-Caveat Lector- An excerpt from: The New Wizard War - How the Soviets Steal US High Technology—And How We Give It Away. Tempus Books Robyn Shotwell Metcalfe©1988 ISBN 1-55615-016-4 ----- One view of the sham of 'capitalism vs communism'. Fostered as a ploy to keep us hoi polloi amused.Foil and fancy. Notice the players. Om K ---- TECHNOLOGY THIEVES: FROM PETER THE GREAT TO THE GREAT COMMUNICATOR The pre-twentieth century Russian economy was based to varying degrees on serf labor. Because serfs earned little or nothing for better harvests, they had no incentive to improve their farming methods. This lack of incentive carried over into Russian industry. Even before the reign (1682-1725) of Peter the Great, Russians began to seek outside know-how rather than develop it internally. Peter's father, Alexis (reigned 1645-76), looked to the West for ideas, skills, and know-how. Much of the know-how was brought to Moscow by Germans who settled in their own suburb, a favorite visiting place of Alexis' son, Peter. The foreigners brought with them a variety of sought-after crafts. For example, the German settlement included architects, engineers, and doctors who offered their skills to Moscow residents.[1] And as early as the mid-1500s, Western European laborers brought industrial skills to Russia; for example, Swedish and English workers brought modern ironworking know-how. In 1632 a Dutchman was the director of the first Russian ironworks to use water power.[2] But it was Peter the Great who first sprinkled Western innovations over the Russian economic system to extract increases in productivity from a systemically unmotivated work force. Tsar Peter concentrated his forays in Europe on his search for ways to bring industrial know-how to Russia. He brought home weapons, and with them came skilled technicians who could teach the Russians how to manufacture and repair the weapons. Peter appeared to have had a similar goal of, and approach to, modernizing the military as his Soviet counterparts have today. Peter sometimes brought Western ways into Russian society with a fervor akin to religious fanaticism. At one point, his travels convinced him that his male compatriots should shed their beards, a symbol, in his opinion, of Russian uncouth appearance in contrast to that of forwardthinking, unbearded Westerners. Motivated by both his Western observations and his obsession with taxation, he demanded that Russian men shave off their beards, personally and abruptly removed some of them himself, and issued small medallions to be carried by those paying a tax that enabled them to keep their beard.[3] When Peter set his sights on making Russia a preeminent naval power, he began spying in other countries. The original catalyst for his campaign was his desire to keep up with Dutch and particularly English naval developments. He ordered the clandestine observance of foreign naval vessels and shipyards and the recruitment of foreign expertise to accomplish his goal. Dutch naval expertise came in the person of Cornelius Cruys. Major General Patrick Gordon from England brought English naval know-how to Russia. Various pilots, engineers, and doctors followed him after a trip Peter made to Europe in 1698.[4] THE CONTINUOUS THREAD: FROM THE REVOLUTION Just as in today's Soviet Union, the motivation for modernization in Russia during the 1800s under the Romanov emperors depended on the state, and the result was an inability to keep pace with the Industrial Revolution that was taking place in the West. During that period, particularly under Nicholas II (reigned 1894-1917), many European and American firms contributed significantly to Russia's technological base. The French assisted with the building of the Trans-Siberian railway in the late 1800s, the English, French, and Belgians with the establishment of mining operations in the Donets Basin, and the Swedish and British with the development of the oil fields near the Caspian Sea. John Hughes, the Englishman mostly responsible for assisting the Russians with their metallurgical technology, was heralded as the "iron king" and honored when the Donets Basin factories were named after him. American companies came to Russia offering two industrial innovations-the sewing machine and agricultural equipment. Both Singer Sewing Machine and International Harvester had large, vigorous operations in Russia until the October Revolution. By 1914 Singer had a sales force of 27,000 in Russia, selling and servicing sewing machines.[5] In 1916, the American-Russian Chamber of Commerce was incorporated "to foster trade, encourage and generally promote the economic, commercial, and industrial relations between the United States of America and Russia." In 1950, when it was dissolved, E. A. Emerson of Armco International Co., T. H. Mitchell of RCA Communications Inc., Reeve Schley of Chase National Bank, Arthur Walsh of Thomas A. Edison Co., and Thomas J. Watson of IBM, among others, were members of the chamber's board of directors. Earlier, representatives of such companies as Westinghouse and Ingersoll Rand also sat on the board.[6] In 1917, the swell of events in Moscow nullified the chamber's plans for the near future. ONE STEP FORWARD The Russian Revolution in 1917 indelibly marked every aspect of Russia's political, economic, and social institutions. V. I. Lenin, the first Soviet leader (1917-24), condemned Western capitalism as an exploitation of the workers by the owners of industry and expropriated all Western assets, including threshing and sewing machines. Early revolutionary attitudes toward scientists further curtailed economic and technological progress. Revolutionaries viewed science as an effort to question the central importance of the individual to the new political order and feared that it offered the potential for replacing the human work force with machines. The new Soviet government also felt threatened by individualistic scientists and made the nationalization of science and technology an important part of its agenda. More independent-minded scientists were branded enemies of the proletariat and often tormented or even killed. Many fled the country. Russia's economy during its first communist year was dismal. In 1918, Lenin said: Now comes the most critical moment, when hunger and unemployment are knocking at the doors of an ever greater number of workers, when hundreds and thousands of men are suffering the pangs of hunger, when the situation is aggravated by the fact that there is no bread.[7] Money was losing its value faster than it was being issued. Between November 1917 and June 1918, the gross yield of grain crops dropped from 641,000 tons to 2,000 tons.[8] During the period of "war communism" immediately following the Bolshevik victory, the government officially discouraged any efforts to seek Western assistance and ideas, including technology, particularly because Britain, France, and the United States intervened on Soviet soil during World War I. Lenin's forces attempted to eliminate the vestiges of opposition to their new order. A wave of anti-Semitism brought with it pogroms that swept away some of Russia's most gifted scientists. (Such purges continued to escalate, especially under Stalin, until the early 1950s.) But the Bolshevik party soon realized its need for Western expertise. In the spring of 1919, the party congress recommended that "ideological purity be overlooked in drawing on the expertise of scientists."[9] In 1921, Lenin attempted to improve the economic situation by instituting the New Economic Policy (NEP). The NEP permitted concessions to Western entrepreneurs, allowed for technology-assistance contracts with foreign engineers, and approved Soviet experts' exchanges with their Western counterparts. Far from being an innovative experiment in economic management, the NEP was an emergency plan for rescuing the economy to the point that it might feed the population. The peasantry had grown hostile as a result of dismal agricultural conditions. To make things worse, the peasants were threatened because of the new regime's forced requisitioning of agricultural surpluses. The NEP attempted to improve the situation by changing agricultural and industrial policy. Instead of forced requisitioning, the NEP provided for a tax on production and a means for placing some produce on the free market. Similar to Gorbachev's new initiatives, the NEP enabled farmers to lease land, hire some labor, and exercise a degree of local autonomy. Small businessmen were allowed to manage some enterprises and, to a limited extent, practice free trade. They were pressured to institute more rigorous management principles and to show increased profits. As early as 1922, the economy began to improve, and Lenin's new policy laid the groundwork for the Soviet Union's first Five-Year Plan.[10] Thus, the Soviets compromised communist principles to maintain the regime. Times continued to be unsettled as Lenin tried to lead a starving, embattled people who had known no peace since the beginning of World War I. Lenin referred to his program as taking "one step backward in order to take two steps forward,[11] surprising his fellow revolutionaries by stating that "communists must learn to trade."" His plan carried with it the hope that the influx of Western skills and assets would develop the store of natural resources that blessed the Soviet Union. He also hoped that the NEP would bring with it the momentum of industrialization that had transformed the West. Several European countries signed trade agreements with the Soviets, including Great Britain in March 1921. The Soviet foreign-trade company, Amtorg, was also created under the NEP, as was another trading company in London called Arcos. Germany extended credits to the Soviet Union for the purchase of German machinery.[12] As a result of this risky reach for the benefits of capitalism, the Soviets granted almost 200 concessions to foreign firms, giving each one the right to engage in a specific commercial activity for a specific period.[13] The concessions were aimed at acquiring Western, mostly U.S., production processes, training engineers, and creating institutes for applied and basic research. U.S. banking interests also played a role. When concessions continued during the first years of Stalin's rule, the Chase Manhattan Bank, then known as the Chase National Bank, held all of Amtorg's accounts. The contracts ushered in a period of unprecedented Westernization of Russian technology, both in equipment and know-how. International Barnsdall Corporation, for instance, introduced U.S. rotary drilling and pumping technology; by the end of the 1920s, 80 percent of all Soviet drilling operations used the rotary technique.[14] Although the concessions had the immediate effect of bringing new life to Soviet industry, they had a longer-term negative impact. The infusion of Western technology began to take away what little incentive there was for internal innovation and development. The consequences were felt in the Soviet economy until 1941, when World War II intervened and the demands of creating and maintaining a huge war machine led to the revival of internal R&D. Lenin died in 1924, to be succeeded ultimately by Joseph Stalin. For the rest of the decade, those agreements already reached with foreign firms remained in effect, but the number of new concessions dwindled. Instead, state planners concentrated on technical-assistance contracts with individual foreign firms. Western ways had come to be the dominant force in the Soviet economy. In his 1979 Commentary Magazine article, Carl Gershman wrote that by 1928 there was not a single important industrial process-from mining, oil, production, metallurgy, chemicals, transportation, communications, textiles, and forestry to the production of industrial and agricultural equipment and the generation of electrical power-which did not derive from transferred Western technology.[15] Anthony C. Sutton, a historian specializing in Soviet history, concludes that U.S. technical assistance to the Soviets between 1917 and 1930 was "the most important factor in the survival of the Soviet regime."[16] American industrialists greeted Soviet markets with enthusiasm. Thomas Watson, founder of the new calculating machine company, IBM, warned Americans to "refrain from making any criticism of the present form of government adopted by Russia," in an effort to keep the doors wide open for business opportunities.[17] Between 1918 and 1933, U.S. companies active in this transfer of technology included Curtiss-Wright Corporation (aviation), Sperry Gyroscope Company (marine instruments), International General Electric Company, and the Radio Corporation of America (electronics).[18] For their part, Soviet engineers had absorbed U.S. technology in large measure via the concessions, and manufacturing centers were becoming self-sufficient enough to do without the massive infusion of U.S. expertise and technicians. When imports from the United States began to taper off, the Soviet Union prepared to internalize its newly renovated industrial society. But American technical input had not come to an end. Between 1930 and 1945, technology-assistance agreements continued to replace the concessions of the 1920s. During that time, an industrial design firm in Detroit, Mich., Albert Kahn Inc., designed and built plants called for by the first Five-Year Plan (1928-33) using non-Soviet equipment. This effort was central to providing American technology so desperately needed by the Soviets to implement their first Five-Year Plan. Other American firms went to the Soviet Union to work under individual contracts with the government. Arthur G. McKee Company managed the construction of the world's largest steel plant, Du Pont constructed two nitric acid plants, and General Electric designed and built electric generators and turbines. Even automobile plants rose in Moscow and Yaroslavl with assistance from A. J. Brandt and the Hercules Motor Company.[19] TWO STEPS BACK Under Stalin's direction, the government continued to monitor Western technical literature and to duplicate some prototypes obtained during the concessions period. Stalin's economic policy initially continued to move the country toward industrialization. Some companies were denationalized in an attempt to stimulate the growth of a competitive marketplace and to compensate for the decrease of Western investment in the Soviet economy. But Stalin quickly moved away from NEP policies, in part because of Lenin's ambiguity concerning whether he intended the NEP to be a temporary program or a permanent fixture of the Soviet economy. During the infamous show trials of the late 1920s and early 1930s, Stalin charged Western technicians with sabotage and "wrecking." Much to their chagrin, U.S. firms saw their assets expropriated by the Soviet government. Only those Americans with significant economic and political clout, most notably Armand Hammer and W. Averell Harriman emerged from the concessions experiment unscathed,[20] receiving reasonable compensation for their business interests. Hammer, whose father was instrumental in founding the U.S. Communist party in 1919, represented thirty-eight U.S. firms during the concessions period. Harriman was a director of the U.S. bank Kuhn, Loeb & Co., one of four U.S. financial institutions active in lending money to the Soviet government. In 1936, operating under his new constitution and with the second Five-Year Plan in full swing, Stalin officially condemned Lenin's NEP in favor of his own economic policy. (In fact, the NEP lasted only until 1924.) In a speech before the Extraordinary Eighth Congress of Soviets, he described the NEP as "based on old, obsolete, poor technique and agriculture." He went on to say that it "resembled an immense ocean of petty individual peasant economies with their obsolete medieval technique." The economy under his policies would grow "to giant strength ... based on a new, rich, modern technique with a strongly developed heavy industry . . ."[21] If reliance on foreign technology under the NEP had slowed internal Soviet R&D, the totalitarian measures carried out by Stalin in support of his new policies virtually stultified it. Free thinking and individualism, personality traits of many great scientists, hardly fit the Stalinist vision of the U.S.S.R. Concerned that scientists could pose an intellectual if not a political threat to his rule, Stalin sent many of the country's leading men of science to the gulags. Although Stalin's reforms, especially the collectivization of agriculture in the 1930s, had been intended to put the Soviet economy on an equal footing with the economies of the Western powers, by late in the decade, the economic situation was starting to decline. Collectivization took with it the lives of millions of peasants and drastically destabilized the economy. Stalin starved the peasants by selling requisitioned grain for hard currency that he used to purchase foreign technology for the military. In large part the victim of Stalin's extremism, economic progress had also suffered the inability of the technicians remaining at their posts to apply and improve on the expertise gathered under the NEP. Stalin thus began, in the 1940s, to bring scientists back from the labor camps in the hope that they could advance Soviet technology and pump new life into the economy and the military. Scientists were given a privileged position in society, so much so that Stalin once told his staff, "Don't bother our physicists with political seminars. Let them use all their time for their professional work."[22] WORLD WAR II: A TECHNOLOGY WINDFALL World War II. again opened the door to U.S. technology. Once the Soviet Union and the United States were allied against Germany, technical assistance began to flow between the two countries. The Lend-Lease Act, passed in 1941, provided for the United States to sell, lend, or lease materials, including machinery incorporating important technology, to its allies in return for in- kind repayment or other vaguely defined assets. Anatoly P. Aleksandrov, the outgoing president of the Soviet Academy of Sciences, claimed in 1986 that assistance from the West during this period "served as the material foundation for our great victory in the struggle with fascism."[23] William Corson and Robert Crowley, in their book The New KGB, argue that, under Lend-Lease, Soviet agents in the United States, posing as trade representatives, made off with any equipment they could put their hands on. Although proving this assertion is difficult, under the act about $167 million worth of electrical-plant shipments—a priority for the Soviets—also reached the Soviet Union via legitimate channels. As provided by the Lend-Lease Act, everything from tanks, trucks, locomotives, and motor vehicles to army boots, telephones, and radio components reached the Soviets under protocol agreements signed between 1941 and 1945, when the war ended. In addition, from 1940 to 1942 alone, at least 1,300 industrial plants opened up with some assistance from the United States in the Soviet Union. By 1944, this U.S. assistance increased Soviet wartime capacity by 20 percent.[24] In all, the Soviets received more than $11 billion in technical aid. (The U.S.S.R. was one of the last recipients to finish its repayment, which it did in 1972, more than 30 years after the act was signed.) Stalin, U.S. President Franklin Delano Roosevelt, and Winston Churchill recognized that their nations would emerge from the war as the world's preeminent powers. Accordingly, each attempted to maneuver into a position that would leave his country with the advantage when fighting ceased. Their common cause of defeating Hitler, however, kept relations superficially cordial even as they competed with each other. This was to change in the war's waning days. When, in early 1945, Nazi defeat appeared inevitable, the Allies turned their attention to dividing the spoils of victory, which, considering Germany's advanced industrial and scientific community, were substantial. Thus began what Winston Churchill called the Wizard War, the Soviet and American effort to commandeer the Third Reich's technicians and technology. As war reparations, the Soviets dismantled entire German factories and moved them lock, stock, and barrel to their own country. Similarly, they moved complete laboratories to the Soviet Union, along with a great many German technicians. Sometimes the facilities proved difficult to reassemble, and the absence of know-how or accomplished scientists who did not go to the Soviet Union with their labs made it difficult to run them. In the end, the most visible technological battle was won by the Americans. They and the Soviets had realized that the awesome V-rocket, the "vengeance weapon" used by Hitler to terrorize London during the war's final months, bore the promises of space travel and military superiority for whatever nation first mastered its power. In 1945, Wernher von Braun, the inventor of the V- rocket, sought refuge with the Americans in anticipation of a German defeat. To protect his invaluable technical papers, von Braun buried them in an abandoned mine shaft in southern Germany. After surrendering to an American soldier in Germany, he and other key rocket experts were whisked to America. Arriving later at their New Mexico testing grounds were the critical technical papers, retrieved by the Americans after von Braun had told them where the stash could be found, and all the rocket equipment U.S. forces could salvage from the underground Nazi rocket factory at Peenemunde, in what was to become the Soviet-controlled Eastern zone. The Soviets, meanwhile, had all along eyed the German rocket facilities and personnel as a top priority for their own use. When the war ended, the Soviets raced to Peenemunde only to find deserted buildings.[25] pps, 44-53 ----- NOTES 1. Henri Troyat, Peter the Great (New York: E. P. Dutton, 1987), p. 45. 2. Jesse D. Clarkson, A History of Russia (New York: Random House, 1961), pp. 168-69 and 207-9. 3. Troyat, p. 119. 4. Ibid., p. 107. 5. Carl Gershman, "Selling Them the Rope: Business and the Soviets," Commentary Magazine, Apr. 1979, p. 2. 6. J. M. Tatcher Feinstein, Fifty Years of U.S.-Soviet Trade (New York: Symposium Press, 1974), pp. 63-64. 7. Clarkson, p. 506. 8. Ibid., p. 511. 9. Vera ToIz, "Aleksandrov's Speech to the Twenty-Seventh Party Congress: The Role of the U.S.S.R. Academy of Sciences," Radio Liberty Research Bulletin, RL 108/86, Mar. 5,1986, p. 1. 10. Donald W. Treadgold, Twentieth-Century Russia, 6th ed. (Boulder, Colo.: Westview Press, 1987), pp. 180-82. 11. "A 1921 Lesson for Russia," Economist, Jan. 24,1987, p. 45. 12. Clarkson, p. 558. 13. Gershman, p. 3. 14. Anthony C. Sutton, Western Technology and Soviet Economic Development 1945-1965 (Stanford, Calif.: Hoover Institution Press, 1973), p. 411. 15. Gershman, p. 3. 16. Sutton, p. 412. 17. Ibid. 18. William Rogers, Think (New York: Stein & Day, 1969), p. 109. 19. Feinstein, p. 63. 20. Gershman, p. 3. 21. Clarkson, p. 627. 22. Gary Taubes and Glenn Garelik, "Soviet Science: How Good Is It?" Discover, August 1986, p. 43. 23. Speech by A. P. Aleksandrov, Pravda: Organ of the Central Committee Of the CPSU (St. Paul, Minn.), Feb. 27,1986, p. 5. 24. Sutton, p. 394. 25. Walter A. McDougall, The Heavens and the Earth: A Political History of the Space Age (New York: Basic Books, 1985), pp. 42-46. ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. 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