(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00798A000500090002-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 9, 2016
• Document Release Date: July 19, 2000
• Sequence Number: 2
• Publication Date: August 19, 1974
• Content Type: LETTER

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DEPARTMENT OF STATE Cy,e
DIVISION OF LANGUAGE SERVICES
/ n 6~,?sCy
(TRANSLATION)
STATINTL
LS NO.43585
DA/
Russian
August 19, 1974
Dr. J.H. Hollomon
Director, Center for the Study of Policy Alternatives,
Massachusetts Institute of Technology
Cambridge, Massachusetts
USA
Thank you for the material on research and development financing,
prepared by the U.S. side in accordance with the agreement reached at
the November 1973 meeting of the USSR-U.S. Joint Group of Experts on
Science Policy. In my opinion, this material is of considerable interest
for accomplishing the tasks before us in our,joint research. The Soviet
side, on its part, deems it necessary to submit a number of proposals,
which, it believes, will facilitate more efficient research on the topic
"Financing Research and Development in the USSR and U.S. (Comparative
Analysis)."
The Soviet side believes that an exchange of statistical data in the
form proposed by the U.S. side, will hardly contribute to carrying
out the tasks of our research. At the first stage of research, the sides
will be able to pro7ide to each other only such statistical data as have
already been published and are thus known to the experts participating in the
research. In any event, the data on research and development financing in
the U.S., which the U.S. side has kindly offered to send us, is contained in
the Soviet publication by V.I. Gromek, V.I. Maslennikov et al., SShA: nauka
i obrazovaniye [Science and Education], Moscow; Nauka Publishing House,
State Dept. declassification & release instructions on file
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1974; in the U.S. research report Science Indicators 1972, Report-of the
National Science Board, 1973; and in certain other works at our disposal.
With regard-to . published data on financing of science in the USSR, a
sufficiently complete (though from the point of view of methodology not
quite perfect) summary of this data is presented in Sources of Financing
Stages of the Research, Development and Innovation Cycle in the USSR by
Lou van E. Nolting, U.S. Department of Commerce, Foreign Economic Reports,
No. 3, 1973.
But even the most detailed statistical data does not give any idea
how it was obtained, what is included therein and to what extent, what the
significance of such indexes is in each country, etc. Yet, without informa-
tion of this nature it is impossible to even begin the work of comparing
indexes of science financing.in the USSR and the U.S. This is precisely
how the Soviet side understands the provision of the "Program of Scientific
and Technical Cooperation between the USSR and U.S. in the Field of Science
Policy" which states that at the first stage exchange of material on
our research topic will be aimed at examining concepts and differences in
definitions, methods, practice,, policy, and financial measures for suppor-
ting research and development (I, line 3).
The Soviet side regards resolution of these questions to be a priority
task of our joint research, since herein lie the basic differences between
the USSR and the U.S. in the field of financing scientific research projects.
These differences are apparent even in the term used to describe the ob-
ject being financed: in the USSR it is "Science," in the U.S. it is
"Research and Development." There are many differences between these con-
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cepts. For example, we will note that a substantial portion of development
in the Soviet Union falls under "Science" only if it is being carried
out by "independent design and planning organizations" (2, pp. 768-90}
On the other hand, development which is carried out not by independent
organizations but by design and planning subunits (divisions, bureaus)
at industrial enterprises and in other organizations, are not financed in
the capacity of science. If an organization has a planning and design
as well as a scientific-research unit, financing of science "includes
the amount of expenditures which pertains only to scientific-research
activity carried out by such a scientific body" (2, p. 28).
There are also other differences in determining the scientific-research
project being financed out of expenditures for science (in the USSR). and
outlays for research and development (in the U.S.). In the Soviet Union,
for example, the index of expenditures for science does not include research
expenditures carried out directly at production enterprises (e.g. in plant
laboratories). Total expenditures for science also do not include outlays
for scientific-research being carried out by academic departments of insti-
tutions of higher learning. Differences of this nature, the Soviet side
believes, must be determined and precisely established at the first stage
of research, in order to work out, at subsequent stages, ways and methods
which would make it possible to eliminate, to a greater or lesser extent, the
effect of these differences upon comparability of science (research and
development) financing indexes, used in our countries.
'In order to eliminate to a certain extent the effect of differences,
existing in the methodology and practice of financing science and research
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and development in the USSR and U.S., it is necessary to define, with
adequate precision, the scope of this financing in our countries. In the
Soviet Union, for example, science financing includes expenditures in-
curred by scientific-research organizations prior to the stage of pilot
-model production which are subject--to check-out and testing under produc-
tion conditions. As of this stage, expenditures incurred by the afore-
mentioned bodies are not included within the overall total of science ex-
penditures (2, p. 28). In the U.S., there probably also exists a finan-
cing stage, similar in concept. Establishment of the positions of these
.stages along the "Science-Production" economic contact line in the USSR
and U.S. will help to define the scope of science (research and development)
.financing and, consequently, will facilitate more accurate comparison
of total expenditures for these purposes in our countries.
In the view of the Soviet side, serious difficulties will arise in
comparing expenditures for science (research and development) in the USSR
and the U.S. in terms of their intended use. In the U.S., the fundamental
classification of scientific-research activity is the distinction between
basic research, applied research,and development. However, as has
been repeatedly pointed out in the literature, this classification is
not based on absolutely precise criteria, and thus, in the course of finan-
cing research and development, subjective interpretations arise which lead
to the adoption of arbitrary decisions during allocation of funds for
intended uses and research stages. In the USSR, such a classification is
not used in science financing (a distinction between basic and applied
research has another purpose here). .
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In the Soviet Union, expenditures for science are made under'a dif-
ferent classification of directions in scientific research activity. Also,
there is a distinct relationship between research directions and their finan-
cing:
-- scientific research activity, related to carrying out government
assignments, to the solution of basic scientific and technical problems
in the field of natural and social sciences, and scientific-research acti-
vity of a basic (theoretical) and exploratory nature are financed through
appropriations from the state budget;
-- scientific-research projects of an all-state or [industrial) branch
nature are financed out of funds for scientific research, provided for in
the cost plans for industrial output, construction and installation work,
and transportation, in plans for operating costs, as well as in plans for
turnover allowances of trade, supply, sales and procurement organizations,
and also in construction estimates (in those instances when scientific-
research work is envisaged during a construction project);
-- scientific-research activity in the sphere of construction, in
the building materials industry, in the building industry, and in the
road-building machine industry of an all-state nature are financed by
funds from the state budget, specifically appropriated for these purposes
in the established manner;
-- agricultural scientific-research activity of an all-state and
branch nature is financed out of the state budget and out of funds
obtained through the sale of goods produced on experimental farms and
at enterprises of agricultural scientific-research establishments;
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-- scientific-research activities, carried out by scientific-research
establishments of the USSR Ministry of Geology, and geology ministries
and administrations of union republics are financed out of appropriations
from the state budget covering operating costs for geological exploration
.and topographic and geodesic activity (2, pp. 28-29).
During the comparison, some further difficulties will arise because
this general approach has recently been undergoing certain changes and
modifications, related to the reorganization of production management in
the USSR. Thus, financing of scientific-research projects in ministries
? which have changed over to the new management system is accomplished from
a single fund for development of science and technology which is maintained
through deductions from planned profits. In all-union and republic indus-
trial associations, financing of scientific-research activities is accom-
plished through the scientific research fund, set up in the associations
in accordance with the Regulations on Establishment and Utilization of this
.fund (2, p. 29).
Taking into account all these differences in the methodology of science
(research and development) financing in the USSR and the U.S., the Soviet
side believes that one of the most important practical results of our joint
research must be recomputation of outlays for research and development in
the U.S. on the basis of methodological and methodical principles accepted
in the USSR (this recomputation is performed by U.S. experts), and recom-
putation of expenditures for science in the Soviet Union on the basis of
methodological and methodical principles, adopted in the U.S. (this recompu-
tation is performed by Soviet experts).
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Let us clarify how such recomputations can be accomplished. For
example, to determine the comparable volume of expenditures for basic re-
search in the USSR, it is necessary to have data concerning the unit weight
of such research within research and development expenditures in indivi-
dual fields of science and branches of the U.S. national economy. Upon
receiving the aforementioned data from the U.S. side, Soviet experts will
compare it with unpublished Soviet statistical material and on this basis
will compute the comparable magnitude of this index for the Soviet Union.
Other approaches to such recomputations, to be worked out and developed
in detail in the course of our joint research are also possible. In the
opinion of the Soviet side, materials to be exchanged by the sides,and joint
consultations should. make it possible to attain maximum accuracy in the results
of these recomputations. If the U.S. side accepts the proposal for mutual
recomputation as a method of comparative analysis, one should also estab-
lish a series of indexes to be analyzed by this method and set a deadline
for computation of each index.
At the same time, the Soviet side believes that our joint research
should not be limited to solving problems related to the comparability
of individual statistical indexes of scientific-research financing in
the USSR and the U.S. In our view, analysis of the economic mechanisms used
in our countries for the actual financing of science (research and develop-
ment) could be an important part of this research. It seems to us that
this analysis must not only show the existing procedure of allocating and
expending funds for carrying out research, for applying its results in
various areas of practical activity,and for creating conditions necessary
for recruiting scientists to the solution of the most urgent and important
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8 STATINTL
problems, etc., but must also describe the historical development of this
procedure, the basic stages of its development, as well as show the most
significant changes which, the experts believe, will occur in the future
in the area of financing scientific activity in the USSR and the U.S.
In the view of the Soviet stile, a separate effort of our joint research
must be to overcome the ciiificuities, resulting from the fundamental cii.f-
ferences of a number of social principles which underlie the economic
mechanisms for financing scientific research activity in the USSR and
the U.S. In the Soviet Union, for example, outlays for science do not
involve any sort of payments for land, since the latter is public property
(3); in the USSR, an a rule, depreciation is not. c:omptrted for egcti.pment
unred for nc l en t iJ i e t:t::;ercrcli , t: i nce Sc n'uce I .: eons i do rcd a non-productive
branch of the national economy (2, p. 703), etc. In the U.S., such ques-
tions are decided in the opposite fashion. Therefore, it appears,impor-
tant to determine these differences which manifest themselves in the
operation of economic mechanisms of financing science. (research and develop-
ment) and t.o work ottt methodological rtpproaches which would permiI a quan-
titative evaluation of tare dlflc:rence:,, rt'::uIting from such di.stinctiun.o.
Perhaps this evaluation should be worked out in the form of special currency
exchange rates for scientific research -- a research rate of the dollar with
respect to the ruble (or of the ruble to the dollar).
The Soviet side thinks it most desirable that materials to he exchanged
by our. ::ides in the process of .joint research c:ito the sources of Concepts
or data used in this material. (the information concerning U.S. methodology
of collecting data, definitions and concepts, attached to your letter of April
24,1974 did not cite such references). It is important that in studying
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the received material it be clear whether the statements and data contained
therein represent the official position of governmental bodies, whether
they represent the views of some organization (scientific, economic, etc.),
or whether they reflect the point of view of an individual specialist.
Specifically, the following sources were utilized in tie present letter:
1. Program of Scientific and Technical Cooperation Between the USSR
and the U.S. in the Field of Science Policy (Attachment 3 to the Record
of Discussions of'the Joint Group of Experts in the Field of Science Policy,
Washington, November 19-23, 1974).
2. Metodicheskiye ukazaniya k razrabotke gosudarstvennykh planov
razvitiya narodnogo khozyaystva SSSR [Methodology Guidance for Working
out State Plans for Development of the National Economy of the USSR],
Moscow, Ekonomika Publishing House, 1974.
3. Constitution of the USSR (Basic Law).
I will be most thankful to you if you could communicate your remarks
and proposals on the questions, set forth in this letter, prior to our
meeting.
Respectfully yours,
[Signed]
Ye.Ye. Grishayev
Chief of the Department of Financing
and Capital Investment of the, State
Committee for Science and Technology
of the USSR Council of Ministers,
Head of the Soviet Component of the
Group on Financing Research and Develop-
men t
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