Panentheism.  Revisionism.  Anarchocapitalism.



Essays by Me

Essays by Others

Chapter Twenty-Nine of Western Technology and Soviet Economic Development, 1945-1965, Stanford, CA: Stanford University, Hoover Institution Press, 1973, 411-423.  The original title is “Conclusions.”  This volume is the third of three, but this chapter refers to all three.

“Although the policies concerning trade and technical transfers appear vague and often confused, there is one fundamental observa-tion to be made: throughout the period of 50 years from 1917 to 1970 there was a persis-tent, powerful, and not clearly identifiable force in the West making for continuance of the transfers. . . .”

“. . . whenever the Soviet economy has reached a crisis point, Western governments have come to its assistance. . . . All along, the survival of the Soviet Union has been in the hands of Western governments.”

In this study's closing pages, Sutton would admit only that he “lean[ed] to the position that there is gross incompetence in the policymaking and re-search sections of the State Department.”  He would spend the rest of his life attempting to clearly identify that force, thereby replacing this earlier verdict of incompetence with a more satisfying one.

Anthony Flood

July 29, 2010


Western Technology and Soviet Economic Development: Conclusions

Antony C. Sutton


Empirical Conclusions: 1917 to 1930 

The first volume of this study concluded that the Soviets employed more than 350 foreign concessions during the 1920s.  These concessions, introduced into the Soviet Union under Lenin’s New Economic Policy, enabled foreign entrepreneurs to establish business operations in the Soviet Union without gaining property rights.  The Soviet intent was to introduce foreign capital and skills, and the objective was to establish concessions in all sectors of the economy and thereby introduce Western techniques into the dormant post-revolutionary Russian economy.  The foreign entrepreneur hoped to make a normal business profit in these operations.

Three types of concessions were isolated: Type I, pure concessions; Type II, mixed concessions; Type III, technical-assistance agreements.  Information was acquired on about 70 percent of those actually placed in operation.  It was found that concessions were employed within all sectors of the economy except one (furniture and fittings), although the largest single group of concessions was in raw materials development.  In the Caucasus oil fields—then seen as the key to economic recovery by virtue of the foreign exchange that oil exports would generate—the International Barnsdall Corporation introduced American rotary drilling techniques and pumping technology.  By the end of the 1920s 80 percent of Soviet oi drilling was conducted by the American rotary technique; there had been no rotary drilling at all in Russia at the time of the Revolution. International Barnsdall also introduced a technical revolution in oil pumping and electrification of oil fields.  All refineries were built by foreign corpora-tions, although only one, the Standard Oil lease at Batum, was under a concessionary arrangement—the remainder were built under contract.  Numerous Type I and Type III technical-assistance concessions were granted in the coal, anthracite, and mining industries, including the largest concession, that of Lena Goldfields, Ltd., which operated some 13 distinct and widely separated industrial complexes by the late 1920s.  In sectors such as iron and steel, and particularly in the machinery and electrical equip-ment manufacturing sectors, numerous agreements were made between trusts and larger individual Tsa-rist-era plants and Western companies to start up and reequip the plants with the latest in Western technology, A.E.G., General Electric, and Metro-politan-Vickers were the major operators in the ma-chinery sectors.  Only in the agricultural sector was the concession a failure.

After information had been acquired on as many such concessions and technical-assistance agree-ments as possible, the economy was divided into 44 sectors and the impact of concessions and foreign technical assistance in each sector was analyzed.  It was found that about two-thirds of the sectors received Type I and Type II concessions, while over four-fifths received technical-assistance agreements with foreign companies.  A summary statement of this assistance, irrespective of the types of conces-sion, revealed that all sectors except one, i.e., 43 sectors of a total of 44, had received some form of concession agreement.  In other words, in only one sector was there no evidence of Western technolo-gical assistance received at some point during the 1920s.  The agreements were made either with dominant trusts or with larger individual plants, but as each sector at the outset comprised only a few large units bequeathed by the Tsarist industrial structure, it was found that the skills transferred were easily diffused within a sector and then supplemented by imported equipment.  Examination of reports by Western engineers concerning individual plants confirmed that restarting after the Revolution and technical progress during the decade were dependent on Western assistance.

It was therefore concluded that the technical transfer aspect of the New Economic Policy was suc-cessful.  It enabled foreign entrepreneurs and firms to enter the Soviet Union.  From a production of almost zero in 1922 there was a recovery to pre-World War I production figures by 1928.  There is no question that the turn-around in Soviet economic fortunes in 1922 is to be linked to German technical assistance, particularly that forthcoming after the Treaty of Rapallo in April 1922 (although this assistance was foreseeable as early as 1917 when the Germans financed the Revolution).

It was also determined that the forerunners of Soviet trading companies abroad—i.e., the joint trading firms—were largely established with the assistance of sympathetic Western businessmen. After the initial contacts were made, these joint trading firms disappeared, to be replaced by Soviet-operated units such as Amtorg in the United States and Arcos in the United Kingdom.

It was concluded that for the period 1917 to 1930 Western assistance in various forms was the single most important factor first in the sheer survival of the Soviet regime and secondly in industrial progress to prerevolutionary levels.


Empirical Conclusions: 1930 to 1945 

Most of the 350 foreign concessions of the 1920s had been liquidated by 1930.  Only those entre-preneurs with political significance for the Soviets received compensation, but for those few that did (for example, Hammer and Harriman), the compen-sation was reasonable.

The concession was replaced by the technical-assistance agreement, which together with imports of foreign equipment and its subsequent standar-dization and duplication, constituted the principal means of development during the period 1930 to 1945.

The general design and supervision of construc-tion, and much of the supply of equipment for the gigantic plants built between 1929 and 1933 was provided by Albert Kahn, Inc., of Detroit, the then most famous of U.S. industrial architectural firm. No large unit of the construction program in those years was without foreign technical assistance, and because Soviet machine tool production then was limited to the most elementary types, all production equipment in these plants was foreign.  Soviet sources indicate that 300,000 high-quality foreign machine tools were imported between 1929 and 1940.  These machine tools were supplemented by complete industrial plants: for example, the Soviet Union received three tractor plants (which also doubled as tank producers), two giant machine-building plants (Kramatorsk and Uralmash), three major automobile plants, numerous oil refining units, aircraft plants, and tube mills.

Published data on the Soviet “Plans” neglect to mention a fundamental feature of the Soviet indus-trial structure in this period: the giant units were built by foreign companies at the very beginning of the 1930s, and the remainder of the decade was devoted to bringing these giants into full production and building satellite assembly and input-supply plants. In sectors such as oil refining and aircraft, where further construction was undertaken at the end of the decade, we find a dozen top U.S. companies (McKee, Lummus, Universal Oil Products, etc.) aiding in the oil-refining sector and other top U.S. aircraft builders in the aircraft sector (Douglas, Vultee, Curtiss-Wright, etc.).

Only relatively insignificant Soviet innovation occurred in this period: SK-B synthetic rubber, dropped in favor of more useful foreign types after World War II; the Ramzin once-through boiler, con-fined to small sizes; the turbodrill; and a few aircraft and machine gun designs.

The Nazi-Soviet pact and Lend Lease ensured a continued flow of Western equipment up to 1945.

In sum, the Soviet industrial structure in 1945 consisted of large units producing uninterrupted runs of standardized models copied from foreign designs and manufactured with foreign equipment.  Where industrial equipment was of elementary construction (e.g., roasters and furnaces in the chemical industry, turret lathes in the machine tool industry, wooden aircraft, and small ships), the Soviets in 1945 were able to take a foreign design and move into produc-tion.  One prominent example (covered in detail in this volume) was the Caterpillar D-7 tractor. The original, sent under Lend Lease in 1943, was copied in metric form and became the Soviet S-80 and S-100.  It was then adapted for dozens of other military and industrial uses.

Thus in the period 1930 to 1945 the Soviets generally no longer required foreign engineers as operators inside the U.S.S.R. as they had in the concessions of the 1920s, but they still required foreign designs, foreign machines (the machines to produce machines), and complete foreign plants in new technical areas.  By 1945 the Soviet Union had “caught up” at least twice; once in the 1930s (it could also be argued that the assistance of the 1920s constituted the first catching-up) with the construc-tion of the First Five Year Plan by foreign companies, and again in 1945 as a result of the massive flow of Western technology under Lend Lease.  While the technical skills demonstrated by the Tsarist craftsmen had not quite been achieved,1 it may be said that in 1945 the nucleus of a skilled engineering force was once again available in Russia—for the first time since the Revolution.


Empirical Conclusions: 1945- 1965 

In the immediate postwar period the Soviets transferred a large proportion of German industry to the Soviet Union—at least two-thirds of the German aircraft industry, the major part of the rocket production industry, probably two-thirds of the elec-trical industry, several automobile plants, several hundred large ships, and specialized plants to pro-duce instruments, military equipment, armaments, and weapons systems.  The stripping of East Germa-ny was supplemented by a U.S. program (Operation RAP) to give the Soviets dismantled plants in the U.S. Zone.  By the end of 1946 about 95 percent of dis-mantling in the U.S. Zone was for the U.S.S.R. (including the aircraft plants of Daimler-Benz, ball bearings facilities, and several munitions plants).

Manchuria and Rumania also supplied numerous plants.  And as we have seen, Finnish reparations which supplemented the pulp and paper industries and ship construction were made possible by U.S. Export-Import Bank credits to Finland.

In the late 1950s all this industrial capacity had been absorbed and the Soviets turned their attention to the deficient chemical, computer, shipbuilding, and consumer industries, for which German acquisitions had been relatively slight.2  A massive complete-plant purchasing program was begun in the late 1950s—for example, the Soviets bought at least 50 complete chemical plants between 1959 and 1963 for chemicals not previously produced in the U.S.S.R.  A gigantic ship-purchasing program was then instituted, so that by 1967 about two-thirds of the Soviet merchant fleet had been built in the West. More difficulty was met in the acquisition of computers and similar advanced technologies, but a gradual weakening of Western export control under persistent Western business and political pressures produced a situation by the end of the sixties whereby the Soviets were able to purchase almost the very largest and fastest of Western computers.

Soviet exports in the late sixties were still those of a backward, underdeveloped country.  They con-sisted chiefly of raw materials and semi-manu-factured goods such as manganese, chrome, furs, foodstuffs, pig iron, glass blocks, and so on. When manufactured goods were exported they were simple machine tools and vehicles based on Western designs, and they were exported to underdeveloped areas.  When foreign aid projects fell behind—al-though they had been given first priority on Soviet resources—they were brought back on schedule with the use of foreign equipment (e.g., British and Swedish equipment was used at the Aswan Dam). And while great efforts have been made to export to advanced Western markets Soviet goods with a technological component (i.e., watches, auto-mobiles, tractors, and so on), a technical breakdown of these goods reveals in all cases examined either a Western origin or the substitution of Western parts where the products are assembled in the West.3

As a further indicator of Soviet technical back-wardness, it may be noted that some Western firms selling to the Soviet Union have found “so many gaps in the control schemes proposed”4 that a two-phase quotation format has been adopted: first a feasibility study is conducted (for which the Western company is paid), and then the actual quotation is determined for a complete system based on the feasibility study. In other words, technical inadequacy is such that the Soviets have not been able to specify exactly what is wanted.  What this reflects is not a lack of scientific skill; it shows a lack of information on the technical constituents of a modern industrial system.

In the few areas where indigenous innovation was identified in the earlier period, we find a move back toward the use of Western technology.  This is visible in the use of Western synthetic rubbers to replace SK-B, a renewed research effort on rotary drilling as a result of efficiency problems encountered in the use of the Soviet turbodrill, and instances of aban-donment of the Ramzin boiler in favor of Western designs.  The research and development effort has continued, but its results in practical engineering terms have been near zero.  From the technical viewpoint the Soviet Union at 1970 is a copy—a rather imperfect copy—of the West. Generally, initial units are still built by Western companies and subsequent units built by Soviet engineers are based on the original Western model, and imported equipment is used in key process and control areas.


Original Western Intent for Technical Transfer 

It may be unwise to attempt to read into an his-torical sequence of events as important as those described, any rational objective on the part of Wes-tern statesmen.  Although the policies concerning trade and technical transfers appear vague and often confused, there is one fundamental observation to be made: throughout the period of 50 years from 1917 to 1970 there was a persistent, powerful, and not clearly identifiable force in the West making for continuance of the transfers.  Surely the political power and influence of the Soviets was not sufficient alone to bring about such favorable Western policies. Indeed, in view of the aggressive nature of declared Soviet world objectives, such policies seem incom-prehensible if the West’s objective is to survive as an alliance of independent, non-communist nations. What, then, are the wellsprings of this phenomenon?

In the years 1917-20 a variant of the modern “bridge-building” argument was influential within policymaking circles.  The Bolsheviks were outlaws, so the argument went, and had to be brought into the civilized world.  For example, in 1918 a statement by Edwin Gay, a member of the U.S. War Trade Board and former Dean of the Harvard Business School, was paraphrased in the board minutes as follows:

Mr. Gay stated the opinion that it was doubtful whether the policy of blockade and economic isolation of these portions of Russia which were under Bolshevik control was the best policy for bringing about the establishment of a stable and proper Government in Russia.  Mr. Gay suggested to the [War Trade] Board that if the people in the Bolshevik sections of Russia were given the opportunity to enjoy improved economic conditions, they would themselves bring about the establishment of a moderate and stable social order.5

At about the same time American businessmen were instrumental in aiding the formation of the Soviet Bureau, and several hundred firms had their names on file in the bureau when it was raided in 1918.6  Hence there was Western business pressure through political channels to establish Soviet trade. No one appears to have foreseen the possibility of creating a powerful and threatening enemy to the Free World.  There was widespread criticism of the Bolsheviks, but this was not allowed to interfere with trade.  In sum, there was no argument made against technical transfers while several influential political and business forces were working actively to open up trade.

The lack of clear policy formulation and foresight was compounded by the apparent efforts of some State Department officials in the 1930s to discourage collection of information on Soviet economic actions and problems.  While the First Five Year Plan was under construction by Western companies, various internal State Department memoranda disputed the wisdom of collecting information on this construc-tion.7  For example, a detailed report from the U.S. Embassy in Tokyo in 1933 (a report containing precisely the kind of information used in this study) was described in Washington as “not of great interest.”8  It is therefore possible that no concerted effort to examine the roots of Soviet industrial development has ever been made within the U.S. State Department.  Certainly internal State Depart-ment reports of the 1930s provide less information than the present study was able to develop.  Such lack of ordered information would go far to account for many of the remarkably inaccurate statements made to Congress by officials of the State Department and its consultants in the 1950s and 1960s—statements sometimes so far removed from fact they might have been drawn from the pages of Alice in Wonderland rather than the testimony of senior U.S. Executive Department personnel and prominent academicians.9

In brief, a possibility exists that there has been no real and pervasive knowledge of these technical transfers—even at the most “informed” levels of Western governments.  Further, it has to be hypothe-sized that the training of Western government officials is woefully deficient in the area of technology and development of economic systems, and that researchers have been either unable to visualize the possibility of Soviet technical dependence or unwil-ling, by reason of the bureaucratic aversion to “rocking the boat,” to put forward research proposals to examine that possibility.  This does not however explain why some of the outside consultants who were hired by all Western governments in such profusion, have not systematically explored the possibility.10  If it is argued, on the contrary, that Western Governments are aware of Soviet technical dependency, then how does one explain the national security problem, outlined in chapter 27?

An argument has been made that a policy of technical assistance to the U.S.S.R. before World War II was correct as it enabled the Soviets to withstand Hitler’s attack of June 1941.  This is ex post facto reasoning.  The German Government financed the Bolshevik Revolution with the aim of removing an enemy (Tsarist Russia), but also with postwar trade and influence in mind.  This German support was largely replaced in the late 1920s by American technical assistance, but until the mid-1930s the Germans were still arming the Soviets; it was only in 1939 that Hermann Goering began to protest the supply.  Thus in the twenties and the early thirties it was not possible for anyone to foresee that Germany would attack the Soviet Union.

The Bolsheviks were assisted to power by a single Western government, Germany, and were main-tained in power by all major Western governments. The result is that we have created and continue to maintain what appears to be a first-order threat to the survival of Western civilization.  This was done because in the West the political pressures for trade were stronger than any countervailing argument.

This conclusion is supported by the observations that in both the 1930s and the 1960s the U.S. State Department pressed for the outright transfer of military technology to the U.S.S.R. over the protests of the War Department (in the thirties) and the Department of Defense (in the sixties).  When in the 1930s the War Department pointed out that the proposed Dupont nitric acid plant had military potential, it was the State Department that allowed the Dupont contract to go ahead.11  A Hercules Powder proposal to build a nitrocellulose plant was approved when the State Department accepted the argument that the explosives produced were intended for peacetime use.12

In the 1960s we have the extraordinary “ball bearing case” of 1961, which revealed that the U.S.S.R. was to receive 45 machines used to produce miniature ball bearings (in the United States almost all miniature ball bearings are used in missiles).  That proposal was called a “tragic mistake” by the Department of Defense but supported by the State Department.  In 1968 came the so-called “Fiat deal” under which the United States supplied three-quarters of the equipment for the Volgograd plant, the largest automobile plant in the U.S.S.R.  This agreement ignored an earlier interagency committee finding that 330 military items can be produced by any civilian automobile industry and that the automobile industry is a key factor for war. It also ignores an argument particularly stressed here—that that any automobile plant can produce military vehicles.  The supply of U.S. equipment for the Volgo-gradplant was diametrically opposed to any policy of denial of exports of strategic goods to the Soviet Union, for under any definition of “strategic” the Volgograd plant has clear and significant military weapons capability.  Yet the State Department was strongly in favor of the shipment of the plant equipment.  The developing story of the Kama plant suggests history is repeating itself.

Under these conditions, where policy is so far re-moved from logical deduction, it would be imprudent to arrive at any conclusion concerning Western intentions.  If logical intentions exist—and in chapter 27 it is suggested that our strategic policies are not logically derivable from observable fact—they are obscure indeed.  The writer leans to the position that there is gross incompetence in the policymaking and research sections of the State Department.  There is probably no simple, logical explanation for the fact that we have constructed and maintain a first-order threat to Western society.


Implications for the Soviet Union 

The Soviet Union has a fundamental problem.  In blunt terms, the Soviet economy, centrally planned under the guidance of the Communist Party, does not constitute a viable economic system.  The system cannot develop technically across a broad front with-out outside assistance; internal industrial capacity can be expanded only in those sectors suitable for scaling-up innovation and duplication of foreign techniques.

Quite clearly a modern economy cannot be self-maintained, however skilled its planners and technicians, if technical adoptions in basic industries are limited to processes that lend themselves to scaling up or duplication.  Further, the more developed the economy the greater its complexity; consequently the planning problems associated with the acquisition of information must surely increase in geometric ratio.

Logically, then, a system that is strictly centrally planned is not efficient either for rapid balanced growth or for any growth at all once the economy is past the primitive stage.  Beyond that stage, the chief function of central planning, so far as the economy is concerned, becomes the retention of political control with the ruling group.  There are few economic functions, and certainly no technical functions, that cannot be performed in a more efficient manner by a market economy.

How have the Russian Party member, the Politburo, Stalin, Khrushchev, and Brezhnev looked upon Western technology in relation to Soviet technology?  This is indeed a fascinating question. Party injunctions, for example in Pravda, suggest that on many levels there has been a deep and continuing concern with lagging Soviet technology. The general problem has long been recognized, ever since Lenin’s time.  But Lenin thought it curable13; the current Politburo must at least suspect it is incurable.

It is however unlikely that either the Party in Russia or the Communist parties in the West have fully probed the depths of the problem.  First, their writings mirror a persistent confusion between science and technology, between invention and innovation.14  Second, it is unlikely that most Marxists appreciate how important an indigenous innovative process is to a nation’s self-sufficiency (in contrast to their clear understanding of the value of scientific endeavor and invention).  Even breakaways from Marxist dogma still find it difficult to absorb the notion that virtually all widely applied (i.e., innovated) technology in the Soviet Union today may have originated in the outside world.  Third, Russian designers and engineers may have succeeded in deceiving the Party and even themselves.  By claiming as indigenous Russian work designs which in fact originated in the West, they may have obscured the realities of Soviet technology.

The dilemma facing the Soviets in 1970 is stark and overwhelming, and periodic reorganization and adjustments have not identified the basic cause. Indeed, each reorganization either stops short of the point where it may have lasting effect or leads to yet further problems.  This is because the Party con-tinues to demand absolute political control while a viable economy increasingly demands the adapta-bility, the originality, and the motivation that result from individual responsibility and initiative. Attemp-ted solutions through use of computers may tempo-rarily ease the problem, but ultimately they too will result in confusion because accurate information still has to be acquired and analyzed.  The computer is only as useful as its human operators are capable and as its data input is sound.  In any event, who will supply the computers?

Moreover a communist regime cannot yield political power; doctrine demands continuance of power in the hands of the Party.  The economy demands diffusion of power.  What will be the result? If Russian historical precedent is any indicator, then the outlook is gloomy indeed.  The Russian Revolution was a gigantic and violent upheaval.  The first revolution achieved what had been attained by evolutionary means elsewhere, the substitution of relatively democratic control for autocracy.  Then the briefly emergent democratic forces in Russia were caught between the autocracy of the right and the Bolsheviks of the left and were rendered impotent.  A new absolutism took power.  Today there is no question that a fundamental change has to come again; what is unknown is the form that change will take and whether it will be revolutionary or evolutionary.

It is also clear—and the writer makes this assertion only after considerable contemplation of the evidence—that whenever the Soviet economy has reached a crisis point, Western governments have come to its assistance.  The financing of the Bolshevik Revolution by the German Foreign Ministry was followed by German assistance out of the abysmal trough of 1922.  Examples of continuing Western assistance include the means to build the First Five Year Plan and the models for subsequent duplication; Nazi assistance in 1939-41 and U.S. assistance in 1941-45; the decline in export control in the fifties and sixties; and finally the French, German, and Italian credits of the sixties and the abandon-ment of controls over the shipment of advanced technology by the United States in 1969.  All along, the survival of the Soviet Union has been in the hands of Western governments. History will record whether they made the correct decisions.


Implications for the Soviet Union 

The Western business firm has been the main vehicle for the transfer process, and individual firms have, of course, an individual right to accept or reject Soviet business in response to their own estimation of the profitability of such sales.  There is ample evidence in the files of the U.S. State Department, the German Foreign Ministry, and the British Foreign Office that Western firms have cooperated closely with their respective governments in negotiating for such sales.

Historically, sales to the Soviet Union must have been profitable, although the Russians are reputed to be hard bargainers and there have been numerous examples of bad faith and breaches of contract. Firms have accepted theft of blueprints and specifications,15 duplication of their equipment with-out permission or royalties,16 and similar unethical practices and still deemed it worthwhile to continue trade.  This applies particularly to larger firms such as General Electric, Radio Corporation of America, Ford Motor, Union Carbide, and Imperial Chemical Industries, Ltd.  There is evidence that larger firms are able to demand and obtain somewhat more equitable treatment from the Soviets, partly by virtue of the fact that respective foreign offices are more willing to back them up and partly because the Soviets are aware of the relatively few sources for their new technologies.  But less well-known firms such as Lummus, Universal Oil Products, and Vickers-Armstrongs (Engineers), Ltd., apparently also have found that Soviet business pays.

This profitability must be balanced against possi-ble loss of domestic sales in the face of hostile do-mestic publicity.  American Motors found itself in this trap in 1966, when it had no more than vaguely con-templated sales to the U.S.S.R.17—and other firms have suffered boycotts.  As long as these sales and the impact of such sales on Soviet capabilities were relatively unknown, however, the possibility of boy-cotts was not great.  It appears that some reevalua-tion may be in order in the light of the findings of this study; i.e., the factors entering into the tradeoffs in considering such business may change.  This applies certainly to sales to Red China, where we now stand at a point equivalent to about 1921-22 with the Soviet Union.  It is eminently clear that comparable sales over a period of 50 years could place Red China on an equal industrial footing with the U.S.S.R.  The difference between the early seventies and the early twenties is that we now have the example of the U.S.S.R. before us: trade has built a formidable enemy, while hopes for a change in ideology and objectives not only have gone unfulfilled but are perhaps more distant than they were 50 years ago.


Implications for the Soviet Union 

The Soviet problem is not that the nation lacks theoretical or research capability18 or inventive genius.  The problem is rather that there is a basic weakness in engineering skills, and the system’s mechanisms for generating innovation are almost nonexistent.

Table 29-1 [not reproduced here.—A.F.] suggests the sparseness of Soviet innovation; engineering weaknesses are implicit in continuing plant purchases abroad—while such purchases continue the Soviets are not building plants using their own laboratory discoveries.  Why does the Soviet system have such weaknesses?

There is certainly no choice among competing inventions using market criteria, but if more useful Soviet processes existed they would be adopted whether market-tested or not.  Absence of the marketplace is not, then, sufficient reason to explain the absence of innovation.  There may be, as has been suggested elsewhere, no compelling pressures to develop innovation despite the fact that the Party is constantly exhorting technical progress. But the explanation that most adequately covers the problem is one that has been previously mentioned though not heretofore stressed-the “inability hypothesis.” The spectrum of engineering skills required to build a complete polyester plant, a large truck plant, a fast large-capacity computer, and a modern marine diesel engine just does not exist in the Soviet Union.  Sufficient engineering skills do exist for limited objectives—a military structure can be organized to select and marshal the technology of war, or a space program can be decreed and realized through top-priority assignment of resources.  But the skills are not present to promote and maintain a complex, self-regenerative industrial structure.

The point to be stressed is that if there were adequate engineering ability some innovation would be forthcoming in the form of original new processes, and such innovation would appear in many sectors of the economy.  This is generally not the case.  In most sectors the West installs the initial plants and subsequent plants are duplicates based on that Western technology.  Once the sector has been esta-blished, major new innovations within the sector tend to be either imported technologies or duplicates of imported technologies.  Therefore pervasive “inabili-ty” in engineering seems the most likely basic expla-nation.  For some reason—and this study has not explored the diverse institutional factors within the system that might be responsible—Soviet central planning has not fostered an engineering capability to develop modern technologies from scratch, nor has it generated inputs (educational, motivational, and material) to achieve this objective.

The world is now presented with 50 years’ history of industrial development in the most important of socialist experiments, and censorship can no longer hide the problem.  Every new Soviet purchase of a major Western technology is pari passu evidence for a central lesson of this study: Soviet central planning is the Soviet Achilles’ heel.



1 Tsarist-era technology was of a higher standard than is generally believed: it had achieved capability to produce aircraft, calculating machines, and loco-motives. Foss Collection, Hoover Institution; see Sutton [Western Technology and Soviet Economic Development], I, pp. 183-84.

2 For typical articles that appeared in Western journals as the Soviets took steps to start a massive acquisition program to fill major technical gaps in the Soviet structure, see: Raymond Ewell, “Soviet Russia Poses a New Industrial Threat,” ASTM Bulletin, no. 239 (July 1959), 43-44; W. Benton, “Are We Losing the Sheepskin War,” Democratic Digest, July 1956; “From Revolution to Automation in 37 Years,” American Machinist, November 19, 1956; G. Marceau, “Exceptionnelles possibilites du forage en U.R.S.S.,” Industrie du petrole, 28 (November 1960), 47-49; “Soviet Scientists Emerge from Curtain to Crow about Progress,” Business Week, September 14, 1957, pp. 30-32.

3 For the example of watches, see Business Week, June 6, 1960, p. 74.

4 Control Engineering (New York), November 1958, p. 80.

5 Minutes of the U.S. War Trade Board, December 5, 1918, vol. V, pp. 43-44.

6 New York [State] Legislature, Joint Legislative Committee to Investigate Seditious Activities (Lusk Committee), Albany, N.Y., 1919.

7 See U.S. State Dept. Decimal File, 861.50/Five Year Plan/50.

8 U.S. State Dept. Decimal File, 861.5017/Living Conditions/709, Report no. 689, Tokyo, August 31, 1933.

9 A former assistant chief of the division of research of the Department of State has formed equally harsh conclusions.  Bryton Barron has listed four examples of highly strategic tools whose export to the U.S.S.R. was urged by officials of the Department of State:

“1. Boring mills essential to the manufac-ture of tanks, artillery, aircraft, and for the atomic reactors used in submarines.

“2. Vertical boring mills essential to the manufacture of jet engines.

“3. Dynamic balance machines used for balancing shafts on engines for jet airplanes and guided missiles.

“4. External cylindrical grinding machines which a Defense Department expert testi-fied are essential in making engine parts, guided missiles, and radar.”

Barron concludes: “It should be evident that we cannot trust the personnel of the Department to apply our agreements in the nation’s interests any more than we can trust it to give us the full facts about our treaties and other international commit-ments.” See Bryton Barron, Inside the State Depart-ment (New York: Comet Press, 1956).

10 See p. x.

11 See Sutton, Western Technology . . . 1930 to 1945, p. 101.

12 Ibid., p. 113.

13 V. I. Lenin, Selected Works. J. Fineberg, ed., vol. IX (New York, International Publishers, 1937), pp. 116.118.

14 Another and more puzzling facet of the Soviet concept of what begets innovation is found in descriptions of the innovatory process in practice. For example, an article by G. B. Nagigin on innovation in the glass industry states: “Technical offices were established [in one factory] before the start of the competition.  Leading engineers and technologists were on duty in these offices and gave practical assistance to innovators who turned to them for advice, consultation, etc.  The technical offices are equipped with reference literature and other material needed by innovators and inventors.  For example, there is a drawing board and the necessary instru-ments in the technical office of the Gushkovskii Works. The establishment of well-equipped technical offices, with qualified engineers on duty, naturally had a very favorable effect on the development of innovation and invention work in the factories.” Steklo i keramika (New York), vol. XIV, no. 2. p. 66.  A table is included in the article giving “results.”  We have to assume that this scheme to encourage com-petition was a serious attempt to induce the inno-vatory process—although one is tempted to dismiss it as naive in the extreme.  It need only be said that anyone with the slightest knowledge of invention and innovation would conclude that little that is worthwhile can be achieved by such a forced and artificial process.

15 Sutton II, pp. 263-67.

16 Ibid.

17 See Milwaukee Journal, January 22, 1967.

18 For example of Russian research capability see A. V. Zolotov, Problema tungusskoi katasstrofy 1908 g. (Minsk, 1969). a fascinating empirical study of vari-ous hypotheses relating to the gigantic meteorite that fell in Siberia in 1908.