Abstract
You are not going to find many figures in this paper. And, nevertheless, it has been based upon an empirical study. It was a study that covered all the former Soviet military industry left behind on the territory of the Republic of Estonia. With the help of my colleagues, I counted 19 individual plants and corporations there that could be considered as formerly belonging to the Soviet military industrial complex (MIC). From these 19, eight were studied on-site (through interviews and documentary analyses), and the rest of them through statistical data. More specific findings are going to be published later. Here I intend to present the main conceptual conclusions of the empirical study that evidently deviate from some of the commonly accepted truisms accepted in this area.
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References
Currently at the University of Notre Dame.
Look at the “Beauty and the Beast” in “The Economist,” Nov. 19–25, 1994, p. 60.
In our empirical study, there was a completely non-classified civilian enterprise to produce gas-analyzers that was also the producer of analyzers to monitor the hydrogen concentration in the battery rooms and oxygen mixtures in the living compartments of submarines. At the same time it is more or less evident that the number of civilian uses of submarines is more than limited.
Parnu Machine Building Corporation was resubordinated to the Ministry of General Machine Building of the USSR (i.e., the administrator of Soviet military space program) in 1988. But the production remained the same.
Although this link itself with the state is what makes the MIC what it actually is, its actual forms and appearances on the political surface may vary significantly: the MIC-Pentagon lobbying combination in the US (Peter Almquist. Red Forge; N.Y., Columbia Univ. Press, 1990, p. 13) is absolutely different from the former Soviet State Commission on Military Industry but they have one thing in common: they create the MIC that otherwise could not exist.
In practical terms this problem may be formulated this way: do less than 20 enterprises in the territory of Estonia that formerly were part of MIC of the USSR constitute the new Estonian MIC or not? It has to be kept in mind that none of them directly produced weapons and only in some cases (like “black boxes” for bomber planes, nuclear-powered mini-power stations for intelligence satellites, etc.)—sort of a “finalized” product.
It has been noted correctly that the breaking of production into very small pieces (“enterprise produced a deliberately limited range of products that it was not required to understand”) was part of organizational strategy of the Soviet MIC. (“Doing Business in Russia” by ALM Consulting, Frere Cholmeley Bischoff and KPMG Peat Marwick, NTC Business Books, 1994, p. 147).
September 24, 1994 Russian TV news (evening program) reported very typically that military nuclear and chemical plants in Krasnoyarsk-N would not allow medical and sanitary inspection by civilian authorities due to the “danger” that they may be closed down or forced to comply with general safety regulations. On the other side, in the U.S. such a type of “special treatment” made it possible for more than one third of military installations that were supposed to close in 1988 stay open and will cost more than $15 billion in the next five years. (Eric Schmitt in the “New York Times,” Oct. 10, 1994, p. A8 ).
We may quote here the “economic trinity” of any socialist system after Vaclav Klaus: subsidized prices, otherwise nonexistent demands and sheltered markets. (In: Leading Economic Controversies of 1995; E. Mansfield, ed., W.W. Norton, 1995, p. 211).
Besides very many other interesting things the outstanding scientist of our days, Acad. Roald Sagdeev has described, for instance, the battle, he calls rightfully–“titanic” between the two extremely powerful schools and structures in the Soviet military space technology–namely between those of Sergei Korolev and Vladimir Chelomey (the significantly less-known “father” of Soviet cruise missiles).–Roald Z. Sagdeev The Making of a Soviet Scientist, John Wiley and Sons, 1994, pp. 201–211 ).
Seymour Melman Profits Without Production, N.Y., A.A. Knoff, 1983, p. 90. There are no reasons to doubt that this principle worked in the USSR as well, and to a significantly larger extent. The costs of the Soviet MIC was more than just a straw that broke the backbone of the whole country. Also the same author’s introduction to “Towards a Peace Economy in the United States,” G.A. Bischak (ed), N.Y., St. Martin’s Press, 1991, pp. XVI-XVII.
I made a bit more detailed note on that in my “A New Old Constitution for Estonia,” in: “Legal Reform in Post-Communist Europe,” S. Frankowski and P. B. Shephan III, eds., Martinus Nijhoff, 1995, p. 86.
Among them one is misleading up to the extreme-commercialization of MIC gives “MIC conversion” the meaning of (a) conversion of MIC itself and (b) the conversion of the fiscal assets of MIC. Even Russian neologisms “conversia” and “convertatsya” do not save much.
Viktor Suvorov. Osvoboditel; St. Pb., 1993, p. 74. Unfortunately, the English translator of the book (“The Liberators,” W.W. Norton, 1981) has omitted this interesting detail.
V. Suvorov. The Liberators…, p. 61.
Sagdeev op cit., p. 55.
The defense industry of Russia traditionally produces the main part (up to 90 and more percent) of TV sets, refrigerators, tape recorders and other complicated domestic apparatus and practically is the monopolist in the field of RandD in this sector.“ The Role of Military Sector in the Economics of Russia and Ukraine; Charles Wolf, Jr., ed., RAND-Hoover Symposium, Nov. 1992, p. 67. Whatever are the current jokes about the quality of such seemingly primitive efforts to hide the real magnitude of MIC behind the shelters of double-bookkeeping, the fact remains, that they were pretty successful and the confusion is still out there. Even to well-informed agencies like SIPPRI, CIA, Gorbachev and Rand Corporation give estimates of ± 8% of GNP! (Soviet Conversion 1991, J.T. Marlin, P. Grenier, eds., CEP, 1991, p. 15; The Soviet Military and the Future; S. F. Blank, J.W. Kipp, eds.; Greenwood Press, 1992, p. 16 )
Look also at our footnote 6.
Towards a Peace Economy…p. 16.
ibid., p. 17.
Commersant (Russian weekly edition), Jan. 17, 1995, p. 61. This analyses by “Commersant” takes into account also: The Political Economy of Arms Reduction, L.F. Dumal, ed; AAAS, Washington, 1982.
This “over-technologization” as a significant cost-increasing and structural problem on the company level shows up macroeconomically as over-industrialization well known from the Soviet economic history (Economic Developments in Cooperation, Partner Countries from a Sectoral Perspective; R. Weichhardt, NATO, 1993, p. 137)
Towards a Peace Economy…p. 173.
Melman p. 208.
And not just that: economic-technological thinking as well. One of our respondents-CFO of the former MIC plant told me, “After I told the workers that our goal will not be to produce ‘black boxes’ for airplanes, but money, they almost went on strike.”Although the change of mentality of the MIC’s workforce is another very special topic, I’d like to agree with Oleg Antonov (in “NG”, Oct 13, 1994) that the key to the saving of the potential of the former USSR’s MIC is in the “emancipation” of the middle-level managers of unique skills able and motivated to make a new start in their lives and careers.
After the Cold War. Russian-American Defense Conversion for Economic Renewal, M. P. Clandon, K. Wittneben, eds., N.Y. University Press, 1992, p. 89.
J. Krause. Ch. K. Mallory. Chemical Weapons in the Soviet Military Doctrine, Westview Press, 1992, pp. 36–72.
Michael Checinski has pointed out one very significant point: although the socialist (or any other totalitarian or militarized society, from Sparta to Nazi Germany and the USSR) may “outperform” the market forces in the short run, on longer terms it will be a loser. The collapse of the USSR is a christomatic sample here indeed. (“The Soviet Military ”…p. 93).
Chr. Bluth Soviet Strategic Arms Policy Before SALT, Cambridge Univ. Press, 1992, pp. 176–181.
The Role of Military…p. 100.
There might be one psychological moment here as well. To quote my own corporal from “good old Soviet days” — A Russian soldier feels himself well and secure if there is lots of metal around him. An absurd and dangerous feeling, of course.
Äripäev, Sept. 2, 1994, p. 10.
Urmas Tooming in “Postimees,” April 7, 1995, p. 10. (In Estonian)
It was one of the typical versions in our empirical study in Estonia. As most of the enterprises produced only parts or custom-made products, the switch from one product to another within MIC occurred all the time.
Novoye Russkaye Slovo, v. LXXXVI, N 29872, p. 1.
A. Vaganov in “NG”, N65 (991), April 12, 1995. “NG” stands for “Nezavisimaya Gazeta,” Russian weekly most actively involved in political debates over the future and the current status of the Russian military and MIC.
According to the estimates of experts, the current volume of a nuclear-power-market is about 50 billion. Thus, the piece of 9 billion is more than just a considerable share of it. (Sergei Cekhmistrenko in “Commersant,” Russian Weekly Edition, 1995, N13 (124), April 11; p. 11 )
In the dilemma between politics and economy, not all conversions (in economic and technological sense) by themselves serve the purpose of political stability. Here I refer to a somewhat unclear U.S. policy towards the denuclearization of Ukraine and Kasakhstan aimed at making Russia (or its not sober leadership-literally) the only and completely unbalanced nuclear power in the area. The rationale behind this thinking is not very clear, but what is, though, is that the military instability in the area of the European Belt is increased by such a “conversion” most radically.
I truly believe that the nuclear sales of Soviet technology by Russians to Iran are of civilian nature. But if it were not? Would that have been a sort of a conversion for Russia? And then, if to replace Iran in this equation by some democratic European country? CEO of “Rosvoruzhenye” Gen. Viktor Samoilov points to the fact that after the free redsitribution of Soviet military hardware by NATO (that was formerly owned by GDR and now given to Sweden, Austria, Greece, Spain, and Turkey) that served as a free advertisement for Russian MIC a new market was created for it. And not only for the additional products but for the spare parts as well. (Andrei, Chernakov in “Commersant” (Russian weekly edition), Nov. 29, 1994, N45 (107), p. 30). Now there is a question-where is the conversion here, if at all?
After: Arthur A. Alexander The Conversion of Soviet Defense Industry, RAND Corp., Jan. 1990, p. 35.
The Soviet Military and the Future, p. 106.
Soviet Conversion-91, pp. 12–15.
Soviet Conversion-91, pp. 12–13.
ibid; p. 1. Let me put aside one other problem striking any methodology-orientated mind: what is meant by “broadness” and “narrowness” here? It could easily be the other way around. But we must hope that the “conversionists” are much better engineers and politicians than philosophers and logicians. That is what matters.
The “humanization” of the development in general is evident. To compare with the whole Gulf War, Russia managed to kill about 120 civilians in Chechenya by its “dumb bombs” during one day—December 20, 1994—only! More than that—the President of Ingushetia, former officer himself, Gen. Ruslan Aushev has pointed at the fact that Russia uses in the neighboring Chechenya also conventional weapons banned by the international law (like needle-shells Zsh2 and Zshl with 8 and 7 thousand needles correspondingly). (“NG” Jan. 27, 1995: So, even binding herself under the international rules of “normal” warfare would mean in this case—a sort of conversion.
Soviet Military and the Future, p. 106.
ibid.
Thus we exclude here as the exceptional ones, the case of a use of a sports-gun to commit a murder and the use of AK-47 as a museum item. In this sense, it is pretty hard to understand from the outsideof-U.S.’s point of view all these debates on the banning of assault weapons under the pretext of proper interpretation of the 2nd Amendment. As far as I understand the Amendment, it is not about target-shooting or hunting, but about “well regulated militia” that “keeps and bear arms.” If that doctrine is outdated, then all arms are to be excluded from private ownership. If it is not, then there is no difference between assault and defense weapons. I may be dead wrong, but in Europe and in the USSR, I was taught to take law (not legal propaganda) as it has been written.
This is the whole concept of the brilliant, and perhaps the most important book ever written about WWII: Viktor Suvorov Ledokol (in Russian), M: Novoe Vremya Publishing, 1993.
Combination of actual social relations and the socio-psychological readiness for MIC-related “sacrafices” (higher fares, inflation, budget deficit, unequal availability of funds, subsidies, etc.).
This point-the military viability-was taken into consideration in our empirical case where we were told that one of “our companies had actually a ”double“ set of workers as well. It meant that in the case of war (when most of the men from the assembly line would be called for duty or might be killed) there were other people-workers in civilian factories, housewives, etc.-trained and able to replace each and every assemblyman in the company and assigned to it as its active reserve.
The commander-in-chief of the 12th Russian Army, stationed in Moldova.
NG“, N219, Nov. 16, 1994.
Prof. E. Rozin, in his latest works, (published, unfortunately, partly posthumously) proved in the most brilliant way that the Soviet aggressiveness or the subversive activities of communists all over the world did not result from historically accidental circumstances (like the personal brutality of Lenin, cruelty of Stalin, adventurism of Che Guevara, etc.), but were the natural and actually the only possible result of the Marxist doctrine itself. (E. L. Rozin Svyaschenoe Pisanie Bolshevizma; Bratislava, Priroda Publishing, 1994. Lenin-Organizator Gosudarstvennogo Terrora; Bratislava, Priroda Publishing, 1994-both in Russian).
Suvorov Ledokol, p. 71–72.
Ibid., p. 113–117.
Ibid., p. 121.
ibid., p. 27.
ibid., pp. 28–30.
Chemical…p. 77.
The general WTO scenario could be summed up in the following way: “Operationally, victory was to be achieved by suppressing NATO’s air power and forcing breakthroughs against the weakest ground forces in the main TSMA in order to encircle NATO’s strongest forces. Encirclement and destruction of NATO’s forward deployed corps in Germany, and a successful effort to coerce Denmark, the Netherlands, and Belgium out of the Western coalition was perceived to offer the greatest hope of ending a war before it escalated to nuclear use and before protracted conflict created unbearable strains on the Warsaw Pact coalition.” (“The Soviet Military…”p. 11).
More detailed description of the shift, pp. 94–104.
Estonian MIC typically produced technologically relatively independent custom-made parts and was similar to those in Latvia and Lithuania, with some irrelevant exceptions.
The Soviet MIC was integrated on the national, not regional basis. Once the break-up started, the last step of the Soviet federal government to save the MIC was the administrative redesign of it along territorial lines. (Robert W. Campbell in: Making Markets. Economic Transformation in Eastern Europe and the Post-Soviet States. Council on Foreign Relations Press, N.Y., 1993, p. 134). But evidently (and to some extent, luckily) this effort came too late.
The Role of Military…p. 100.
The Soviet Military, p. 102.
Chemical weapons…p. 9.
ibid., p. 22.
The NK-33 booster engines mentioned earlier, and initially designed for the Soviet manned moonflight program, are very marketable even today. The reason they did not work for the program they were designed for was not in their own quality, but the inability of Soviet designers to synchronize the performance of 30 NK-33s in one booster (already mentioned article in “NG” N65, April 12, 1995). So after “sweeping away” the whole system of NK-33s, what remains is a superb and marketable engine-NK-33, itself. Analogous, although an unusual case of taking advantage of the valuable leftover of a destructive product, can be found in the Czech Republic: one can find there the infamous name SEMTEX (the explosive produced by Czechoslovakia that is most beloved by the IRA and Mid-Eastern terrorists) as a brand name for a new… soft drink!
This gives me an opportunity to clarify Estonia’s position on the acceleration of the conversion of the former MIC on her territory. The actual danger from Russia against Estonia is not related to the actual temptation to regain the elements of MIC with the goal of their reconversion, but the very existence of such a pretext that may be added to the other ones (like the defense of ethnic Russians in “near abroad” etc.) And another point-not all versions of reconversion can be valued negatively. To continue the story from the footnote 33 it has to be said that the most marketable products of the Soviet MIC in the West are the ones outdated for Russian Army herself. So Russia now faces the opportunity to restart the production of hardware or its spare parts for some NATO and neutral countries in Europe (“Commersant,” 1994, N45… ibid.)
Alan W. Dowd. Reconsidering the CSCE, “Hudson Briefing,” Feb. 1995, N173.
A.A. Konovalov. “NG,” Dec. 7, 1994, p. 5.
The Chief of Russian Staff, Colonel-General Mikhail Kolesnikov writes: “As prescribed [by the CFE Treaty] of the general level of 6,400 tanks, 11,470 APCs…after 1995 we can locate in the Caucasian and Leningrad Military District no more than 700 tanks and 580 APCs. At the same time their territory combined covers more than a half of the European Russia. Thus the quotas granted to us do not correspond to the needs of creation of the absolutely minimal defense systems…” (“NG”, November, IO, 1995, p. 5). I leave it to the military experts to decide how much of a defense (and not offensive) power do the tanks and APCs carry and what they have to do in the Leningrad Military District strategically neighboring with the Baltic states and Scandinavia, but we have to admit one fact: the playing field is evidently uneven here.
More specifically-the counselor to the President of Russia, Andrannik Migranyan, has expressed concerns about the realization of APC and tank quotas established in Vienna in favor of not only Ukraine, but the Caucasian states as well (A. Migranyan Vneshnaya Politika Rossii. “NG”, Dec. 10, 1992, p. 3; D. Hearst Competing Loyalties Tear Away at Hopes for Real Peace; “The Guardian,” Dec. 6, 1994, p. 5.)
The Role of the Military…p. 182.
Konvalov, ibid.
After the Cold War; pp. 114–115.
On Conversion of Defense Industry in the Russian Federation (Law of March 20, 1990, N 2551–1), after: After the Cold War…pp. 116–123.
After: Henry S. Rowen. et al. Report from Iron Mountain; in: Peace and War Industry…pp. 54–55.
Jonathan Hughes and Louis P. Cain American Economic History, 4th edition, Harper Collins, 1994; look at the Table 25.1 on p. 446.
Towards a Peace Economy…p. XIII.
The logic here goes as follows: the governmental ability to spend influences the aggregate demand and thus its relation to supply. But, I have to say that even that logic is not correct. 1) The government’s purchasing power is within the limits of aggregate demand, not outside of it, so the increase is not possible through it by definition; 2) The government may influence the demand and supply in a nongovernmental sector, but only in one direction-towards the suppressing of free-market demand. I.e., the actual increase, if it happens, occurs only in the governmental, socialized and socialist sector at the expense of the suppressing of free market.
ibid., p. XV.
Here I have to refer to one of my own earlier essays, where I pointed out a dichotomie exclusiveness-you may have a company competing under the rules of civil law and contracts or the one that operates under the administrative state law and is sheltered by governmental supplies and rocurements. You cannot have them both at the same time and in the same economic unit. Only in this sense Marx was right-it is really whether “we” or “them.” (I. Grazin The Rule of Law: But of Which Law? Natural and Positive Law in Post-Communist Transformations. “The John Marshall Law Review”, Spring, 1993, v. 26, n. 3, pp. 719–737). Those familiar with the Soviet academic legal discussions of the late ‘20s on so called “Soviet-trust-property” understand what I mean.
On such a type of mechanism in general Heinz Köhler “Soviet Central Planning” in: “The Road to Capitalism” D. Kennett and M. Lieberman, eds., The Dryden Press, 1992, pp. 5–14. Do not be misled by Soviet realities. It must work the same way for the Pentagon as well, or not work at all. The opposite naive, socialist idea by Elwin H. Powell (the U.S. “military establishment is modeled after the business corporation, and not conversely; generals behave like board chairmen, soldiers like clerks”) could be accepted at least after some factual proof and the author has provided us with none whatsoever. (Elwin H. Powell Paradoxes of the Warfare State, in: “Peace and the War Industry,” Transaction Books, 1970, pp. 14–15.) The only case I have ever heard about when privates and officers voted on whether to fight or not was that of “commandos is - group,” of KGB in August, 1991. But even that beautiful story turned out to be just a fairytale. But the ideological consequences of the Powell’s theory are evident: more civilian-like you manage to show the military the easier it will be to turn the whole society into a barracks.
The Role of the Military Sector…p. 89.
Economic Developments in…p. 114. Also: The Role of Military Sector…p. 281.
i.e., conversion that leaves the civilian and military production within the same economic unit-1.G.
Soviet Conversion…. p. 21.
Economic Developments…p. 116.
After the Cold War, p. 34. The lack of adequate transitional financing was named as one of the main obstacles for conversion by all CEOs and CFOs in our empirical study. It is remarkable that it is not only the problem of “underachievers.” The inability to get credits under reasonable conditions was considered to be one of the main problems by the CEO of a company that was a recipient of “Euromarket Award-1994” and of the 19th International Award for the Best Trade Name (granted by the European Trade Leaders’ Club)!
Profits Without Production…pp. 152–153.
ibid., p. 151.
Although politically extremely sensitive, the answer to the question—how far to go, will be unavoidable. Yuri Andreev recently proved that and, by the way, put the current MIC conversion’s target-level on a quite reasonable (for Russia) level: between 20 to 50% of the level of the early ‘80s (“NG”, March 3, 1995, p. 3). That first margin-20%—may seem to be even surprisingly low, but it has to be taken into consideration that the current volume of Russian military production results to a significant extent from the reaction (and the inability to halt it immediately) to the U.S. Star Wars program (Sergei Rogov in “NG,”, Nov. 3, 1994, p. 5).
Look at our footnote 1.
The term “private asset” needs clarification. I admit that not all MIC all over the world has been state owned and vice versa, evidently (and unfortunately) very few of all civilian producers have been doing so under the conditions of free market. But one truth still remains: whatever is the basic economic system of the society, the moving out form the MIC is always moving from the more-state-supportedand-privileged sector to the less-protected one. And that is the point here.
Oleg Antonov in “NG,” Sept. 6, 1994.
Look at the “NG’s” publication in Jan. 10, 1995 issue and articles by Andrei Vaganov in the issues of Feb. 2 and Feb. 22, 1995.
Alexander Malyutin in “Commersant” (Russian weekly edition), Aug. 30, 1994, N 32, p. 29.
It was Milton Friedman who so brilliantly proved that economically socialist ideology of U.S. Senator Joe McCarthy in the early 50s was not economically feasible just as any other socialist economy wasn’t. (M. Friedman. Capitalism and Freedom, Univ. of Chicago Press, 1982, pp. 19–21.)
The fact that the conversion of MIC is not a merely technical or even purely technically complicated problem was proved by... Stalin! Under his iron fist and with the aid of the GULAG System, the Soviet conventional wartime MIC was converted for the civilian sector in three years. (Anatoli Sitnov in “NG,” Nov. 24, 1994, p. 4).
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Grazin, I. (1997). The Civilization of Military-Industrial Complex in Post-Cold War World or: Military-Industrial Complex as the Socialist Institution. In: Dundervill, R.F., Gerity, P.F., Hyder, A.K., Luessen, L.H. (eds) Defense Conversion Strategies. NATO ASI Series, vol 9. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1213-2_10
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