NEWS OF THE WEEK
SOVIET CHEMICAL INDUSTRY: Output falls as economic crisis grows Reports on the Soviet Union's economy and industry paint a bleak picture, using terms like "deepening crisis," "widespread breakdowns," and "free-fall." "Stagnation and decline now prevail in nearly all sectors of the economy," says a U.S. Department of Defense study, for example. Soviet chemical industry is doing even worse than industry overall, notes a report just issued by PlanEcon Inc., a Washington, D.C.-based firm specializing in research on Soviet and East European economies. Soviet industry's overall gross output grew just 1.7% in 1989 compared with 1988, the lowest growth rate since World War II. Production deteriorated throughout the year, reaching a decline in absolute terms in the fourth quarter, according to the United Nations Economic Commission for Europe. This decline continues in 1990, with production falling 1.2% in the first quarter and 0.7% in the first half. Last year also marked a turning point for Soviet chemical industry. Production growth for the chemicals complex—which includes chemicals, wood, and paper products industries—slowed to just 1.4% for the year, less than a third the average annual rate for the years 1981-88. Moreover, in sharp contrast to the past, growth of chemicals now trails that of industry overall. Chemicals was one of the fastest growing sectors during the 1970s and from 1981 to 1988. Its 8.1% annual growth rate in the period 1971-80 and 5.0% in 1981-88 far outpaced industry overall (5.9% and 3.9%, respectively). Chemical output slowed steadily in 1989, actually falling slightly below the 1988 level in the fourth quarter. This decline accelerated to drops of 0.6% in the first quarter of 1990 and 0.9% the first half. The comprehensive 341-page re4
October 8, 1990 C&EN
Soviet chemical output has plummeted since 1988
a Includes chemicals, wood, and paper products industries, b PlanEcon estimate for chemicals complex, c For first six months. Source: PlanEcon
port on Soviet chemical production, trade, investment, and joint ventures was prepared by Jay K. Mitchell, manager of Soviet and East European chemical services at PlanEcon. Selling for $4000 in the U.S. and Canada, the report is the second in what is to be an annual series. Data are available for only a handful of chemicals and chemical products for the first half of 1990, but the figures bear out the overall decline in chemical production. Mineral fertilizer output was down 10%, with drops in sodium hydroxide (9%), plastic pipes (5%), sulfuric acid (3%), plastics and synthetic resins (2%), and chemical fibers (0.6%). However, production increased for a few household chemical products that fall into a high-priority area. Soviet President Mikhail Gorbachev last year put great emphasis on production of consumer goods. Thus, in the first half of 1990, the Soviets produced more detergents (up 10% in terms of volume), soaps (up 8%), and pharmaceuticals (up 7% in terms of value).
Chemical industry, like the rest of Soviet industry, suffers from a host of problems that have inhibited its development, PlanEcon notes. These problems include "technological backwardness (often a decade or more behind the West), problems with assimilating new technology, delays and cost overruns in constructing new plants, excessively rigid central planning, low quality of products (particularly consumer chemicals), irrationally set prices, problems with supply of raw and intermediate materials, mounting environmental problems (which have given rise to an emerging 'green movement'), lack of a steady supply of skilled labor, and [the] gross ineptness of most Soviet managers/7 In response, the Soviets launched a "chemicalization" program to cover the years 1986 to 2000. The program called for a sizable overall increase in chemical output, and especially focused on plastics, chemical fibers, pharmaceuticals, and paints and lacquers. Under the current five-year plan (1986-90), for example, total chemical output was supposed to rise 30 to 32%, with investment in the industry up 50%. Plastics were to grow 36%, chemical fibers 33%, pesticides 30%, and mineral fertilizers 26%. "This program, like so many past programs of the Soviet commandadministrative economy, has failed miserably," PlanEcon says. The program was "nothing more than another old-style campaign" calling for "unrealistically high growth rates . . . while offering no plan for improving the gross inefficiency and extreme backwardness." In fact, chemical investment fell rather than grew in 1985-89. Pesticide output did likewise, falling 8.4% in 1986-88. Mineral fertilizer production stagnated, up just 3.3% in 1986-89, and
other chemicals missed their targets by wide margins. "The already apparent failure of this chemicals program illustrates the need for serious market-oriented reform in the Soviet chemical industry in particular, and the Soviet economy in g e n e r a l / ' PlanEcon stresses. "Nothing less than such a reform would overcome many of the deep-seated problems." PlanEcon's forecast for the 1990s, therefore, is for slow or no growth or even contraction for the chemical industry and industry overall. Even under an optimistic scenario of serious market-oriented economic reforms—as in the "500 Days" plan proposed by the Russian Republic's president, Boris Yeltsin—PlanEcon projects several years of disappoint-
ing chemical performance before any kind of economic recovery and a takeoff in growth rates. However, the report stresses, not all chemical branches face such dismal prospects. Paints, varnishes, synthetic dyes, pharmaceuticals, household chemical products, and plastics and synthetic resins will likely show impressive growth in the 1990s, because of their past neglect and expected high Soviet demand. Other branches, including chemical raw materials, basic inorganic chemicals, mineral fertilizers, and bulk petrochemicals, will probably grow more slowly, as the Soviets seek to shift from a bias toward bulk chemical production and move toward higher value-added products. Richard Seltzer
"Excesses" in science community denounced National Academy of Engineering president Robert M. White in recent years has criticized the government's failure to establish a technology policy that means business in the pursuit of U.S. technological excellence and in competition with Japan and other nations. Now he is targeting "excesses" in the American technical community itself. One excess takes the form of "too many scientists chasing too few dollars." Another is a kind of myopia that prevents the technical community from choosing research and engineering priorities that really meet national needs. In his address to NAE's annual meeting last week in Washington, D.C., White acknowledged predictions of future shortages of scientists and engineers and the consequent effects on the U.S. economy. But he also pointed to the 65% growth (to 155,000) of doctoral scientists and engineers in academic research during the past decade. He suggests it is time to rein in that growth. "Our present competitive R&D grant system needs review," White says. "It is generating excesses that have begun to undermine the effectiveness of the R&D enterprise." He doesn't name other "excesses," but they are well known: so-called Big Science projects like the manned space station, the mission to Mars,
and the Superconducting Super Collider. White suggests that $1 billion, or 1.5%, be skimmed off the federal R&D budget ("It would hardly be missed"). Half would be shunted to such apparently underfunded activities as the National Science Foundation's Engineering Research Centers and the Advanced Technology Program in the National Institute of Standards & Technology. The aim would be to support research on technologies that promise high future economic payoff.
White: undermining R&D enterprise
The other $500 million would go as institutional grants to universities, which would support talented but languishing young researchers. Thousands of such researchers have had their grant applications approved but not funded. White likens the present system to the mindlessness of the sorcerer's apprentice, who acquired the sorcerer's power but lost control of it. Wil Lepkozvski
Budget pact to impact science only slightly Last week, the White House and Congressional leaders reached a compromise budget agreement. On its face, the pact would have very little impact either on the federal government's ability to fund scientific research or on the chemical industry. In fact, it would have little impact, either, on the fiscal 1991 deficit— which is now estimated at $294 billion—reducing it by just $40 billion. The a g r e e m e n t was a w a i t i n g House approval at press time—and the outcome was still uncertain. If approved, it would constitute the first step in a complex process. But if it is voted down, everything would be up for grabs again, with triggering of massive, across-the-board cuts in federal spending and mass furloughs of federal employees an imminent threat. The Chemical Manufacturers Association says it supports the agreement, which it sees as the best that can be had at this time. CMA is concerned about some parts, according to its tax expert, Robert Hill, but is pleased that the tax provisions won't undermine the competitiveness of U.S.-based chemical production Under the agreement, discretionary domestic spending, which includes the National Institutes of Health, the National Science Foundation, and the Department of Energy's civilian R&D programs, would, in aggregate, grow by just enough to cover a low rate of inflation in fiscal years 1991-93. The agreement does call for the imposition of a number of new or increased fees that would affect the October 8, 1990 C&EN 5
