Weapons, Culture, and Self-Interest

Kimberly Marten Zisk

Columbia University Press, New York

1997

2. The Endurance of Soviet Enterprises

 

One of the striking features of Russian reform has been the obvious reluctance of managers, workers, and the state to let the old Soviet-era defense enterprises die. These large entities, often employing thousands of workers, have remained in existence even when they have no obvious market for their products and when bankruptcy would have seemed logical. Managers seem to continue to hope that the old Soviet-era collectives can find something new to produce, and this is how they look at the notion of defense industry conversion. ¹

This strategy flies in the face of the advice usually given to Russian policy makers by U.S. experts. The consensus in the West has been that the conversion of existing plant floorspace to a new product line, even a line closely related to its existing defense counterpart, is rarely profitable or efficient. The costs of redesigning existing assembly lines and other pieces of infrastructure to engage in flexible, market-oriented production are simply too high. ² Instead, the preferred strategies for U.S. defense firms facing declining military orders have been either downsizing or diversification, where diversification means acquiring other, existing, nondefense businesses. These diversification efforts are most successful when they are managed by individuals with good track records in the commercial market. U.S. defense industrial managers are thought to be insufficiently innovative and risk-acceptant to be good commercial market managers. ³ Responsiveness to the market often means that the diversified firm must relocate to another city or region, one with an infrastructure base or tax regime that is more appropriate for the new kind of production undertaken. U.S. defense industry experts therefore tend to advise the Russians to raze inefficient plants and "bulldoze the managers." ⁴ Research or production teams from the old enterprises should restructure themselves into decentralized, high-technology spin-off companies, occupying new spaces under new management principles. ⁵

As will be discussed in chapter 4, spin-off and start-up companies from Soviet defense enterprises have indeed become important actors in the Russian economy. But rather than replacing the old Soviet enterprises, these spin-offs have coexisted alongside  them. Russians often call the Soviet-era enterprises the "mother enterprises" and the spin-off firms the "daughter companies." The mother enterprises tend to become holding companies for the daughter firms. Almost all spin-offs and start-ups continue to occupy the same floorspace they were assigned back when they were subdivisions of the Soviet defense enterprise. Il'ia Klebanov, general director of the Leningrad Optical Mechanical Association (LOMO) in St. Petersburg, made a comment typical of defense managers when he said that his ability to form a holding company for his enterprise's newly independent subdivisions meant that he could keep his Soviet-era enterprise "whole." ⁶

Of course, in some cases, maintaining existing Soviet defense enterprises became an economically viable option in the new Russia. Especially in the areas of shipbuilding, space technology, and aircraft manufacture, some large enterprises have found new customers for large-scale projects that resemble their Soviet-era products. With modifications of their former product lines, such as technical upgrades or the addition of Western parts, these enterprises have proved that they can engage in what appears to be profitable business. ⁷

Yet there are dozens of examples of enterprises that have been unable to find significant new contracts, unable to pay their bills or workers on time, and unable to keep their main assembly lines operating, often for a year or more, that nonetheless have stubbornly refused to dissolve themselves. Given tight Russian federal budgets and the shrinking international demand for weapons exports, ⁸ these enterprises have been unlikely to find large new orders. Nevertheless, they endured. Although at least 226 defense enterprises had been labeled bankrupt by federal authorities by April 1995, only 10 of these had actually been examined by the relevant courts, and in four of those cases, the creditors withdrew from the procedure. ⁹ Enterprises occasionally chose to declare themselves bankrupt, ¹⁰ but this was done merely to give them time, under a new director (usually, someone already in the company or closely connected to it), to continue to attempt to survive in the same market, with the same basic organizational building blocks as before. ¹¹ Reports indicate that even if the labor force had to be sent on a forced leave because of a lack of orders, the director and his or her immediate staff usually continued to come in to the factory on a regular basis to try to work out plans for keeping the plant open. ¹² An occasional director resigned in protest over the lack of state orders. ¹³ Yet the vast majority of managers of Russian defense industrial plants have seemed determined to hold on to their positions for as long as possible. As I discuss below, a significant fraction of Soviet-era workers have also remained at the mother enterprises, despite low salaries, late wages, shortened work weeks, and poor working conditions

In this chapter, I match the arguments from the two contrasting theoretical perspectives outlined in chapter 1 against the available evidence, to see which does the best job of explaining why both managers and workers continue to cling to enterprises that have lost their economic purpose. Does the fact that enterprises continued to exist and employ large numbers of workers in the absence of profitable orders indicate that managers have an abiding social attachment to the collective and its glory, despite the fact that they would have done better to leave or disband the enterprise? Or instead was it in the best material self-interest of workers and managers to use and support these obsolete enterprises to maximize their own advantages as individuals?

The Pattern to Be Explained: Maintenance of the Old Enterprises

Before turning to the arguments about why  managers and workers have remained at Soviet-era enterprises, let us examine the evidence indicating that remaining at the old workplace was in fact a common behavioral pattern

Managers

The general directors of the old Soviet defense enterprises have done everything in their power to keep their jobs in the new Russia. For example, in the large number of state defense enterprises that were privatized by 1995, ¹⁴ directors have tried to buy a significant percentage of the available enterprise stock. Under Russian law, this allowed them to ensure their own job stability. Control of a significant share of stock meant that they could appoint themselves to the new board of directors and therefore exert influence over the choice of management appointees. ¹⁵ They did not have to worry about outsiders coming on to the board and cleaning house

In order to set the stage for this to happen, directors (from both inside and outside the defense complex) had to take strong political action to affect the progress of Russia's policies for privatizing state enterprises. ¹⁶ The original plan of Russian prime minister Yegor Gaidar had been to enact a single variant of mass privatization, whereby all privatizing enterprises would have been sold at auction, primarily in exchange for the free voucher coupons given to every Russian citizen. This would have made small shareholders the controllers of state defense companies. Managers and workers inside those companies would have been granted potential access (through a combination of free shares and purchases) to only 40 percent of their enterprises' stock. Banding together with Russian labor interests in 1992 and 1993, company directors lobbied federal authorities to create a new variant of this state privatization law, the so-called Option Two. This option permitted enterprise insiders (i.e., workers and managers) to buy 51 percent of their own enterprise's shares at the start of the privatization process. In the words of Anders Aslund, a Western economic adviser to the Russian government, "the government was compelled to accommodate the managers." ¹⁷ The collectives of the enterprises undergoing privatization were given the right to choose which version of privatization they wanted to adopt, and most chose Option Two

Pressure on this issue emanated from the directors' faction within the Russian Congress of People's Deputies and the Supreme Soviet, the national legislative bodies that had been freely and popularly elected in 1990. ¹⁸ During the early years of Russian reform, the legislature had the legal power to unseat government ministers. They exercised this power against Prime Minister Yegor Gaidar, the man most associated with Yeltsin's original radical reform strategy, by ousting him in December 1992. Yeltsin's economic policy was thus forcibly bent to the will of a powerful congressional faction, the Russian Union of Industrialists and Entrepreneurs (RUIE), led by a man who championed the interests of defense industrialists, Arkady Vol'skii. ¹⁹ Managers as a group found themselves well placed at the time of the Soviet collapse to grant themselves the legal right to seize control of a significant percentage of the stock of their own privatizing enterprises

Managers have furthermore been clever in using privatization laws to their individual advantage. By law, the labor collective as a whole, not managers alone, had responsibility for selecting the privatization option preferred by the enterprise, and under Option Two, it was the collective as a whole that was given the right to buy the majority insider shares. But as time went on, managers were often able to take over the shares originally sold to the workers, thus gaining an even bigger say in how the enterprises were run. There have been many cases of defense enterprise workers being persuaded or coerced to sell their shares to the managers who supervised them. ²⁰

Defense managers further worked with the Russian State Committee on Defense Industry to ensure that outside investors were largely excluded from the opportunity to buy enterprise shares at auction. ²¹ Even in those cases where Option Two was not selected by the collective (often because the collective in question lacked the cash to buy a majority of the shares), managers have sometimes arranged matters so that they might eventually buy back control over the stock. An example of this is the strategy followed by the director of the Impuls' Scientific Production Association in Moscow. ²² The labor collective there chose a different state-sanctioned privatization plan, called Option One. Workers received 25 percent of the company's stock for free without voting privileges and were allowed to buy 10 percent of the stock with voting privileges at a discounted rate. Managers were allowed to buy only 5 percent of the voting stock. Of the remaining 60 percent, the Russian State Property Committee (Gosudarstvennyi Komitet Imushchestva , or GKI) retained 31 percent for future sale at auction; the final 29 percent of the stock was sold at auction in exchange for the free privatization vouchers given to every Russian citizen in 1992. This would seem to imply that managers lost control of the stock. But it turns out that private citizens did not buy many of those auctioned shares independently. Of the last 29 percent, approximately one-third of the stock was purchased by the employees or other "friends" of Impuls' with their own vouchers, and one-third was purchased by major Russian investment funds. The general director of Impuls', Aleksandr V. Grigor'ev, saw this as a good sign: the investment funds bought the shares as a commercial venture, hoping for quick speculative gain, and this meant that insiders would be able to buy them back easily (if at a higher price). ²³ At the conclusion of the privatization process, Grigor'ev hoped that insiders would own 59 percent of the stock (the 40 percent originally designated, plus two-thirds of the 29 percent sold at market), even though the collective had chosen a privatization variant apparently calculated to keep insiders as minority owners. If Impuls' followed the common pattern, all the insider stocks would be likely to end up eventually in the hands of the managers, as workers could be persuaded to sell their shares to them

Even those directors who have lost control of enterprise stock have not always been willing to step down when the new owners have voted them out of their jobs. At least one case has been reported of a director snatching a document listing the purported stockholders of a privatized company, declaring it fraudulent, and holding it under armed guard so that he might continue to direct the company against the wishes of its trade union. ²⁴ Despite promises that the state would develop a national stock registry, during this period privatized enterprises in Russia often kept the only official list of stockholders locked in a safe in the director's office, and thus, as one analyst noted, "investors risk being deleted from the registry with little evidence of ownership." ²⁵

Nevertheless, there have been cases where directors were let go against their will. According to one report, one-tenth of all privatized Russian enterprises had their old directors replaced following a stockholders' meeting. ²⁶ In addition, at defense enterprises that are not allowed to privatize for state security reasons (reportedly numbering somewhere in the hundreds) ²⁷ or have not yet completed the privatization process, the employees' Labor Collective Council (Sovet Trudovogo Kollektiva, or STK) has the legal right to hold a referendum and register a no-confidence vote in the director. This has happened frequently when the STK believes that the director has violated the wage or benefit rights of the workers or failed to find a workable conversion plan for the enterprise. After such a vote, the STK communicates the result to the responsible state authorities, who may ask the director to step down and then hold a new employee election for the post. There are numerous cases where Soviet-era defense enterprise directors have been voted out and replaced by this method. ²⁸

Yet newspapers regularly report on efforts made by directors to stay in power even after STKs have lobbied the appropriate authorities to get them to leave. The state authorities have a great deal of discretion, and directors' efforts to hang on at all costs have sometimes succeeded. ²⁹ Even when they have clear evidence that they are unwanted by their employees, then, directors have often done all they could to retain their jobs

Workers' Views of Managers

Workers, for the most part, also prefer that management be controlled by insiders. When either the STK or a group of insider shareholders has managed to unseat the old director successfully, the employees almost always elect to the vacant position another, lower-level manager from within the enterprise. ³⁰ According to the deputy director for personnel at the Mashinostroenie enterprise in Reutov, each manager at every level in the company has his or her own corps of "reserves," people who are being trained as possible replacements for the manager in the future. ³¹ The new contenders for the general director's post usually come from this pool. This system is a holdover from Soviet times, when supervisors trained members of a narrow internal applicant pool for managerial posts. ³² (In Soviet times, there were no business schools in the Western understanding of that term, so future managers had to be trained on the job, from within.) Workers often say that only insiders have sufficient understanding of the plant to be able to manage it successfully.

This system for replacement in the event of conflict with the manager is different from the one in place in large corporations in the United States. U.S. managers who retire in the normal course of things are most often replaced by members of their inside management teams (which ensures stability if good management is in place), but according to one recent study of management turnover in top U.S. companies, in the majority of cases where the chief executive officer (CEO) of a company was forced to resign by the board of directors because of poor performance, the board chose as a replacement either an outside member of the board or someone who was not previously associated with the firm in any capacity. ³³ In contrast, even those Russian defense enterprises undergoing crisis prefer insiders to continue as directors

The preference for inside management in Russian defense industry in fact means that the Soviet-era general director often remains the employees' favorite candidate for the post when elections are held. Well-publicized conflicts between some directors and STKs should not be taken to indicate that most STKs disapprove of their general directors. For example, at the Mashinostroenie plant in Reutov, three candidates, all internal, ran for the general director's post during the last election. The man who had been general director in the 1980s, Gerbert A. Yefremov, is said to have easily won the race, since, as one of his deputies said, "only Yefremov had sufficient upper management experience" to do the job correctly. ³⁴ Even in enterprises facing difficult situations, the workforce often loyally turns to the same general director for guidance

Workers and the Enterprise

It is not only managers who exhibit a strong desire to remain in their positions and keep their plants open despite a lack of customers. A large number of employees also remain, even after many of the youngest and most talented workers have left. It is difficult to determine the overall outflow of employees from Russian defense industry, because no relevant category appears in official state employment statistics and managers have incentives (including those related to taxation and subsidization) to hide the real level of factory employment. According to one definitive interpretation of official records from the USSR State Committee for Statistics, the Russian Republic of the USSR employed somewhere around 5.5 million people in the military-industrial sector in 1985. ³⁵ (This total may not have included workers in the defense nuclear sector, which may have numbered several million.) By early 1993 Russian defense industrial factories were reported to have lost 600,000 employees, while scientific research institutes in the defense complex were reported to have lost 200,000 (1992 was the year when the drastic cutting of the military procurement and research-and-development budgets began). ³⁶ From mid-1993 to mid-1994, 1 million additional employees apparently left defense industrial production jobs, and another 600,000 left defense scientific enterprises. ³⁷ If the reports are correct, and if their databases are comparable, this would indicate that over 46 percent of the overall workforce left Russian defense enterprises voluntarily between 1992 and the end of 1994. ³⁸

Clearly, this exodus is massive, and Western analysts have usually focused on it as the key point for analysis, since they see it as evidence of either the market restructuring or the weakness of those enterprises. But these figures also indicate that around 50 percent of the employees remained  in defense enterprises, despite the objectively poor prospects for continuing long-term employment there. Given how large these enterprises were, at least as of late 1993, this would have meant that the average defense plant still retained more than a thousand workers. ³⁹ Based on reports of individual factories in Moscow, St. Petersburg, Nizhnii Novgorod, Barnaul, and other defense-heavy cities and regions, it seems that a high fraction of these employees were at plants that faced hard times. Managers in turn have avoided mass layoffs whenever possible, preferring to rely on attrition alone to shrink swollen workforces

The employees who remained faced dismal conditions and low pay. In 1994 and into 1995 the average wage in Russian defense industry was only 60 to 70 percent of the average wage in civilian industry, ⁴⁰ and often workers did not even receive their full pay. As of October 1994, 400 defense enterprises in Russia had fully stopped work, sending their employees on forced leave at minimal pay (by law, those on forced leave must receive two-thirds of the pay they are entitled to in their employment contracts, ⁴¹ although this law is not always enforced). ⁴² An additional 1,500 enterprises were operating with shortened workdays or workweeks, proportionately lowering the amount of take-home pay. ⁴³ Even when full wages were paid, they were often paid late. A relatively successful enterprise, the Central Aerohydrodynamics Institute (TsAGI) in Zhukovskii (just outside Moscow), regularly paid wages two weeks late throughout 1994 because it received late payments from the Ministry of Defense. ⁴⁴ Elsewhere in defense industry, payments delayed by several months have been common. When inflation levels in Russia averaged 10 percent per month or more, such delays significantly decreased the value of the pay received

It is of course likely that many of these employees took on second jobs. The Russian Labor Ministry claimed in late 1994 that 4 million Russians worked in the underground economy, paying no taxes. ⁴⁵ Presumably, some of these underground workers were people from defense enterprises who were on forced leave or partial workweeks. Yet in many cases such workers have been denied the opportunity for regular full-time work elsewhere, as they were expected to sign in at the defense factory and stay a minimal amount of time there to indicate their continuing employment, even if no actual work was performed. Furthermore, private automobiles are uncommon among those earning average wages in Russia, and most public transportation systems are heavily overburdened, limiting the ability of part-time workers to commute to distant locations for secondary employment

Defense industry workers may be getting by on multiple employment arrangements, but there is no evidence that they are doing well. As analyst Jerry Hough remarks on reports about the expansion of the underground service economy, "the women selling newspapers on the subway or caring for their friends' children at home are earning peanuts." ⁴⁶ Many workers spend their forced leaves tending small garden plots at their dachas. ⁴⁷ While this provides them with food for the winter, and perhaps extra produce to sell in city marketplaces, it likely does not come close to matching the high standard of living they maintained in the past as employees of favored state enterprises. Even those laid-off workers who find work outside the defense sector are often in jobs that do not utilize their advanced skills. A nuclear engineer with a Ph.D. who works as a bank guard and chauffeur while on forced leave may be earning adequate wages, ⁴⁸ but the expert skills gained through years of work are likely to degrade with nonuse, leaving such experts unemployable in high-technology fields in the future. ⁴⁹ By hanging on to their jobs at the old enterprises, then, employees appear to be allowing their labor market advantages to atrophy.

The question of why workers hang on to their defense sector jobs through such economic hardship, rather than cutting their ties and looking for permanent work elsewhere, becomes even more puzzling when we add the fact that working conditions at Russian defense industrial sites are often dangerous and unpleasant. Although the Russian press does not often report on such issues, we know from occasional stories that a combination of old habits and funding cuts has meant that factory safety conditions are often poor. ⁵⁰ Workers remain at jobs that not only pay them poorly but endanger their health. The Russian State Statistics Committee has argued that one of the major reasons for the decline in male life expectancy in Russia in recent years is an increase in industrial accidents. ⁵¹

Why do both managers and workers cling so resolutely to positions that seem objectively undesirable and unlikely to continue for long? One response was provided by the man who was head of Russia's Federal Unemployment Service, Fedor Prokopov, in July 1995. He claimed that it was due to a "tradition of collectivism." ⁵² Does the evidence in fact support the notion that it is socialization into this tradition that keeps people at the enterprises?

The Soviet Cultural Background: Ingrained Paternalism

Managers and workers in the transition era may have remained bound to the Soviet enterprises because of ingrained social networks and emotional and moral attachment to the system underlying those networks. The Soviet enterprise was a community that surrounded every social aspect of its members' lives. It is not surprising that those whose lives were spent in such a community would come to identify with it. For employees, leaving the enterprise would mean not merely leaving behind coworkers but stepping away from family, friends, neighbors, and teachers, all the people who shape and affirm the individual's identity. For managers, leaving the enterprise in a time of hardship would be akin to a captain deserting a sinking ship

Many Soviet defense industrial enterprises, particularly those outside Russia's older metropolitan areas, built the apartments in which their employees lived and developed "microcities" ⁵³ (often within existing cities), complete with their own power and heating facilities, for factory employees. Enterprise employees thus lived next door to (and above or below) their coworkers. As anyone who has lived in an apartment building knows, sound travels through walls; this is especially common in Soviet-constructed apartment buildings. ⁵⁴ Having coworkers as neighbors must have meant that there was virtually no separation between home life and work life. In fact, the factory trade unions established housing committees that delved even further into employees' private lives. Parents' committees were formed within housing blocks to oversee the raising of children; a sanitation subcommittee would inspect individual living quarters on an annual basis to verify that proper standards of cleanliness and fire safety were being followed; and the housing committee wall newspaper often listed the names of those residents not following the rules of polite socialist communal living. ⁵⁵ People would have grown up in an atmosphere where the enterprise oversaw virtually every aspect of its employees' lives and where such an all-encompassing paternalism was considered normal

Many enterprises also provided nursery schools and daycare for the children of enterprise employees, reinforcing the pattern of the common workplace surrounding family life. Enterprises owned medical clinics, health spas, vacation rental homes, children's summer camps, dachas, collective farms, sports complexes, musical and theater performance centers, and movie theaters. All the services provided were designated primarily for enterprise employees and were either free or heavily subsidized. These services were known to be of relatively high quality by Soviet standards (for example, Andrei Sakharov wrote that employees of the nuclear installation in the closed defense city of Arzamas-16 received better health care than other residents of the city). ⁵⁶ It is clear from both observations on the street and conversations with those who lived there that defense enterprises and defense-heavy regions, ranging from Zelenograd and St. Petersburg to Nizhnii Novgorod, were materially favored by the Soviet state. They are reported to have received preferred access to consumer goods such as meat, for example, and lightened restrictions on such things as the ability to buy Western jazz records when the state officially repressed such "decadent" music. While work at Soviet defense enterprises from the Stalin era onward had its disadvantages (including the need to maintain excessive secrecy and the lack of opportunity for innovative experimentation by scientists), ⁵⁷ and while the lifestyle those enterprises supported may not have been luxurious by Western standards, those choosing to take and keep defense industry jobs in Soviet times lived at a relatively comfortable material level

The collective farms provided food for workday meals, as well as subsidized baskets of groceries and carloads of cheap winter potatoes. ⁵⁸ According to a 1959 history of the Krasnoe Sormovo military shipbuilding plant in Nizhnii Novgorod (then known as Gor'kii), "housewives may order meals to take home" from the factory cafeteria. ⁵⁹ The trade union helped employees plan their vacations, often at enterprise-funded dachas, spas, or campgrounds. The sports complexes provided subsidized ballet and soccer lessons for employees' children. ⁶⁰ Each large factory had its own sports teams (usually soccer and sometimes hockey as well), and the general director was expected to attend every game. ⁶¹ In the evenings, employees and their families participated in musical and drama clubs sponsored by the enterprise, and the internal enterprise newspaper would typically send a reporter to cover their activities. ⁶² Teenage and young adult children of employees joined the enterprise's Communist Youth League (Komsomol) organization, which, among other things, sponsored field trips to other workplaces, so that the young people could learn about a variety of employment opportunities. ⁶³

Many enterprises maintained adjunct faculty links to university and higher technical school science and engineering departments and acted as funnels to gather the brightest local children into these programs from an early age. For example, the Mashinostroenie enterprise in Reutov sent representatives to the local elementary schools to advertise their enterprise's technical achievements and sponsored a Young Pioneers camp to give training through technical games to children they wanted to tap for the future. About half of those brought into this program were the children of Mashinostroenie employees. ⁶⁴ Many enterprises ran vocational-technical training programs for high-school-age students, giving them four to five years of standard secondary education along with on-the-job training. ⁶⁵

These training programs encouraged multiple generations of the same families to work in the same enterprise. A 1976 history of the Admiralteiskii shipbuilding association in St. Petersburg, which produced both icebreakers and nuclear attack submarines, proudly noted that one family had worked there for 150 years. It also recounted the job history of the Kuz'mich family: one brother, Boris, was the night manager in the general director's office; another, Konstantin, was the head of a berth; Boris's wife, Antonina, also worked at the shipyard in an unnamed capacity, and their son Yurii and his wife, Galina, were both technicians there; their other son, Georgii, was a metalworker at the enterprise. ⁶⁶ While countrywide statistics on where family members worked are not available, such situations do not seem to have been unusual. ⁶⁷

A position at a Soviet defense enterprise was thus not merely a job: It meant receipt of one's own apartment, in a country where communal housing was (and is still) common (indeed, given the defense industry's privileged status in the economy and the importance attached to hiring qualified workers, defense factory housing was probably better than other factory housing). It meant access to relatively high quality, free medical care, in a country where publicly available medical care (for example, at open-access municipal clinics) was often poor. It meant home delivery of low-cost fresh food, in a country of relative scarcity. It meant access to education, entertainment, moral training, and job prospects for the children, in a country where parents' social and political status significantly determined children's opportunities. Above all, it meant that an all-encompassing community surrounded one's everyday activities: friends, neighbors, and family tended all to be coworkers, who probably knew each other's private business much more intimately than is common in an individualistic country such as the United States. Such were the norms of everyday life in many Soviet defense industrial enterprises, norms that were suddenly interrupted by the explosion of the market economy

What about the directors of these enterprises? Many analysts, including some general directors themselves, have referred to the managers of large Soviet defense enterprises as "mayors." ⁶⁸ Directors were expected to set aside time from their regular workdays in order to hear petitions from their employees, ⁶⁹ who would ask for their advice or intervention on everything from their children's schooling to meat delivery in local shops. ⁷⁰ In the dozens of closed military-industrial cities throughout Russia, some of which retain tight control over entrance and exit today, the enterprise literally was the city. For example, in the closed nuclear city of Arzamas-16 (now Sarov), there was no municipal soviet or council until 1990. All the functions normally performed by a city administration were instead performed under the aegis of the Ministry of Atomic Energy (earlier known as the Ministry of Medium Machine-building), and the city was merely a "branch of the enterprise." ⁷¹

Economist Clifford Gaddy notes that even in the defense-heavy city of Saratov, which had more than one large defense enterprise, the multiple enterprises each created their own self-enclosed subcities; he concludes, "There was no 'downtown' Saratov, only a series of 'micro-company towns.'" ⁷² Journalist Bill Keller discovered that in Sverdlovsk (now Yekaterinburg), a consortium of large enterprises and not the municipal government was responsible for local police protection. He quotes the deputy general director of Uralmash, one of the Sverdlovsk defense factories, as dismissing the need for a city government: "Why do we need them? We have our own city--180,000 people. Isn't that a city? It's all on our budget." ⁷³

Managers undoubtedly developed abiding, paternalistic interest in the well-being of their employees and the microregions that they built, almost akin to that of a feudal lord. It would be natural for them to see it as their responsibility to provide jobs and social services for their employees in a time of economic upheaval. From the socialization perspective, it would make sense that to keep the enterprise functioning for the sake of employee well-being would thus be an overriding goal in the manager's life. Directors socialized into feelings of paternalistic responsibility for their employees could not, in good conscience, have sacrificed those duties for the sake of individual gain

From the socialization perspective, the individuals who had earlier found themselves most frustrated by the bonds of such a community would be the most likely to leave the enterprise when new opportunities arose. If the prospect of continuing to abide by the old system was intolerable to them, they might leave even if the risks of the market threatened their material well-being. Conversely, those most accustomed to the existing order, and especially those most content within it, would fight the most strongly to preserve the community, because the community would legitimate the rules under which they operated. They would not consider the idea of leaving the community to be a viable alternative, even if exit would provide them with better economic opportunities. This would explain, then, the tendency of managers and older workers to remain most closely tied to the enterprise, while the youngest, best educated (and presumably most worldly) employees left

While an explanation based on historically socialized norms fits the situation outlined above, where enterprises are kept alive at all costs, the fit alone does not demonstrate the power of those norms. New patterns could be consistent with old patterns by coincidence. In fact, as the following section will demonstrate, keeping the existing factories alive served the material interests of managers and workers so strongly that their survival in many cases depended on the old enterprises.

The Rational Self-Interest Explanation: The Lack of Alternatives

The economic system of transitional Russia provided a set of strong material reasons for individuals to choose to remain at the enterprises where they were employed in Soviet times. In particular, most risk-averse individuals, both managers and many workers, had a number of clear economic incentives for trying to hold on to their Soviet-era positions. Given the limited opportunities for employment and economic gain that both managers and workers faced if they chose to leave their enterprises, it was in fact economically rational for them to stay

Managers

At first glance, it would seem that Soviet-era managers were ideally suited to become successful, independent entrepreneurs in the new Russian market. Directors of large enterprises in particular were high-ranking members of the Communist Party elite nomenklatura . Most of them were prominent actors in local and regional politics, ⁷⁴ as will be discussed more in the next chapter. Most of the senior officials in the nine Soviet ministries overseeing defense industrial-plan implementation were appointed from the ranks of plant managers and chief engineers. ⁷⁵ Given the widespread perception that the old Soviet nomenklatura was very well placed both to enter the market and to shape the laws regulating the market economy, ⁷⁶ one might have expected Soviet-era defense managers to lead the pack of new millionaires

Defense managers certainly had a long history of learning how to bargain with authorities to get exceptions made to rules. ⁷⁷ They also had a long history of cleverly interpreting any available loopholes in Soviet enterprise law and of sweeping laws under the carpet when they could get away with it. They needed to do this to ensure that their factories could meet or surpass the plan imposed by central authorities, even when it was technically impossible to fulfill. ⁷⁸ Beginning in the Gorbachev era, this potent mix of capabilities was strengthened by managers' ability to gain control over privatizing firms and to use Soviet state property to line their own pockets. Evidence abounds that they in fact did make themselves wealthy this way; stories circulate about managers' fleets of expensive cars and children in the best private schools in the West

Why, then, haven't managers departed en masse from their old jobs? Why not devote their contacts, skills, and capital to running booming real estate firms or brokerage houses in Moscow or St. Petersburg or at least to working full-time in independent high-technology spin-off firms, instead of staying at hapless tank plants in Siberia? The fact is that the capital enterprise managers controlled in this transition era, including both the "human capital" of their skills and the investment capital they garnered during the privatization process, was anchored in the mother enterprise and would lose most of its value if moved

Soviet defense managers did not go to business schools. For the most part, they spent their entire lives inside a single enterprise, working their way up to management positions after having joined the factory as an engineer or designer. When appointed to the post of general director, a manager would usually remain in that position for a decade or more. ⁷⁹ This means that managers knew their factories inside and out. They had hands-on knowledge of the panoply of technical issues involved in production. They had long experience in dealing with both the workplace and home-life concerns of their employees and probably knew most of their employees by name. They understood who the real powers were behind the trade union and STK. They knew where to turn for supplies, for bank loans, and for the transport of finished goods, in a country that lacked a developed market infrastructure. And they established personal ties and information channels that connected them to local and regional politicians and leaders, to ministerial officials in Moscow, and to other directors in their subsector. They were ideally positioned to run their enterprises smoothly across the potholes of the transition era

But all these skills would lose meaning outside the context of each manager's specific enterprise. Knowing all one's employees by name, and understanding the subtleties of the power base underlying the factory trade union, does not mean that one has generalizable personnel management skills. Grasping the technical bases of a specific set of production outputs does not make one able to modify a consumer product to keep up with changing market demand, whether for washing machines or for airplane engines. The supply, funding, and transport relationships established over decades often worked because the providers got something for barter in return for their efforts, not pure cash (this was especially true outside Moscow and certain other big cities, where the variety of consumer goods for sale was and remains more limited because of transportation and other infrastructure costs). At another firm in a different location, those relationships would have to be built again from scratch

Probably most importantly, access to information--about changing tax and business laws, government credit opportunities and upcoming state orders, visits of foreign delegations, etc.--is the key to survival in a country governed by decree, where public disclosure is haphazard at best. For example, it has been reported that managers of large St. Petersburg enterprises have used their long-standing personal connections for information-gathering operations ranging from background investigations of new business partners to locating new suppliers after their contracts with non-Russian enterprises were severed following the breakup of the USSR. ⁸⁰ Yet the channels managers have used are specific to their enterprise's location and output profile: the director of a tank factory in Altaiskii Krai would probably find his information channels fairly useless even for running a rocket factory in Moscow Oblast, much less a real estate brokerage in St. Petersburg. There are no business-friendly local public libraries, and few companies advertise on the Internet. Yellow pages are rare, better business bureaus are nonexistent, behavior that would be considered stock fraud in the United States is common, and, from all reports, organized crime is rampant

But if outside the home enterprise, the manager's human capital skills do not carry much currency, inside the enterprise, those skills are absolutely essential. There are good economic reasons why labor collectives would prefer to have an insider with decades of experience running their factories, rather than an outsider fresh from business school in the West. These reasons go beyond the threat that outsiders pose to employees' jobs. The outsider has not spent years keeping personalities from the local, regional, and central authorities in delicate balance or kept supplies flowing in and laden trucks flowing out in the absence of a developed market. When workers say that only the current general director has sufficient upper-management experience to do the job right, they may be correct, given the absence of a strong, enforceable legal climate for Russian business and the continuing necessity for trade to be cemented by personal ties and mutual backscratching

There was no guarantee in this era that even experienced directors could succeed in their business efforts. Seven of the nine former ministries were absorbed into one federal committee, Goskomoboronprom (Gosudarstvennyi Komitet na Oboronnuiu Promyshlennost', the State Committee for Defense Industry), ⁸¹ and it is has not been clear for quite some time which of the many arms of the state bureaucracy actually controls the purse strings in Moscow (complaints have abounded, for example, about the tendency of the Ministry of Defense to place orders for weapons without first ensuring the funding for them from the Ministry of Finance). Old political contacts may no longer be as useful as they once were. Furthermore, following the demise of the ministries, monopoly Russian suppliers of specialized inputs have forced defense industrial managers to accept unfavorable contracts for incoming goods. Even winning a court case leaves managers unable to collect damages, if the defendant is a monopoly supplier required for the plaintiff's continuing operation. ⁸² Meanwhile, power configurations at the local and regional levels have also shifted, often repeatedly, in response to the advent of democratization as well as to frequent rule changes governing elections and legislative procedures. ⁸³ Yet even though the personalistic system where defense industrial managers thrived is in such upheaval, the striking endurance of the old party nomenklatura's influence in Russia's new political arenas means that managers with decades of experience in the particular situations of their factories are likely to remain more savvy than generalist outsiders in their responses to an uncertain political and economic environment. Human capital, then, has tied managers to enterprises, as well as tying enterprises to their old managers

This is not the only capital tie that managers have to their old enterprises, however. They have also been tied to the enterprise through the small private companies established out of the enterprise's subdivisions. Chapter 4 discusses these subdivisions in detail, but I will briefly sketch out here how they have kept defense managers tied to their mother enterprises

While the ownership arrangements of these privatized divisions differ, in many cases managers from the mother enterprise own a significant share of the daughter company stocks or derive other financial benefit from their operations. ⁸⁴ If Russia had a normal developed market economy, this alone would not tie managers to their mother enterprise jobs. They could continue to work or own stock in the divisions (which are separate legal entities) without being directly employed by the holding company, or they could sell their division stocks to an outside buyer and transfer their capital investment elsewhere. Throughout Russian defense industry, however, these privatized divisions seem to have survived and often profited precisely because of their links to the managers of the mother enterprises. Given the lack of available rental property in most prime locations in Russia, the privatized divisions could not move out of the mother company's floorspace. In most cases, they therefore had to swallow whatever rent, water and power usage rates, and security service arrangements that the mother enterprise set for them. When mother enterprise managers have had a significant ownership stake in the privatized divisions, the divisions have tended to be given very favorable arrangements on these points. For example, in the closed nuclear city of Arzamas-16, it was reported in January 1994 that VNIIEF, one of the major defense nuclear scientific institutes in Russia, was charging rent at rates ranging from 0.76 to 2.07 rubles per square meter per year ⁸⁵ (at a time when the exchange rate was approximately 2,000 rubles to the dollar). In cases where managers have not had ownership stakes in privatized spin-off companies, the daughter companies have often found themselves in bitter disputes with the mother enterprise

The dual-ownership and dual-employment interests of managers have thus usually not been transferable at a profitable rate. If a manager resigns from his position at the mother enterprise with the idea of running a daughter company independently, he is likely to find himself punished by the remaining managers of the mother company for the "theft" of the mother company's intellectual property. If he tries to sell his stock in the daughter company to an outsider, that outsider, too, is likely to be punished, because the enterprise has an interest in keeping control over the assets of profitable privatized divisions. Thus the only buyer of a departing manager's stake is likely to be another manager from the mother enterprise. This keeps mother enterprises and their spin-offs closely connected and ensures that the mother enterprises control the costs of inputs for the daughter companies. In most cases, then, those who have an ownership stake in privatized former divisions of the enterprise have every incentive to maintain good relations with mother enterprise managers. (Of course, in situations where the mother enterprise is still the primary owner of the privatized division, the ties bind even more closely.)

Both the human and financial capital of managers has remained institutionally tied to the old Soviet mother enterprises. Leaving those enterprises behind would entail enormous risks, unless managers had made themselves so wealthy during the few years of reform that they could permanently live off their accumulated capital. The absence of other opportunities probably explains why managers have fought so hard to retain their positions, even in cases where STKs have appealed to higher authorities to have them removed (which must leave managers feeling persecuted by their employees).

Employees

If managers need a functioning factory in order to maintain their own wealth, it is perfectly understandable that they would find the voluntary departure of employees threatening. It is also understandable that they would perpetuate a culture centered on the enterprise, so that employees would continue to view the enterprise as the basis for economic life. In fact, there are widespread rumors that when trade unions have engaged in national protest marches and pickets throughout Russia in recent years, agitating for payment of back wages and increased budgetary funding of enterprises, employees have actually been paid by their managers to participate in those activities. ⁸⁶

But why would employees choose to stay? It turns out that because of the way the social benefits system was structured in Russia through 1995, most employees and their families remained dependent on positions in the enterprise for social welfare. This has been particularly true in the areas of housing and health care. This means that even those who could find adequate wages in jobs elsewhere did not have the incentive to move. In Russia in the early 1990s, cash did not provide many workers with the opportunity for job mobility, especially outside of a few big cities. Additionally, egregious hiring discrimination in Russia has limited the ability of many workers to find any alternative employment at all

Housing

Even though enterprises no longer control who lives in the apartments that they built, the lack of available housing has kept families tied to old enterprises

In Soviet times, enterprises used housing to attract and hold employees under conditions of systemic labor shortage. They distributed individual apartments as rewards to their best employees and could evict individuals that they wanted to punish. ⁸⁷ Lack of decent housing was cited as a major reason for labor turnover in Soviet enterprises, ⁸⁸ and turnover could mean difficulty in fulfilling the plan. The defense complex in Soviet times thus had good reasons for maintaining control over as much housing as possible. By 1993, though, enterprises had both economic and legal incentives for turning over their housing and other social facilities to municipal governments. ⁸⁹

Through 1995, however, most Russians lacked the ability to move to a new location. Housing remained scarce. State-supported housing construction declined as the Soviet economy worsened, and those wishing to build new private housing in urban areas often lacked access to both bank loans and a sufficient supply of appropriate construction materials. ⁹⁰ Private investors also continued to face complicated bureaucratic and legal battles if they wished to receive permission for new construction, even on their own land. ⁹¹ As a result, housing was prohibitively expensive for those who had not been grandfathered in at subsidized rates. In the words of one defense enterprise trade union leader, "We have no millionaires who can purchase housing on the side. It is possible to receive it only from the enterprise, and on subsidized conditions." ⁹² The extravagant private kottedzhi  ("cottages") springing up outside major Russian cities are far beyond the means of the average worker

Much of the housing stock that did exist in Russia throughout this period was undesirable. As of 1990 40 percent of residents in one of Moscow's urban districts were forced to live in communal housing, and 25 percent of the population of both St. Petersburg and Yaroslavl' were living in communal apartments, where several family members share a single all-purpose room, and several families share a bathroom and kitchen. ⁹³ Furthermore, much of Russia's individual apartment housing is considered by Russians to be poorly appointed, and according to the State Statistical Committee, 30 percent of apartment blocks and 80 percent of single-family houses (the latter mostly in rural areas) "lack the basic amenities of running water and sewer lines." ⁹⁴ This means that if a family had obtained a good apartment from a defense factory, it had every incentive to stay there. Those who dared to seek new work in different cities have often been men who left their wives and children behind in the apartments they already occupied. These men have been living in the only places they can afford, uncomfortable communal apartments, ⁹⁵ and have probably thus seen their new jobs as temporary expedients at best

Even if one could secure an acceptable apartment, it was difficult to relocate in Russia in the early 1990s because of the lack of developed infrastructure. A basic impediment was that throughout this period, a residence permit was still required to live in several of the more desirable cities in Russia, including Moscow, even though such permits were declared unconstitutional by the Constitutional Court. These permits could be bought, but often only for the equivalent of thousands of dollars. Some enterprises provided them for recent graduates they wanted to attract, but many private businesses lacked this capability. Furthermore, relocation in Russia carried enormous transaction costs because the consumer services market was undeveloped and transportation difficulties were immense. ⁹⁶

For all these reasons, employees who wanted to leave the factory still had strong incentives to remain in the immediate vicinity of their old employment, so that they could retain their factory-supplied, state-subsidized housing. In large cities with developed markets or with natural resource industrial bases related to Russia's current export emphases (such as the energy or precious mineral sectors), ⁹⁷ this may not have required remaining at the enterprise. Plenty of alternative positions may have been open nearby. But as of 1995 many regions of Russia, even those whose leaders enthusiastically support market reforms, simply didn't have developed, booming consumer economies like Moscow's, with its large variety of retail shops and kiosks on every major street corner and high levels of foreign investment. In outlying areas, the only alternative jobs available may have been such things as baby-sitting, auto repair, vegetable tending, and the semi-illegal carrying of imported goods across state boundaries. (The relatively large and defense-heavy region of Novosibirsk has been cited as an example of an area where other sectors cannot absorb those laid off from defense enterprises.) ⁹⁸

This situation may improve in the future. The World Bank has promised, for example, to provide a $400 million loan to municipal governments to leverage private investment in housing in six Russian cities--Moscow, St. Petersburg, Nizhnii Novgorod, Barnaul, Tver, and Novgorod--in the hopes of constructing 22,000 apartments, 8,200 townhouses, and 1,000 private dwellings for those with "moderate incomes." ⁹⁹ This may ease the housing pressure in those cities in the long run. Meanwhile, it has made sense even for employees who are terribly underemployed to retain their factory jobs for the sake of the housing they already occupy, since relocation to a healthier economic area is not a reasonable alternative

Health care

Good-quality publicly available health care (for example, in municipal clinics) has also been scarce in Russia. The fact that factories continued to supply relatively good health care to employees and their families, at low cost, gave families the incentive to keep at least one member employed in the enterprise. Large enterprises in Soviet times usually built health-care facilities for their employees and paid the salaries of the specialists who worked there. It seems that in most cases defense enterprises continued to try to provide their employees with free health care and subsidized medicine even in difficult economic times. ¹⁰⁰

While many enterprises plan simultaneously to make these services available on a profit-making basis to outsiders, ¹⁰¹ such plans seem not to have borne fruit during the initial transition period. Presumably, if and when they do, then as long as one's salary is high enough, buying adequate health care may no longer be a hardship. Large enterprises have a reputation for providing good-quality treatment

As of 1995, however, high-quality affordable health care was not widely available in Russia. The quality of state-provided health care available to the general public, even in large cities, has generally been considered poor. Equipment is outdated, basic medicines such as insulin are scarce, and sanitation standards often shock visiting Western specialists. ¹⁰² While enterprise-based facilities may not all meet Western standards either, the average enterprise facility is known to be superior to the average public facility

This situation, like the housing situation, has served to bind families to the old Soviet enterprises. Even when salaries are paid late or employees are on forced leave, the fact of continuing employment at the enterprise has allowed workers to use whatever health benefits still remain in operation, and it appears that many enterprises faced with an economic crunch continue to provide social benefits for their employees even when wages cannot be paid

Hiring discrimination

Beyond these incentives to stay in factory jobs, many workers had to face the fact that they could not obtain new jobs because of sex or age discrimination. No enforced laws prevented hiring discrimination in Russia during this period, and such discrimination was both rampant and public. Newspaper want ads from late 1994 often clearly stated the age and sex of the person wanted for a given job. Here are some examples from a random issue of the want ads for sale in the Moscow subway: ¹⁰³ "Enterprises invite to work in a security service: officers of the reserve, under 35 years old, having a Moscow residence permit." "Bookkeeper with knowledge of computers, young woman under 25." "Courier, secretary, salary negotiable, not more than 22 years old, with a pleasant appearance and good manners." "Office manager, with experience, under age 22, pleasant appearance, good manners, pay negotiable." "Guard, man under 45, for a private security enterprise in the Elektrozavodskaia region of Lobnia, working one day out of three, pay from 300,000 rubles." "Lawyer's assistant (young man or woman from 18 to 25 years old) with knowledge of computers." "Secretary-editor, productive, computers, English and Spanish, young woman under 27." "Layout artist, experience in layout of texts and newspaper ads on computer, man under 40, higher education, high pay, center [of Moscow]." "Worker--man under 45 without bad habits, Khimki." Similarly, January 1995 want ads in one of the major St. Petersburg newspapers offered the following positions: chief bookkeeper, to a woman aged twenty-five to forty; commercial director, to a man aged twenty-eight to forty-five; interpreter for a Finnish trading company, to a woman aged twenty-two to thirty-two; and trade representative for a telecommunications service, to a man aged twenty-four to thirty-two. ¹⁰⁴

Almost no ads express the desire to hire anyone over forty-five, and few want to hire anyone over thirty-two. The exception is that enterprises were required to set aside a certain number of positions for workers nearing pension age; ¹⁰⁵ usually, though, they had enough older workers remaining from Soviet times that they did not need to hire anyone new to fill this quota. According to the monitoring group Human Rights Watch--Helsinki, employers often expressly refused to hire women of child-bearing age to avoid paying state-mandated maternity benefits. ¹⁰⁶ Other reports indicate that women over age forty were almost never able to find work in the private sector. ¹⁰⁷

Meanwhile, the normal age at which one received a state retirement pension was fifty-five for women and sixty for men; exceptions could be made by the authorities in some cases, but only down to the age of fifty-three for women and fifty-eight for men. ¹⁰⁸ Employees in their forties thus had little alternative except to keep their old jobs for the foreseeable future. Simultaneously, at least some Russian defense enterprises continued to offer "veterans' benefits" to workers who remained at the enterprise for more than twenty years. At the Mashinostroenie plant in Reutov, these benefits included free telephone service, payment of half of one's rent, and a one-time payment of three-months' salary on retirement. ¹⁰⁹ Older workers had every reason to maintain their employment at the old Soviet enterprise rather than trying their luck on the market. It is thus completely understandable that younger (especially male) workers should want to leave the plant, while older (and female) workers remained behind

Both managers and many workers therefore had clear economic incentives to keep inefficient enterprises functioning. If the enterprises died, they would be left without the means for survival. The major impediment to mobility, in all the instances examined here, was the absence of a general social safety net and enforceable fair-trade and fair-hiring laws. State-funded low-income housing; job retraining and relocation programs; adequate public-clinic healthcare or minimal health insurance; state work on improving the communications, transport, and business infrastructure; and state creation and enforcement of antidiscrimination laws would have allowed individuals to take employment risks

In the absence of state guarantees, the enterprise fulfilled the social benefits function. This was a valuable public service, but in providing it, enterprises simultaneously acted to perpetuate themselves. The rational self-interest scholar would ideally want to ascertain who convinced the Russian state government not  to consider instituting a general public welfare program as part of its reform program. At the moment, however, we do not know whether the absence of state programs was due primarily to abstract financial calculations made by disinterested economists or instead to quiet lobbying efforts by directors eager to ensure that the enterprise remained the key economic unit in the society so that they could keep their jobs. It must be noted that it is not merely directors who had this interest. Enterprise trade unions had responsibility for oversight of enterprise social programs, and by law they received 5.4 percent of the enterprise wage fund to pay for the various programs they administered. (There are reports that this money has sometimes been misappropriated for "doubtful commercial operations.") ¹¹⁰ Thus trade unions too had rational economic incentives to keep workers tied to enterprises.

Managerial Behavior that Failed to Maximize Economic Self-Interest

Despite all this evidence, however, it appears that some enterprise behavior goes beyond what would be required for managers' rational self-interested goals and is only explicable with reference to the power of the institutions and norms into which people have been socialized. The continuation of some behavior patterns in fact interfered with the economic motives to keep the enterprise functioning

An example of such a behavior pattern, one that was economically appropriate in Soviet times but inconsistent with rational economic considerations in the reform era of 1992-95, was the tendency of managers to follow ingrained habits associated with labor shortage, despite the objective circumstance of overemployment (measured in terms of the "hidden unemployment" of workers sent on forced leave) in Russian defense industry. Economist Janos Kornai, in his authoritative description of the socialist economy, explains that internal labor hoarding was endemic to all enterprises in the Soviet system, particularly those in industries such as defense that demanded highly qualified workers. ¹¹¹ Internal surpluses were necessary to ensure that mandated output plans, which were ratcheted up every year, could be fulfilled even if qualified workers decided to leave and even if senior members of the planning hierarchy decided to cut labor allocations to the enterprise. The fact that other enterprises also hoarded labor aggravated the situation, because it meant that few qualified job candidates were available at short notice and enterprise managers faced a seller's market

A Russian sociologist specializing in labor economics wrote in 1991 that managers were still behaving as if they needed excess reserves of labor. ¹¹² In 1991 this may have been perceived as a rational economic decision for managers to make, given that, as many observers have noted, it was only in 1992 (when defense spending first plummeted in Russia) that defense industrialists began to believe that the command economy was actually dead. ¹¹³ But if such behavior continued through 1995, it would indicate that ingrained norms, rather than rational economic calculation, had power over managers' choices

There were of course objective economic reasons why managers would have wanted to retain a large workforce. At least some regions gave tax benefits or other privileges to enterprises with many employees. A telling example is found in the oblast (region) of Samara. The regional administration there instituted a cap on the salaries of directors of firms more than 50 percent state-owned. But the cap varies by enterprise, and its level depends on, among other factors, "the number of workers in the enterprise." ¹¹⁴ It makes sense that a region facing high levels of unemployment would like to provide incentives to enterprises to keep as many people employed as possible

Several analysts have also suggested that overemployment has been the result of a pact between trade unions or STKs on one side, and directors on the other. If management refrains from mass layoffs, then the trade union and/or STK cooperates in allowing managers to take control of the enterprise stock during privatization. ¹¹⁵ Keeping a large workforce would thus be consistent with managers' desires to keep their jobs

Two strands of evidence, however, are difficult to explain using this self-interested economic and political reasoning and therefore indicate the perseverance of an old cultural mindset: (1) the desire of managers to retain the same relative balance among employee profiles and qualifications within the enterprise, even as output characteristics should have changed to reflect new market demands; and (2) the unwillingness of both managers and collectives to let go of the enterprise's social assets

Recall that the arguments of the socialization perspective are directly opposed to the rational self-interest school's stress on self-centered materialism. Instead, they predict that managers will try to maintain the health and well-being of their enterprise collectives and subdivisions because they see this as part of their fundamental obligation to society. These concerns are part and parcel of the paternalistic social role managers were allotted under the Soviet system. Managers should be willing to sacrifice personal wealth when necessary in order to help retain jobs, benefits, and other resources for those inside the krugovaia poruka. Furthermore, preserving the glory of these Soviet-era enterprises and the high regard in which society holds them should be seen as important, since these reflect well on managers and help them to maintain their own social reputation.
What does the evidence indicate about these arguments?

Retaining the Collective and Its Glory

Perhaps the most widespread concern articulated both by Russian defense managers and trade union leaders has been the need to "retain the collective," ¹¹⁶ meaning not just a large workforce, but one resembling what the plant had always had. Managers treated as self-evident the fact that a large cadre of highly qualified scientific, engineering, and technical personnel was required at their enterprises, despite what appeared to be a permanent cost crunch. (In fact, when I asked a variety of people associated with the defense industry in Russia in fall 1994 why it was important to retain the collective, the most common response was bewilderment that I would raise such a question at all.) In the words of one observer, "If one asks the managers to name their two chief priorities . . . the social bloc [of answers] takes first place--stabilizing employment, retaining the core of the collective, and realizing social interests--with the expansion of markets or the development of [new] technology at an enormous distance behind." ¹¹⁷

Only through maintenance of such a collective, one that had worked together on large-scale projects over the space of decades, could managers hope to retain the high-technology production profiles they had built up in Soviet times. Sometimes the intention was to use this profile in their approach to the market. ¹¹⁸ At other times, hope remained that the past profile would once again be required by the state for large technology projects. ¹¹⁹ It was not uncommon to hear managers say that because the major profile of their production had always been huge, one-of-a-kind, high-technology projects for the state customer, they needed that sort of venture now in order to survive. ¹²⁰ In one case, the director of a defense electronics enterprise in Zelenograd (who was eventually unseated by his STK) is reported to have "brushed off" orders from nonstate customers throughout 1993 and 1994 because he wanted to keep his best technical workers available for future state orders that never came. ¹²¹

There has been an overwhelming belief among Russian defense industrialists in the need to retain their enterprises as technology powerhouses, regardless of cost. Many defense enterprises have turned to bank loans to cover their employees' salaries, even though they have no clear ability to repay them. ¹²² This stands in stark contrast to the experience of U.S. defense enterprises undergoing restructuring since the cold war's end. In the early 1990s, many newspapers ran stories about the large number of unemployed engineers in defense-heavy regions of the United States. It was considered par for the course that downsizing meant that well-trained, highly qualified technical specialists would be laid off. ¹²³

Part of the difference between the Russian and U.S. views of how enterprises should approach a changed market may be economically rational, attributable to the loss of resources to support advanced education in Russia. As the state budget has contracted, universities and scientific institutes have been particularly hard hit. Most faculty members have had to take on second jobs in order to survive, and students can no longer get by on state pensions. Young Russians with skills and talent are either entering business instead of science or flocking to graduate training programs in Western countries and then entering the job market abroad. Numerous top Russian scientists, particularly physicists and mathematicians, have taken tenured positions at Western universities. ¹²⁴ It is thus much harder than it used to be for enterprises to find sufficient qualified replacements for trained personnel who leave, and figuring out how to train new personnel has become a pressing concern. TsAGI, for example, used to hire 700 to 800 people per year; they are now down to hiring around 150 per year, and most of these are only minimally qualified workers. The flow from higher-training institutes has ebbed. According to TsAGI managers, it is rare for someone with great scientific potential to be looking for a job nowadays. ¹²⁵

Yet it was not always clear that these enterprises should concentrate on maintaining an extensive high-technology profile. (Note that the question of whether the Russian state  should try to retain high-technology scientists and engineers and discourage emigration is a separate issue unrelated to the economic calculations of managers.) Little objective evidence indicates that a potential flood of orders would await these companies if they maintained sufficient personnel levels. The notion that the typical defense enterprise should continue to employ a mix of technical people similar to that used in the past indicates the pull of historically instituted norms of behavior. If it were the number of employees on the payroll alone that counted in managers' calculations, then there would have been no reason for them to hang on to the highest-paid specialists. Yet when a U.S. researcher suggested to the personnel director of one defense plant in the Moscow region in 1994 that perhaps a different mixture of employees was needed now that the plant's production profile had changed, his comment was met with polite bafflement. ¹²⁶

There are exceptions to this rule. For example, TsAGI rewards those employees who work well on outside private orders, placing them on a special list of key workers. ¹²⁷ The general director, Gherman I. Zagainov, also publicly announced in internal enterprise radio broadcasts that he intended both to liquidate some sectors of the enterprise and to further decrease the number of employees in the basic subdivisions of the institute. ¹²⁸ (Note that reducing the size of the workforce here had not yet entailed mass layoffs; it merely involved unequal distribution of wages and other benefits based on performance, so that less desirable workers were encouraged to go elsewhere.)

While other enterprises have also given special benefits to a particular core of valued employees, TsAGI's method for choosing who to favor appears to be exceptional. At other enterprises, the preexisting subdivisions of the enterprise were responsible for putting together for the director a list of their own core employees. This meant that the basic structural profile of the old enterprise was kept intact, even as downsizing occurred. ¹²⁹

A situation at the Impuls' enterprise in Moscow demonstrates the consequences of this line of thinking. Impuls' as a whole was basically financially sound as of late 1994 and working at a higher productivity level than in the early 1990s, although some subdivisions that managers had always considered unimportant to the enterprise's overall profile were disbanded. ¹³⁰ One division, however, which used to make chemical coatings for a particular (unnamed) Impuls' product, remained in existence even though it was now running at less than a third of its former capacity. Rather than eliminating or downsizing that division, managers were instead trying to find a new customer for it. ¹³¹ In other words, the existing structure of the enterprise was driving the search for new orders. The market was not driving enterprise restructuring. Managers worked to preserve their collectives and subdivisions in the face of economic pressure to do otherwise

To some extent, this may have reflected a belief that the state would require in the future a workforce resembling that from the Soviet era. Until mid-1994 defense enterprises were required to maintain a "mobilization base" of equipment and raw materials that would allow quick reconversion to military production in time of war. ¹³² Some enterprises might have felt obligated also to retain the people capable of running that equipment. Presumably, however, if this had been the only concern of managers, the necessary personnel could have been made into the equivalent of a reserve officer training corps. It wouldn't matter if employees took other jobs as long as they could be called back to defense enterprises in the event of war mobilization. But I have found no evidence indicating this to have been the case. Instead, the average manager seemed to conceive of the defense industrial enterprise as a technological powerhouse, providing products or services that remained vital to making the Russian state great. In the words of a Nizhnii Novgorod shipbuilding factory manager, "What can I say to the worker concerning his profession as shipbuilder, which always 'rang proudly'? [There are] traditions, dynasties, through which it was repeated to him over many years [that he] remained necessary for the future, the 'radiant future.' I explain [to him]--it's mistakes by the politicians." ¹³³ Wrote another manager of a military shipbuilding firm in St. Petersburg, "Are we a great power or a banana republic? We have vast border expanses, and we must defend them." ¹³⁴

The idea of completely refiguring the plant and reorganizing the workforce to respond to changed conditions was not considered, even though ensuring the continued existence of the enterprise was the manager's highest self-interested economic goal. For example, according to press reports, some managers at the Mashinostroenie enterprise in Reutov took offense when conversion assistance promised by the U.S. government turned out to be a soft-drink bottling joint venture rather than a project related to the enterprise's primary work in aerospace technology. The head of the satellite imaging division of the enterprise said, "It was absolutely our last choice. . . . Everyone is laughing at us." ¹³⁵ (The director nonetheless accepted the offer, and the enterprise welcomed the new source of funds.) The notion that a great military and space enterprise would focus on consumer goods production was hard to swallow, because high technology and highly trained employees defined what the enterprise was. Related attempts by the Soviet state in the Gorbachev era to assign low-tech conversion production plans to high-tech defense enterprises were met with disdain by enterprise managers. ¹³⁶

Not all managers were insistent that they must continue to produce defense  orders per se. In fact, the League for Assistance to Defense Enterprises, a lobbying group made up of general directors from many large firms in the Russian defense complex, proposed to the state that 60 percent of all defense enterprises (those whose current state orders were 25 percent or less of their production levels) should be released from the official designation of the "military industrial complex," given that the state clearly lacked the resources to fund their defense production anyway. ¹³⁷ Some enterprise representatives express relief in finding orders for civilian production from abroad, because foreign firms are more likely than the Russian state to pay for orders on time. ¹³⁸

The issue then was not so much the production of exactly what was made before but rather the maintenance of the enterprise's basic structure and high-technology profile. The reasoning behind such retention seems to be conditioned by a combination of three factors, none of them based on objective material calculations. First are pride in past achievements and identification with the glory heaped on the defense industrial enterprise in Soviet times. The high-technology collective made the enterprise great, and therefore it is assumed that the enterprise's further success depends on that same type of collective. Second is continued hope for large high-technology orders. Realistically, the number of such orders does not seem likely to grow much with time, given that the Russian state has lost its raw economic ability to sustain many such projects and foreign investors continue to show ambivalence toward the Russian market. Obviously, some enterprises have found such orders and will continue to do so, but it is probably not realistic to believe that most will have such opportunities. (In any case, many of the large-scale orders placed now are one-time deals, with no guarantee of continued orders in the future.) ¹³⁹ Third is the tendency to focus on sunk costs. The fact that the enterprise purchased or created high-technology equipment in Soviet times and trained people to use it seems to translate into a belief that such equipment and training must be maintained, ¹⁴⁰ because it defines where the "advantage" of the firm lies

Sunk costs should not be part of an objective economic calculation about what to do to keep an enterprise functioning in current conditions. In the words of a standard microeconomics textbook, "A sunk cost is an expenditure that has already been made and cannot be recovered. Because it cannot be recovered, it should have no influence whatsoever on the firm's decisions." ¹⁴¹ In other words, the fact that an enterprise owns particular equipment and has always employed such equipment should lead managers to turn to that equipment for future production only if its use matches the economic opportunities available from state or market. If the market for such activities exists, then a unique research group that has become more than the sum of its parts through years of cooperation should be retained to use that equipment. If a market for that activity is not on the horizon, however, the only reason to keep such a group together is grounded in a sociological, cultural attachment to a historical institution that no longer matches the enterprise's economic interests

Pressures emanating from the trade union or STK may force a director to maintain such collectives. It is difficult for outsiders to decipher what the political balance of decision making looks like inside enterprises. We thus cannot determine for sure whether it is the director's preferences alone that matter or instead the preferences of the collective as a whole. Keeping the collective happy may have been necessary for the manager to stay employed. Regardless of who is responsible, however, the fact remains that the strategies chosen indicate the power of cultural understandings about the nature of the collective. Without such acculturation, managers could have closed old divisions without laying off workers by shifting personnel around within the enterprise. They also could have lowered costs, as TsAGI did, by selectively rewarding those who brought in the most business rather than those who helped each division the most.

Retaining Social Assets for the Collective

As was noted above, both federal laws and economic necessity have encouraged enterprises to transfer most of their housing and some of their other social assets to municipal budgets, and many have done so. A number of enterprises have nevertheless expressed their desire to hold on to some social facilities and even to continue to build new ones. Managers and workers seemed to prefer the continuation of a paternalistic system based on the transfer of real goods and services within a hierarchy rather than on cash. But if enterprises had fewer social expenditures to make, they would have more resources, which workers could then bargain into higher wages

Some managers have indicated that they do have self-interested motives for holding on to at least some of their social facilities. For example, managers at TsAGI intend to use their easy access to land and building permits to construct housing and other facilities for profitable rent or sale to outsiders. ¹⁴² Such projects are even more attractive when local tax breaks are given in return for continued construction of facilities. This is the case in the Siberian city of Barnaul and in St. Petersburg. ¹⁴³ (Reports from other regions indicate, however, that sometimes the transfer of facilities to the municipal budget gives enterprises tax savings.) ¹⁴⁴ Enterprises' seeming desire to maintain social assets can sometimes turn out to be a desire only to maintain ownership of the building where the social assets are located, in order to use it for other purposes. This was apparently the case in the closed nuclear city of Arzamas-16, where argument centered on whether the nuclear weapons scientific institute or the city should retain control of the enterprise's preschool facilities. ¹⁴⁵

Despite these indications that social facilities are sometimes retained for self-interested reasons, a number of enterprises appeared to be holding on to them not for tax or outside profit reasons but because doing so aided the cause of employee retention. Once again, maintaining the collective and its benefits structure was paramount. Arguments along this line have been commonly reported in the Russian press. ¹⁴⁶

In 1994 the deputy general director for social services of the Mashinostroenie plant in Reutov shared such thinking, saying that his enterprise was continuing to build housing explicitly "to stabilize the collective." Every new recruit to the company was given at least a dormitory room at a subsidized rent. While a large fraction of Mashinostroenie's housing and other social facilities had been given to the city of Reutov, the plant at that time was holding on to two buildings with 110 apartments, two dormitories, a hotel, a polyclinic, a stadium, two palaces of culture, a children's summer camp, and a vacation spa. ¹⁴⁷ Nonemployees could now use these facilities on a rental basis, but insiders still got subsidized, preferential access. The children of employees were given free lessons in six sports at the stadium, "so the kids are not out on the streets doing drugs"; workers could still buy subsidized food in Mashinostroenie's dining halls and retail shops; and the enterprise maintained contracts with local state farms for delivery of autumn potatoes to employees' homes

Even TsAGI, an enterprise known for cost-conscious and profit-seeking disposal of its social assets, still offered its employees' children a subsidized summer camp in 1994. According to a press report, children were pleased to get luxuries at camp that were unavailable at home, such as chocolate, oranges, bananas, and meat every day. While parents had to pay part of the fee for this camp, the full cost was heavily subsidized by TsAGI. ¹⁴⁸ Other examples abound: for instance, the military electronics firm ELMA in Zelenograd maintained two vacation areas that were paid for out of the enterprise's social insurance fund, ¹⁴⁹ and a military spare-parts plant in the town of Nerekhta kept open its summer camps and vacation spas even when worker salaries were delayed by several months. ¹⁵⁰

Factory provision of housing may very well have been necessary to hire new scientific and engineering employees; as I mentioned earlier, housing was scarce and expensive, and newcomers would be unlikely to move to an area without the guarantee of a reasonable place to live. Factory provision of health care also helped to attract new employees and keep valued members of the existing core. It is unlikely, however, that other subsidized social facilities, such as stadiums and summer camps, were necessary to attract new employees fresh out of training. It would be cheaper to retain core employees by paying them more so that they could afford to buy social services themselves rather than to maintain large facilities that benefited the entire collective. Social services funds accumulated by the enterprise that were not transferrable to cash could instead have been used for projects such as vocational education or improvement of the information resources available to employees, to help them find new jobs elsewhere

Nonhousing-, nonhealth-related social services were not provided to the collective for rational self-interested motives. Instead, there seem to have been at least two additional cultural reasons for maintaining this infrastructure. First, yet again, there was an attachment to the sunk costs that the collective had put into building the facilities in the past. Analyst Gregory Andrusz notes that in Soviet times, enterprises tried hard to hang on to their housing facilities, rather than transferring them to municipal governments when there was pressure to do so, at least in part because "the housing may seem to be 'theirs.'" ¹⁵¹

This seems to be equally true of enterprises' attitudes toward their social facilities in the transition era. An example is provided by Valerii A. Radchenko, general director of the Zvezda ship engine-building factory in St. Petersburg. Zvezda was supposed to give its social facilities (including a preschool, a stadium with a swimming pool, a children's summer camp, and a vacation area) to the local government, but Radchenko was afraid that outside commercial owners would ruin them. "All this we built with factory money and have maintained in good condition up until now," he wrote. ¹⁵² A similar situation was reported in Arzamas-16, where an employee collective voted to retain ownership of an enterprise sports facility despite the financial drain it imposes. They feared that outside owners would not maintain the existing profile of the sports complex or might charge customers so much to use it that employees would not be able to afford it. ¹⁵³ (This in fact happened with the preschool that the scientific institute wanted to maintain in Arzamas-16: after the institute was forced for financial reasons to give it up to the city, it was privatized, and the new owners now charge parents 10 percent of the average monthly wage for each child's care.) ¹⁵⁴

Again, it may be pressure from the collective as a whole that forces managers to maintain existing enterprise structures, rather than the preferences of the managers per se. Yet these situations indicate that the collectives were suffused by a paternalistic cultural attitude. Employees would rather have guaranteed access to social facilities (including nonessential ones, such as swimming pools, sports complexes, and vacation spas) than to more liquid resources that they could then bargain into wage increases. While the desire to hang on to a day-care facility can easily be explained by rational self-interested motives, the desire to keep everything the way it was cannot

The second cultural reason for hanging on to these facilities was the managers' belief that maintaining benefits for the collective was part of their duty. In Soviet times, the pooled bonuses of the enterprise collective were funneled by the manager into facilities that served the common good. As a 1959 history of a Soviet shipyard put it, the trade union and manager decide together "how the profits of the establishment are to be spent on improving the workers' living and cultural conditions." ¹⁵⁵ In the fall of 1994 the deputy director of the Mashinostroenie plant in Reutov made a similar statement, arguing that it remained important for employees to feel cared for by the enterprise. ¹⁵⁶ These cultural norms of paternalism were probably reinforced by enterprise directors' desire to attract the same level of respect from their employees that they elicited in Soviet times. ¹⁵⁷ Joseph Berliner, in his classic work on Soviet managers, argued that "the director . . . who is able to build a larger worker's club or an additional nursery for children of working mothers or make some improvements in the plant cafeteria, is likely to obtain the support of workers and the rest of management." ¹⁵⁸ Historically, the director was responsible for implementing the common will, and the construction of social facilities constituted physical proof of the director's concern for employees. By tapping in to that institutionalized expectation, directors today may find the provision of social services a means for preserving not only the collective but also their reputations for effectiveness inside the krugovaia poruka 

Theoretical Conclusion: Culture Matters

The chairman of the trade union committee at the Mikron factory in Zelenograd said in 1992, "The economic basis of our life is the enterprise. No one will ever be permitted to destroy it." ¹⁵⁹ As I have shown in the preceding pages, preservation of the Soviet defense enterprise is an economic necessity for both managers and many workers in Russia today. The rational self-interest perspective is in large part supported by the evidence, because individuals have clearly acted to protect their own economic well-being during this time of societal upheaval, and managers have acted to expand their existing property rights in order to gain more wealth

At the same time, however, managers do not appear to value their own individual wealth above all else. While self-interest keeps enterprises open and keeps managers and workers in them, enduring cultural notions of what it means to preserve the enterprise--including preservation of its basic preexisting structural divisions and its social assets--are at odds with the notion of self-serving individualism. Managers want to fulfill their traditional social roles and to maintain their reputations as powerful providers for the common good. As enterprise budgets continue to retract, both managers and employees may find themselves harmed by these institutionalized expectations of what the enterprise should provide

In addition, the continuing importance of Soviet-era structures--namely, the mother enterprises--limited the choices that managers were able to consider. The need to remain at the enterprise has prevented managers from taking advantage of the relative wealth they accumulated in the Soviet system (especially their ownership stakes in spin-off companies) to become independent entrepreneurs. History is path dependent; the structure of the old system continues to channel materialistic behavior in the new system. Self-interested motives are important, but they alone do not provide a complete picture of how managers have related to their enterprise collectives. Instead, attention must also focus on how cultural norms limit the choices managers can consider

The major structural factors ensuring the continued social importance of the enterprise could all, in theory, have been changed by human action. The absence of a general social safety net and adequate public information resources served to limit employment mobility. There does not seem to be any evidence that defense managers lobbied for laws that would have aided this mobility. Instead, their lobbying seems to have revolved around the needs of their enterprises, especially in the area of credits and other subsidies. And even though the Russian state may not have been interested in pursuing general social welfare policies in any case, enterprise subsidies have certainly acted as a major drain on budgetary resources that the state might have put to other uses.

Policy Conclusions: Political Fragmentation and Enterprise Desperation

The fact that both managers and employees are structurally anchored in individual enterprises means that we should not expect the Russian defense industry to be a particularly effective force in Russian national politics. Both labor and capital are relatively immobile, because social benefits, information resources, and spin-off investments are all bound to particular enterprises and are not easily transferable. But if enterprises shared a set of common interests, this might not present a problem: shared economic interests between labor and capital within particular sectors can lead to powerful industrial lobbies. ¹⁶⁰

Given the coherence that many observers found in the directors' lobby during the 1992 privatization debates, one might have expected that strong sectoral pressure would continue in Russia through 1995. With time, however, so many differences have appeared in the objective interests held by various enterprises that such a lobby would be difficult to maintain. Some enterprises are privatized or in the process of privatization, while others remain on the state's not-for-privatization list. Enterprises with differing ownership structures are likely to have competing preferences about tax laws and state subsidies, because strong competitors will not want to bail out the weak

The customers of these enterprises vary significantly as well. Some enterprises, such as the MAPO-MiG consortium that manufactures fighter jets, are primarily engaged in arms production for export to third world countries. Others, such as TsAGI, are significantly supported by lucrative high-technology civilian projects with Western companies and governments. Logically, MAPO-MiG might favor the expansion of the Russian weapons market. If such weapons were sold to pariah countries such as Iraq or Libya, Western ire would likely be raised, and Western economic sanctions would probably be levied against Russia. Yet MAPO-MiG would emerge unscathed, because its customer base would be expanded. TsAGI, in contrast, currently has an extensive range of contracts with the Boeing Corporation, which is the primary user of one of TsAGI's giant component-testing wind tunnels, as well as with General Dynamics and McDonnell Douglas; TsAGI is also the recipient of a U.S. Air Force grant and has been negotiating with NASA. ¹⁶¹ Given these ties, it would not be logical for TsAGI to engage publicly in lobbying activity that favored the Russian competitors of U.S. aerospace companies, nor would it make sense for TsAGI to support Russian arms sales that might provoke U.S. retaliation against the Russian economy. ¹⁶²

Thus the fact of labor and capital immobility, combined with differing economic interests across firms, leads to fragmented, not unified, political action within the sector. ¹⁶³ Given that capital and labor are enterprise specific and that economic interests vary dramatically across enterprises, it is not surprising that the mighty Russian defense industry has turned out to be somewhat of a paper tiger in national politics. Many Russian observers have noted that the defense industry has lost out to the oil and gas and agricultural lobbies in obtaining subsidies and other government assistance. ¹⁶⁴

Since 1992 a single, formal defense industrial pressure group has not really existed in Russia. In 1992 the RUIE lobby clearly played the decisive role in influencing state privatization policy. But by 1993 the general perception was that the old RUIE constituency had split in two. Insider privatization was well under way, and that meant that the unified interests of managers in buying up state property were no longer sufficient to hold the lobby together. The directors who owned successful factories had aligned themselves with the liberal reformist parties, while the "producers of goods that no one wants to buy at the prices set by those producers" joined the protectionist and socialist Federation of Goods Producers. ¹⁶⁵ This latter group may regain legislative power through its coalition with Russian nationalists in the electoral party known as the Congress of Russian Communities. Given the vicissitudes of Russian politics (and the short-run orientation toward cooperation outlined in chapter 1), however, it is unlikely that such a bloc will hold together indefinitely; it was already falling apart at the time of the Duma elections in December 1995.

In 1992 a lobbying organization for defense industrialists was established. Called the League for Assistance to Defense Enterprises, it was formed "so that the voice of the 'defense complex' would be strengthened" and to "exert influence on governmental structures." ¹⁶⁶ While its representatives have met regularly with top Russian leaders, ¹⁶⁷ enterprise managers proved not to be very committed to this group. At its 1993 annual meeting, the league criticized the directors of two huge Moscow-area enterprises, NII Avtomatiki and TsAGI, for being "insufficiently active" in the organization despite being members of its presidium. Two additional directors who served on the presidium were chastised for having "practically withdrawn" from league activities. ¹⁶⁸ As the rational self-interest school would have expected, the collective action problem was at work. Directors have not taken time away from managing their individual enterprises to work for abstract political gains for the sector as a whole

The general director of one large defense enterprise told me in September 1994 that he joined the league only "so as not to be the white bird," which in Russian folklore is an outsider pecked to death by the other birds. ¹⁶⁹ Around the same time, a senior manager of a different large defense enterprise informed me that his team sees the league as primarily a joint marketing endeavor and that its members all have their own ideas and find it hard to cooperate on any but the most basic questions. ¹⁷⁰ One success the league prides itself on is its ability to "propagate ideas" in major Russian news publications. ¹⁷¹ It was also the major force behind the establishment of a slick new advertising magazine for Russian weapons, Military Parade . ¹⁷² These activities indicate that the league may indeed function primarily to assist enterprises with marketing, rather than as a successful lobbying group

While defense industry does not seem to be a predominant player in the crunch of national lobbies descending on the Russian capital at the moment, this does not mean that enterprises lack political influence. As the next chapter will demonstrate, enterprises have instead made a strategic decision: rather than looking to the federal level for support, they are focusing on the local and regional levels and allowing lower-level governments to do their lobbying for them. Defense industry is actually having a major impact on the de facto, as opposed to the official, Russian state budget, and individual enterprises are quite able to win favors for arms exports and other forms of governmental support. They are just not doing it in a way that benefits the sector as a whole. ¹⁷³ The next chapter will explore in more detail how both subsectoral and local lobbying groups have dealt with the collective action problem facing Russian defense industrial firms

Employment immobility within defense enterprises, along with the varied economic interests of individual managers, has two major implications for Russia's political future. First, it means that the so-called red directors and any associated military-industrial alliance ¹⁷⁴ are unlikely to be a unified political force. It is doubtful that they will be able to field or elect a common slate of candidates for office or to push for any particular foreign policy goal, such as the reestablishment of the Russian empire. The West should not fear that such an alliance may lead the Russian state to become a military threat in the future, because cooperation among enterprises will be hard to maintain. Yet foreign influence, either Western or anti-Western, can grow in the sector as individual enterprises become dependent on particular export markets or investors and vulnerable to the breaking of those ties

The second, more alarming implication is that employee collectives are likely to fight tooth and nail to keep their enterprises open and their jobs intact. If the enterprises close, both managers and workers are left with nothing. This means that as state resources for subsidies decline, the number of factory-based protests should increase. The level of violence may also increase, as desperation grows

This seems in fact to be occurring. According to one newspaper report, there were 859 enterprise strikes throughout Russian industry during the first five months of 1995, a 120 percent increase over the same period in the previous year. ¹⁷⁵ While there is no data on what percentage of these occurred in defense industrial enterprises, strikes are common in the sector, and some have indeed involved the threat of violence. In July 1994, for example, the labor collective at the Mashinostroenie defense plant in Nizhnii Novgorod imprisoned the plant director in his office one morning and marched out on to the street, threatening local and regional authorities with beatings if back wages were not paid (their demand was met). ¹⁷⁶ A year later, at the Uralvagonzavod plant in Nizhnii Tagil, a disgruntled worker who hadn't been paid in four months stole a tank from his own shop at the factory following a family quarrel and drove it up and down the streets of the city with the police in hot pursuit. ¹⁷⁷ He said that his actions were "a protest against the hopeless poverty of the defense complex." It would be easy to dismiss this as the act of a single misfit, except that "the following day spontaneous mass meetings occurred around the cashier officers of the factory: the workers demanded their pay." The county prosecutor decided to drop charges against the man with the tank, "considering the social tensions in the region and the support for the transgressor inside the factory." ¹⁷⁸ Even more recently, in mid-1996, Interior Ministry troops were sent to break up a protest by workers at the Gorokhovets Shipyard, a former production site for naval weaponry, who had blocked the major highway linking Moscow and Nizhnii Novgorod. ¹⁷⁹

Managers trying to protect their jobs may also employ threats of violence against those who want to replace them. For example, at the Rybinskie Motors aircraft engine plant in Yaroslavl', the old general director, Valerii Anikin, angered Goskomoboronprom (which held 37 percent of the enterprise's stock) when he failed to invite its representative to a shareholder meeting that reconfirmed him in his post. As a result, the state authorities refused to renew Anikin's contract and appointed a temporary replacement director to take charge until the next stockholder meeting. This replacement director was then told by the enterprise's chief engineer that "if he signed the contract in the name of the general director, a blood terror would be organized" against him and his team. ¹⁸⁰ Goskomoboronprom did win in this case, at least temporarily (more will be said about this in the next chapter), and a new meeting of the stockholders was held during which a new director was elected. The night before the meeting, however, the Moscow office of Rybinskie Motors was hit by two hand grenades. While no one was injured, many of the enterprise's legal documents were destroyed in the resulting explosions and fire. ¹⁸¹

Thus while labor and capital immobility, supported by an underlying network of paternalism toward the individual collective, saps the national lobbying strength of Russia's military-industrial complex, it also increases the potential for social instability and mob violence in Russia's defense-heavy regions. Each of the cases noted above, at defense enterprises in four different regions and from four different subsectors, involved either the use or the threat of violence in response to fears of lost jobs or wages. Certainly, it is not only in the defense complex that strikes and the threat of labor violence have been reported in Russia. Coal miners and energy workers, among others, have also been involved in such activities. This should not make us any any less worried about the impact that defense sector unrest will have on Russia's future, however. Social unrest and strikes at enterprises where weapons and military materials are made are dangerous, because they make threats of armed violence credible. In the next chapter, I further explore the consequences of defense sector regionalism in Russia

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Endnotes

Note 1: James R. Lecky, "American Experiences in Diversification: Ideas for Nizhniy Novgorod," unpublished paper prepared for the International Conference on Defense Conversion in Nizhnii Novgorod, Nizhnii Novgorod, Russia, May 1994, p. 7. Back.

Note 2: For examples, see U.S. Arms Control and Disarmament Agency, "Report to the Congress on Defense Industry Conversion," August 1990; Murray Weidenbaum, "The Future of the U.S. Defense Industry," unpublished paper prepared for the annual meeting of the Western Economic Association, Seattle, Wash., July 1, 1991; Steven Pearlstein, "Trying to Give Peace a Chance," Washington Post , May 24, 1992; Richard T. Minnich, "Defense Downsizing and Economic Conversion: An Industry Perspective," in Downsizing Defense , ed. Ethan B. Kapstein (Washington, D.C.: Congressional Quarterly, 1993); and C. R. Neu and Michael Kennedy, "Do We Need Special Federal Programs to Aid Defense Conversion?" Rand Issue Paper, Santa Monica, Calif., Feb. 1993. For a dissenting view, see Jurgen Brauer and John Tepper Marlin, "Converting Resources from Military to Non-Military Uses," Journal of Economic Perspectives  6, no. 4 (fall 1992): 145-64. Back.

Note 3: Minnich, "Defense Downsizing and Economic Conversion," pp. 125, 128. Back.

Note 4: See Kenneth L. Adelman and Norman R. Augustine, "Defense Conversion: Bulldozing the Management," Foreign Affairs  71 (spring 1992): 26-47. Back.

Note 5: David Bernstein, "Spin-offs and Start-ups in Russia: A Key Element of Industrial Restructuring," in Privatization, Conversion, and Enterprise Reform in Russia , ed. Michael McFaul and Tova Perlmutter (Stanford, Calif.: Stanford University Center for International Security and Arms Control, 1994). Back.

Note 6: Arkadii Sosnov, interview with Il'ia Klebanov, "Nash investor stoit u poroga" (Our investor stands at a threshold), Nevskoe Vremia  (St. Petersburg), Jan. 10, 1995. Back.

Note 7: Here are some examples. The Moscow Aviation Production Association (MAPO-MiG) in 1995 still employed 20,000 people, produced eighteen MiG-29 jet fighters for sale to Malaysia and was continuing MiG production for sales to India and possibly the Philippines. See "Swords to Ploughshares--MiGs to Microlights," Reuters, Dec. 15, 1994; and "Russia MiG Maker Completes $550 Million Malaysia Deal," Reuters, June 6, 1995. The Il'iushin Design Bureau, using Pratt and Whitney engines, Rockwell International avionics, and a variety of other Western parts, began manufacturing low-cost passenger airplanes that caused even the Boeing Corporation to fear it as a competitor. See "Boeing Objects to Russia Deal," Associated Press, Mar. 7, 1995. The Baltiiskii Zavod shipbuilding plant in St. Petersburg began building chemical tankers for a German company, making up for the losses it suffered when two Russian state orders were fulfilled but not paid for. See L. Rakhmanov, " 'Iberia' plyvet na mezhdunarodnyi rynok" (The 'Iberia' is sailing into the international market), Sankt-Peterburgskie Vedomosti , Aug. 2, 1994; and O. Steshenko, "Odin iz poslednikh rossiiskikh zakazov" (One of the Last Russian Orders), Sankt-Peterburgskie Vedomosti , Oct. 21, 1994. And the Izhorskie Zavody complex in a suburb of St. Petersburg (which made nuclear submarine reactors, among other items) won a reactor contract from the Perm' Oil Refining Factory, which promised to keep twelve Izhorskie shops operating at capacity for at least a year. See "Zakaz s Urale snial ugrozu bankrotstva" (An order from the Urals prevented the threat of bankruptcy), Sankt-Peterburgskie Vedomosti , Dec. 20, 1994. Back.

Note 8: See Kevin O'Prey, The Arms Export Challenge: Cooperative Approaches to Export Management and Defense Conversion , Brookings Institution Occasional Papers, Washington, D.C., 1995, pp. 5-15. Back.

Note 9: Vitalii Vitebskii, "The Military-Industrial Complex in the First Quarter of 1995," Krasnaia Zvezda , Apr. 29, 1995, as reported in Foreign Broadcast Information Service Daily Report--Central Eurasia (FBIS-SOV) , May 2, 1995, pp. 22-23. Back.

Note 10: A defense enterprise whose workers successfully sought to have the firm declared bankrupt, in hopes the enterprise might survive under new management appointed by the regional Arbitrage Court, is the Lazur' plant in Nizhnii Novgorod. See V. Seryi, "Eshche odno miagkoe bankrotstvo" (One more gentle bankruptcy), Nizhegorodskie Novosti , Feb. 8, 1994. Another enterprise that followed suit is the Samara Aviation Works; see "Avis Aviation Works Declares Bankruptcy," Moscow Mayak Radio Network, Sept. 15, 1994, as reported in FBIS-SOV, Sept. 15, 1994, p. 25. The ELION defense electronics factory in Zelenograd, as of September 1994, was in the midst of a similar process. See I. Makhovskaia, summarizing a report of Aleksandr Ivanovich Lebedev, the first deputy prefect of Zelenograd, "Novye avansy, starye dolgi . . ." (New advances, old debts . . .), Sorok Odin  (Zelenograd), no. 36 (May 13, 1994); and "Poteriavshii doverie A. Vetchinkin" (A. Vetchinkin has lost trust), Sorok Odin  (Zelenograd), no. 68 (Sept. 2, 1994). Back.

Note 11: In fact, to my knowledge there is only one report of a Russian defense enterprise ending its existence: the Teleradio Factory in the city of Cheremkhovo, in the Siberian region of Irkutsk. Apparently only 98 of its 5,400 workers remained at the plant, and its director disappeared without a trace. The Irkutsk Electric Company was therefore allowed to take over its premises. See Natal'ia Gotova, "Voennyi radiozavod budet remontirovat' eletrooborudovanie" (Electrical equipment will overhaul a military radio factory), Kommersant-Daily , Oct. 21, 1994. Back.

Note 12: See Tatiana Kirshina, "Vzroslye ushli na kanikuly. Deti nachali rabotat' " (The grown-ups are going on summer vacation. The children have begun to work), Sibirskaia Gazeta , no. 28 (July 1993). Back.

Note 13: For example, see an untitled item from Rossiiskaia Gazeta , June 22, 1993, as reported in Foreign Broadcast Information Service Daily Report--Central Eurasia (FBIS-SOV) , June 24, 1993, pp. 39-40. The general director of the Vladivostok Dalpribor Production Association, Viktor Paulo, said he was resigning "because the Russian government was no longer committed to military production." Back.

Note 14: By October 1994, 40 percent of Russian defense enterprises had been sold to private owners, and an additional 40 percent had restructured as state-controlled joint-stock companies, signaling the start of privatization (A. N. Shulunov, as quoted by Leonid Kosals and Rozalina Ryvkina, "Gosudarstvennoi politiki v sfere VPK net" [There is no state policy in the sphere of the military-industrial complex], Segodnia , Oct. 18, 1994). Back.

Note 15: Michael McFaul, "State Power, Institutional Change, and the Politics of Privatization in Russia," World Politics  47 (January 1995): 210-43, esp. 233. Back.

Note 16: Anders Aslund, How Russia Became a Market Economy  (Washington, D.C.: Brookings, 1995), pp. 233-34; and McFaul, "State Power," pp. 230-31. Back.

Note 17: Aslund, How Russia Became a Market Economy , p. 234. Back.

Note 18: Ibid. Also see McFaul, "State Power," p. 230. Back.

Note 19: Aslund argues that Russian voters in 1990 paid insufficient attention to who the candidates were and what they stood for (How Russia Became a Market Economy, pp. 54-5, 61). McFaul, "State Power," p. 230, has gone so far as to claim that the legislature that resulted was not part of a truly pluralistic, parliamentary system but instead a herald of sectoral corporatism, against which the interests of individual citizens had little chance. Back.

Note 20: For examples, see Michael McFaul, "Agency Problems in the Privatization of Large Enterprises in Russia," in Privatization, Conversion, and Enterprise Reform in Russia , p. 45; and "Dinamika kursov obyknovennnykh aktsii privatizirovannykh predpriiatii S. Peterburga s 01.12.94 po 10.1.95" (The exchange action of common stock of privatized enterprises in St. Petersburg, Dec. 1, 1994 to Jan. 10, 1995), Sankt-Peterburgskie Vedomosti , Jan. 19, 1995. This finding is seconded by Kevin O'Prey, A Farewell to Arms? Russia's Struggle with Defense Conversion  (New York: Twentieth Century Fund Press, 1995), p. 58. For the argument that this is common throughout all sectors in Russia, see Igor Gurkov and Gary Asselbregs, "Ownership and Control in Russian Privatized Companies: Evidence from a Survey," Communist Economies and Economic Transformation  7, no. 2 (June 1995): 208. Back.

Note 21: O'Prey, Farewell to Arms?  p. 58. Back.

Note 22: From an interview conducted by members of the CISAC team, including the author, Sept. 1994. Back.

Note 23: This is apparently a common occurrence when banks buy shares at auction; they sell them back to the enterprise either on credit or at a higher price. See Larisa Gorbatova, "Formation of Connections Between Finance and Industry in Russia: Basic Stages and Forms," Communist Economies and Economic Transformation  7, no. 1 (Mar. 1995): 24. Back.

Note 24: Andrei Nikolaev, "Vooruzhennyi direktor zakhvatil vlast' v NII" (An armed director seized power at a scientific institute), Segodnia , Aug. 17, 1994, reports this of the Central Scientific Institute of Experimental Engineering Equipment in Moscow. Back.

Note 25: Scott Gerber, "The Financial Revolution," Bisnis Bulletin  (U.S. Department of Commerce), Jan./Feb. 1995, p. 4. Back.

Note 26: Pavel Kuznetsov, "Fondovye reguliatory nadeiutsia na uskorenie oborota direktorov" (Bond regulators hope for an acceleration of director turnover), Segodnia , Jan. 31, 1995. Back.

Note 27: The Russian government maintains a list of defense enterprises that are forbidden to privatize because of the necessity of maintaining their current output profile or because of the dangerous nature of their products. The size of this list has varied over time, and enterprises have lobbied both to be stricken from and added to it. Goskomoboronprom  figures from August 1995 put the size of the "not-for-privatization" list at 350 enterprises; see Vladimir Belov, "Fond Konversii ne konkurirovat' s bankami" (Conversion fund not to compete with banks), Kommersant-Daily , Aug. 30, 1995. Back.

Note 28: An interesting example is that of the Polet aerospace enterprise in Omsk. According to a newspaper report, General Director Valentin Zaitsev was unseated by a "coup" based on a vote by forty-two of his forty-eight enterprise shops while he was on a business trip in Moscow. See "Director 'Poleta' 'sletel' po vole trudiashchikhsia" (The director of Polet "flew away" by the will of the laborers), Kommersant-Daily , Apr. 15, 1995. Back.

Note 29: See, for example, Andrei Garavskii, "Kupite zavod v zelenograde, nedorogo" (You can buy a factory in Zelenograd, cheap), Krasnaia Zvezda , Sept. 17, 1994, which states that four STKs in Zelenograd have tried without success to unseat their directors; and Irina Vladykina, "Ob'edinenie 'Avtomatika' dobilos' vyplaty zarplaty" (The Avtomatika Association obtained wage payments), Segodnia , Nov. 29, 1994, which says the same thing about the Avtomatika plant in Yekaterinburg. Back.

Note 30: An example was the leadership change made at the Izmash artillery plant in Udmurtiia. The former leaders had decided to pay dividends to investors despite having been declared insolvent by the federal courts. The Izmash Council of Directors replaced the president with the factory's chief engineer and named the factory's former general director as its new chairman. See Yevgenii Ostapov, "Predpriiatie--bankrot vuplachievaet dividendy" (Enterprises--A bankrupt one pays dividends), Kommersant-Daily , May 25, 1995. Back.

Note 31: Interview conducted by the author during a plant visit with a team from Stanford CISAC, Sept. 1994. Back.

Note 32: Paul R. Lawrence and Charalambo A. Vlachoutsicos, eds., Behind the Factory Walls: Decision Making in Soviet and U.S. Enterprises  (Boston: Harvard Business School Press, 1990), p. 167. Back.

Note 33: David J. Denis and Diane K. Denis, "Performance Changes Following Top Management Dismissals," Journal of Finance  50, no. 4 (Sept. 1995): 1029. This study of 908 management changes unrelated to takeovers that were reported in the Wall Street Journal between 1985 and 1988 found the external appointment pattern in 52 percent of the cases of forced resignations. Back.

Note 34: Interview by the author with the deputy general director for personnel, during a plant visit with the Stanford CISAC team, Sept. 1994. Back.

Note 35: Brenda Horrigan, "How Many People Worked in the Soviet Defense Industry?" Radio Free Europe/Radio Liberty Research Report  1, no. 33 (Aug. 21, 1992): 35. Back.

Note 36: Gherman Lomanov, "Military-Industrial Complex Losing Personnel," Moscow News , Mar. 13, 1993. Back.

Note 37: A. N. Shulunov, chairman of the League for Assistance to Defense Enterprises, as quoted in Leonid Kosals and Rozalina Ryvkina, "Gosudarstvennoi politiki v sfere VPK net" (There is no state policy in the sphere of the military-industrial complex), Segodnia , Oct. 18, 1994. Back.

Note 38: While such "voluntary" departures may have occurred under extreme economic pressure, given the fact of low and unpaid wages, this does represent a separate activity from the involuntary firing of employees or downsizing of workforces. O'Prey states that around 50 percent of the workforce may have left voluntarily (Farewell to Arms , p. 45). A Russian report from February 1995, apparently sponsored by defense industrial interests, claims, however, that the defense industrial workforce has only shrunk by 23 percent since 1991. See I. V. Prostakova and A. M. Folometov, "Intellektual'naia sobstvennost' i privatizatsiia v VPK" (Intellectual property and privatization in the military-industrial complex), EKO, no. 2 (Feb. 1995): 120. Back.

Note 39: In 1993 only 5.8 percent of Russian defense enterprises employed fewer than 1,000 people per enterprise; 49.8 percent employed from 1,001 to 5,000 people, and 44.4 percent employed more than 5,000. These figures are according to Alexander Ozhegov, "Conversion and Russia's Regions," in The Post-Soviet Military Industrial Complex: Proceedings of a Symposium, ed. Lars B. Wallin  (Stockholm: Swedish National Defense Research Establishment, 1994), p. 59. Back.

Note 40: See Doug Clarke, "Hard Times in Defense Industry," Radio Free Europe/Radio Liberty Daily Report , Nov. 22, 1994, and idem, "Defense Workers Want Yeltsin Out," Omri Daily Digest , no. 10 (Jan. 13, 1995). Back.

Note 41: See Kodeks Zakonov o Trude Rossiiskoi Federatsii  (Codex of labor law of the Russian Federation) (Moscow: Firma Spark, 1994), article 92, p. 39. Back.

Note 42: Some newspapers have columns giving legal advice to the public, and a frequent complaint is that managers are not following the rules of the codex. For example, see A. Vorob'ev, "Za chei schet--v otpusk?" (Who has to pay for the leave?), Sankt-Peterburgskie Vedomosti , Oct. 5, 1994. Back.

Note 43: Shulunov, as quoted by Kosals and Ryvkina, "Gosudarstvennoi politike v sfere VPK net." Back.

Note 44: From an interview conducted by the CISAC team, including the author, Sept. 1994. Back.

Note 45: Reported by George Nikides, "Millions Work on the Side," Moscow Times , Oct. 1, 1994. Back.

Note 46: Jerry F. Hough, "Russia--On the Road to Thermidor," Problems of Post-Communism  41, special (unnumbered) issue (fall 1994): 28. Back.

Note 47: Alessandra Stanley, "In Russia, a Breakdown on the Road to Capitalism," International Herald Tribune , Aug. 25, 1994. Also see Pavel Felgenhauer (sic), "Nuclear Cities' Secrets Revealed," Moscow Times , Aug. 25, 1994, which claims that the potatoes grown by residents of the closed nuclear cities at their dachas "are now becoming an increasingly important part of their diet." Back.

Note 48: This example is cited in Sonni Efron, "Russians Doff Lab Coats for Suits," Los Angeles Times , as reported in the Minneapolis Star-Tribune , Dec. 27, 1994. Back.

Note 49: This point is made by V. I. Zhil'tsov, general director of the Submikron Scientific Production Association, as quoted by Kosals and Ryvkina, "Gosudarstvennoi politike v sfere VPK net." Also see Aleksandr Yakushev, "Chto imel--ne sbereg. Chto nashel--poterial" (What it had is not retained. What it found is lost), Vechernyi Barnaul , Feb. 7, 1995, who says that workers leaving the large Sibenergomash enterprise in Barnaul are "disqualifying" themselves by working elsewhere. A similar point was raised by a senior official of the Russian government's Interdepartmental Analytic Center who works as a consultant on defense industrial economic policy, interviewed by the author in Moscow, Oct. 1994. Back.

Note 50: For examples, see a report on the ELMA factory in Zelenograd, with complaints about sewage treatment, ventilation systems, and unsafe density and spacing of equipment, in I. Korenev, "Deputaty trebuiut otseleneiia zhitelei vos'mogo mikroraiona" (Deputies demand the outward settling of inhabitants of a potential microregion), Sorok Odin , no. 31 (Oct. 1991); and a roundtable discussion on the danger of radioactive dispersion from accidental conventional explosion in the dismantling of nuclear warheads at the Avangard factory, reported by Petr Khven', "Liubimyi gorod mozhet spat' spokoino?" (Can the favorite city sleep peacefully?), Gorodskoi Kur'er  (Arzamas-16), Nov. 4, 1992. Back.

Note 51: "Life Expectancies in Russia to Fall Further," Jamestown Foundation Monitor  1, no. 23 (June 1, 1995). Back.

Note 52: Quoted by Thomas Sigel, "Unemployment Gradually Increasing," OMRI Daily Digest , no. 141 (July 21, 1995). Back.

Note 53: For an example, see the description of the Uralmash factory's microcity in Sverdlovsk (now Yekaterinburg), in Bill Keller, "In Urals City, the Communist Apparatus Ends but Not the Communist Power," New York Times , Dec. 13, 1990. Back.

Note 54: See, for example, Alfred John DiMaio Jr., Soviet Urban Housing: Problems and Policies  (New York: Praeger, 1974), p. 102. I have also experienced this firsthand. Back.

Note 55: Ibid., pp. 167-70. Back.

Note 56: Andrei Sakharov, Memoirs , trans. Richard Lourie (New York: Knopf, 1990), p. 114. Back.

Note 57: See Mikhail Agursky, The Soviet Military-Industrial Complex , Jerusalem Papers on Peace Problems 31 (Jerusalem: Hebrew University Leonard Davis Institute for International Relations, 1980). Also see Matthew Evangelista, Innovation and the Arms Race: How the United States and the Soviet Union Develop New Military Technologies  (Ithaca, N.Y.: Cornell University Press, 1988), pp. 33-35. Back.

Note 58: Author's interview with the deputy general director for social services at the Mashinostroenie plant in Reutov, with the CISAC group, Sept. 1994. Back.

Note 59: Nikolai Anishchenkov, A Soviet Factory: Past, Present, and Future , Soviet Booklet no. 59 (London: Soviet Booklets, 1959), p. 18. Back.

Note 60: Author's interview with the deputy general director for social services at the Mashinostroenie plant in Reutov. Back.

Note 61: Lawrence et al., Behind Factory Walls , p. 275. Back.

Note 62: Information from a 1970s internal "multiple-page newspaper" article, from a defense enterprise in the Moscow region. Back.

Note 63: Ibid. Back.

Note 64: Author's interview with the deputy general director for personnel. Back.

Note 65: Blair A. Ruble, Leningrad: Shaping a Soviet City  (Berkeley: University of California Press, 1990), p. 144. Back.

Note 66: V. M. Yurasov, Admiralteitsy: Istoriia Leningradskogo Admiralteiskogo Ob'edineniia  (The admiralty workers: A history of the Leningrad Admiralty Association) (Leningrad: Lenizdat, 1976), pp. 26-27. Back.

Note 67: For another example, see Stanley, "In Russia, a Breakdown." Back.

Note 68: See, for example, Nikolai A. Kaniskin (general director of the Sibelektrotiazmash enterprise in Novosibirsk), "The Western Executive and the Soviet Executive," trans. Arlo Shultz (of "Zapadnyi menedzher i Sovetskii direktor," EKO no. 5 [1990]), in The Russian Management Revolution: Preparing Managers for the Market Economy , ed. Sheila M. Puffer (Armonk, N.Y.: Sharpe, 1992), p. 45. Back.

Note 69: Lawrence and Vlachoutsicos, Behind the Factory Walls , p. 79. Back.

Note 70: For one manager's lament about how this ate up his time, see Kaniskin, "The Western Executive and the Soviet Executive." Back.

Note 71: Dmitrii Sladkov, "Otkrytie zakrytogo goroda: O problemakh Arzamasa-16 (Sarova)" (Opening a closed city: On the problems of Arzamas-16 [Sarov]), Moskva , no. 10 (1993): 134-38. Back.

Note 72: Clifford Gaddy, "Brief History of a Soviet Defense Enterprise and the Development of its Social Assets," appendix D of "Notes for a Theory of the Paternalistic Russian Enterprise," unpublished paper prepared for the annual convention of the American Association for the Advancement of Slavic Studies, Philadelphia, Pa., Nov. 1994, p. 35. Back.

Note 73: Keller, "In Urals City, the Communist Apparatus Ends." Back.

Note 74: Peter Almquist, Red Forge: Soviet Military Industry since 1965  (New York: Columbia University Press, 1990), p. 100. Back.

Note 75: Ibid. Back.

Note 76: McFaul, "State Power." Back.

Note 77: Janos Kornai, The Socialist System: The Political Economy of Communism  (Princeton: Princeton University Press, 1992), esp. pp. 122-23, 140-42, 150. Back.

Note 78: Joseph S. Berliner, Factory and Manager in the USSR  (Cambridge: Harvard University Press, 1957), esp. pp. 64, 111-12, 120; and Lawrence and Vlachoutsicos, Behind the Factory Walls , p. 279. Back.

Note 79: Almquist, Red Forge , p. 46. For examples of careers that followed this path, see Valerii A. Radchenko (general director of the Zvezda factory in St. Petersburg), "Pochem banany v Afrike?" (How much are bananas in Africa?), Nevskoe Vremia , Oct. 5, 1994; Alevtina Gorelova, interview with Vladimir S. Sandovich, chief engineer of the Sokol fighter-jet design bureau in Nizhnii Novgorod, " 'Sokol' obiazan byt' sokolom" (Sokol must be a hawk), Birzha  (Nizhnii Novgorod), no. 42 (Oct. 22, 1993); and Vladislav Tarasov, interview with Boris A. Konstantinov (general director of NPO Zenit), "My vyzhivem pri liubom pravitel'stve" (We will survive under any government), Sorok Odin , no. 10 (Mar. 1992). When interviewed by the author during a visit from the Stanford CISAC group in September 1994, the deputy general director for personnel at the Mashinostroenie plant in Reutov said that he was appointed as an engineer at the plant immediately after he graduated from the Kharkov Aviation Institute and that he had been at his current post since 1976. Back.

Note 80: Oleg Kharkhordin and Theodore P. Gerber, "Russian Directors' Business Ethic: A Study of Industrial Enterprises in St. Petersburg, 1993," Europe-Asia Studies  46, no. 7 (1994): 1075-1107. Back.

Note 81: In 1996 this committee was renamed the Ministry of Defense Industry. Back.

Note 82: Kathryn Hendley, "The Spillover Effects of Privatization on Russian Legal Culture," Transnational Law and Contemporary Problems  4, no. 1 (spring 1995). For another example of a defense industrial firm facing problems with monopoly suppliers, see "Enterprise Profiles: Energia," Conversion: Report on Russia's Defense Industry  (Stanford University CISAC), no. 5 (April 1995): 8, 10. Back.

Note 83: For an example of power shifts over time in a defense-heavy city, see Vladimir Gel'man and Mary McAuley, "The Politics of City Government: Leningrad/St. Petersburg, 1990-1992," in Local Power and Post-Soviet Politics , ed. Theodore H. Friedgut and Jeffrey W. Hahn (Armonk, N.Y.: Sharpe, 1994). Back.

Note 84: The best report on this activity is Simon Johnson and Heidi Kroll, "Managerial Strategies for Spontaneous Privatization," Soviet Economy  7, no. 4 (1991): 281-316. Also see McFaul, "State Power," pp. 222-23. For Russian analyses of the situation, see V. Vladimirov, "Neplatezhni: yesli oni narastaiut, znachit, eto komu-nibud't nuzhno?" (Insolvent companies: If they are growing, does this mean someone needs it?), Sankt-Peterburgskie Vedomosti , Sept. 2, 1994; and, most strikingly, Arkadii Vol'skii, "Tendentsii" (Tendencies), Moskovskie Novosti , no. 14 (April 3-10, 1994). Back.

Note 85: Petr Khven', "Zakon surov . . . A surov li?" (The law is strict--or is it?), Gorodskoi Kur'er , Jan. 29, 1994. Back.

Note 86: For a hint of this, see "Oboronka ne pogibnet, yesli budet vypuskat' . . . inkubatory" (The defense complex will not perish, if they issue . . . incubators)," Sibirskaia Gazeta , no. 24 (June 1994). In addition, observers of a large Moscow trade union demonstration in late October 1994 overheard right-wing political party participants in the demonstration say that trade union representatives were participating only because their directors had paid them to do so (personal communication from Sharon Shible, Oct. 1994). Back.

Note 87: Gregory D. Andrusz, Housing and Urban Development in the USSR  (London: Macmillan, 1984), pp. 71-72. Back.

Note 88: Ibid., p. 66. Back.

Note 89: For a discussion of the laws and a set of examples, see Tova Perlmutter, "Reorganization of Social Services," in Defense Industry Restructuring in Russia: Case Studies and Analysis , ed. David Bernstein (Stanford, Calif.: Stanford University Center for International Security and Arms Control, 1994). See also Yelena Tregubova, "Viktor Chernomyrdin obeshchaet podderzhat' promyshlennikov" (Viktor Chernomyrdin promises to support industrialists), Segodnia , Nov. 10, 1994, who cites the example of the Kirovo-Chepetskii military chemical factory gladly transferring its social assets to the local government. Back.

Note 90: T. Belkina, "Housing Statistics and the Condition of the Housing Sector," Voprosy Ekonomiki , no. 7 (1993): 60-69, as trans. and reprinted in Problems of Economic Transition  37, no. 1 (May 1994): 56-71. Back.

Note 91: Perlmutter, "Reorganization of Social Services," p. 189. Back.

Note 92: Yevgenii Maifet (chairman of the trade union committee of NIIME and Mikron), interviewed by Tatiana Kutyreva, in "Stanet li profkom zashchitnikom?" (Will the trade union become the defender?), Sorok Odin , no. 4 (Feb. 1992). Back.

Note 93: Blair A. Ruble, "From Khrushcheby to Korobki," in Russian Housing and the Modern Age: Design and Social History , ed. William Craft Brumfield and Blair A. Ruble (New York: Cambridge University Press, 1993), pp. 234, 263. Back.

Note 94: Reported by Aleksandr Vysokovskii, "Will Domesticity Return?" trans. Carl Sandstrom, in Russian Housing and the Modern Age , p. 279. Back.

Note 95: Interview by the author, Sept. 1994, with a Nizhnii Novgorod official who did not wish to be named. Back.

Note 96: Affordable, reliable moving companies were not listed in the yellow pages to call for estimates. Even if one managed to obtain access to a truck for long-distance hauling, navigating the heavy load over poor roads, often gravel or stone at best and thus subject to flooding and mud-slicked during spring thaws, remained a formidable challenge. Back.

Note 97: Kevin O'Prey notes that the city and region of Perm' have been able to absorb those leaving the defense complex into other work (Farewell to Arms , p. 56). Perm' has a major oil refinery (see Isabel Gorst, "Russian Companies Reorganize," Petroleum Economist  62 (Sept. 1995): S66), as well as enough diamonds to warrant its governor visiting the United States to pursue a sorting and cutting joint venture (see "Rossiisko-amerikanskoe SP dlia ogranki permskikh almazov" [Russian American JV for evaluating Perm' diamonds], Segodnia , Nov. 10, 1994). Back.

Note 98: For example, see "Novosibirsk khochet poluchit' status 'zony natsional'nogo bedstviia' " (Novosibirsk wants to receive the status of a "zone of national poverty"), Kommersant-Daily , Apr. 1, 1995. Back.

Note 99: "World Bank OKs $400 mln Loan for Russian Housing," Reuters, Mar. 7, 1995; and Michael Mihalka, "World Bank Approves $400 Million Loan to Russia," OMRI Daily Digest , no. 48 (Mar. 8, 1995). Back.

Note 100: According to page 5 of "Impuls 1994," an advertising brochure put out by the Impuls' enterprise in Moscow, "company-owned medical service and voluntary medical insurance for all employees" are major employee attractions. The Mashinostroenie plant in Reutov still owns a polyclinic that can serve 1,200 people; it provides free medical treatment and doctor visits for employees, including at hospitals in Moscow with which it has agreements, and pays for half the cost of employee medicines (interview by the author with the deputy general director for social services of the Mashinostroenie plant). Perlmutter, "Reorganization of Social Services," confirms these two examples and adds that of TsAGI. Back.

Note 101: Perlmutter, "Reorganization of Social Services." Back.

Note 102: See Murray Feshbach, "A Disease Crisis Strikes Russia," Eurasian Reports  4, no. 1 (winter 1994/95): 51-54; and Rita von Luelsdorff, interviewed by Gerard J. Janco, in "Lending a 'Helping Hand,' " Eurasian Reports  4, no. 1 (winter 1994/95): 54-58. Back.

Note 103: Advertisement, Priglashaem: ezhenedel'naia reklamno-informatsionnaia gazeta , no. 38 (Oct. 1994). Back.

Note 104: "Uchitelam, ekonomistam . . . akteram" (For teachers, economists . . . actors), Nevskoe Vremia , Jan. 5, 1995. Back.

Note 105: V. Luk'ianov, "Kollektivnye dogovora i soglasheniia: zashchita ot bezrabotitsy" (The collective contract and agreement: Defense from unemployment), EKO, no. 1 (Jan. 1995): 206. Back.

Note 106: "Russia Berated on Women's Rights," Associated Press, Mar. 8, 1995. Back.

Note 107: Efron, "Russians Doff Lab Coats for Suits." Back.

Note 108: Galina N. Vladimirova (chief legal counsel for the St. Petersburg Mayor's Committee on Labor and Employment), "Bezrabotitsa: Pravovye aspekty" (Unemployment: Legal aspects), Nevskoe Vremia , June 1, 1993. Back.

Note 109: Author's interview with the deputy general director for personnel. Back.

Note 110: Mikhail Zelenkov, "Da zdravstvuet 'uravnilovka'? . . ." (Long live "leveling"? . . .), Nevskoe Vremia , Sept. 29, 1993. Back.

Note 111: Kornai, The Socialist System , esp. p. 223. Back.

Note 112: Vladimir E. Gimpel'son, "From Labour Shortage to Unemployment: Soviet Workers' Attitudes About Possible Changes in Labour Relations," Labour  5, no. 3 (1991): 71. Back.

Note 113: For examples, see Vsevolod Mikhelev's interview with Dmitrii Sobolev, chief of the Conversion Department for the Mayor's Committee on Economics and Finance in St. Petersburg, " 'Oboronka' zhdet kreditov, kotorykh na vsekh ne khvatit" (The defense complex awaits credits, which will not be sufficient for all), Nevskoe Vremia , Apr. 19, 1994; and Elena Denezhkina, Is There a Future for Russia's Defence Industry? Conversion in the Context of Current Economic Reforms , Lectures and Contribution to East European Studies at FOA, no. 7 (Stockholm: Swedish National Defense Research Establishment, 1994), p. 3. Back.

Note 114: "Provintsial'naia khronika" (Provincial chronicle), Segodnia , Nov. 9, 1994. Back.

Note 115: See Yevgenii Kuznetsov, "Enterprise Adjustment and Interest Groups Within the Military Industrial Complex," in The Post-Soviet Military-Industrial Complex: Proceedings of a Symposium  (Stockholm: Swedish National Defense Research Establishment, 1994), pp. 84-85; Vladimir Gimpel'son, "Politika rossiiskogo menedzhmenta v sfere zaniatosti" (The policy of Russian management in the sphere of employment), Mirovaia Ekonomika i Mezhdunarodnye Otnosheniia , no. 6 (1994): 5-20; McFaul, "State Power," p. 233. Back.

Note 116: See Kimberly Marten Zisk, "Arzamas-16: Economics and Security in a Closed Nuclear City," Post-Soviet Affairs  11, no.1 (Jan.-Mar. 1995): 72-73, for one example where such concern had important consequences for privatization of pieces of a nuclear weapons enterprise. For other examples, see Mikhail Ul'iashchenko writing on the Malakhit shipbuilding design bureau in St. Petersburg in "Chtoby sokhranit' umy" (To retain minds), Inzhenernaia Gazeta , no. 8 (Jan. 1992); Kutyreva, "Stanet li profkom zashchitnikom?"; and Gorelova, " 'Sokol' obiazan byt' sokolom." A similar concern was raised by Anatolii A. Kutumov, head of the labor dept. of the Central Aerohydrodynamics Institute (TsAGI) in Zhukovskii, during interviews by the Stanford CISAC group (including the author) in Sept. 1994. In that regard, also see the speech made by Deputy Prime Minister Oleg Soskovets at TsAGI's seventy-fifth anniversary jubilee in 1993: "My gordimsia, chto u nas est' takoi institut" (We are proud to have such an institute), Inzhenernaia Gazeta , no. 135 (Dec. 1993). Confirmation that this is a generalizable phenomenon across enterprises is found in Gimpel'son, "Politika rossiiskogo menedzhmenta." Back.

Note 117: Vladislav Borodulin, "Trudnee vsego zastavit' ikh rabotat' ne na Rodinu" (The hardest thing of all is to compel them to work not for the motherland), Kommersant-Daily , Mar. 2, 1995. Back.

Note 118: David Bernstein and Jeffrey Lehrer, "The Central Aerohydrodynamic Research Institute (TsAGI)," in Defense Industry Restructuring in Russia , pp. 11, 15-16. Back.

Note 119: Tova Perlmutter, Michael McFaul, and Jeffrey Lehrer, "The Mashinostroenie Enterprise," in Defense Industry Restructuring in Russia , p. 67. Back.

Note 120: See O. Steshenko, reporting on the Elektron Scientific Production Association in St. Petersburg, in "Vremia zimnikh otpuskov" (The time of winter vacations), Sankt-Peterburgskie Vedomosti , Sept. 14, 1994; also see Vitalii Zemskov, writing on the Almaz shipbuilding factory in the same city, in "Spasatel'nyi krug dlia 'Almaza' " (A lifesaver for Almaz), Nevskoe Vremia , Dec. 6, 1994. Back.

Note 121: This report about A. Vetchinkin, who remained director of the ELION enterprise until Sept. 1994, appears in A. Lavrent'ev, "Otkrovennyi razgovor" (Frank conversation), Sorok Odin , no. 38 (May 20, 1994). Back.

Note 122: Valerii Baberdin, "It's Nearly July, but There's Still No Clarity," Krasnaia Zvezda , June 23, 1995, as reported in FBIS-SOV, June 28, 1995, p. 29. This is confirmed by Tova Perlmutter, Michael McFaul, and Elaine Naugle, "Impuls," in Defense Industry Restructuring in Russia , p. 47. Back.

Note 123: For an example, see Pearlstein, "Trying to Give Peace a Chance." Back.

Note 124: An excellent description of this situation is provided in Dorothy S. Zinberg, "Better Off Back Home," London Times Higher Educational Supplement , Mar. 4, 1994, and "Russia's Hard Frontier," London Times Higher Educational Supplement , Nov. 5, 1993. Back.

Note 125: Interview conducted by the Stanford CISAC group, including the author, Sept. 1994. The director of TsAGI, G. I. Zaiganov, talked about the importance of training new Russian scientific personnel in his remarks before the League for Assistance to Defense Enterprises, as reported in the league's Informatsionnyi Sbornik , no. 2 (Apr. 22, 1993): 34. A senior official at the Russian government's Interdepartmental Analytic Center confirmed that TsAGI in particular considers this a pressing concern (author's interview in Moscow, Oct. 1994). Back.

Note 126: Interview conducted by members of the Stanford CISAC team (including the author), Moscow region, Sept. 1994. Back.

Note 127: Bernstein and Lehrer, "The Central Aerohydrodynamic Research Institute," p. 16. Back.

Note 128: G. I. Zagainov, "Griadut ser'eznye izmeneniia" (Serious changes are coming), radio address of Feb. 21, 1994, as reported in Novosti TsAGI , no. 33 (1994). Back.

Note 129: For example, at the Mashinostroenie enterprise in Reutov, "each section of the enterprise has drawn up a list of its top people" to receive special benefits, according to Perlmutter, McFaul, and Lehrer, "The Mashinostroenie Enterprise," p. 66; the Impuls' enterprise in Moscow encouraged "growth in real wages for the most active 'core' employees of each division," according to Perlmutter, McFaul, and Naugle, "Impuls," p. 52. Back.

Note 130: Perlmutter, McFaul, and Naugle, "Impuls," p. 52. Back.

Note 131: Aleksandr V. Grigor'ev, interview conducted by the Stanford CISAC group, including the author, Sept. 1994. Back.

Note 132: The rule changing this requirement was Presidential Decree no. 1195 of July 11, 1994, "On Curtailment of the Mobilization Capacity and the Mobilization Reserve," reprinted in Sobranie Zakonodatel'stva Rossiiskoe Federatsii  11 (1994): 1655-56. Back.

Note 133: Valerii Lisitsyn (deputy general director for the Krasnoe Sormovo shipbuilding factory in Nizhnii Novgorod), "O politike zastavliaet dumat' ekonomika" (Economics is compelled to think about politics), Birzha , no. 49 (Dec. 10, 1993). Back.

Note 134: Radchenko, "Pochem banany v Afrike?" Back.

Note 135: Adi Ignatius, "Russians Resent Array of U.S. Partners Chosen to Convert Defense Industry," Wall Street Journal , Sept. 19, 1994. Back.

Note 136: For examples, see Aleksandr Batkov, a department head at the Ministry of Aviation Industry, interviewed by Yurii Kozmin, TASS (in English), July 4, 1990, as reported in FBIS-SOV, July 5, 1990, p. 65; V. Shishkovskii and A. Rudakov, Vremia television broadcast, Sept. 10, 1990, as reported in FBIS-SOV, Sept. 14, 1990, p. 51; Viktor M. Chepkin, general designer of the A. M. Liulka aircraft engine design bureau, interviewed by A. Manushkin, in "Turbines, Onions, Sheepskins . . ." Krasnaia Zvezda , Feb. 12, 1991, as reported in Soviet Press: Selected Translations  (U.S. Air Force Technology Division, FTD-266OP-295-91) 1 (summer 1991): 3-4; Mikhail P. Simonov, director and chief engineer, Sukhoi Design Bureau, interviewed by Laurie Hays, in "Soviet Fighter Maker Takes a Sharp Turn," Wall Street Journal , June 12, 1992; and William S. Ritter Jr., "Soviet Defense Conversion: The Votkinsk Machine-Building Plant," Problems of Communism , Sept.-Oct. 1991, pp. 45-61. Back.

Note 137: "Goskomoboronprom rassmatrivaet vozmozhnost' perevod 60% predpriiatii VPK v razriad grazhdanskikh" (The state committee for defense industry reviews the possibility of transferring 60% of military-industrial complex enterprises to the rank of civilian), Segodnia , Dec. 14, 1994. Back.

Note 138: Tatiana Belova, head of the trade union committee at the ELMA Scientific-Production Association in Zelenograd, which specializes in microcircuitry pastes and photographic template equipment, interviewed in "Na 'ELME'--ideal'nyi koldogovor" (At ELMA--An ideal labor contract), Sorok Odin , no. 52 (July 8, 1994); and a report on the Angstrem microchip and crystal factory, by Aleksei Lavrent'ev, "Vse budet Chip-top" (All will be chip-top), Sorok Odin , no. 5 (Feb. 1-7, 1993). Back.

Note 139: A good example of this is the success found by the Izhorskie Zavody enterprise in St. Petersburg. It appeared to be surviving because of a single order for a reactor from a Perm' oil refinery; the Izhorskie director said in December 1994 that if it hadn't been for this order, the company would have been forced to declare bankruptcy. He hoped that the successful fulfillment of the order would be good advertising for the enterprise in the future, but the order itself was scheduled to end on September 15, 1995. See M. Matrenin, "Izhortsy vyigrali konkurs na krupnyi zakaz" (The Izhorskie employees won a competition for a huge order), Sankt-Peterburgskie Vedomosti , Dec. 12, 1994. Back.

Note 140: For an example of such reasoning, see Perlmutter, McFaul, and Lehrer, "Mashinostroenie Enterprise," p. 68. Back.

Note 141: Robert S. Pindyck and Daniel L. Rubinfeld, Microeconomics , 2d ed. (New York: Macmillan, 1992), p. 199. Back.

Note 142: Perlmutter, "Reorganization of Social Services," pp. 189-90. Back.

Note 143: "O naloge na soderzhanie zhilishchnogo fonda i ob'ektov sotsial'no-kul'turnoi sfery" (About taxes on the upkeep of the housing fund and objects of the social-cultural sphere), Altaiskaia Pravda , July 12, 1994; "Nalogovaia sistema v Sankt-Peterburge izmenitsia" (The tax system in St. Petersburg will change), Segodnia , Dec. 29, 1994. Back.

Note 144: For example, the Raduga laser design bureau in the Vladimirskaia oblast reportedly saved 3 billion rubles per year in taxes by giving its farmland and social facilities to county (raion ) authorities. See "Administratsiia Vladimirskoi oblasti predostavliaet nalogovye l'goty KB 'Raduga' " (The Vladimirskaia oblast administration offers tax benefits to the Raduga Design Bureau), Segodnia , Nov. 1, 1994. Back.

Note 145: The case is described in Zisk, "Arzamas-16," pp. 70-71. Back.

Note 146: See Radchenko, "Pochem banany v Afrike?"; and N. Figurovskii, interview with Irina Mikhailova Rukina, head of the Moscow Duma Committee on Economic Reform and Property and coordinator on industrial questions, in "Otechestvennaia promyshlennost' ne mozhet ne vozrodit'sia" (Domestic industry must be reborn), Ekonomika i Zhizn'--Vash Partner  (Moskovskii Vypusk ), no. 12 (June 1994). Rukina makes the argument in regard to the Moscow Aviation Production Association (MAPO). Back.

Note 147: Interview conducted by the author. Back.

Note 148: N. Sinitsyna, "Teplo nelaskovogo leta" (The warmth of an unfriendly summer), Sovremennik  (Zhukovskii), Aug. 3, 1994. Back.

Note 149: Belova, "Na 'ELME.' " Back.

Note 150: Stanley, "In Russia, a Breakdown." Back.

Note 151: Andrusz, Housing and Urban Development , p. 71. Back.

Note 152: Radchenko, "Pochem banany v Afrike?" Back.

Note 153: Perlmutter, "Reorganization of Social Services," p. 196. Back.

Note 154: Zisk, "Arzamas-16," p. 71. Back.

Note 155: Anishchenkov, A Soviet Factory , p. 9. Back.

Note 156: Interview conducted by the author. Back.

Note 157: A 1992 psychological survey of Russian managers in the defense-heavy region of Cheliabinsk found that Russian managers placed a higher intrinsic value on the goal of having power over other people's lives than did a sample of U.S. managers in similar positions (David N. Holt, David A. Ralston, and Robert H. Terpstra, "Constraints on Capitalism in Russia: The Management Psyche, Social Infrastructure, and Ideology," California Management Review 36, no. 3 [Mar. 22, 1994]: 124). Back.

Note 158: Berliner, Factory and Manager in the USSR , p. 68. Back.

Note 159: Kutyreva, "Stanet li profkom zashchitnikom?" Back.

Note 160: Jeffry A. Frieden, Debt, Development, and Democracy: Modern Political Economy and Latin America, 1955-1985  (Princeton: Princeton University Press, 1991); and Eduardo Silva, "Capitalist Coalitions, the State, and Neoliberal Economic Restructuring: Chile, 1973-88," World Politics  45 (July 1993): 526-59. Back.

Note 161: Bernstein and Lehrer, "The Central Aerohydrodynamic Research Institute." Back.

Note 162: For an expansion of this argument, see Kimberly Marten Zisk, "The Foreign Policy Preferences of Russian Defense Industrialists: Integration or Isolation?" in The Sources of Russian Foreign Policy After the Cold War , ed. Celeste Wallander (Boulder, Colo.: Westview, 1996). Back.

Note 163: See Helen Milner, Resisting Protectionism: Global Industries and the Politics of International Trade  (Princeton: Princeton University Press, 1988). Back.

Note 164: For examples, see Pavel Fel'gengauer, "Sudnyi den' VPK" (Judgment day for the military-industrial complex), Segodnia , Mar. 15, 1994; and Mikhail Malei, "VPK mozhet stat' detonatorom sotsial'nykh bur' " (The military-industrial complex may become the detonator of a social storm), Sankt-Peterburgskie Vedomosti , Aug. 30, 1994. Back.

Note 165: Mikhail Leont'ev, "Yurii Skokov pokazhet tovar litsom" (Yurii Skokov will show to good effect), Segodnia , July 30, 1993. Back.

Note 166: A. N. Shulunov (president of the league), "Otchet o rabote prezidiuma Ligi za period mart 1992 g.-mart 1993 g. i osnovnye napravleniia dal'neishei deiatel'nosti ligi" (Report on the work of the league's presidium from Mar. 1992-Mar. 1993 and the basic direction of further activities of the league), Informatsionnyi Sbornik  (of the league), no. 2 (1993): 5. Back.

Note 167: For examples, see "Ekstrennoe zasedanie rabotnikov VPK" (Extraordinary conference of military-industrial complex workers), Segodnia , Mar. 12, 1994; and "MO RF rassmotrelo voprosy struktornoi perestroiki oboronno-promyshlennogo potentsiala" (The Russian Defense Ministry considers the question of restructuring military-industrial potential), Segodnia , Nov. 3, 1994. Back.

Note 168: Shulunov, "Otchet o rabote," pp. 16-17. Back.

Note 169: Off-the-record comment. Back.

Note 170: Off-the-record comment. Back.

Note 171: Shulunov, "Otchet o rabote," pp. 15-16. Back.

Note 172: Aleksei Sokovnin, " 'Voennyi parad' ob'iavil voinu pravitel'stvennoi gazete" ("Military Parade" has proclaimed war against a government newspaper), Kommersant-Daily , Feb. 8, 1995. Back.

Note 173: For an argument that lobbying by individual directors rather than interest groups has been the norm across Russia, see Borodulin, "Trudnee vsego." Back.

Note 174: See Jack Snyder, Myths of Empire: Domestic Politics and International Ambition  (Ithaca, N.Y.: Cornell University Press, 1991). Back.

Note 175: Trud, July 25, 1995, as reported in "Withholding of Pay Sparks More Strikes," (Jamestown Foundation) Monitor  1, no. 61 (July 27, 1995). Back.

Note 176: This was confirmed to the author by two knowledgeable sources, one associated with the Nizhnii Novgorod regional administration and the other a Muscovite with close connections to the Defense Ministry. The workers were said to have been drunk. For press reports of these events (which do not directly mention the threat of violence against the authorities but do say that authorities were frightened by the events), see V. Seryi, "Kogda vydadut zarplatu?!" (When will they give us our pay?!), Nizhegorodskie Novosti , July 28, 1994; "Grom grianul--kto perekrestilsia?" (The thunder clapped: Who crossed himself?), Nizhegorodskie Novosti , Aug. 3, 1994; and Ye. Starichenkova, "Verkhom i bez vozhzhei" (On horseback without reins), Nizhegorodskie Novosti , Aug. 5, 1994. Back.

Note 177: The summary here is from Yelena Ovchinnikova and Viktor Smirnov, "Ispytatel' ugnal tank ot otchaianiia" (A drunk stole a tank in despair), Kommersant-Daily , June 17, 1995. A similar report was made by Valentina Nikiforova, "I stal tank oruzhiem proletariata" (And the tank became a weapon of the proletariat)," Pravda , June 12, 1995. Back.

Note 178: Ovchinnikova and Smirnov, "Ispytatel' ugnal tank ot otchaianiia." Back.

Note 179: Penny Morvant, "OMON Breaks up Shipyard Workers' Protest," OMRI Daily Digest , no. 111 (June 7, 1996). Back.

Note 180: Aleksandr Tsvetkov, "Direktor zavoda nachal bor'bu s rossiiskim rukovodstvom" (A factory director has begun a struggle with the Russian leadership), Kommersant-Daily , Feb. 1, 1995. Back.

Note 181: Yevgenii Ostapov, "Valeriia Anikina uvolili pod grokhot vzryvov" (Valerii Anikin is fired under the crash of explosions), Kommersant-Daily , Apr. 18, 1995. Back.