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Why Does Russia Have So Much Trouble Modernizing?
14 November 2011
Why Does Russia Have So Much Trouble Modernizing?

Why Does Russia Have So Much Trouble Modernizing?
By Loren Graham

Russias leaders are making a major effort to modernize, emphasizing that high technology is the key. The Russian government has asked my university, MIT, to help it create a new silicon valley, Skolkovo, near Moscow. Major Western companies, including Intel, Cisco, Siemens, Boeing, and Nokia are investing in facilities in Skolkovo.

Unfortunately, Russias current leaders are making the same mistake that its past leaders, going back to Peter the Great, have repeatedly made: they have their eyes on technology, not on the social and economic conditions that cause technology to flourish. Russias history reveals that getting ones hands on technologies does not result by itself in economic growth and prosperity. Russia has often been good in developing new technologies, but abysmal in sustaining them and benefitting from them. If Russia produces novel technologies at Skolkovo, those innovations will be commercialized elsewhere, in countries with more propitious social and economic conditions. The Western companies investing in Skolkovo know this, and that explains their enthusiasm.

Russians have often claimed that they invented many of the important technologies of modern civilization: the steam engine, the light bulb, the radio, the airplane, the transistor, the laser, the computer, and many other devices and machines. Western commentators ridiculed these claims. Recent research has revealed a big surprise. Russians did indeed build the first steam locomotives outside England and the first operational diesel-powered locomotives in the world; they did first illuminate the avenues of major cities with electric lights; they did transmit radio waves before Gugliemo Marconi; they did build the first multi-engined passenger planes (just a few years after the Wright brothers first flew); they did pioneer in the development of transistors and diodes; they did publish the principles of lasers a generation before any others; and they did build the first electronic computer in continental Europe. While the claims that they actually invented each of these devices are exaggerations, one thing remains clear: the Russians have absolutely legitimate claims to being pioneers in their development.

But if the Russians have been so creative, why are they so backward in technology at present? None of the remarkable achievements cited above was followed by successful commercial development. Because of its adverse business environment Russia has great difficulty taking advantage of the technologies it creates. The Russian economy today is largely dependent on oil and gas; it is difficult to name one Russian high-technology manufacturer that is world-class, with the possible exceptions of a few software companies and vestigial Soviet strengths in the weapons, nuclear, and space industries. Little Switzerland exports each year about three times more high-technology, measured in dollar value, than Russia.

In order to solve this problem Russias next leaders should stop merely trying to get their hands on the latest technologies by creating their own isolated silicon valleys and instead ask the following questions about their society as a whole:

  • How does one change the mentality of Russians about business, shifting to a view that a businessperson making money from an innovation is an admirable citizen, one of the major contributors to a countrys prosperity, and not a person involved in dirty deals merely for self-benefit?
  • How does one create a political order in which successful entrepreneurs are not feared by government leaders as rivals for power and influence but promoted?
  • How does one create a society in which freedom of expression, geographic mobility, and economic independence are valued and protected?
  • How does one establish a legal system in which judges are independent from political authority, intellectual property rights are protected, and people accused of a crime have a chance of being acquitted? 
  • How does one create an economic and political order in which investors are not only numerous, but willing to take risks on developing novel ideas?
  • How does one overcome rampant corruption, an environment in which extortionists quickly focus on any business that looks profitable?
  • How does one reform a research and education system so that it combines teaching with research as a single operation, producing prominent scientists and students who care about application and economic development rather than priding themselves on working in an ivory tower?

Thus, Russia faces a tall order if it truly wishes to modernize. But in principle improvement is possible. After all, South Korea made the transition in about forty years, reforming its society, creating a democracy, at the same time it modernized technologically. That is the ticket. Vladimir Putin does not want to buy that ticket because of his dislike of competition and political democracy. It is sad, because in an interconnected world of knowledge economies we would all benefit if Russia truly modernized.


Loren Graham is professor emeritus of history of science at MIT and Harvard, and author of the forthcoming Lonely Ideas: Russias Trap.


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