Samara's Defense Industry Moves Reluctantly toward the Free Market Old Habits Persist in Russian Military Complex, as Managers Still Shy from Converting Factories or Even Marketing Their Highly Competitive Rockets Series: Along the VOLGA Recreating RUSSIA. Part 4 of a Six-Part Series. First of 2 Articles Appearing Today

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IN the decades before the 1917 Bolshevik seizure of power, commerce defined this Volga River city.

The trade of grain, wool, and leather goods largely drove the local economy, allowing merchants to dominate cultural life. Amassing small fortunes, they built fancy mansions in the city center and filled them with fabulous art collections.

The Bolsheviks' attempt to remake society put an abrupt end to the merchants' golden age here, as the free market gave way to Communist planning. The overhaul extended even to the city's name, which in 1935 was changed from Samara to Kuibyshev in honor of an old Bolshevik leader.

The most drastic changes did not come until World War II. Early in the war, with factories being evacuated westward as Nazi troops advanced into European Russia, this city almost overnight metamorphosed into a vital military production center. It also briefly became the Soviet Union's capital. (A peek at Stalin's wartime bunker, Page 9.)

The cold-war era saw Samara cemented into the Soviet Union's military-industrial complex. And national security concerns dictated that all important Soviet military-industrial centers, including Samara, become "closed cities," meaning they had little, if any, contact with foreigners.

Secrecy shrouded Samara until only recently, when the Soviet system came unglued and the Communist Party was swept from power. Over the past few years the city has opened up again and gotten its original name back. In addition, "conversion" has become a buzzword, with Russia's new leadership stressing the retooling of military enterprises for civilian-oriented production.

But as this city tries to reorient itself, communism's 70-year legacy - especially its former closed-city status - is proving difficult to overcome. A significant problem is the inability to draw upon past experience. The communist assault on the entrepreneurial mentality was so thorough that many contemporary industrial managers here appear at a loss when it comes to market skills.

"They don't have any idea of what they don't know," says Richard Pierce, a US Peace Corps volunteer in Samara who provides market transition advice.

"Closed-city status retarded market thinking," adds David Lawrence, another Peace Corps volunteer. "Since this was a military center, people here think it's a natural place for investment. But that isn't true.... There's competition for investment dollars, and if they don't encourage them, they won't come."

Since former Soviet President Mikhail Gorbachev first started talking about military conversion in 1988, the effort has suffered from two deficiencies: the lack of a comprehensive plan and a shortage of funds. A few nationwide conversion blueprints have been formulated over the last five years, but they only outlined broad strategic aims, containing few tactical specifics. Also, the money outlook remains bleak, given Russia's economic crisis.

As a result, conversion is having problems gaining momentum. And in Samara, there is no shortage of complaints by conversion officials.

Vladimir Moskovsky, Samara's deputy mayor in charge of conversion, bemoans the city's industrialization experience. Back in 1941, when the Soviet Union was desperately trying to fight off the Nazis, plants here were quickly thrown up in the middle of fields, with some producing munitions even before roofs were finished, Mr. Moskovsky says. No consideration was given to human needs such as housing, transport, and sewage.

"This unbalanced character concerning the organization of industry and housing still exists," he says.

Yuri Motkov, chief of the Conversion Department for the Samara Regional Administration, criticizes the federal government for its rapid and deep cuts in defense spending. The drastic approach, Mr. Motkov says, has deprived many defense plants of the means to reorient. …


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