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Konversiya

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Konversiya (Cyrillic: Конверсия), Russian for "conversion" and used here in the sense of economic conversion was an economic policy initiated by Mikhail Gorbachev in the final years of the Soviet Union[1] and which continued into the early years of post-Soviet Russia.[2]

His aim was to divert resources and economic capacity from military production to civilian production.[1] These measures, carried out from 1987 onwards, were only moderately successful.[1]

Gorbachev first attempted to implement konversiya in the context of the 1987 INF Treaty[1] and continued it in the defence budget cuts of the following year.[1] In theory, once free of the demands of military procurement, manufacturers could spend capacity on consumer goods and other products to enhance civil society.[1] Such a shift in production would also decrease the Soviet Union's reliance on importing such goods from Western nations.[1] All of this assumed that manufacturers would find the switch easy and that only minimal retraining and retooling would be required to make this change.[1] In a 1989 speech to the United Nations, Gorbachev suggested that plans for such conversion should be implemented world-wide, in parallel with arms reduction.[3]

Implementation

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In practice, konversiya was not as easy as this.[1] Defence manufacturers found themselves under-resourced to develop and manufacture new classes of goods.[2] Furthermore, this "bottom up" approach left it to individual manufacturers to determine how to spend capacity, without taking into account broader market forces.[1] At the same time, the Soviet government's capability to provide central planning and guidance was severely eroded.[1] Initial challenges included deciding what exactly to produce, to whom to sell it, how to source the necessary raw materials, and how to finance new production.[4] Additionally, the economies of defence markets are fundamentally different from consumer markets: the former is characterised by highly complex products developed largely irrespective of cost, and the latter by simple products produced cheaply.[5]

As a result, freed-up capacity was not efficiently converted to civil production, and many products that were manufactured turned out to be economically unviable.[2] Managers of manufacturing plants began to jokingly refer to konversiya as diversiya (диверсия, "sabotage") or konvulsiya (конвульсия, "convulsions") or talk about "falling under" konversiya in the sense of "falling under a bus".[2]

Konversiya in post-Soviet Russia

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Following the dissolution of the Soviet Union, Russian government reforms from 1992 onwards exacerbated the situation by privatising large chunks of the defence industry without addressing these gaps in decision-making.[6] Many of the newly privatised suffered because the loss of historical income impacted their ability to cover fixed costs, particularly wages.[6] This led to a temporary freeze on privatisation on 19 August 1993.[6]

Once privatisation recommenced in a more controlled way in 1994, manufacturers were able to convert capacity more efficiently, but by then the maligned term konversiya began to fall out of use.[2] Notably, financial-industrial groups (финансово-промышленные группы — finansovo-promyshlennye gruppy) spontaneously arose within various industries which were able to help fill the void in manufacturing strategy left by the absence of central planning.[4]

References

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  1. ^ a b c d e f g h i j k Cooper 1995, p.130
  2. ^ a b c d e Cooper 1995, p.131
  3. ^ Van Metre 1990, p.259
  4. ^ a b Sánchez-Andrés 1995, p.1272
  5. ^ Van Metre 1990, p.263
  6. ^ a b c Sánchez-Andrés 1995, p.1270

Sources

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  • Cooper, Julian (1995). "Conversion Is Dead, Long Live Conversion!". Journal of Peace Research. 32 (2): 129–32. doi:10.1177/0022343395032002001.
  • Sánchez-Andrés, Antonio (1995). "The transformation of the Russian defence industry". Europe-Asia Studies. 47 (8): 1269–92. doi:10.1080/09668139508412321.
  • Van Metre, Lauren (1990). "Defence Conversion in the Soviet Union: Will it Succeed?". Soviet Union/Union soviétique. 17 (3): 259–80.