The decline of the Russian R&D sector and the prospects for its revival

In the decades since World War II the USSR became one of two great powers for research and development (R&D), the United States being the other one. By 1990 the USSR had over one million researchers, more than any other nation except the United States. The peaks of its achievements (especially in military aircraft, nuclear science and space research) contributed to the perception that the USSR was one of the two superpowers of R&D. Many observers considered that the R&D sector would be one of the most valuable assets bequeathed to the new Russia. Science and technology, freed of the rigidities of central planning, was held to provide the basis for high technology exports and economic growth. Like many of the rosy hopes for Central and Eastern Europe, the prediction was incorrect. The R&D sector went into a precipitous decline that continued to at least 1995. Neither the promised exports nor the economic growth materialized. This essay attempts an answer as to why Russian R&D failed to live up to its promise. We think an important factor is that the Soviet legacy included an institutional structure that was inefficient and ill-suited to a market economy. The first section describes the major features of the Soviet system and why it deserved the labels we have given it. The second section describes the crisis in the R&D sector during the initial years of the transition (1991-1994). The characteristics of the Soviet R&D sector continued into the transition years and added to the problems in the R&D sector. The Soviet R&D system was very large, centrally directed and government financed, all features ill-suited to a market economy. It is not surprising then that transition generated a crisis in the R&D sector. Still the policies of 1991 to 1994 appear to have made the transition even more painful. The final section examines the events of 1995 and 1996 to see whether the recent events provide a basis for a limited optimism that the R&D sector has begun to be transformed into one that is more efficient and more consistent with a market economy