The re-emergence of Eastern European science and technology

0160-791X/93 $6.00 + .OO Copyright Q 1993 Pergamon Press Ltd.

!&chnology in Society, Vol. 15, pp. 3-23,1993 Printed in the USA. All righta reserved.

The Re-Emergence of Eastern European Science and Technology Charles Weiss, Jr.

ABSTRACT Economic competitiveness, and with it the survival of democracy in Eastern Europe, depends in large part on the ability of the region to manage technology for manufacturing exports. Most East European products are now oriented toward civilian and military needs of the former Soviet Union, and cannot now be sold anywhere. The communist system of central planning and soft budgets provided no incentive to manage technology or any other resource. Innovation was hampered by isolation from changes in world markets and technology, and by the separation of teaching, research, and production. Teaching was carried out on schools and universities, research in government institutes, and production in state-owned enterprises. Eastern European scientific and technological infrastructure is oversized, under-equipped, and politicized, but includes a strong nucleus which could be reformed and reoriented towards world markets. This process is beginning in several countries. But public support is lacking, as are funds for long-range investments. Strategic alliances are urgently needed with western firms and researchers with an understanding of world markets.

The collapse of the Soviet Empire brings both new freedom and a wrenching reorientation for science and technology in Eastern Europe.1 For the first time in four decades, the scientific and technological communities in Hungary, Romania, Poland, Czechoslovakia, Bulgaria, and the former Yugoslavia should now be able to practice their professions free of totalitarian control imposed on them by an alien political system. Dr. Charles Weiss, Jr., is President of Global !&chnology Management, Inc., an independent research firm specializing in science and technology and environmental policy in Eastern Europe and the developing world. He was the first Science and l%chnologyAdviser to the World Bank and served in that capacity from 1971through 1986. Dr. Weiss has been AGunct Professor at the University of Pennsylvania and Viiiting Lecturer at both the Woodrow Wilson School of Public and International Affairs (Princeton University) and the School of Advanced International Studies (The Johns Hopkins University). He received his B.A. in chemistry and physics, summa cum laude, and his Ph.D. in biochemistry and chemical physics from Harvard University. 3

4

C. Weiss, Jr.

At the same time, science and technology in Eastern European countries must undergo massive retrenchment, reorientation, and reform if they are to make up for decades of stagnation, at a time when industry and government are preoccupied with issues of short-term survival. Even after they complete the transition to a free market economy, these countries will join the world as small, low-to-middle income economies with limited resources. Science and technology in Eastern Europe will thus depend on international collaboration and support for many years. Eastern Europe was until recently the major buffer between the West and the Soviet Empire, and has many times in history seen instability develop into worldwide crises. The survival of democratic institutions in Eastern European countries will depend to a large extent on the viability and growth of their economies. There are no major advantages in prospect from mineral or petroleum resources, and only limited benefits from tourism and proximity to eastern markets. Economic viability will therefore depend on productivity and competitiveness in world markets, and hence on the ability to manage technology. Thus, the outcome of the crisis in Eastern European science and technology has major geopolitical importance. Less tangible but equally important, a resurgence of science and technology in Eastern Europe would contribute to the political stability of the region indirectly by serving as a symbol and an expression of the restoration of the values of rationality, openness, and free inquiry. The resources of Eastern European countries in science and technology are significant, especially considering their small size and modest per capita income. The availability of well trained, low-cost technical personnel is one of the major attractions of the region for foreign investment. Eastern European scientists have to their credit major accomplishments in research. For example, the soft contact lens is a Czech invention, and tranquilizers based on Hungarian research and development have attained sales of hundreds of millions of dollars in Japan. A research group from the former Yugoslavia was transplanted intact to the Argonne National Laboratories in the U.S. to try to scale up an original gene-sequencing technique that could become a basic technology for the multi-billion dollar Human Genome megaproject. The scientific and technological community under the communists was both privileged and stifled: a pampered tool of a corrupt system. Within the Soviet Empire, Eastern Europe was expected to maintain a technological level well above that of the “mother country.” The scientific and technological infrastructure consumed a large proportion of available resources - 2% of GNP for research and development in Hungary, for example, albeit according to questionable official statistics. These resources were allocated without a corresponding control of the amount of quality work, or of its contribution to the society or the economy

Re-Emergence of Eastern European Science and lldno~

5

The scientific and technological establishment inherited from the communist period, although it includes pockets of excellence around which a sound new structure could be erected, is bloated and distorted. Overall, the accomplishments of Eastern European science and technology are extremely modest compared with those of the advanced industrialized countries. There is little public sympathy for the scientific community or support for its claims on public resources in difficult economic times. Eastern European countries are all in the throes of a severe recession and varying degrees of political and economic turmoil. The collapse of the former USSR, the major market for Eastern European products, has left an industrial plant mostly suited for the production of inferior goods that can no longer be sold. There are few domestic resources for long-term investments of any kind, including those for research and development. Foreign investors are deterred by the nascent state of physical, commercial, and legal infrastructure, and are unlikely to fill the gap on their own. At the same time, Eastern European scientific and technological infrastructure is badly out of date. Major investments are needed to modernize equipment, catalyze institutional reform, and train a new generation of managers, faculty, and researchers who are familiar with modern science and technology and comfortable with the operations of world markets. Eastern European science and technology thus faces an extremely difficult set of institutional, political, and financial problems. It must reform and reorient itself, and justify major investments of public resources - all at a time of great economic stringency and widespread public skepticism about all official institutions. Its success in solving these problems will be an important element in its medium-term economic future.

Science and !&xhndogy in Communist Eastern Europe Despite its emphasis on investment in science and technology, the communist system of central physical and economic planning created a “shortage economy” in which everything that was produced could fmd a market, either domestically or in some other communist country This system destroyed the demand for improved technology. It insulated producers from consumer demand, competition, and bankruptcy,covered losses with supplementary “soft” budgets, and eliminated the need to make any kind of realistic accounting for allocations of capital and natural resources. In summary,the communist system discouragedefficient production by forcing profitable enterprises to subsidize the losses of inefficient ones, as

6

C. Weiss, Jr.

well as wasteful use of inputs, swollen imports, and boondoggles of all kinds. There was no incentive for properly managing technology - or indeed any other resource. As a result, the communist system, although supposedly based on scientific principles, disrupted the delicate institutional links of science and technology to the economy that insure that its results are of practical use. Indeed, in retrospect, the inability of the communist system to innovate and to respond to the advance of technology is one of the major reasons for its collapse. Given the Marxist doctrine of public ownership of the means of production, all production in Eastern Europe (except for the informal sector and private farm plots) took place in enterprises owned by the state and administered by government ministries. Marxist economics focussed single-mindedly on the production of tangible goods to the exclusion of the service sector and all management and marketing functions. Production was controlled by central planning carried out by government officials, with little product innovation and without even the most elementary customer feedback. The sole goal of the productive system was the fulfillment of physical production targets - 1~number of tanks, y number of sweaters - or at least the filing of a report that said they had been achieved. The top manager of an enterprise under communist central planning was thus reduced to a functionary more akin to a factory manager than a chief executive in a western firm. Ironically in view of Marx’s highly developed respect for technological progress and his concern for the welfare of the worker, the economic model adopted by his followers was one in which technology, job descriptions, productivity, and markets were static. Once a new machine was installed, it typically remained until worn out, with little effort to improve productivity by improved management. In the absence of a concept of human capital, investments in education, health, and other “non-productive” sectors were funded as “residuals” out of moneys left over from investments in agriculture, industry, energy, etc. Education was designed to convey factual knowledge, and not the skills to solve problems or to think independently. Worker training was seriously neglected. Vocational training was inflexibly geared to the requirements of clearly foreseen, narrowly specified jobs, and in some cases amounted to little more than a supply of free factory labor. This attitude stemmed in part from the doctrines of Marxist-Leninist labor economics that, while glorifying the unskilled worker, ironically accepted the idea (derived from early 20th-century theories of factory management, but paradoxical in an economy supposedly run for the benefit of the worker) that the worker was a mere extension of the machine.2 Worker health and safety were unimportant, and indeed the polluted and unsafe working environment was regarded as confirmation of the heroism of the unskilled worker.

Re-Emergence of Eastern European Science and lbchnology

7

A further corollary of this lack of appreciation of the importance of investment in human resources was severe wage compression, whereby managers and scientists were paid no more than three times the salary of unskilled workers who were, after all, the heroes of the Marxist society. In some countries, this salary structure even discouraged capable students from applying to engineering programs. Marxist economics also neglected the cost of natural resources and of damage to the environment. Enterprise managers had little incentive to limit pollution, creating gross waste of natural resources and environmental “black spots” far worse than anything that would be tolerated in the West.334 This system had direct consequences for agricultural research, which typically sought to increase yields by increased application of fertilizers, pesticides, and other inputs regardless of cost, profitability, or environmental impact. (See article by Maticic in this issue.)

Higher Education and Research Eastern European universities, which had inherited a somewhat inflexible structure from the German model well before World War II, were intentionally fragmented under the communist system into semiindependent, narrowly defined departments. Faculty salaries were low, research support meager, and travel opportunities limited. They were under-equipped, more or less isolated from research and from industry, and weakened by a generation of political hiring, doctrinaire design of curricula and classroom censorship. University curricula in science and engineering were designed to produce narrow specialists.5 Although sound and thorough at the level of basic courses, they were old-fashioned and rigidly prescribed, and discouraged independent investigation and inter-disciplinary study. In most Eastern European universities, it was (and still is) difficult for faculty to introduce multi-disciplinary programs to deal with such critical fields as environment, materials science, and technology management, and for students to shift from one discipline to another or to design a course of study to meet individual needs and interests. Throughout Eastern Europe, the university system was distorted by intense political influence on policy making and recruitment. Universities and research institutes were subject to a Party hierarchy that paralleled (and frequently overlapped with) the academic or managerial hierarchy, and had the final say on policy and personnel matters. In particular, senior appointments at research institutes, and virtually all faculty appointments at universities, were subject to political clearance. Membership in the academy of science (as opposed to working-level research positions) typically had a strong political element as well.

8

C. Weiss, Jr.

Allocations of research funds were frequently as much a function of the personal connections of the principal investigator and the administrators of the institute as of the priority and quality of the research.6 The degree of political interference often varied from institution to institution, and from department to department within the same institution. Courageous leaders were sometimes able to mitigate the damage by resisting political interference and by protecting and encouraging capable scientists whose intellectual independence made them politically marginal. Working level appointments in academy research institutes were often relatively free of political influence, so that they became something of a haven for scientists who wished to pursue their research in relatively professional and non-political surroundings. The structure of education, science, and technology enforced a rigid separation between teaching, basic research, applied research, and production. With important variations from country to country, which are spelled out in several articles in this issue, education took place in the schools and universities, basic research in institutes managed by the various national academies of science, and applied research in institutes reporting to a national academy or to the various sectoral ministries. (The academies themselves functioned much as operating ministries of research.) Despite these difficulties, there are many examples of individual scientists who avoided political involvement, worked within the limitations of the system, worked hard to keep up their international professional contacts, and succeeded in achieving creditable research results. Similarly, research institutes in Eastern Europe were in many cases able to achieve an impressive level of technology, especially in areas the regime deemed of special economic importance and on which it concentrated resources. Examples are found in the fields of coal mining and rail transportation in Poland, and ship hydrography in Bulgaria. As in all protected economies in which there is little or no incentive for technological improvement, the major problem arose at the stage of application. Almost entirely missing were the linkages among and between these institutions and the market - linkages that are critical for the contribution of science and technology to economic development. As a result, sophisticated research capabilities coexisted with shoddy production and poorly designed products. In response, planners instituted campaigns for developing or introducing advanced technology on the assumption that it would automatically lead to improved productivity, instead of letting the application of technology be determined by demand, as it would have been in a market economy In the absence of financial or commercial discipline, the orderly management of research and development was also virtually non-existent. In many countries, researchers were judged according to whether or not they had “fulfilled the plan,” which in practice meant whether or not they had spent all the monies allocated under the various budget categories.

Re-Emergence of Eastern European &knee and Zkchrwlqy

9

In Hungary, efforts were made to press research laboratories to increase the practical applicability of their work by requiring them to cover a substantial portion of their budgets through contracts for applied research with industrial clients. This too was subverted by the system of “soft budgeting.” Laboratory directors would cadge contracts from friends in state-owned firms, who would then simply add the cost of the contract to the budget they submitted to the parent ministry, with neither researcher nor client being accountable for the practical applicability of the work.

A Future Tied to the Past The countries of Eastern Europe differ over a wide range in state of economic development and level of achievement in science and technology. These differences are rooted in historical differences going back centuries. The Ottoman occupation of Hungary ended in the late 17th century, whereas Serbia and Bulgaria won independence from Turkey only in the 19th century. (Bulgaria won its independence with Russian help, and still regards Russia as a liberator and friend.) Czechoslovakia, Croatia, Slovenia, and much of Romania, by contrast, were parts of the Kingdom of Hungary within the dual Austro-Hungarian Empire until its collapse at the end of World War I. Poland was divided among Austria, Czarist Russia, and Germany in the late 18th century, and only reappeared on the map after World War I. As recent events have made tragically clear, Yugoslavia was cobbled together after World War I from republics with different and ultimately incompatible religions, ethnic compositions, and cultures. Between the two World Wars, the countries of the region became rightwing dictatorships or kingdoms. Their governments took advantage of the threat of the “bolshevik menace” to suppress liberal thought and consolidate their control. They drifted towards fascist influence and eventually came under Nazi rule. Czechoslovakia, a liberal democracy before its occupation by Germany, was the only exception. Before World War II, the economies of all six Eastern European countries were devoted predominantly to low-productivity agriculture. Yugoslavia, Bulgaria, and Romania were both the lowest of the six in per capita income and the highest in the proportion of their population dependent on agriculture before World War II. The sole exception was found in the Czech heartland, which alone among the six countries sustained little damage from World War I, attracted foreign investment, and attained a degree of industrialization and a standard of living close to those of Austria.

10

C.Weiss, Jr.

The inter-war period saw considerable growth throughout the region, both in agriculture and in industry. The former came through expansion of acreage rather than through increase in yield. The latter was sustained through protective tariffs adopted in support of a policy of high-cost industrialization.7 The experience of the six countries under communism was also very different. After the suppression of the 1956 revolt by Russian tanks, Hungarian rulers developed a tacit understanding with their population: Don’t rock the boat and you will live better than anyone else in the Soviet bloc. This “goulash communism” eventually led to an industrial sector about a third of which was oriented toward export to western markets. (In 1990, South Korea exported more manufactured goods than all of Eastern Europe and the former Soviet Union combined!) Communist Romania and Yugoslavia had their own idiosyncratic histories, Romania under the independent-minded but megalomaniac dictatorship of the Ceaucescus (see the article by Denchev in this issue), and Yugoslavia as a multi-ethnic republic with a pioneering experiment in worker self-management, albeit subject to political manipulation by the Party hierarchy. Under the international communist economic system, the Eastern European countries were expected to import energy and raw materials from the USSR, and to export to it machines and manufactured goods, in order to help the USSR catch up with the West and to maintain its economic and political independence from it. Eastern Europe was actually assigned specific specialties that it was expected to master. In 1985, for example, these were electronics, automation, nuclear energy, biotechnology, and new materials. Trade in both directions took place under artificial prices, which at first strongly favored the USSR. Industrial development in Eastern Europe was able to take place only by dint of a brutal program of resource mobilization. By the 1960s and especially the 19708, the terms of trade between manufactures and raw materials had reversed to the point where cheap energy and raw materials from the USSR, combined with western credits, were able to sustain an expansion of rawmaterials- and energy-intensive industry in Eastern Europe. By the benchmark year of 1980, Bulgaria and to a lesser extent Hungary, Romania, and Yugoslavia had actually improved their economic positions compared to before the war (as measured by the admittedly imperfect indicator of GDP/capita) relative to Western Europe, while Poland and Czechoslovakia had held their own or slipped only slightly By the late 197Os, however, Soviet exports of energy and raw materials could no longer be sustained at their historic levels. Eastern European countries, however, were by this time burdened with heavy investments in capital-, energy- and raw-materials-intensive industry oriented to the needs of the USSR and other Eastern markets. The central planning

Re-Emergence of Eustern European Science and lkchnology

11

system, moreover, hampered them from undertaking the innovations needed to meet the needs of world markets. Their exports on world markets could not earn enough foreign currency to buy the technology they needed to modernize their industry. Eastern European governments, moreover, complicated their problem by borrowing to sustain the standard of living of their people through what they thought was a temporary crisis, thus creating a serious debt burden (except for Romania, which paid off most of its debt at tremendous social and economic cost).8

Eastern Europe in International

Perspective

The six countries of Eastern Europe re-enter the world economy as small economies with per capita incomes in the middle-income range of developing countries. These range from $1640 for Romania, about the same as Turkey, to $2780-$3140 for Hungary, Yugoslavia, and Czechoslovakia, higher than Brazil but lower than uranium-enhanced Gabon ($3330) or oil-rich Trinidad and Tobago ($3610). For comparison, Portugal and Greece, the poorest countries in the European Community, stand at $4900 and $7050, respectively. Among “newly industrializing countries” (NICs), Korea has a per capita GNP of $5400, Singapore of $11,160. Among the next tier of aspiring NICs, Thailand has $1420, Malaysia $2320.9 (See Table 1.) ‘lb put matters in perspective, the total GNP of Hungary, for example, is comparable to that of a medium sized city in the US - say Milwaukee. Broadly speaking, the economic and social statistics collected by the World Bank for the six countries and summarized in Table 1 are intermediate between those of the better-off Latin American and the poorer Western European countries. The same is true of the social statistics in Table 2, except that population growth has stabilized at rather low birth rates. Energy and fertilizer consumption rates are relatively high, reflecting the absence of an effective pricing mechanism discussed earlier. It is difficult to compare the performances of centrally planned and market economies on the basis of GNP per capita, however, because this indicator does not capture many of the costs imposed on the consumer by the communist system, such as queuing, poor product quality and design, poor service, and environmental damage, or those imposed on the citizen by the market economy, such as the threat of open unemployment, and a leaky “safety net” of social services for the poor. Statistics on basic indicators of scientific and technological development are available for only a few Eastern European countries. According to official statistics, research and development expenditure for Hungary and Yugoslavia is 2.7% and 0.8% of GDP, respectively.10 Patenting activity ranges from 0.04% of world activity for Yugoslavia,

91.4 38.0 64.6 25.6 19.8 76.5 403.1 29.4 72.8 49.3 51.0 231.1

Population Mid-1990 (Millions)

56.1 23.2 38.2 13.2 8.8 32.3 150.4 10.6 23.8

15.7 10.4 42.8

GNP Per Capita, 1990 (Dollars)

1630 1640 1690 1940 2250 2370 2680 2780 3060

Sourm World Development Report, World Bank, 1992.

Hungary Yugoslavia Ceecho3140 Slovakia Portugal 4900 5400 Korea OECD 15000-32000

Turkey Romania Poland Chile Bulgaria Argentina Brazil

Country

GNP, 1990 (Billions of Dollars) 43 1.8 54 21 2.2 395 284 9 123 1.9 18.1 5.1 l-10

28.2 0.4 4.9 25.9 16.7 34.1 20.8 37.9 13.7 10.4 17.8 10.7

5.1 1.2 1.8 3.2 2.6 -0.4 2.7 1.3 0.8 1.4 2.7 9.7 2-4

Average Annual GDP Growth Rate, 1980-90 (%) Average Annual Inflation Rate, 1980-90 WJ)

Data

Total Debt service/ Exportaof Goods and services, 1990 (96)

TABLE 1. Economic

12.2 0.4-4.5

2.1

3.4 4.6 -1.1 2.1 -0.5 0.8

6.2 0.7

Bat% 1980-90 (%I

Industrial GDP Growth

AIUlUd

Average

45 28-s2

56

52 41 39 32 48

33 48 36

of GDP 1990 (W

ptiOU

Induetry as a Pro-

207 2123 715

697 0 89 595 0 2036 1340 0 0

Net Foreign Investment, 1190 (Millions of DolhVS)

3315 13069 40773

6709 1729 4553 611 489 1715 11001 3433 9229

Man&ictured Exports to OECD Countries 1990 Willions of DollarS)

13

Re-Emergence of Eastern European Science wad Zxhnobgy TABLE 2. Social Data

Urban Total lbtal Infaut Mortality, Life Population/ Secondary Population Tertiary Enrollment Under Enrollment Population 1990 Expectancy T&al Per (Per 1000 at Birth, Population, Age Group, Age 14, Age Group, 1990 1989 1989 1990 1990 Physician, five Birthz) (%I Country 1984 Wears) (?a (96) cm Wl=Y Romania Poland Chile Bulgaria Argentina Brazil Hungary Yugo8lavia Czecho8lovalcia Portugal Korea OECD Range

1390 570 490 1230 280 370 1080 310 550

60 27 16 17 14 29 57 15 30

67 70 71 72 73 71 66 81 72

61 53 62 86 68 86 75 61 56

Sl 88 81 75 75 74 39 76 80

34.8 23.8 25.1 30.5 19.9 29.8 35.4 19.5 22.7

13 9 20 19 26 41 11 15 19

280 140 1160

12 12 17

72 75 71

78 34 72

87 53 86

23.2 20.7 25.1

18 18 38

5-9

76-79

58-97

78-112

230-700

16-22

24-66

Source: World Development Report, World Bank, 1992.

about the same as Argentina, to a very respectable 0.31% for Hungary half that of Korea, a much larger economy with ten times Hungary’s budget for research and development. (See Table 3.) The countries of Eastern Europe will have no choice but to rely on imports for the great bulk of their technology. They must quickly master imported technology and apply it to manufacturing for world markets at world standards of price and quality. Even if their GNPs are doubled or tripled in the next decade or so - a very ambitious goal - domestic resources for science and technology will necessarily be limited. Their scientific and technological capacity must therefore equip itself to support this strategy. Korea and Taiwan are the most obvious models for export-led strategies of economic growth based on the careful build-up of local technological capacity. Beginning with the skills and institutions needed for the absorption of foreign technology, they progressed through creative adaptation to the launching of new products with local brand names, based on indigenous design, development, and research. The problem in applying this experience to Eastern Europe is that both Korea and Taiwan undertook the development of indigenous scientific and technological capacity during a period of extraordinarily rapid economic expansion, in sharp contrast to the straitened circumstances of Eastern Europe. More recently, countries like Turkey and Malaysia have also prospered dramatically after opening up their closed economy to the stimulus of

R&D Expenditures as a Percentage ofUSR&D 0.9

0.1 1.4 1.2 0.5 0.9 0.2 1.8 1.4 0.8-100

R&D Expenditures as a Percentage of GNP 0.6

0.5 0.4 0.7 2.7 0.8 0.5 1.8 1.2 1.3-3.1

R&D Expenditure (Unit.)

23-77

31.1 9.9 32.0 41.6

47.0 16.1 9.3 20.5

21.8

11.8

columll4: Scientists and Engineers Engaged in R&DPer 10,000 Labor Force

5:

.03-26.6

56 .06

0.7 0.3 1.0 .31 .04 .15

0.7

Percent of World Patent Activity (1988)

c&mn

15,490 20,037 21,072 11,965 26,764

35,886 10,141

Scientific Papers (1981-90)

Number of

Column 6:

4.3-7.3

2.36 2.51 3.32 2.61 2.38

2.93 2.19

Mean Citations Per Paper (1981-90)

c&mn7:

*If more than one yearis cited, the first year refers to the first three columns of data, and the second year refers to the fourth column. Source for Columne 1 through 4 :D. R. Chichon, ‘Intamational Science end ‘khnology Updatez lQQ1: National Science Foundation Report NSF 91-609. See aleo footnote 10. Sourca for Column 5: “The Role of EC Investment in fiomoting R&D Capability end Technological Innovation in Eaetam European Countriee: Scientific Goalr and Financial Instruments,” Interim Report on Hungery. Available from Inetitut fk Wirtechafteforechung, 8 Miinchen 86, Poechingeretraeee 6, Poetfach 860460, Federal Republic of Germany. Source for Columns 6 and 7:ISI Science Indicators Database, 1981-90.

Turkey (1988) 1,004 Romania Poland (1982) Chile (1988) 74 Bulgaria (1982) Argentina (1981,1982) 1,087 Brazil (1987,1985) 1,275 Hungary (1987.1982) 588 Yugoslavia (1987) 976 Czechoslovakia (1982) Portugal (1987,1986) 217 Korea (1987) 1,945 Taiwan (1988,1987) 1,555 High Income OECD Range (Various) 800-111,500

Country (yearIa

ColLlmn3:

Column 2:

Column 1:

TABLE 3. Scientific and ‘Ibchnoligical Indicators

Re-Emergence of Ea.&en European Science und %hn&gy

15

foreign competition and undertaking an export-led strategy of economic growth, In contrast to Korea and ‘Mwan, these countries have expanded their manufacturing production and their exports almost exclusively through the importation of conventional technology, even to the relative neglect of their indigenous scientific and technological capacity. Only after nearly a decade of continuous expansion have these countries sensed the limits of expansion through imported technology, and taken a renewed interest in building indigenous technological and scientific capacity. In retrospect, it might have been wiser for these countries to have invested earlier in indigenous scientific and technological capacity Certainly their success to date is no reason for Eastern Europe to allow its hard-won capacity to deteriorate.11

A Necessity and a Duty The aftermath of the break-up of the Soviet Empire reminds one of the history of Eastern Europe after 1918, shorn of the malevolent influences of communism to the East and fascism on the West.12 The leaders of the Eastern European scientific and technological community appear determined not to muff this second chance. To them, the restoration of scientific and technological excellence is not only an economic necessity, but also an important national goal per se. The synergy and the tension between these two themes form a subtext that runs through the contributions to this special issue of Technology In Society. Eastern Europe includes the relatively cohesive area comprised of the newly independent republics of Poland, Hungary, Bulgaria, and Romania, as well as the heirs to Czechoslovakia and Yugoslavia. Contributors from these countries have given generously of their scarce and valuable time to contribute to this Special Issue. East Germany, Albania, and the Baltic republics raise somewhat different issues and are material for future issues of Zkchnokgy in Society. All contributors are experienced and distinguished scientists or science policy officials in Eastern Europe, who speak with authority on the effects of the current rapid economic and political changes on the scientific and technological enterprise. We are grateful to them for responding to the invitation to contribute, and for their willingness to produce excellent and insightful articles having a very short deadline. Professor Erno Pungor, President of the Hungarian National Committee for Technological Development, and his colleague Lajos Nyiri, stress the paradox of a communist system that emphasized science and technology, yet failed in large part because it proved rigid and unresponsive to changes in markets and technology. This was true even in Hungary, which was after all the least isolated from world markets

16

C. Weiss, Jr.

among all Eastern European countries. Professor Pungor and Dr. Nyiri outline the reforms that have already begun to adapt Hungarian science and technology to the needs of a modern economy. Rudolf Zahradnik of the Heyrovsky Institute of the Czechoslovak Academy of Sciences paints a sad picture of the remnant of Czech and Slovak science after the successive blows of Nazi and communist domination, and describes the first efforts at reform since the end of communist rule. The pain palpable behind his diplomatic but eloquent prose, Zahradnik details the rapid reforms needed for his country to become “a functioning part of Europe” before Czech and Slovak science are decimated by the brain drain. He urges that these reforms be implemented rapidly; to do otherwise would be to commit “spiritual autogenocide.” Zahradnik attacks the vested interests in his own country who seek to delay urgently needed reforms long enough to assure themselves a comfortable retirement. (Zahradnik’s contribution was written in the name of both Czech and Slovak scientists, before the fate of the combined federated republic had been determined.) In a startling statistical annex, Zahradnik’s colleague and compatriot Juri Ullschmied documents the anomaly of a country with scientific and technological personnel comparable to those of Sweden, but GNP per capita and a research and development budget more like that of Turkey, one of the least advanced countries of Europe. (See also footnote 11.) If Czechoslovakia abandons its scientific and technological capacity because of its present economic straits, he argues, it will have to invest heavily to recreate it a decade or so hence. Stoyan Dencev, Deputy Director-General for Research and Development of the Information Center for Technology Transfer of the Bulgarian Council of Ministers, echoes Zahradnik’s conclusions and describes his country’s efforts to take advantage of its new freedom and bite the bullet of reform: to restructure universities, break down artificial barriers among institutions, and (most painful of all) pare down excess staff and close down unnecessary institutions. In the last of the national surveys, an article by Dr. Witold Karczewski of the State Committee for Scientific Research in Poland (with an annex by Dr. Jan Krzystof Frackowiak of the same institution) documents the communist legacy in science and technology, and what it means to try to institute reforms after 40 years under a segmented and heavily politicized system as it existed. Dr. Karczewski highlights both the aspirations of the reformers and the potential problems they may expect. Dr. Frackowiak’s addendum provides an inside perspective on attempts to introduce a competitive grant system to fund and revitalize Polish research. More details on the brain drain, the most immediate threat to Eastern European science, are offered by Professor E. Sylvester Vizi of the Institute of Experimental Medicine of the Hungarian Academy of Sciences and Chairman of the Hungarian National Committee on the

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Brain Drain. As in most countries, the major motivation of East European scientists is to be able to practice their profession - preferably at home, but if not, wherever they can. Discrepancies in salary are important but usually not decisive. Professor Vizi welcomes the fact that many East European scientists are in the West for studies or research. The issue is whether they will return. To this might be added that even if they do not return immediately, the experience of Korea and Taiwan shows that expatriate scientists and engineers can be cultivated as a resource of technical and strategic advice, and later, as a source of professionals with high-level experience who have retained an understanding of their native cultures. The picture painted in these national portraits is fleshed out in overviews of Eastern European research in agriculture, medicine, and environment offered by Professors Brane Maticic, Vratislav Schreiber, and Sandor Kerekes, respectively. Professor Brane Maticic, Head of the Division of Irrigation and Drainage of the Faculty of Agriculture of the University of Ljubljana in Slovenia, reviews the present state of agricultural technology in Eastern Europe and projects the likely consequences of the widespread privatization that must come to the region if it is to become competitive. He recommends a thorough reorientation of agricultural research, analogous to that recommended by other contributors for industrial research, to make it more responsive to the needs of the farmers. ‘Lb introduce competition into a stultified system, he further recommends that money be awarded to researchers by a system of competitive project grants awarded on merit by peer review, and that technical services (soil and fertilizer analyses, artificial insemination, etc.) be privatized. Professor Vratislav Schreiber, President of the Czech Medical Research Council describes the effects of the communist system on medical research, especially the “ideological deformation” of medical science due to communist ideological objections to endocrinology, psychiatry, and cybernetics. Professor Sandor Kerekes of the University of Economic Sciences in Budapest describes the increased investment in environmentally polluting industries that began in Hungary in the 1970s and still continues. Although present economic conditions make it difficult to create public support for direct public investments in environmental clean-up, he pins his hopes for pollution control on the coming decentralization of Hungarian industry, on an increased public awareness of local environmental effects, and on the creation of effective means to channel public dissatisfaction to effect the enforcement of environmental policies. One of the most important international efforts to reintegrate Eastern Europe into the world scientific and technological community is that of the European Community (EC). G. Boggio and R. Thomas of the

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Community explain the major EC programs that promote the exchange of students, faculty and researchers between Eastern Europe and the members of the Community. Dr. Michael Oborne of the OECD Secretariat describes the reviews of Hungarian and Czechoslovak science and technology policy conducted by the Organization of Economic Cooperation and Development (OECD). These reviews, carried out by leading experts, recommended the strengthening of university research, the involvement of researchers in Academy institutes in university teaching, the reorientation of research and development to market needs, and the strengthening of national strategic planning for science and technology. Finally, Eastern European research laboratories and technical services have no choice but to seek alliances with western sources of technology, capital, and management know-how if they are to meet the requirements of world markets, or even to compete with Western European laboratories for their own hitherto protected domestic markets. In some cases, these may be partnerships with fms offering similar services in the west. More often, however, Eastern European laboratories seem to be seeking alliances with western firms that are well established in world markets, and that have an immediate use for their capabilities, as, for example, in software design or toxicological testing of drugs. Among these alliances, the path-breaker is Digital Equipment Hungary Ltd., a joint venture between the Massachusetts-based electronics giant and the computer science department of the Central Physics Research Institute of the Hungarian Academy of Sciences. This joint venture builds on the computer expertise built up during Hungary’s days of isolation, enforced by COCOM regulations, from western developments in computer science. It is firmly oriented towards the market for software services in Eastern Europe. A brief contribution from Ferenc Bati outlines the current objectives of the venture.

An Urgent Call for Reform The political and economic stability of Eastern European countries depends on their ability to create jobs with high value added - that is, high productivity - in the reasonably near future. This depends, in turn, on their ability to capture economic gains from managing technology: to manufacture goods and produce services at international levels of price and quality, using technology imported from abroad and adapted to local conditions; to follow changes in world markets and to master the technology needed to satisfy them; to collaborate with foreign firms in technology-based alliances; and eventually, to launch innovations on world markets based on indigenous research and development. As all the contributors to this Special Issue agree, the strengthening of Eastern

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European science and technology will require a thoroughgoing, wider&nging reform. !%or industrial firms, the opening up of Eastern European markets to foreign competition will mean a drastic change in strategy. Many face imminent and probably unavoidable bankruptcy. Those firms that wish to compete in world markets will need to identify products and markets in which they can compete without the protection and automatic compensation of losses to which they have been accustomed. The alternative is to become a mere low-wage manufacturing platform and “jumping-off point” for foreign firms attempting to penetrate Eastern markets. To avoid this situation will require a major change in management practice, substantial investments in market development, new product development, and improved production technology, as well as a concomitant search for foreign financial, technical, and marketing partners. This suggests the need for a massive program of technical assistance, on a sufficient scale to bring Eastern European frms up to date on the management of technology, with emphasis on manufacturing and marketing. The best precedent for such a program would be the massive technical assistance program of the Marshall Plan, now nearly forgotten, which brought virtually the entire population of Western European managers, engineers, union leaders, and government officials in touch with the latest American concepts of enterprise management and manufacturing engineering in a period of just four years after 1950.13 Eastern European scientific and technological research institutions face wrenching changes. They have no choice but to undergo a sharp and painful contraction, ideally based on a clear sense of priorities that reflect the likelihood of achieving practical results. In practice, this will amount to “triage,” with some programs and even whole institutions being closed down, others being converted to commercial technical services or manufacturing firms, with only the very best retaining their roles as research institutions. Such an effort is already well underway in Poland. In most cases, the best way to accomplish this will be to grant these institutions their autonomy, give them a strictly limited endowment or annual grant, and leave them to fend for themselves. Here Hungary has shown the way by converting applied research laboratories that formerly served ministries into manufacturing f-s, with research being redirected into product support. For example, the Hungarian water resources laboratory has been converted into an independent company offering contract research and technical services. Another applied research laboratory in chemistry, formerly dependent on the Ministry of Industry, has become a manufacturer of specialized motor oils, its research laboratory being reconstituted as a product support laboratory.

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Even the best of the former research laboratories will have trouble sustaining themselves under current economic conditions. Even firms that have invested in special, cooperative relationships with universities and research laboratories in the past are cutting back such expenditures. Here an interesting precedent was provided by the former Yugoslav republic of Croatia, which provided funds for temporary support to viable research laboratories or engineering firms while they were reorganized into commercial services if they were able to present a viable business plan. The unemployment among research scientists and engineers resulting from this retrenchment will be both substantial and inevitable. Painful as this may sound, it must be borne in mind that Eastern European research institutes were padded with professional staff having dubious scientific credentials or motivation, not to mention layers of administrative, Party, and security supervision. ‘lb the western ear, some of the calls for reform of long-established institutions may seem destructive, the more so since they seem to be accompanied in many cases by a general hostility to science and technology; to a veteran of the communist years, however, they seem just retribution for years of mismanagement, abuse of privilege, and subservience to an alien political system. For the long term, the fundamental task facing Eastern European scientific and technological communities is to build for the future by training a new generation of citizens who are accustomed to thinking for themselves, particularly about social and political issues that have an important element of science and technology. It also calls for the training of scientists, technologists, and technically trained managers who are fully conversant with contemporary science, accustomed to working to the highest international standards, and familiar with the workings of the global economy and the world-wide scientific and technological community Crucial to this task is educational reform, from primary school to the university, In the universities, curricula will have to be modernized and laboratories re-equipped. Obsolete, unmotivated, or unproductive professionals will have to be eased out of faculty positions, and qualified researchers from non-university institutes welcomed into teaching roles. These changes may require some modification of traditional attitudes towards tenure and academic freedom, which ironically under present circumstances may serve to protect the vested interests of political appointees left over from the old regime.14 Underlying reform of the university should be the restructuring of basic research. The inherited system of block grants to favored institutes, or occasionally university departments, will need to be complemented by a system that encourages and supports scientific merit through competitive grant proposals, and in so doing restores faith in the legitimacy and openness of the grant-making process. Here Hungary, Bulgaria, and

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Poland have led the way with the establishment of granting mechanisms along the lines of the U.S. National Science Foundation.15 (See the article by Frackowiak in this issue.) The need for these reforms is evident to most observers, both inside and outside Eastern Europe. The contributors to this Special Issue emphasize that many Eastern European countries have already made promising beginnings in this direction. A message of hope and inspiration consistently filters through their tales of trial and trouble.

Epilogue The contributors to this Special Issue make it clear that the quiet crisis of technology and science is no less critical to the long-run economic future of Eastern Europe than are the better known political, ethnic, economic, and environmental crises afflicting the region. They are unanimous in acknowledging that international cooperation is critical to the re-emergence of quality science and technology in Eastern Europe, and in expressing their eagerness to re-establish relations with their colleagues in the U.S., Europe and Japan. Finally, they know that given the immediate demands on limited resources in both the public and the private sector, and the universal tendency of political and industrial leaders to cut back on long-range investments when economic times get tough, it will be many years before Eastern European countries will resume an adequate level of investment in science and technology, either from government or from industry. They also know that both technical and financial assistance from the scientifically advanced countries will be essential if these countries are to attain competitiveness in world markets, and that only through such competitiveness can they hope to attain economic growth and hence political stability. The stakes are thus very high, both for Eastern Europe and for the rest of the world.

Notes 1. For other overviews of science and technology in Eastern Europe, see G. E. Schweitzer, “The Future of Scientific Research in Eastern Europe,” Zkchndogy in Society, Vol. 13, (1991) pp. 39-51, and the news sections of Science, Nature, and Chemical and Engineering News. 2. Surprisingly, this attitude carried over even to the workers’ self-management system of the former Yugoslavia, where elected workers’ coundls did not normally invest in improvements in their own capabilities, or even in improved working conditions and on-the-job safety for themselves. More commonly, workers’ councils used their power to press for increased wages and living accommodations, and for capital investments that would lead to an immediate increase in worker productivity and thus justify higher wages, even when this was to the detriment ofthe long-term interest of the firm. This paradoxical behavior was most likely due to the protection enjoyed by Yugoslav industry, which removed any threat to workers’ jobs; to the

C. Weiss, Jr. lack of education of Yugoslav workers; and to the fact that they did not hold shares or any other long-term eco~~~mic interest in the health of the firm that they could keep if they left its employ. 3. Exclusive of these black spots, and contrary to popular impression, the overall state of the environment in Eastern Europe is comparable to that of the West. Improvement, however, is very much slower, and is due more to the loss of obsolete factories than to purposeful environment actions. See R Ackermann, “Environmental Policy Issues: Background Note,” World Bank, 1992, mimeo. 4. This pattern is not exclusive to communism. Under all political systems, enterpfises operated by the state (especially the military) have until recently been notorious for their wasteful use of allocated resources. Poor fuel efficiency of government motor pools is a world wide phenomenon. 6. The final guarantee of a rigid labor market was the low priority given to investments in housing. The absence of a private market in housing created a lO-year wait for apartments - which no one would then give up in order t.c move to a possibly better job! 6. The method of allocating research moneys differed according to the type of laboratory. Within the academy institutes, research funds were generally allocated by a formula that depended on the size of past budgets or on the size of the scientific staff. Funds for university research were granted to the institute or department and were under the control of the director. Institutes belonging to a ministry were supported by the budget of that ministry, or in some cases by competitive grants awarded by government-owned enterprises. 7. For an excellent summary of the economic situation in Eastern Europe between the two world wars, see E. A. Radice, “General Characteristics of the Region Between the Wars,” Chapter 1, in M. C. Raser and E. A. Radice, The Economic History of Eastern Europe, 1919-1976, Vol. I @xford: Clarendon Press, 1985). 8. A detailed summary of the economic history of Eastern Europe atter World War II, including a technical discussion of the considerable measurement difficulties involved, is found in I? Marer, “The Economies and Trade of Eastern Europe,” in W. E. Griffith ted.), Central and Eastern Europe: The Opening Curtain? (Boulder, CO: Westview Press, 1989). 9. Figures are from the World Development Report World Bank, 19921. 10. Corrections carried out by Hungarian authorities, designed to bring Hungarian statistics into line with OECD methodology, bring the figure for Hungarian R&D investment down to 2.1%. See C. Weiss and L. Briggs, “Research and Human Resource Issues in Scientific and ‘Bxhnological Development” (World Bank Technical Report IDP-0100,1992). 11. For a further discussion of the Turkish example in comparison to Hungary and Yugoslavia, see C. Weiss, “Scientiiic and Technological Responses to Structural Adjustment: Human Resources and Research Issues in Hungary, Turkey and Yugoslavia,” Zbchnology In Society, accepted for publication. 12. Standard texts on Eastern European history suggest further parallels. ‘The first comprehensive scheme for the reconstruction in Europe under the auspices of the United Nations . . . remained stillborn since the U.S. Treasury took the view that it should retire from the banking business, and that credits should primarily be granted through the usual private channels.” One might further conjecture that the macro-economic effects of the collapse of Soviet markets in the 1990s may be comparable to those of the Great Depression of the 1930s. See M. C. Raser and E. A. Radice, op. cit., p. 41 ff. 13. See J. Silberman and C. Weiss, Restructuring for Productivity: The Technical Assistance Program of the Marshall Plan, 1948-61,” World Bank Energy and Industry Technical Report, December, 1992. There are surprisingly close similarities between the state of Western European industry after World War II and that of the former communist countries of Easter Europe and the former Soviet Union. European industry aft&r World War II was not merely destroyed; its ruins were those of an industrial plant that had been seriously out of date even when it was fully operational before the war Production technology, management practices, and union rules all reflected the earlier era of small-scale production by craftsmen. Distribution channels were old-fashioned and modem marketing was virtually unknown. The Marshall Plan technical assistance program was designed to allow large numbers of Europeans to see at first hand the multiple requirements for a competitive operational plant in the poetwar world: new products, design and engineering functions, new equipment, new concepts of organization of the workplace, and new concepts of marketing and business organization. Hundreds of study tours to the U.S. were organized to cover such industrial subsectors as steel foundry, machine tools, electric power, or such functions as equipment procurement, productivity statistics, technical

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joumds, or even sciantificdisciplines. The study tours WBIW organized in &Ticient 11u~1be.r~ that the new understanding could spread throughout the country and throughout Western Europe. The Marshall Plan technique was to organize teams of up to 30 people from different plants within an industry, and to include in these teams a cross-section of the people who would be needed to make the new ideas work: industrialists, managers, engineers, foremen, workers, and union leaders. For example, every factory in France with over 50 employees sent at least one representative on one of the study tours. 14. In many Eastern European countries, initiatives to reform the relationship between the universities and the Academy of Science are led by Ministries of Education. They are attempting to take control of the research institutes hitherto managed by the Academies of Science, which are often seen as holdovers from the old regime. However great the deficiencies of the Academies in the different countries may be, the typical Ministry of Education is a week institution, unlikely to be an improvement as a research manager. It would be much better to resolve this difficult issue by mobilizing the combined wisdom of the scientific community rather than by awaiting the outcome of a bureaucratic power struggle between the Ministry and the Academy, (See article by Zahradnik in this issue.) 15. To institute a competitive grant system does not necessarily change the pattern of research support in a country, and has problems of its own in a small scientific community prone to both the scratching and the stabbing of backs. Hard-pressed universities and research institutes may hardly be blamed for claiming overhead allowances for the support of impoverished libraries and other support structures. But Eastern European scientists seem generally enthusiastic about the prospect of even a small amount of unrestricted research funds free from hierarchical control.