claimed that there should be a reestablishment of economic relations on a joint venture basis which could secure a higher flow of technological products and processes to the Soviet Union than under the previous trade regime. In fact, Hewett believed that Eastern Europe could even serve as a "cheap West" for the Soviets, creating a whole new channel of technology flows. While the specialists did not speculate about how changes in the COCOM guidelines might alter the "supply side" of technology transfer, they did claim that a comprehensive nbera Cation of Western export controls would significantly expand the range and quantity of technological goods and processes available to Soviet users. Debate was focused on two questions: who would benefit from this mereased a~radablitity of technology en c! how Trade between the Soviet Union and Eastern Europe has traditionally been conducted "transferable rubles." 39
- would this affect Soviet economic development? The contending answers to these questions were based on different understandings of the potential for successful economic reform, the relationship between the mi itary and civilian sectors, and the continued relevance of pre-reform economic and administrative structures. Ericson advanced an argument that framed the specialists' debate on these questions. "The first order impact of abolishing technology controls," he e~plamed, ''would be a tremendous boon to the Soviet military and a dramatic reduction ~ the costs for the military. One must remember that the entire hierarchical structure is designed for bringing ~ technology and making `t usable for the military sector. The technology will then be available to the civilian economy' but the reform will have to go much further before it arid be properly used ~ this sphere." Ericson based his argument on three fundamental premises. First, since economic reform has not yet reached the practical or conceptual stage at which the civilian economy could effectively begin to acquire and assimilate a new range of Western technology, he argued that civilian economic actors would probably not benefit from the increased technology supply. Second, sunce the reform has not abolished the old centralized administrative mechanisms, which continue to coexist with and dominate the new mst~tutions, he claimed that an opening in the flows of technology to the Soviet Union would continue to be cha~elled through the VPE-VIM! network to privileged military end- users. Third, since the military has maintained its comparative advantages, he maintained it would be the only sector capable of assimilating the new range of technologies, especially as the civi fan sector moves toward economic instability. In Ericson's view, a lib eratization of Western export controls could only benefit the Soviet economy as a whole if "the Soviets 40
ntrc,duce sufficient changes to be able to use that technology from the perspective of generating economic development rather than military development.' Yet as we have seen in other sections of this paper, Ericson s basic premises were not shared by an the specialists. who cosequently offered different scenarios of the beneficiaries of a more open technology transfer. Goodman claimed that there are isolated "islands" within the military R&D sector that have the abitilv to assimilate advance c! Western technology and, consequently, might be the immediate beneficiaries of decontroRed trade, though this would not occur across the board. He felt that there is still a high degree of uncertamtv about the probable results of a liberalized trade regime: "We just don't know where these decontrolled technologies win go and how they're going to come out." The military Will certainly be able to take advantage of more open technology transfer, if they get first priority on foreign currency reserves. Yet at the same time, Goodman said, the military is finding it mcreas~ngly hard to preempt technology from others. In addition, the joint ventures and cooperatives have the ability for the first time to work out deals which might get some of the new technologoies into their part of the economy. In the end, Goodman argued that the beneficiaries of a more liberal trade regime would depend more precisely on what types of technologies are decontroDecI. Hewett dissented from the basic premise that the civilian and defense economies could be distinguished as different targets of ~ more open Bade regime. 'You can't trade exclusively with the civilian economy," he said. "We must recognize that for any dual use technology, the potential is there for dual use." As defense plants continue to become more integrated mto civilian production and tate the lead ~ the formation of cooperatives and 41
this question. It has generally been regarded in the West that the process of covert, passive technology transfer and the distribution of such technology withm the Soviet Umon has been centrally coordinated by the Mititary- Industrial Commission (VPE) under the USSR CouncH of Misters and the All-Union Institute of InterBranch Information (VIMI). This administrative hierarchy exists, according to Ericson, to acquire Western technology and channel it towards military uses. Hewett and Meyer claimed that its role In high technology transfer has generally been overstated by Western analysts.7 Regardless of their understanding of the role of the YPK-VIM1 structure, none of the specialists could offer concrete evidence that it has been substantially altered in the course of reform. Several pointed to a set of [GB documents obtained ~ France (known as the "Farewell" papers) which provided information on Soviet technology acquisition efforts from 1979-1981. Thane Gustafson of Georgetown Um~ersity analyzed the documents and came to the conclusion that "it's business as usual" for the VPL-VIMI network. Yet Hewett argued that the documents read "like a classic bureaucracy-generated report, overstating achievements and hiding weaknesses" and therefore gives an exaggerated picture of the network's activity. While he admitted that the YPL-VIM! system is probably slid In use, he claimed that it might be transformed Into a simple Industrial espionage network. The most significant Institutional change ~ technology transfer under perestroi`a has been the vast expansion of overt, active technological relationships between new Soviet actors and the West. As Seymour 7 It was the lIP[-YIM! network tom became the focus of increasing concern in the early years of Me Reagan adminis~ion primarily for its covers acquisition efforts 34
happening. It would represent ~ / ~ 00 of ~ X of the variance of what is going on right now.''l2 He found it difficult to imagine that any decontrolled duaI- use technology, other than at the very highest end of the spectrum (supercomputers, certain semi-conductors, etc.), could make a substantial difference ~ the level of performance or innovation of the Soviet defense sector. In fact, he argued that the opening of the Western export control regime would have little effect on any of the significant economic actors the Soviet Union until the larger internal problems of the economy are adequately addressed. CAN WESTERN POLICY AFFECT THE REFORM PROCESS ? Regardless of they views on which groups ~ the Soviet Union would benefit from a more open trade regime, many of the specialists agreed that Western export Control poppy would have Httle or no effect on the stabilization of the economy or on the general course of reform. Some specialists focused on the ~nsig~ficance of the issue of export controls itself in comparison with the enormous domestic problems within the Soviet Union and the fundamental transformations ~ the international landscape. Meyer illustrated this pout with an analogy: Imagine that the United States had just puDed out of the Vietnam War. Imagine that all the domestic and social turmoil Connected with that was just reaching a peak. The people are angry, the economy is a mess, and inflation is rampant. Then imagine that Georgia, Alabama, and Florida decide to secede from the union and ~ ~ Though Legend and Barker did net fully support Meyer's line of argument' they did agree that Ericson's position overstates the capacity of the defense sector ~ me gremr advantage of expanded technology transfer opportunities than the civilian economy. 43
go to war with each other at the same time. Then imagine that an of Europe pulls out of NATO and joins the Warsaw Pact. And on top of that, you decide to throw out the constitution and start ad over again from scratch. In this situation, how significant could the effects of opening high technology transfer possibly be? It s just not that important. Leg~old concurred, arguing that most of the technologies that are crucial change in the Soviet Union are already available (with the exception of certain computers). "High technology is lust not at the heart of the problems they face," he said. Yet he did suggest that removing the technology barriers might do some good in promoting economic development in certain areas. Those who did assert that Western export control policy could have an impact on Soviet development and reform admitted that this would occur only at the margins. Julian Cooper claimed that ~ liberalization might facilitate economic and social modernization in the Soviet Llmon by contributing to the development of modern systems of commurucations, computerization, and more efficient manufacturing technologies Hewett suggested that increased technology transfer might draw the best Soviet firms and cooperatives inn the World economy and, consequently, stengthen their po~it~nn ~ the domestic Mono my. Yet these assessments were an laced with cautious warn ngs against the tendency to overstate the potential of Western policy on Soviet domestic developments. Jack Snyder referred to other historical cases to make the strongest case for the influence of Western economic actions on the reform process. "If you took back historically at tentatively fibers ng states, he eta ned, incipient liberal reforms ~ various countries have often depended to a significant degree on the kind of international environment In which they take place. An international economic situation ~ which social groups that 44
benefit from economic integration with democratic countries are supported and encouraged to flourish and even to dominate domestic politics has been an important factor in the success of liberal and democratizing forces in other countries. To the extent that removing barriers on technology transfer would be favorable to economic integration arid to the creation of such a conducive international environment, Western economic control policy can mate a difference In the course of liberalization. Snyder's argument was based on an assumption that liberal forces would necessarily gain from an opening of export controls, which, as we have seen, other specialists took issue with. Surprisingly, the different assessments of the role of export control policy on Soviet domestic processes did not lead the specialists to offer competing policy prescriptions. With one exception, all the analysts interviewed caned for a comprehensive reform of COCOM guidelines that would reduce export controls to a "reasonable, plausible minimum." In their common view, this minimal test of controlled exports should include those items that are exclusively for military-strategic use, as weD as the most advanced dual-use technologies. 1 3 They overwhelmingly agreed that this list should not include those items that could help the Soviet {Anton improve its basic economic infrastructure and~ra~se the quality and quantity of its consumer goods production. In justifying this position, many of the specialists looked beyond the changes within the Soviet Union to the larger transformations in the mternationa1 arena and ~ the nature of the technologies themselves. One recurring line of argument throughout the interviews was summed up by Ed Hewett: "The origins of COCOM are the origins of the cold war; it Supereemputers were the most frequently mentioned simpler ~5
Hanson argued lbal it is also pIzus~le lbal we might see an immedlae scat din ~ Spiel Jerseys lechnol~y acquisition efforts reflected the degrade ~ both ~eslment and defense pros. He lbougb1 1bat there would be a Dew empbash on the acqulshion ~ rectory for the consumer sector and lo some extent on 1be acqul~tion ~ k~-b~ relaunch 1be =-erslon ~ military production f=~11es to Cowan outpuL In addition to 1~ chimes OD 1~ "demand side" ~ levy transfer {l.e, S~~1 lec~o~lca1 Weds Ed 1~ Vernal mecb~sms ~ acquisil~ and assimbaUon), the speciaUsls also Holed SigDifiCOdl1 developments in the 1~ ~ab~ 'supply" ~ 1e_.l° TV most obvious Rubles He relied lo the uansform~lon ~ economy relations wh~ 1~ Wasp Pap. ~_ _~_ ~a~ In~s~le~." Meyer explabed1 the Souls bye ~S1 the secure 1ec~1c~ Ed du~i~ base ~ Used Burope ~ ~ bad come ~ depend on pr~ls~n ~ elects (Human' mac^e Paris (~chosl~~ls)$ optics ~ ~m~11 Ed ~ Adage ~ _ _ ~u~ ~ presses. Thumb 1be East BuropeaDs my so be willing 10 trade 1bese Hems gab the 1be Sahel USA, 1be prigs w~ rise subset Ed 1be ~ m Pete mild ollber W estern m arkets for iluose good ~ es Eastern Europe beglos prod using for llba m ore ~ m pelllize W esL ID Tbls peer oat dews ~ cages ~ Me "guppy side" ~= ~ baked ~ we reams current udders ~ Me Soviet Ualo" "d _= Europe. May of we -~ ~ ~ Hem cage ~ ~= ~ =~ "d ~d~1~ ~~e ~cbook~ "d we ~c=^g up ~ cent ~cboo~g~ A ~D desc~pHon of ~e. obiec~e chases quad be beyond We scope of ibis per 38
In addition, the political revolutions In Eastern Europe have deprived the Soviets of an important source of they covert acquisition of Western technology. Espionage networks that relied on East European contacts and personnel have broken down. The ability that the Soviets once had to mspect an technologies acquired, through covert or overt channels, by the East Europeans has been eRectively undermined. Meyer argued that the breakdown of this crucial source of technology flows win contribute to the technological regression that he has predicted ~ the short term. With a broader perspective, Hewett stated that the consequences of restructuring the Warsaw Pact's economic ties may eventually result ~ a technology boon for the Soviets. Though he admitted that the "doDarization- of trade between the Soviets and East Europeans 1 I win lead to an initial plunge ~ trade, he claimed that there should be a reestablishment of economic relations on a joint venture basis which could secure a higher flow of technological products and processes to the Soviet Union than under the previous trade regime. In fact, Hewett believed that Eastern Europe could even serve as a "cheap West" for the Soviets, creating a whole new channel of technology flows. While the specialists did not speculate about how changes in the COCOM guidelines might alter the "supply side" of technology transfer, they did claim that a comprehensive nbera Cation of Western export controls would significantly expand the range and quantity of technological goods and processes avaHable to Soviet users. Debate was focused on two questions: who would benefit from this increased a~raHablitity of technology en c! how Trade between the Soviet Union and Eastern Europe has traditionally been conducted "transferable rubles." 39
- would this affect Soviet economic development? The contending answers to these questions were based on different understandings of the potential for successful economic reform, the relationship between the mi itary and civilian sectors, and the continued relevance of pre-reform economic and administrative structures. Ericson advanced an argument that framed the specialists' debate on these questions. "The first order impact of abolishing technology controls," he e~plamed, ''would be a tremendous boon to the Soviet military and a dramatic reduction ~ the Costs for the military. One must remember that the entire hierarchical structure is designed for bringing ~ technology and making `t usable for the military sector. The technology will then be available to the civilian economy' but the reform will have to go much further before it arid be properly used ~ this sphere." Ericson based his argument on three fundamental premises. First, since economic reform has not yet reached the practical or conceptual stage at which the civilian economy could effectively begin to acquire and assimilate a new range of Western technology, he argued that civilian economic actors would probably not benefit from the increased technology supply. Second, sunce the reform has not abolished the old centralized administrative mechanisms, which continue to coexist with and dominate the new mst~tutions, he claimed that an opening in the flows of technology to the Soviet Union would continue to be cha~elled through the VPE-VIM! network to privileged military end- users. Third, since the military has maintained its comparative advantages, he maintained it would be the only sector capable of assimilating the new range of technologies, especially as the civi fan sector moves toward economic instability. In Ericson's view, a lib eratization of Western export controls could only benefit the Soviet economy as a whole if "the Soviets 40
would realize that any mistakes we could make with regards to dun use technology transfer "are just not going to matter that much." Finally, Dialer argued, In a broader context, that though we may not know what the future holds for the Soviet Union, we can say with some assurance what they have left behind. Alluding to the revolutions of 1 9 17, he said, "Russia is moving past its February. Whether it has a chance to avoid an October, on a long road of evolutionary, spiritual and material rebirth, or what kind of October it may have, we can hardly know. But it seems increasingly probable that a point of no return is being reached and that we are withes sing the passing of the Soviet order, not only as created by Stalin but as modified by his successors." In his view, we can base our policy decisions neither on a stability that cannot come soon nor on the fear of a return lo an old order which, In an likelihood, no longer exists in the Soviet Union. Instead, he argued that Western choices should be based on an acceptance of the inherent instability involved In the process of transition, a close analysis of the transition as it evolves, and an effort to contribute, even if only on the margins, to the stabilization of the larger environment in which this inherently unstable transition takes place. CONCLUSION In all the interviews, one theme was predominant: the Soviet order that inspired the creation of the post-war Western export control regime has been seriously undermined by the current wave of reforms. While few were wiring to hazard a guess about the new order to come, an predicted with assurance that instability win be the mam characteristic of the society, economy, military, and the poetical system for the forseeable future. Some 49
- r A` of the specialists felt that Western policymakers should react with caution to the uncertain conditions; others viewed the instability as a challenge to the West to take bold measures that might promote the stability of change. Yet regardless of their differences, almost an of the specialists agreed that we should more actively engage the Soviets in a broader expansion of technology transfer. They consistently argued that COCOM restrictions need comprehensive reexamination towards a more reasonable, plausible minimum that does not impede the process of economic reform and the development of a technological infrastructure for ~ more efficient, flexible economy. Though they suggested alternative views on what such a minimum set of restrictions should be, they agreed that the level of technology transfer would not have a significant impact on Soviet development until the domestic reforms cre ate c! an environment more conducive to {arge-scale technology assimilation. ~0
