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Russia's Defense Enterprises: Between the State and the Market
Mar 01, 2001
Michael D. Intriligator, Leonid Ya. Kosals and Rozalina R. Ryvkina

There is no consensus on Russian conversion or the results of the market reforms. According to one group of observers, both were complete failures, and led to economic destruction without yielding any positive results. Another group of observers states that the reforms achieved their goals successfully and did generate a market economy for Russia, albeit one with problems. The resolution of this disagreement lies in analyzing the trends in changes in industrial capacity and ownership. These are the keys to understanding why the Russian defense enterprises, representing nine branches of the Russian MIC, have been experiencing such great difficulties in trying to enter the market. Only such an analysis can help us understand which school of thought is closer to reality.

Time is the best judge. Now, after more than a decade of Russian defense conversion efforts, with their many positive approaches, experiments, trials, errors, accomplishments, and failures, we begin to see answers to the questions did production in the MIC increase at all? Who in today's Russia officially owns the defense enterprises? Who are the real owners of the state and privatized defense enterprises? Who are their directors at present - are they owners or managers? Do the directors want to become owners? Who are the decision makers in those enterprises?

Answers to these questions would provide deeper insight into the modem trends of conversion as a process for demilitarizing the economy, as well as into the general process of political, economic, and social reforms in Russia during the Yeltsin era. The insights gained from studying the earlier conversion efforts are needed as a basis for trying to understand the new, post demilitarization conversion efforts and trends that are just now getting under way in the year 2000.