The limits of authoritarianism become apparent in Russia

ARTICLE: "Dubna's tale: Russia is trying to build a high-tech economy, but red tape is strangling it," The Economist, 2 August 2008, p. 54.

Dubna refers to a scientific town, sort of the old USSR's version of Oak Ridge TN. Like the national labs here, Dubna seeks to diversify itself and become a high-tech hub that incubates new businesses. One sign? It's designated a free economic zone, meaning Russian companies born there are exempted from custom duties and pay fewer taxes.

Moscow wants Dubna to become a Silicon Valley, "or at least a Bangalore." The biggest IT firm in Russia, IBS, plans to move hundreds of programmers there.

Interesting, but I hear this from IT execs here: Russian programmers are the best in the world. Not the best designers, as those are found here, but the best pure programmers. A part of that "blackboard smarts" legacy of the USSR (smart guys working with few resources have to be more theoretically sound).

The key:

But the big problem for high technology in Russia is neither money nor ideas. It is the country's all-pervasive bureaucracy, weak legal system and culture of corruption.

Thus Russia's high-tech exports amount to just 0.6% of its total exports--astonishing low given the talent pool (which is aging, BTW).

Putin can only go so far with the energy equation. He can recreate the same trajectory other energy-rich nations have forged, but it tops out much more quickly than most leaders anticipate and soon enough, you're looking to diversify.

Comments

[Louis Heberlein]

Russia's high tech expertise has been funded and oriented towards military needs, particularly for short, high shock conflicts. They did not have a skill core oriented to civil users' desires and criteria like cost effectiveness and ease of use.

Instead of taking the insights they could get from the AK-47 design and globalization, the Russian capitalists and bureaucracy focused on things like oil, weapon systems for new Core that were show pieces, and the 1990s virtual financial world schemes. In their minds those schemes were what capitalism had always been.

Now they can have an opportunity to join and compete with Old Core nations in things like electric cars, modern energy technologies etc.

[Louis Heberlein]

Since I made my comments above, it was announced that Russia will invest in and share production of Eclipse Aviation's modern mini- business jet. That is a good example that Russia is getting to understand civil aviation needs, particularly those in the New Core economies.