MIKHAIL GORBACHEV'S ambitious plans to use technology to modernize the Soviet economy may be doomed not simply by conservative political opposition forces, but also by the cumbersome way the economy is managed.
In some technological areas the Soviets have a strong position; in others, they lag far behind the West. But in almost every case the relative level of nearly all technologies is far ahead of their application. With its perverse system of economic incentives and planning, the Soviet Union has a very hard time managing the technology that it does possess.
In the West, computers have been used to automate factories, control manufacturing and distribution, formulate business strategies, determine prices and reduce inventory. The best Western managers, with the help of computers, try to maximize efficiency and production from the lowest to the highest level of a particular enterprise. Such is the definition of success.
Life for the Soviet manager could not be more different. His job is much more limited than that of his Western counterpart. His job is to take the inputs assigned him by planners and then produce the maximum amount of output. It's that simple. Make more: that's the credo.
The Soviet manager has no incentive to reduce inputs. Since he does not pay for his inventory, he always wants to maximize inventory, no matter what. Further, he has no incentive to share information with his superiors or his customers and suppliers. Indeed, the manager has no interest at all in showing his bosses how easily or quickly he has fulfilled his goal, for that will only mean a tougher set of goals the following year.
Finally, the Soviet manager has no opportunity to use computers for business strategy. He is not involved in such matters. Prices, customers, production -- all those decisions are made in Moscow by central planners.
All of these "incentives" would apply even if innovation were widespread and the technology came for free. But, of course, that is not the case.
Once more a comparison of the two systems explains a great deal.
In the West, hi-tech firms keep in close touch with their customers to see what they need, what's working and what isn't. This information feeds immediately back to the product developers. If the marketers fail to communicate their customers needs, there are always competitors who will step into the picture.
Further, in the West there is great division of labor among companies. Because there are so many small companies trying to meet the various needs of a wide range of customers, decisions are quick, development rapid.
None of these conditions holds in the Soviet Union.
In most cases there is a single source for a given technology. A lead research institute works in a given field and that institute is held responsible for the entire range of products needed. Since the institutes are reasonably free to work on waht they wish rather than satisfy the demands of specific customers. The customer has little leverage over the institutes.
Say an institute wants to develop a new automated tractor production process. First, it must reflect that in next year's plan, then test it out at one or two factories and finally disseminate it through the industry. When this systemic clumsiness is taken together with the conservatism of the technical decision-makers, the formula is one for a very slow rate of innovation.
So far, these systemic problems have cost the Soviet Union relatively little compared to what it might cost in the future.
At present the Soviets are doing rather well in automating the production process,but the gains are limited. Enterprises are still inflexible and lacking in coherent strategy.
The difficulties of applying computer technology to change the course of an enterprise are profound. To develop several alternatives in parallel is costly. Heavy bets are often made on losers.
Soviet planners have adjusted to the realities of their system, and even under Gorbachev, they delegate little authority.
The system is the problem. Given the changes announced by Gorbachev last June, this situation may change. They may fix solve some of their problems, but they are not there yet.
The Soviets are succeeding now in areas which are amenable to centralized planning, projects that require perserverance more than flexibility. For instance, in the space race, the Soviet tortoise is outrunning the American hare. They are doing well, too, in mechanical areas -- such as metallurgy -- and theoretical fields -- such as applied mathematics, guidance systems, and rocket propulsion. In other words, areas that do not lead to rapid technical obsolescence or require very fine, high quality volume production.
These patterns of Soviet success resemble the Western European orientation toward technology which involves a large theoretical content. They contrast with the Japanese penchant for high volume, low cost, high quality manufacture, and the American gift for very high technology, semi-customized, expensive solutions to difficult, one-of-a-kind problems.
Nevertheless, for all the reasons mentioned earlier, the Soviets face an uphill battle in precisely those areas of technology which are so important to economic progress.
Will this change? I am pessimistic for the Soviets.
They can probably improve their technology if they will invest the massive resources required. However, they will first have to change their system before modernization through technology will make much sense. Only then need they worry about the availability of high technology.
The issue is: Can they broaden the incentives to enterprise managers for productivity and innovation? Can they introduce internal competition in the development and production of world class technology? Can they loosen the hand of central planning on their industrial economy? No other communist economy has ever even tried to liberalize the basic heavy industries.
These are the very objectives of the reforms that Gorbachev announced in June. Therefore, we can put the questions another way: Will Gorbachev be able to implement these reforms? Unless he is able to do so, it will not matter very much whether the Soviets can produce or borrow the technologies relevant to rejuventing the economy.
Even if he does succeed in implementing these reforms, the Soviets will still have formidable obstacles to overcome before they will have the technologies available to them.
The Soviets see the need to reform and to present themselves to the world as more than a developing country which happens to have a first-class military machine. This realization, however, comes precisely at a time when the costs of being competitive with the West appear ready to take off again.
Ivan Selin is chairman of American Management Systems Inc. and travels frequently to the Soviet Union for the United Nations Association.