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Analysis & Opinion
01.10.10 Will A Russian DARPA Help Modernize Russia?
Introduced by Vladimir Frolov

Contributors: Vladimir Belaeff, Ethan Burger

President Dmitry Medvedev said last week that he wants the Defense Ministry to create a unified research agency, similar to the U.S. Defense Advanced Research Projects Agency (DARPA) created by the U.S. Defense Department in 1958 to ensure American technological superiority in weapons systems. America’s DARPA pioneered many cutting-edge military and dual use technologies, including creating a prototype of the Internet. Will all these grand plans work? Is it a good idea to imitate something that was first created 50 years ago? What does this move tell us about Medvedev’s approach to governance?

"The country lacks an efficient structure that would deal with demand for the so-called breakthrough research and development (r&d) in the interests of defense and security," Medvedev said at a session of the Presidential Commission for Modernization and Technological Development of Russia's Economy. The decision reflects Medvedev’s frustration with the pace of technological modernization in the Russian defense sector, as well as his desire to use the federal funding for defense r&d projects to generate spillover effects of cutting-edge technologies into the commercial sector. "In a whole range of areas, the Russian defense industry is not capable of reacting to additional orders or increased financing to manufacture high-tech products in sufficient numbers. They are still perfecting Soviet era weapons designs, not producing revolutionary breakthroughs in weapons systems,” Medvedev said at the meeting of his commission.

Medvedev hopes to use growing defense spending (Russia will spend up to 22.5 trillion rubles ($725 billion) on arms programs by 2020) as a locomotive for the country’s technological modernization, just as the nuclear and space programs were for the Soviet Union in the 1950s and 1960s.

The decision to create a Russian version of DARPA (which will not be a federal government agency, but rather a government-funded venture capital fund, selecting promising technology projects with transformational military applications), will allow for small companies and even individual groups of scientists to get funding for their projects and increase the pool of ideas the military will be able to draw from in its r&d. A Russian DARPA would also unite existing defense industry actors like state corporations, large defense holdings, design bureaus and academic research institutes under one roof and allow the government to focus on promising projects. There is even talk that the Russian DARPA will open a branch at Skolkovo while building a separate and secure r&d and production facility to allow for top secret research.

Will all these grand plans work? Is it a good idea to imitate something that was first created 50 years ago? Could there be newer and perhaps better institutional and managerial arrangements than the American DARPA to coordinate and fund basic research with defense applications? Could the spillover effects into the commercial sector be really that substantial? How can such a new approach to defense r&d square off with the traditional Soviet-era system of lead design bureaus and defense holdings that now enjoy the lion’s share of defense spending on weapons systems? What does this move tell us about Medvedev’s approach to governance? Why has Putin kept silent on the issue?

Ethan S. Burger, Senior Lecturer, Centre for Transnational Crime Prevention, Faculty of Law, University of Wollongong, Australia:

Underinvestment in research and development is frequently cited as a major shortcoming of the U.S. corporate model, because many if not most officers and directors have a tendency to want to boost short-term profits (and increase the value of the corporation’s shares and hence their compensation), rather than think far ahead.

Furthermore, even when r&d is performed in the states, corporations frequently locate facilities in locations where the costs of production are low, which is often but not always abroad. This results in a technology transfer that frequently helps foreign countries more than the United States.

Without a doubt, DARPA has had major successes in developing technologies that have achieved real breakthroughs in the defense and civilian sectors (with respect to the latter, one need merely think about the global impact of the Internet, but it would be a mistake to overlook laudable advances in biotechnology). Nonetheless, president Medvedev would be mistaken if he believed that it would be possible to replicate DARPA’s experience in contemporary Russia.
DARPA is a non-hierarchical organization which largely oversees, as opposed to performs, considerable research at universities and private laboratories. Its personnel exude a spirit of entrepreneurship and the vast majority of its personnel are recruited for relatively short stints (four to six years), so that the organization is constantly exposed to new ideas. It is populated by non-conformists, many of whom would not succeed in a corporate environment. I think few specialists would argue that most Russians have a similar mindset.

I am not convinced that Russia has a sufficient number of people with the required attitudes and the necessary skills to successfully develop a DARPA-like entity on Russian soil. Many of the individuals who fit this mold have left Russia to make their mark in more dynamic economies – they are unlikely to uproot themselves and their families if they have been successful there.

Frankly, most Russian managers do not seem to be risk-takers by nature. While this is probably changing with the passage of time, query what percentage of Russian nationals with recently earned MBAs decide to make their mark in their country of origin. There are numerous reasons for this, but one is that Russia does not have a well-developed consumer market – this can be seen in the underdevelopment of the country’s banking sector. Venture capitalists may be willing to take risks (with other people’s money), but they are looking for results in a shorter time-frame that a
DARPA-like organization requires.

DARPA got its start shortly after the Soviets launched Sputnik. The U.S. political leadership and the American people feared falling behind in defense related technologies. Most economists will tell you that defense spending generates less economic growth than expenditures in education, health, infrastructure, etc. Fortunately for the United States, many of the technologies that resulted from DARPA programs had civilian applications. Let’s hope that president Medvedev knows this and his emphasis on modernizing the military sector is merely part of a political strategy, rather than a misguided understanding of the DARPA model.

Prime minister Putin's noticeable silence could be attributed to his general lack of interest in economic issues, or perhaps his reluctance to be a catalyst for change in the Russian defense sector, particularly when it is less than clear that such changes will produce the intended results.

Vladimir Belaeff, Global Society Institute, San Francisco, CA:

Weapons development, since the times of Assyrian and Egyptian war chariots, has been a forceful stimulus for general technological innovation and scientific discovery. The Manhattan Project stimulated the development of electric power generation using controlled nuclear fission reactors.

As noted, DARPA has made very substantial contributions to general technological advance world-wide. Much of this advance is not specific to pure military needs. A Russian “DARPA” would definitely contribute to technological innovation both in Russia and outside its borders, much as it happened with the American agency.

The currently prevailing liberal market paradigm (which may soon collapse under the pressure of the economic crisis it provoked) depends strongly on innovation and new product development as fuel for its consumption-oriented economic engines. At the same time, this same free market ideology does not favor large r&d expenditures, because r&d is risky, takes years to complete and does not help with constant quarter-over-quarter profit growth. R&d is overhead expenditure, and the liberal market does not like overhead – “investors” (day-traders and speculators) do not understand real investment as represented by r&d – expenses which may produce revenue in as long as 18 or 24 months, or may fail to deliver a profit altogether.

The situation described above generates a contradiction: r&d is needed to create new products to feed the liberal market business model – yet r&d is to be avoided or minimized because it requires unwelcome expenses. The contradiction is resolved by funneling government money via appropriate federal agencies into commercial and educational r&d centers, which produce the desired results in projects often spanning many years.

In America DARPA is one of the solutions that effectively funnels government funding into industrial r&d activities in fields deemed important for national defense (which always was a very broad concept in the United States.) DARPA is not the only one such agency in the United States (NASA, to mention an example is another of many) – it is though the scientific r&d coordination agency which is most visibly associated with the nation’s military needs.

Russia’s version of DARPA must be tailored to Russian realities and objectives. The key need for any kind of modernization is the transformation of people’s modes of behavior: intellectual, social, economic, scientific, creative, spiritual. This aspect is often noted and repeated, yet it seems that its significance is not always understood or appreciated.

For example, r&d is not a strict “9 to 5, weekends off” activity. It is not usually compatible with “work sessions” in a “banya” embellished with chilled vodka and pickles. R&d requires focus, dedication, vision, drive. Plenty of Russians have those qualities, yet the local social dynamics often defeat these admirable traits. Modernization is expected to clear away the social defects – which is needed in order to achieve modernization.

Thus we have a vicious circle: to achieve modernization one must be already modernized. Systemic solutions, such as a Russian “DARPA” are very much part of an escape from the vicious circle – they are necessary, but not sufficient. The other ingredients that are needed involve the human component: a careful and ruthless selection of the truly best people, without any consideration for someone’s unqualified favorite niece or cousin; patience – Rome was not built in a day; persistence – significant results may appear quickly, but that must not be cause for declaring the program successful and therefore “completed.”

A well-designed and liberally funded Russian “DARPA” institution will definitely contribute to Russia’s modernization.
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