Perestroika and Change in Soviet Weapons ... - The Black Vault

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products without excellent machine tools, but the experience of VAZ
and KAMAZ, which have mainly imported equipment, shows that we
have learned quite well how to produce poor products with excellent
equipment." 2 Even with priority and good equipment, the constraints
and incentives of the broader economic system can interfere with and
impede effective production and efficient processes.
DEFENSE PRODUCTION INEFFICIENCY
The defense production complex possesses two other "resources"
that may be available for conversion to civilian use: excess capacity
and inefficiency. Excess capacity exists by design-for mobilization
purposes--and by inadvertence. Because of the priority of defense,
resources have flowed to defense production, often beyond reasonable
needs; the political leadership is now trying to recapture these reserves.
The new openness surrounding defense matters has shed light on the
detailed practices of the industry, suggesting a level of bloated inefficiency
that combines the systemic disincentives of the civilian sector, the
monopsony power of the military customers, and the priority supply of
production resources. One analyst, apparently a specialist within the
defense production complex, claims that labor and capital productivity
and energy efficiency in the defense branches correspond on the average
to the indicators of the economy in general.3 According to Isayev, the
growth of defense industry was controlled by the system of goal-oriented
program planning in which price played a secondary role in the allocation
of orders and resources. He argues that despite the better technological
level of equipment, higher skills of personnel, and scientific potential of
the defense complex, the type of production relations that have developed
there and the absence of efficiency-promoting incentives are behind the
poor utilization of productive forces.
Since the 1930s, the production of military hardware has been
managed through the formation of so-called "pyramid structures," the
apex of which is the output of a specific article, with the rest of the
pyramid encompassing the enterprises supplying the materials and
subassemblies. 4 All the enterprises in the structure are rigidly linked
together in a manner that guarantees the supply of inputs required at all
28. Yelekoyev, -rhe Last Trump," SotinuiticheshDya IndustriyA, January 28, 1969,
p. 2 (FBIS-SOV-89-021, February 2, 19689, p. 80).
3 A. ayev, "Reform and the Defense Branches," Kommunait, March 1989, p. 25.
*The pyramid structure is described by Yu. S. Valkov, "The Last Trump Card," Sotsiaiticheskaya
Induatriya, November 13, 198, p. 2 (FBIS-SOV-88-233, December 5,
1968, p. 123).