Green post-communism?: environmental aid, Polish innovation, and evolutionary political economics

GREEN POST-COMMUNISM?

In recent years the environmental situation of post-communist societies has been a topic of much debate. Green Post-Communism? asks whether foreign aid can help such societies to steer their technological innovation systems in more environmentally-sound directions. Mikael Sandberg examines the legacy of Soviet-type innovation systems, then looks at opportunities for ‘greener’ innovations in post-Communist Poland, considering: • • • •

institutional transformation and environmental investment incentives the persistence and spread of the first environmental aid technologies the adoption of national environment policies and the role of aid in their implementation evidence of changing innovation systems in Central and Eastern Europe

Throughout the book, Sandberg develops an ‘evolutionary’ approach to understanding innovation in political economic systems, taking the work of Joseph Schumpeter and Karl Deutsch as points of departure. Drawing together unique interviews with the first Polish aid recipients and previously unpublished ministerial information, Green Post-Communism? will be an important resource for economists, political scientists, environmentalists and aid institutions. Mikael Sandberg is Head of Research Projects at the Department of Peace and Development Research, University of Göteborg, Sweden. He was previously EC Research Fellow at the United Nations University Institute for New Technologies in Maastricht, the Netherlands, and the 1997 Karl W.Deutsch Guest Professor at Wissenschaftszentrum Berlin für Sozialforschung.

ROUTLEDGE STUDIES OF SOCIETIES IN TRANSITION

1 THE ECONOMICS OF SOVIET BREAK-UP Bert van Selm 2 INSTITUTIONAL BARRIERS TO ECONOMIC DEVELOPMENT Poland’s incomplete transition Edited by Jan Winiecki 3 THE POLISH SOLIDARITY MOVEMENT Revolution, democracy and natural rights Arista Maria Cirtautas 4 SURVIVING POST-SOCIALISM Local strategies and regional response in Eastern Europe and the former Soviet Union Edited by Sue Bridger and Frances Pine 5 LAND REFORM IN THE FORMER SOVIET UNION AND EASTERN EUROPE Edited by Stephen Wegren 6 FINANCIAL REFORMS IN EASTERN EUROPE A policy model for Poland Kanhaya L.Gupta and Robert Lensink 7 THE POLITICAL ECONOMY OF TRANSITION Opportunities and limits of transformation Jozef van Brabant 8 PRIVATIZING THE LAND Rural political economy in post-Communist socialist societies Edited by Ivan Szelenyi 9 UKRAINE State and nation building Taras Kuzio 10 GREEN POST-COMMUNISM? Environmental aid, Polish innovation and evolutionary political economics Mikael Sandberg 11 ORGANISATIONAL CHANGE IN POST-COMMUNIST EUROPE Management and transformation in the Czech Republic Ed Clark and Anna Soulsby

GREEN POSTCOMMUNISM? Environmental aid, Polish innovation and evolutionary political economics

Mikael Sandberg

London and New York

First published 1999 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2003. Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1999 Mikael Sandberg All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Sandberg, Mikael. Green post-communism?: environmental aid, Polish innovation and evolutionary political-economics/Mikael Sandberg. 1. Environmental policy—Europe, Central. 2. Environmental policy—Europe, Eastern. 3. Environmental policy—Poland. 4. Green movement—Poland. 7. Technological innovations— environmental aspects. I. Title. GE170.S363 1998 98–20421 363.7’00943–dc21 CIP ISBN 0-203-44740-9 Master e-book ISBN

ISBN 0-203-75564-2 (Adobe eReader Format) ISBN 0-415-16678-0 (Print Edition)

CONTENTS

List of illustrations Preface 1

vii xi

Towards a ‘greener’ post-Communism? An evolutionary perspective on the political economics of innovation ‘Innovation Darwinism’ 1 A political origin of greener innovations? 5 Deutsch’s learning model and Soviet-type systems 14 Studying transformation 22 Greener post-Communism? 26

2

‘Soviet-type’ imitative innovation Studies of Soviet-type technology assimilation reconsidered 29 In the hybrid zone 34 Optimising imitations 36 Persistence of the first generation 38 From persistence to fecundity? 41 Benchmarking Soviet-type imitations 43

3

Post-Communist Poland as habitat for greener innovations: institutional transformation and environmental investment incentives Opportunities for post-Communism 46 Transforming institutions for investment 50 Environment, investments and institutional ‘learning’ 57 Aid for institutional imitation 68 Conclusion 73

v

1

29

46

CONTENTS

4

First environmental aid projects: seeds of greener innovations? Persistence and fecundity? 75 Investigation design 75 First Batch interviews 77 First Batch in terms of ‘origin’ 84 First Batch ‘persistence’ 92 First Batch ‘spread’ 96 Second Batch data 97 Summary and conclusions 107

75

5

‘Domesticating’ environmental aid in Poland The origin of innovation 110 The ‘load’ of Western aid 117 ‘Domestication’ principles 131 Deutschian ‘gains’? 136 Comments and conclusion 147

6

Innovation under post-Communism: survival of the greenest? 148 Improved imitation 148 Creative innovation in an evolutionary and national perspective 149 The institutional path shift 151 Canalising a ‘greener’ innovation path? 157

110

Appendix A: Letter from Mr Haliniak, Secretary of the Polish Commission for Sustainable Development Appendix B: Questionnaire

164 168

Glossary Notes Bibliography Index

197 203 206 219

vi

ILLUSTRATIONS

Figures 1.1 2.1 2.2 2.3 2.4 4.1

4.2

4.3

Deutsch’s ‘guided missile’: a learning system steering toward a moving target Proposal work lead-times (months) for Swedish-Soviet plant transfers 1970–85 Negotiation lead-times for Swedish-Soviet transfers 1970–85 Product quality after installation of Swedish-Soviet transfers 1970–85 Observed diffusion (replicas) from Swedish-Soviet transfers 1970–85 First eight Polish recipients of environmental equipment aid: proposal work and negotiation lead-times (months), arithmetic means and comparisons with Soviet-type median values from UK and Swedish experience First eight Polish recipients of environmental equipment aid: ‘incorporation’ lead-times (months), arithmetic means and comparisons with Soviet-type median values from UK and Swedish experience First and Second Batch Polish recipients of environmental equipment aid: lead-times (months, arithmetic means), and comparisons with values from UK and Swedish commercial technology transfer to the USSR

20 37 38 40 42

93

95

107

Tables 1.1 2.1

2.2

Phases in the process of change 24 Project lead-times in Soviet technology assimilation: 7 UK (late 1950s to mid-1970s) chemical and 15 Swedish (1970–85) plant exporters to the USSR (unweighted arithmetic means, months) 31 Specific national level opportunities and barriers to machine-tool

vii

ILLUSTRATIONS

2.3

3.1 3.2 3.3 3.4

3.5 3.6 3.7 3.8 3.9 3.10 3.11 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5.1 5.2 5.3

5.4 5.5

industry innovation in the Soviet-type NSI (as opposed to the US or UK market economy-type) Imitating by assimilating Western technologies in a Soviettype system of innovation: sample of all Swedish plant transfers to the USSR, 1970–85 Privatisation in CEE countries, end of 1994 Vintage of capital stock among 207 Polish firms by ownership Gross foreign investments in CEE countries Unlearning and learning: effects of output decrease and efficiency increase on emissions from the 80 most polluting enterprises, 1989–92 Polish environmental investments, 1990–92 Environmental fee rates in Poland (ECU/tonne) Financing environmental investments, 1992 (bZl) Key characteristics of five national environmental protection funds in CEE Compliance to EU Environmental Legislation (REG ranking) Foreign environment assistance to Poland, 1990–94 Phare environmental administrative support projects Forms of environmental aid (committed) Transfer forms: environmental aid to Poland implemented as of March 1993 The eight environmental aid technical equipment transfers implemented as of 1993 Implemented Polish environmental aid projects (all types), 1991–94 Implemented projects by type of environmental protection, 1991–94 Donor country distribution, 1991–94 Forms of environmental aid in 1994 (implemented) The 15 additional environmental aid technical equipment transfers reported implemented as of 1994 ‘Lag’ from committed to implemented environmental aid: Poland in 1993 and 1994 Age structure of equipment in Polish industry, 1975–88 (share of assets under 5 years of age, per cent) Disbursements of official development aid from all sources to individual CEE recipients (mUSD) Commitments (loans plus grants) of environmental aid to Central and Eastern Europe and former Soviet Union, by donors, 1990–95 (mECU) Environmental aid commitments to Poland, 1990–94 (mUSD) Phare environmental aid to Poland: project description and grant viii

33

44 55 56 57

59 62 64 65 66 68 70 71 78 78 79 98 98 99 100 101 106 116 118

119 120 122

ILLUSTRATIONS

6.1 6.2

Sources of financing environmental expenditures in 1994 (percent) Environmental expenditures and investments in 1994 as percentage of GDP

ix

160 161

What I am advocating is a point of view, a way of looking at familiar facts and ideas, and a way of asking new questions about them. (Dawkins 1982:1)

x

PREFACE AND ACKNOWLEDGEMENTS

Can aid help post-Communist systems steer technological innovation into environmentally sound pathways? Combining interview data from the first Polish aid recipients, unpublished ministerial information on aid projects, and the more easily available published sources, this book gives an account of the road towards a ‘greener post-Communism’: how post-Communist institutional transformation changes the ‘rules of the game’ for environmentally sound innovations (Chapter 3); in detail, what Polish recipients gain from Western environmental aid (Chapter 4); how Agenda 21 principles on environmentally sound technologies are actually transmitted into national policies, and what role aid projects play in their actual implementation (Chapter 5); and what evidence there is of greener innovations in Central and Eastern Europe (Chapter 6). But it does so in an unconventional way; Chapter 1 outlines an ‘evolutionary’ approach to understanding institutional and technological innovation among political-economic systems. It is argued that Soviet-type systems of innovation were unviable, or learning pathologically, due to avoidance of diversity and openness to ‘Darwinian’ competitive selection among products, processes and producers. Rather, Soviet-type systems attempted optimised imitation as standard for innovation. Since postCommunism is institutionally and technologically partly the offspring of the Soviet-type innovation system, Chapter 2 attempts a benchmarking of that heritage. The proposed evolutionary political-economics approach takes as the point of departure the co-operation between two great social scientists, the economist Joseph Schumpeter and the political scientist Karl Deutsch, as they worked on tools for understanding international innovation and learning patterns. I do that since the currently very influential ‘national innovation systems’ approach, created by a new generation of evolutionary economists who often refer to the works of Schumpeter, now enter into the field of politics and government of innovation processes without paying much respect to political science contributions in the past, such as those of Deutsch. xi

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For instance, as evolutionary innovation research has now increasingly come to focus on innovation as learning processes under institutional constraints, political science perspectives on nation-level institutional evolution and learning are generally lacking. It is therefore worth recalling Deutsch’s contributions towards the understanding of learning processes in national systems. What, then, is evolutionary economics? Some readers may already have considered the similarities and analogies between the biological evolution of species, population ecology and how innovations—whether technical, institutional or organisational—emerge, reproduce and spread. To make it easy to define evolutionary economics specifically, I prefer to quote the already classic study An Evolutionary Theory of Economic Change by Richard R.Nelson and Sidney G.Winter (1982:9): Our use of the term ‘evolutionary theory’ to describe our alternative to orthodoxy also requires some discussion. It is above all a signal that we have borrowed basic ideas from biology, thus exercising an option to which economists are entitled in perpetuity by virtue of the stimulus our predecessor Malthus provided to Darwin’s thinking. We have already referred to one borrowed idea that is central to our scheme—the idea of economic ‘natural selection’. Market environments provide a definition of success for business firms, and that definition is closely related to their ability to survive and grow. (…) Supporting our analytical emphasis on this sort of evolution by natural selection is a view of ‘organisational genetics’—the processes by which traits of organisations, including those traits underlying the ability to produce output and make profits, are transmitted through time. I also could simply refer to Hodgson’s survey of evolutionary economic theory (1993). Names included in Hodgson’s history of evolutionary economic thinking are, for instance, Marshall, Veblen, Schumpeter and Hayek. But, as the quote from Nelson and Winter above indicates, a primary concern for the evolutionary economics literature is ‘organisational genetics’, i.e. firm-level dynamics of innovation and learning. But how can such evolutionary path dependencies be understood in political and national systems terms? What about ‘national’ or ‘national systems genetics’? Selection mechanisms in the field of innovations are not so ‘natural’ in a Darwinian sense, but rather are highly artificial and politically manipulated through the creation of institutions which provide incentives and constraints to innovation. Technological change and institutional change are the basic keys to societal and economic evolution, and both exhibit the xii

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characteristics of path dependence. Can a single model account for both technological and institutional change? Do they have much in common? (North 1990:103) asks the 1993 Nobel Laureate Douglass North. Technology and institutions evolve in interaction, much like species communities in one habitat and genes in the gene pool. David (1994) agrees with North’s proposition (1991) that institutions are the ‘carriers of history’: ‘Yes, institutions do “evolve” in a manner that shares important attributes with biological processes of evolution’ (p. 217). If evolutionary economics is about the organisational genetics, evolutionary politics of innovation is rather about how the organisational genetics are governed as parts of the political-economic system, characterised by national policy goals and means, which, as the policies and their outcomes accumulate, evolve as the pool of that national system’s formal and informal institutions. The evolutionary political-economics approach is therefore neither an example of ‘social Darwinism’, socio-biology nor ‘biologism’, but rather the type of evolutionary institutionalism that Veblen was first to propose (Veblen 1899; Hodgson 1996). The evolution we deal with is that of institutions, i.e. habits, rules, norms and other informal and formal ‘rules of the game’, and technological innovations—not of human beings as biological organisms. A glossary (p. 197) provides an introduction on how some fundamental biological terms may be translated into an evolutionary political economic terminology. This book is, in its empirical parts, a product of a one-year EC Human Capital and Mobility Research Fellowship at the United Nations University, Institute of New Technologies (UNU/INTECH), Maastricht, the Netherlands. Additional support for my stay at INTECH in September –November 1995, before the EC fellowship started, was given by the Tercentenary Foundation of Göteborg University and The Royal Society of Arts and Sciences in Gothenburg. The extra costs for my field study trip to Poland in 1996 were covered by FRN (the Swedish Council for Planning and Co-ordination of Research). The initial conceptual framework for the study was fundamentally transformed with the constructive criticism from the UNU/INTECH research group, in particular from Prof. Charles Cooper, but also Anthony Bartzokas, Maria-Ines Bastos, Nagesh Kumar and, last but not least, Prof. Gu Shulin, with whom I had particularly interesting discussions on several of the themes in this study. The UNU/INTECH lunch seminar, Anthony Arundel at MERIT (Maastricht Economic Research Institute on Innovation and Technology), Prof. Adam Budnikowski and Tadeusz Szumanski, Warsaw School of xiii

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Economics, helped me develop research ideas and the bilingual questionnaire (see appendices) for my Polish field study. It was the 1997 Karl W.Deutsch Guest Professorship at Wissenschaftszentrum Berlin für Sozialforschung (WZB), however, that gave me further time to develop the conceptual themes more specifically. Some of Deutsch’s former colleagues at WZB also gave me valuable insights into his work; and Jörg Meyer-Stamer made some important suggestions on Chapter 1. Lastly, Lundberg’s foundation, Sweden, provided support for finishing the book. I also benefited from the research-conducive environments of the Department of Peace and Development Research (PADRIGU) and the Department of Zoology at Göteborg University, Sweden. I particularly wish to thank Make Anderssen, Torghy Bolin and Mats Olsson for interesting discussions.

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1 TOWARDS A ‘GREENER’ POSTCOMMUNISM? An evolutionary perspective on the political economics of innovation

‘Innovation Darwinism’ Why is political economics of innovation not an evolutionary science? Why are the transformations of social systems not studied as the evolution of innovations? Do market reforms in post-Communist countries provide evolutionary opportunities for environmentally sound innovation? Markets and minds of people provide the prerequisites for Darwinian selection processes and, thereby, also the conditions for evolutionary processes among products, innovations, and firms. For instance, when a Polish firm and/or public enterprise now selects equipment, machinery and techniques, a variety of traits or features are considered, including those that may help to make money out of environmentally unsound residuals. The producer of that environmentally sound equipment responds to this selection process (i.e. learns) by producing variants proportional to the expected sales, perhaps with some occasional or cyclical modifications (i.e. new models). Some more radical modifications—inherent creative innovations or environmentally sound ‘mutations’ in the product—may further increase demand, perhaps because they may help to avoid environmental taxes and fees. In the long run, therefore, one may expect that technological trend to be selected within the population of products. The increased demand will cause that type of creative innovation to be reproduced more than others and, therefore, expand its proportion in the product population, i.e. will improve its Darwinian ‘fitness’ to the postCommunist selection environment. There are other companies, however, that observe the success of the inventor, and accordingly react with imitations. This will in turn lead to a selection process from among the imitative and creative innovations by

1

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means of customer preferences and purchase behaviour. Market selection mechanisms thus provide for adaptive learning in production within the whole branch or product segment population of enterprises. Evolutionary competitive selection processes thus act among products, processes and firms, but with innovations as units of selection. Institutional evolution? Nations have their array of institutions that favour some innovations through incentives, such as investment subsidies, or through constraints, such as taxes, fees, permits or bans. Environmentally sound technologies may thrive from—or co-evolve with—subsidies of investments from institutions. Other technologies, i.e. those that are considered to be environmentally unsound, may be banned or their use may be subject to national taxation or fees. Thus, institutional incentives and constraints (policies) are created politically in each institutional ‘habitat’ for innovations (the national innovation system) that put limits on the selection processes for those innovations (new techniques). Not all incentives and constraints are decided politically and formally, however. Informal learning from innovations—say, by doing, using, marketing or communicating—also creates habits, norms and other ‘rules of the game’, the words North (1990) used to define ‘institutions’. Institutions evolve as the fundamental rules of the game for innovators and innovations in a particular selective environment. Institutional innovations are therefore more cumulative and territorial than technological innovations, which may differ more radically from one another.1 Why evolution? The conditions of Darwinian evolution are fulfilled with regard to both institutional and technological innovations (such as policies and new techniques) when (a) there is individual variation in particular traits, (b) some of this variance is ‘inherited’ from earlier generations, (c) some of these variants are better adapted than others, and (d) other things being equal, those variants that are better adapted will contribute more to the characters of future generations (Dunbar 1982). That the difference in survival or reproduction among individuals depend on differences in some other trait was the fundamental Darwinian idea of natural selection. It is the same Darwinian idea that—however applied to innovations—permeates this study of post-Communist institutional and technological innovations: •

First, there is a variety of post-Communist institutional innovation traits within and among Central and East European societies, including those 2

TOWARDS A ‘GREENER’ POST-COMMUNISM?

•

•

•

regulating environmentally sound innovation. There is also a variety of available and conceivable environmentally soundtechnologies, all the more since aid programmes finance their transplantation or migration into Central and East European habitats. Second, post-Communist institutional innovations are seen as having traits that are partly inherited (as ideas, modes of behaviour, routines, etc.) from previous Soviet-type institutions, and partly from the Western economies and democracies (as hybrids or ‘graftings’). Environmentally sound innovations also inherit routines of earlier unsound technologies, such as recycling based on automotive technologies. Third, some of these institutional and technological innovations are better adapted than others to the international and national ‘rules of the game’, such as environmentally sound technology or environmental protection institutions. Lastly, other things being equal, those variants that are better adapted will contribute more to the characters of future generations: the origin, persistence and spread of post-Communist institutional and technological innovations, such as policies and techniques, depend on their fitness in their national system (as assessed by entrepreneurs). Green institutional and technological innovations may, if better adapted, lead to the reproductive success of new generations of greener institutional and technological innovations, i.e. a ‘greener postCommunism’.

As institutions and innovations co-evolve in such an interaction, one can speak of ‘learning’ at a national systems level. The cause of such learning at the international level is that some innovations increase their Darwinian fitness (reproduction) more to the national and international level than others. Innovation Darwinism thus is a logic that integrates the politics and economics of innovation in quite a different way from traditional political economy, whether non-evolutionary or revolutionary. Political economy In order to understand, promote and sustain creative innovation, Lenin and Stalin, in building up Soviet institutions, would have been better served reading Darwin than Marx. Darwin’s On the Origin of Species (1859) explains—if used as an analogy—fundamental change among innovations in a way more ‘fitting’ to the actual history of technology than Marx’s theory of productive forces. Creative innovation cannot successfully and sustainably be forced or planned on a national scale, such as in the ‘socialist’ experiments. Rather, creative innovation is the outcome of selection processes among changed technologies or perhaps ‘routines’ of 3

TOWARDS A ‘GREENER’ POST-COMMUNISM?

production—analogous to mutated genes, as proposed by Nelson and Winter (1982). Fostering creative innovation is therefore a matter of creating environments to which innovation adapts by being more creative, and incentives and constraints that put limits to option sets for creative innovators. However, the Soviet-type systems of innovation were managed in exactly the opposite direction: the national innovation systems were characterised by an avoidance of diversity and creativity, and a focus on centralised optimisation of imitation through (a) monopolies rather than competitive selection among products, processes and producers, and (b) institutions that provided disincentives rather than incentives for creative innovation (except in priority sectors). ‘Political economy’ has, since the days of Adam Smith, been fragmented into economic, political and other social sciences. When it comes to current needs to learn and understand the innovation of technology, this fragmentation seems particularly unfortunate. Generally, neither traditional nor modern economic or political science models have even attempted to grasp comprehensively the processes of learning and innovation of technology within, between and across nations. And Marxism, it seems, for long blocked creative thinking about institutional-technological relations internationally and transnationally, at least to the extent at which dogmatism and politics came to influence empirical study. And now, in the post-Communist era, the study of the politics and economics of national innovation has somehow been increasingly dominated by institutional and evolutionary economics, i.e. a type of economics that emerged from dissatisfaction with the neo-classical theory of ‘climbing along the production function’. But from a political science perspective, Karl Deutsch2 felt a similar dissatisfaction with traditional, narrow, political science models: Increasingly often political scientists also are asked directly questions about political systems characteristics and system performance. What are the prospects for political stability in a country? What are the present political and military capabilities of its government? What are its abilities and inclinations to fulfil its international obligations? Are its present political institutions compatible with rapid economic growth? Is its present political regime capable of making effective use of large-scale financial or military aid from abroad? Can it make effective use of technological information under some technical-assistance program? (…) With the present trend in the social sciences, political scientists have (…) found it increasingly hard to rest content with partial models of isolated traits or situations. Increasingly, they have found themselves in need of models capable of representing the behaviour 4

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of whole decision systems. This need, in turn, has madeacute the problem of choosing the most suitable models from all those that could be constructed. (Deutsch 1963:15–16) Deutsch’s theory of nations as learning systems (1963) provides a bridge from evolutionary and institutional economics to an evolutionary political economics. In this and the following chapters I will exemplify what such an approach may mean when it comes to what Marxism never could explain: the deficient dynamics of innovation in Soviet-type systems and the prospects for a ‘greener’ post-Communism. This chapter first introduces the reader to the proposed conceptual elements and origins of an integrated ‘political economics of innovation’ and a link between learning and evolution—from greener trajectory adaptation into greener evolutionary innovation paths—as an effect of Darwinian competitive selection mechanisms. This leads us into the analogous theory of Deutsch (1963), in which is proposed various degrees of systems viability in terms of learning capacity, as well as a model for systems steering. Deutsch is explicitly Lamarckian, however, basing his theory on the will of nations. Finally, the chapter introduces Matthews’ (1984) important distinction between optimised and evolutionary innovation—a tool that will be used throughout the book for detecting Darwinian innovation in politicaleconomic systems. A political origin of greener innovations? Politics of innovation and learning within and among nations The technology policy and evolutionary economics research of the past decade indeed tends to focus on learning processes in ‘national systems of innovation’ (Freeman 1988, Lundvall 1992, Nelson 1993) in the context of technological evolution (for example Nelson and Winter 1982, Sahal 1983, Dosi et al. 1988). A ‘national system of innovation’ (NSI), according to Johnson (1992), ‘simply means all interrelated, institutional and structural factors in a nation, which generate, select, and diffuse innovation’ (p. 39). But most research efforts on national innovation systems have been directed towards firm-level and organisational learning, and national systems and institutions are therefore regarded as the selection environment for learning and evolution, without giving much consideration to the learning and evolution that occur at the national systems level. This study, therefore, takes as one point of departure the co-operation between two great social scientists, the economist Joseph Schumpeter and the political scientist Karl Deutsch, as this was reflected in the latter’s work

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on conceptual tools for understanding international and nationalinnovation and learning patterns. I do that since the currently very influential ‘national innovation systems’ approach, created by a new generation of successful evolutionary economists with roots in work by Schumpeter, now enter into the field of politics and government of innovation processes without paying much respect to the political science contributions of the past, such as those of Deutsch. For instance, as evolutionary innovation research now increasingly has come to focus on innovation as learning a process under institutional constraints, political science perspectives on the nation level of institutional evolution and learning are generally lacking. It is therefore worth recalling Deutsch’s contributions towards understanding learning (co-evolving innovation) processes in national systems. The evolutionary approach to technological change and the construction of the NSI models were made by economists predominantly interested in firm-level innovation processes. The evolution of national systems, social learning and institutional change have not been among the core subjects of political science. But Deutsch, one of the founders of modern political science, in Nerves of Government (1963), suggested a model by which it would be possible to estimate ‘the problem-solving capacity of a government or a society, as well as to estimate its ability for innovation’ (p. 165). Deutsch suggested—relying on cybernetic and learning theory, rather than biological analogies—to check the ‘structural data about learning capacity’ against the ‘observed data on learning performance’ (ibid.). In fact, in 1949, in the proceedings from a meeting of Harvard University Research Center in Entrepreneurial History, led by Joseph Schumpeter, one of the classics of evolutionary economics, Deutsch had proposed a measurement of what corresponds to ‘national innovation systems’ and their performance: We might (…) measure the imitative innovation rate, that is the rate at which selected, standardised, technical innovations were accepted in given countries. (…) Complementary to these investigations of imitative innovation would be an investigation of initiative innovation, that is, the frequency with which significant innovations originate and are first significantly applied in a particular country, or in special types of economic institutions. (Deutsch 1949:25–6) ‘Soviet-type’ national systems When the ‘national systems of innovation’ approach was introduced in the 1980s as model and conceptual framework for studies of national-level capabilities for technological change, the focus was placed on industrial nations in the West (Freeman 1987, Lundvall 1988, Nelson 1988). At that 6

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time, Lundvall, in focusing on the process of learning in ‘a modern industrial society (capitalist or socialist)’ (p. 349), concluded from a study of innovations in the Soviet Union (Amann and Cooper 1982) that ‘userproducer interaction seems to be a major problem in the real existing socialist countries’ (Lundvall 1988:351). This understatement by one of the founders of the NSI approach points to the fact that, since the NSI approach was introduced by scientists involved in studies of industrialised Western countries at the time when command economies still existed in Europe and since these countries never exhibited exciting technological learning patterns, no ‘generic’ NSI studies were made of the Soviet bloc, or Soviet-type countries. The NSI research community was more interested in asking why some nations learned more quickly than others than in asking why Soviet-type economies learned differently, imitating from, and then further diffusing waves of mature technologies from the West. As expressed in an OECD study on Poland by Fallenbuchl (1983:15): During the industrialisation drive in Eastern Europe at the beginning of the 1950s attempts were made to construct a comprehensive multibranch industrial structure based on priorities given to heavy industry, import substitution and the long-run objective of self-sufficiency. To a considerable extent this was an imitation of the Soviet industrial structure that had been built during the 1930s. It gave priority to those branches of industry that (…) belong to the classic 19th century type of industrialisation: the iron and steel, heavy machinery and heavy chemical industries. On the other hand, insufficient consideration was given to the ‘new’ branches being born at the time in advanced countries. Soviet bloc countries were thus forced to replicate Soviet obsolete technologies, originating largely from the Soviet first five-year plan technology acquisitions from the West. Soviet-type patterns of slow and impeded imitation from Western technology was also spread to the evolving East European innovation systems. One major reason was that institutional set-ups dominated over technological imperatives; the Soviettype system lacked an ‘adequate distribution network, the application of modern marketing techniques, servicing and spare parts’ (Fallenbuchl 1983:87). Similar results had been reported about the USSR (Hanson and Hill 1979). The NSI approach, in my view, therefore needs not only the framework for comparison between similar systems (such as Porter 1990) but also a framework for comparative analysis among different types of national systems. Not only Western, industrialised and market systems require a 7

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comparative analysis (such as Nelson 1993), but this group of Westerncountries, when compared with Soviet-type and post-Communist systems, require a broader and deeper framework of analysis. To summarise along the biological analogy, the national systems approach parallels the physiology of healthy—rather than all, including pathological—innovation systems. But we are interested in the national system as a pool of technological and institutional innovations. The unit of selection is the innovation, not the system. Seemingly Lamarckian ‘learning’ by systems is better understood as selection of fitter innovations in the system. Creativity and intentionality Though ‘initiative’ or creative innovation has for some time been a central concept already in early institutionalist thinking, the conditions for its existence are not generally understood. Veblen, the founder of institutional economics, and the first to ask ‘Why is economics not an evolutionary science?’ (1899:56) in his pioneering application of Darwinian analogies to economics, devised the concept of ‘idle curiosity’ as term for the genesis of innovative diversity and variation (Hodgson 1993 and 1996a). And this is indeed an increasingly critical point in assessing today’s post-Communism; will it be able to transform habitual thinking—i.e. informal institutions— about innovation from one in which the state or government optimise imitative innovations, to one in which variety and competitive selection processes, in analogy with the conditions for evolution, provide for creative innovations? If nations ‘learn’, i.e. host growing and reproducing innovations, then certain institutions provide incentives and constraints for learning in societies. Institutions, ‘the humanly devised constraints that shape human interaction’ (North 1990) are thus not only formal, such as governmental authorities, but also an ‘outgrowth of habit’ (Veblen’s term), ‘sets of habits, routines, rules, norms and laws’ (Johnson 1992). The classic definitions tell that institutions in a general sense provide a nation-specific context for technical change and technological learning. Almost all learning processes, the ‘source of technical innovation’, writes Johnson (1992), ‘are interactive, influenced, regarding their content, rate and direction, by the institutional set-up of the economy.’3 Furthermore, relations between institutions and innovation sometimes fundamentally change over time. The reason is a ‘tension between technology and institutions’, which provokes national systems of innovation to ‘cope with this problem, i.e. to learn about, adapt and change their institutional frameworks—to engage in “institutional learning” ’ (1992:23). It has been argued by founders of the national innovation systems approach and evolutionary economics that the fundamental difference 8

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between biological and economic evolution is the intentional character of the latter. Firms intentionally innovate to a higher extent than organisms intentionally mutate, the argument goes. Metcalfe’s view on the difference between biological and economic evolution centres around this theme: …while no treatment of innovation can ignore a stochastic element, it is also true that innovation represents guided and intentional variation (…) purposely undertaken in the pursuit of competitive advantage. (…) Indeed, as Nelson has repeatedly stressed, it is this guided element of innovation which explains the rapid and sustained rates of progress in capitalist market economies. (Metcalfel995:28–9) It seems to me that intention is indeed a factor of individual firm and innovation importance in the way it may influence individual adaptability through learning. Much less, it seems, is intention important from a population or evolutionary perspective: intergenerational changes and fundamentally new innovations are to a very limited and unpredictable degree related to individual intentions, but the results of environmental conditions may make some adapted innovations more suitable than the old. Evolution is Darwinian, not Lamarckian at innovation level. Gradual intergenerational adaptation to the environment may, occasionally, produce fundamentally new innovations, i.e. ‘genetic’ variants of modes of behaviour or routines, bearers of which eventually no longer ‘mate’ with the bearers of the old variants. Once this speciation event occurs, the new innovations are split from the old, i.e. they have created a new innovation ‘species’. Thinking of innovation in Darwinian rather than Lamarckian terms means that intentions are considered effects rather than causes of evolution. Under market conditions, innovative creativity is selected for and, in the longer perspective, leads to new ‘species’ of innovations. Intentions are only indirectly related to such innovative creativity and speciation. New transportation and communication innovations, for instance, influence most other innovations, not because of firm-level intentions but rather because communication is such a central function in any social system. The evolutionary ‘speciation’ of the automobile technology, for instance, is the competition-driven evolution leading to the current types of passenger cars—from the times that locomotives were moved from the rails, to the petrol- rather than steam-driven vehicle with rubber tyres rather than steel wheels. Intention has a limited role in this. There was a competitive selection process in the first decade of this century, the short period when petrol, steam and electric alternatives were open, in which the petrol-driven car showed better fitness. Due to car races, as well as the constraints of a lack of rural electric grid systems in the United States at the time, the appeal for electric vehicles decreased (Kirsch 1995, Foray 1997). 9

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Likewise, the ‘speciation’ (paralleling paradigmatic change as defined in Dosi 1984 or Freeman and Perez 1988) towards microprocessors, computers, and information technologies does not ‘mate’ with, only add to, the previous species and population community of communication technologies. Such macro-evolutionary transformation of systems cannot primarily be explained by intentional breeding (through artificial selection), since intentions tend to optimise adaptive changes, not the speciation of radically new technologies. Biologists have a number of explanations to why, and in what circumstances, a genetic variant causing reproductive isolation may evolve. For instance may a physical barrier, analogous to the divergence of innovations by the Iron Curtain, create speciation of a formerly continuous population. When the diverged populations meet again, reproductive isolation may be reinforced by natural selection. The question then is: Is reproduction isolation complete? If not, the hybrids produced may or may not have higher fitness than each of the divergent populations. This is a matter of competitive selection under new environmental conditions. For instance, will any of the Soviet-era innovations survive and reproduce under current market conditions? Another type of biological explanation to speciation is the emergence of hybrid zones (such as the few forms of East-West co-operation in R&D that existed in the Soviet era). If inferior hybrids are produced, reproductive isolation is favoured only while the populations remain distinct; i.e. products from West-East joint ventures would only reproduce successfully as long as the East kept its isolation. But if the innovations were not isolated—and here is perhaps the single and minimal hope for a minority of old Soviet-type innovations under new post-Communist conditions— natural selection will either eliminate one of the ‘genes’ (such as Soviet-type modes of behaviour or routines) or genetic flow (the movement of market economy ‘genes’ into the Eastern innovations) will in fact merge the two populations. Current post-Communism still seems to be a hybrid system. Hybrid zones, according to biological theory, are examples of stepped ‘clines’, i.e. environmental or geographical gradients in the frequency of a gene or in an average value of a character (Ridley 1996:438). Suppose post-Communism is a kind of—hopefully temporal—hybrid zone. The Western innovation populations then start to expand into the contiguous Central and Eastern Europe, in which the environment previously favoured a different form. As selection works on the population in the new area, different ‘genes’ (‘Western’ modes of behaviour or routines) will accumulate in it and the two populations will slightly diverge to become better adapted to their respective environments (some aid project technologies actually adapt this way, as we will see in Chapter 4). If reinforcement of this pattern is effective in a longer run, i.e. if post10

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Communism will be distinctively different from Western Capitalism as habitat for a large number of innovations generations, two full innovation ‘species’ may evolve. However, the environmental gradients will probably converge, if not already, then increasingly so as a consequence of EU accession. Intentionality at institutional level, therefore, is a question of governing the environmental gradients of innovations and their reproduction rather than deciding on singular innovations themselves. From an evolutionary rather than an adaptive learning perspective, intentionality, the political political economics of innovation, is a matter of governing institutional incentives and constraints as they provide selective environments for emerging innovations. International institutions The institutional and technological changes are not only national phenomena; on the contrary, international regimes and globalisation of innovations provide sets of options for open societies. Agenda 21 and related regimes belong to this context of international institutions affecting nations as habitats for innovation; e.g. through international norms and constraints—institutions. With regard to international co-operation, the Rio Declaration (Principle 9) states that: States should co-operate to strengthen endogenous capacitybuilding for sustainable development by improving scientific understanding through exchanges of scientific and technological knowledge, and by enhancing the development, adaptation, diffusion and transfer of technologies, including new and innovative technologies. These are, in fact, rather far-reaching obligations: states should cooperate in capacity-building through transfer of technologies, and this includes the newly developed technologies, not only obsolete or mature technologies. In Chapter 34 (‘Transfer of environmentally sound technology, cooperation and capacity building’) of Agenda 21, ‘environmentally sound technologies’ (EST) are defined as systems of know-how, goods, services, equipment as well as organisational and managerial procedures. ESTs are both ‘clean’ and ‘cleaning’ technologies taken together (Kemp 1993), and are defined as follows: 34.1. Environmentally sound technologies protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual 11

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wastes in a more acceptable manner than the technologies for which they were substitutes. 34.2. Environmentally sound technologies in the context of pollution are ‘process and product technologies’ that generate low or no waste, for the prevention of pollution. They also cover ‘end of the pipe’ technologies for treatment of pollution after it has been generated. 34.3. Environmentally sound technologies are not just individual technologies, but total systems which include know-how, procedures, goods and services, and equipment as well as organisational and managerial procedures. This implies that when discussing transfer of technologies, the human resource development and local capacity-building aspects of technology choices, including gender-relevant aspects, should also be addressed. Environmentally sound technologies should be compatible with nationally determined socio-economic, cultural, and environmental priorities. (Agenda 21) Environmentally sound technologies (ESTs) are those protecting the environment, those creating less waste or those recycling more wastes and residual products. There are formal institutions pushing nations towards adaptive policies for further co-operation in both creative (new) and greener (cleaning and cleaner) innovations. There are also policies that restrict (make less fit) some adaptive policies that would violate such international institutions. In biological theory ‘adaptive landscapes’ are graphical expressions for how organisms or populations may increase their fitness under conditions of environmental parameters. By selection of those traits of genotypes that are more fitted to the environmental parameters, arrays of individual organisms or populations are deployed onto the surface of a landscape, the elevation of which symbolises their adaptive values, their fitness. The rugged fitness landscape evolves over time. Adaptations may climb fitness peaks to the extent that they do not run into imposed constraints. Therefore, only those adaptive trait values that are climbing peaks under the level of constraints provide a set of options for decisions at individual level. Picture such an adaptive landscape—the Polish post-Communist innovations—in which firms and other economic agents adapt innovation policies and industrial innovations between values of institutional incentives and constraints that give options for fitter ‘greener’ innovations and international co-operation. Harsh conditions, such as limited engineering and innovation capabilities of the national system, may also put limits to climbing fitness peaks, even if institutional incentives push ahead.

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Likewise, extremely favourable systems environment conditions may give a fertile soil for innovations to evolve traits that actually run into institutional constraints—thus hindering further climbing into, say, environmentally unsound adaptive peaks. Canalisation into greener evolutionary paths? ‘Genetic assimilation’ as suggested by Waddington in the classic piece The Strategy of the Genes (1957), provides a similar explanation of how adaptive learning, as a consequence of competitive selection under several generations, can be selected for and therefore encoded into the genotype. Such canalisation ‘produces exactly the same results as those emphasised by advocates of the Lamarckian inheritance of acquired characters, but it produces them by an orthodox Darwinian mechanism operating on developmental systems that have the common properties of canalisation and adaptability’ (Waddington on ‘canalisation’ in Encyclopedia Britannica 1997). Waddington’s canalisation theory—influenced by cybernetics as was Deutsch’s theory—has had widespread influence in various disciplines. It also inspired evolutionary economists, notably Sahal, who notes: In an important work in theoretical biology, C.H.Waddington has put forth the concept of ‘creodes’ or necessary paths of development which bears several interesting parallels to the concept of ‘innovation avenues’. (Sahal 1985:456–60) Canalisation—what Sahal called ‘innovation avenues’ or microevolutionary paths—is the biological equivalent to the passage from one mutation of a routine or mode of behaviour to another as gradual change from one generation of an innovation to the other. This has been the most elegant solution to the problem of how innovation trajectories are transformed from micro-evolutionary innovations, and likewise how innovation paths may be canalised along trajectories due to institutional changes. In fact Baldwin, more than a century ago (1896), presented the idea, that adaptive learning may influence selection processes in at least two ways: (1) ‘By securing adaptations, accommodations, in special circumstances the creature is kept alive’, and (2) ‘those (…) variations are kept in existence, which lend themselves to intelligent, imitative, adaptive, and mechanical modification during the lifetime of the creatures which have them’. The latter principle—if extended to adaptation through learning across generations—is quite similar to the canalisation mechanism defined by Waddington (1957), and is called the Baldwin effect. 13

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‘Micro-evolution’ means smaller development steps towards new traits across generations. The collapse of the Soviet-type systems, of course, lays a ground for micro-evolution of firm behaviour through innovation quite analogous to Waddington’s canalisation. The environmental shock for the Polish enterprises, used to the Soviet-type, luke-warm climate of the People’s Republic central planning system, was a shock ‘heat’ in the form of radically altered systems environment values, institutional incentives and constraints as an effect of introduced industrial and consumer goods markets, privatisation, and fundamentally altered environmental institutions. The market shock revealed a part of the population of Polish innovations to be viably adaptive to radically changing environmental condition, by learning, and those are selected for producers. The adaptiveness may include more efficient combinations of available, but scarce, resources such as technologies, some of which were increasingly available through international aid programmes or environmental investment funds. The new generation of de novo private companies in Poland have some sibling features quite different from their parent generation. As we shall see, they are not based on new technologies, and are still rather juvenile; as such they are more flexible as well as focused, and are enterprises with highly adaptive human resource practices and low fixed costs in general. Logically, as Waddington indicates, these specific characteristics of the new generation also influence their prospects in their struggle for their innovations’ survival—as does their adaptive learning success. As the new carriers of routines grow, and thereby increase the probability of adapted routine survival (i.e. reproduction), their learning processes may thus—after a number of generations of routine reproduction—canalise micro-evolution towards greater adaptiveness to ‘greener’ institutions. This is thus the hypothesis in this study drawn from a Waddingtonian evolutionary perspective on the political economics of innovation. Polish learning from environmental aid would, as new generations of businesses and routines emerge and adapt after the market-economy shock therapy, canalise Polish innovation—in a selection environment provided by the national innovation system under incentives and constraints of ‘greener’ institutions—into an innovation path of environmentally sound technologies. But how can a system be steered into such a path? Deutsch’s learning model and Soviet-type systems Deutsch and national learning Deutsch interpreted evolution of innovations within a particular social system—organisation or nation—as technological learning by that system. Technological learning within a nation, according to Deutsch, therefore

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requires a capacity to learn and—in the organisational form, such as in an enterprise or a complex of enterprises—master the innovations imitated or created. Still, such learning is not always successful, but can have quite different turn-outs from the national systems perspective: learning may be creative, viable, or even pathological, as suggested by Deutsch in Nerves of Government (1963:249): •

•

•

creative, which is the pattern in self-developing or self-enhancing systems which increase the ranges of possible intake from the outside world and ranges of possible inner combinations, thereby also the probability of survival, only viable (i.e. neither has added nor detracted from subsequent learning and self-steering—typical for systems which are only able to preserve, not improve, their original probability of survival) or pathological (typical for systems which reduce their subsequent capacity to learn, and are apt to break down eventually even in relatively favourable environments).

Since this Lamarckian view of systems as learning—rather than being ecological systems of evolving populations of innovations—is so dominant in evolutionary economics it will also often be used for convenience in this book. But when Deutsch—Lamarckianly—talks of creative learning of the system, in Darwinian innovation terms this means that the system is the ecological system of innovations climbing an evolutionary peak in the adaptive landscape. This requires mutations of innovations—an evolutionary path shift. When Deutsch says that the system is viable, it means that its innovations are neither climbing a peak nor descending in an adaptive valley. This requires only incremental innovation and pathdependency. Finally, when a system is learning pathologically, it means that the system is host to populations of innovations which are reducing their survival values or reproduction by descending into an evolutionary valley in the adaptive landscape—i.e. they will become maladaptive. Learning outcomes, if relying on Deutsch, depends primarily on the openness and responsiveness of the learning organisation to negative and positive feedback (1963), and thus what ‘rules of the game’ there are in the institutional environment. To the extent that national institutions create learning paths, we can indeed speak of learning processes at national systems level, thus along nation-driven or institution-guided innovation avenues. Characteristic of self-developing or self-enhancing systems’ creative learning is that they will increase the probability of survival in the long run, since they have a higher degree of independence and are capable of coping with different environments and environmental change, such as rapid and globalised technological innovation. However, some systems cannot accomplish that. 15

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The closer we come to such nation-driven or institution-guided innovation paths, the more applicable is the Deutsch model (1963) of national (cybernetic) steering of innovation. For instance, nations may be more or less centrally and decentrally organised in innovation matters, may use quite different innovation policies, and may also be very heterogeneous in diffusion of innovations. Pathological, ‘Soviet-type’ learning National systems, such as innovation systems, thus show quite different flexibility in terms of the continuous adjustment of informal and formal institutions, such as to incorporated technology. ‘Soviet-type’ systems (former Soviet bloc countries) did not have the same capabilities of ‘inner rearrangement’ (Deutsch 1963:227) of institutional set-ups. Despite fundamental system changes, post-Communist countries have still to deal with Soviet-type institutional legacies when learning foreign technologies. Thus, the problem now is not only to learn, but to unlearn or overcome the rules, routines and habits that act as evolutionary path barriers or thresholds to creative innovation and learning when assimilating technology. At the time of Stalin’s death, Deutsch had argued that the USSR would suffer from disintegration tendencies in the 1970s to 1980s (‘Cracks in the Monolith’, in print the year after, in 1954). Deutsch, a decade later, in the classic Nerves of Government, but without explicitly mentioning the USSR, elaborated the argument (1963:249) that on occasion non-viable organisms or self-destructive organisations can emerge, and that ‘such highly selfdestructive organisations will tend in fact not to survive’.4 The first failure of such a system, according to Deutsch, is that ‘the pursuit of actions or policies (…) tend to dissipate or destroy the material and social resources required for its own continuation’ (1963:223). We no doubt find such destruction of natural and human resources in the former Soviet Union and Eastern bloc if we look at the environmental degradation, diversion of large amounts of manpower to unproductive ends, and hoarding of labour in enterprises and bureaucracies. The second failure of such a system is: the gradual narrowing of intake of information from the outside world. This failure involves the overvaluation of memories over current ranges of intake, of internal over external messages, and of current ranges of intake over new data and new ranges of information. (Deutsch 1963:224) This is at least typical of the Soviet-type policies since Stalinism, and became an overall characteristic of the East European satellites, both in relation to 16

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technological imports and to information flows in general. As an example, one may note the experience with the New Economic Policy (NEP) in the 1920s (‘speculation’ and ‘NEP-men’), which was the memory—we can now call it informal institution—on which Bolshevism relied in every debate on market economic reform. Even Gorbachev would advocate (only limited) introduction of market principles with reference to Lenin’s acceptance of NEP (an example of overvaluation of memory, i.e. a suppressing institution), rather than look at the surrounding world and successful market economies (an example of narrowing of information intake). The third failure Deutsch suggests is ‘the decline or degeneration of steering capacity or co-ordination’. This was indeed a typical trait of the ‘stagnation period’ (the Brezhnev regime). This failure may involve the ‘overvaluation of structure over function’. The most obvious example is the rigid Party-as-State structures Gorbachev was the last to defend in the USSR. The failure may also imply an ‘overvaluation of machinery over performance’ according to Deutsch, something I feel was the most distinguishing element of Soviet-type technology culture (‘technology-aspanacea’ leading to conclusions like ‘once we get the equipment, problems will be solved’). Deutsch also emphasises the time periods required for decision making—serving the same purpose as institutional inertia: ‘As an autonomous system grows more complex it may increase the length of channels and the number of stages through which messages must go before resulting in decisions’ (1963:225–6). The fourth and fifth failures, the loss of depth of memory and the loss of capacity for partial ‘inner rearrangement’ (i.e. reform), are related to the ‘overvaluation of established routines for recalling and recombining data’. As the reader may recall, the official ‘memory’ was selective and changed in correspondence with Politburo power balances. A classic example of Soviettype loss of official memory was when all subscribers to the Soviet Encyclopaedia received an extended article on the Bering Sea in a format which, if fitted into the page, totally covered the article on the former head of the Soviet intelligence, Lavrenti Beria, who had been ousted and liquidated by Khrushchev. Similar ‘loss’ of memory in other spheres of political, economic and cultural life was frequent and a part of Soviet-type culture. For instance, who, after Stalin, would officially remember Lysenko and his theory of genetics in the USSR? The USSR suffered from insufficient institutional learning capacities, i.e. inapt adaptive learning. Apart from the loss of memory, there is the loss of capacity for partial ‘rearrangement’, i.e. reform. Need we line up all the attempts of reforming Stalinism under Khrushchev, Brezhnev and Kosygin, Andropov and Gorbachev, the ‘treadmill of reform’ as it has been called by sovietologists? Or the corresponding attempts in Eastern Europe? The sixth and last failure, Deutsch suggests, is the loss of ‘capacity for learning’ through ‘comprehensive and fundamental rearrangement of the 17

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inner structure’, i.e. for our purposes the loss of the capacity to make a ‘velvet revolution’ without revolution, to succeed with perestroika but still preserve inner state and party structures. Interestingly, Deutsch explicitly relates this failure to the problem of commitment. In the Soviet-type case, commitment to Leninist goals justified any party means for achieving them. Thus, the more Leninist creed before transition, the more problematic the post-Communist prospects. Deutsch’s learning systems model Unviability of a system means an evolutionary dead end, a suboptimal peak in the adaptive landscape the system has chosen to climb. But can nations decide paths and steer along them towards a selected adaptive peak? Deutsch, influenced by cybernetics that also formed the biologist Waddington’s thinking, focuses on the nation-state’s steering mechanism as a ‘homing torpedo’ (1963:92) and ‘guided missile’ (1963:183, 187), thus parallel to the evolution of the society as social system. Nations decide their fate by steering towards goals while learning from successes and failures. Each attempt represents a generation of technological and/or institutional innovation and each feedback represents the trial-and-error process in fitness to the adaptive landscape as selection mechanism. If we think of ‘homing’ technology policy ‘missiles’ of a national innovation system, then international and national institutional, as well as other, selection environments (such as the natural and built environments) create the path buffers and thresholds for the variety of attempted innovation-related generations of policies towards adaptive peaks. So, seen from this cybernetic-evolutionary perspective, Deutsch’s model can justifiably be interpreted in an evolutionary political science way. As do evolutionary economics and Waddington’s canalisation theory (micro-evolutionary pathways), Deutsch’s political science thus presents an alternative to equilibrium or rational choice approaches, i.e. an alternative, dynamic and evolutionary ‘feedback model’, in which processes in politics are seen as analogous to processes of (politicaleconomic) steering and goal-seeking. Governments may seek goals in domestic and foreign policies, i.e. formulate intentions, create and sustain their canalisation into micro-evolutionary pathways. In order to approach these goals ‘they must guide their behaviour by a stream of information concerning their own position in relation to these goals; their remaining distance from them; and the actual, as distinct from the intended, results of their own most recent steps or attempts to approach them’ (1963:185ff). Deutsch thus proposes a model of how nations ‘decide their fate’, which can be interpreted as a model of how policy trajectories are guided into canalisations in an adaptive landscape of possible micro-evolutionary paths or canalisations. 18

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The four factors which determine the fate of policy projects are: the drive, the cue, the response and the reward, i.e. essentially what nations want, sense, do and get (Dollard 1945, to which Deutsch 1963 refers). Deutsch’s view of social learning from experience of policy trajectories works much like a Pavlovian training of a dog (see Dollard 1945: footnote 2). The dog wants his food, senses the signal, produces the ‘correct’ response, and gets his food. Likewise, a policy missile can be guided towards a goal on the basis of the system’s ‘lead’, ‘load’, ‘lag’, and ‘gain’ (Figure 1.1): 1

2

3

4

What a national system wants: its ‘drive’ is influenced by the strategic aims of the nation or learning system at that particular time in relation to the moving target of change—i.e. in Waddington’s understanding the determination of the direction and final end location of the creode (corresponding to ‘intentions’ at organisational level). What it senses: the ‘cue’, from bouncing into the creodic walls of institutional incentives and constraints, i.e. inputs from the external and internal environments, such as changes at international regime level and domestic signals from performance of subsystems. What it does: the ‘response’ is a question of speed, size and accuracy of the reaction to running into path walls of institutional constraints and the responsive recommitment of the national system of innovation to the new information it received as feedback from attempt, i.e. how fast (or bureaucratically slow) the national system of innovation selects or decides about how to guide and modify or abolish innovation policies (how competitive selection and learning make innovations follow the intended path). What it gets: the ‘reward’ is the monitoring of how well (or poorly), how much (or how little) the national system is ‘forging ahead’ (as Abramowitz calls it in his famous essay 1986) along the microevolutionary pathway, by moving along, say, innovation paths as defined in strategies and gains from achieved rewards from incentive systems. The reward may in fact be the extent to which the system gains from competitive technological performance, growth, returns, prestige and the like and reaches the desired adaptive peak.

Deutsch’s cybernetic view on how nations decide their fate is explicitly Lamarckian, i.e. it bases itself on the will of nations and the inheritance of acquired gains. In Darwinian terms, however, the drive, cue, response and reward can be understood as the institutional means by which the fitness of innovation populations within the system is being politically and economically influenced, i.e. guided in an adaptive landscape.

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Figure 1.1 Deutsch’s ‘guided missile’: a learning system steering toward a moving target Source: Adapted from Deutsch (1963:183–9)

The Soviet pathological path-dependence In the world of evolutionary economics, increasing returns through learning by doing, learning by using or some other similar dynamics, tends to lead to path-dependency in the sense that it is easier to continue to move down that path than to change to another (Arrow 1995). The increasing returns at the firm level correspond to the rewards of the gain at the national level in Deutsch’s model. The rewards may later appear to have been encouraging steps into a trap; in a changing environment, which creates new demands and pressures on the system, the system’s rigidity may hinder it from being able to shake loose from influences of events in the past. For instance, one might argue that the Soviet system took another fatally irreversible step into a pathological and suboptimal path when Stalin launched the five-year plan command system in 1929, pursuing the 20

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Socialism in One Country strategy. Stalin formulated the xenophobic goals of the first five-year plan’s modernisation programme: a reduction of the Soviet 50 to 100 year distance to the advanced countries: ‘Either we do that or they crush us.’ More resilient towards the West, Khrushchev in 1961 expressed the optimism of the ‘scientific-technological revolution’: the USSR would surpass the USA in per capita production within a decade. ‘Full communism’ was to be reached in 1980! The problem in reaching full communism indeed presented the USSR with insufficient ‘gains’, as reality failed to fulfil the Communist Utopia. Although Stalin reported that he was ‘Dizzy with success’ on the Party Congress following the end of the first five-year plan, and Khruschchev gained from prestige ‘rewards’ as outcomes of Sputnik and Laika space successes, most of the technological steps ahead were in fact imitations that, in the long run, could fool neither Soviet citizens, scientist nor the leadership (Medvedev 1978). The Utopia thus became a ticking bomb that would eventually deprive the system of its ideologically defined ‘drive’, one of the cornerstones of its foundation. (Many historians have emphasised the parallels between Soviet Leninist and Russian Orthodox ‘Messianisms’ as Moscow aspirations to spiritual leadership in Eastern Europe.) In the more profane, tactical planning of what Soviet innovation aimed at for the future—given the inherent lags for innovation processes in the Soviet system—there was the practical problem of the closed character of the system. Forecasts had to be based on information from abroad, say on the development of nuclear bombs, passenger cars or new types of corn crop. For that purpose, international contacts were centrally organised primarily by the ministries, the State Committees, the Academy of Sciences, the military-industrial complex, and so on, which, to a degree, could tap the information needed (Hanson 1987). Technical espionage and industry intelligence must be understood from this perspective—a mechanism of gathering information about the position of Soviet science and technology in relation to the West—and what to do about it (the guidance of the missile). One problem for the Soviet-type systems was thus the load, i.e. the degree to which there was adequate information about the performance of the system itself. Data and statistics were generally not reliable for a number of reasons, such as the great incentive for enterprise managers to manipulate plan figures in order to get a higher allocation of resources. As was pointed out by many Soviet dissident scientists, the elites in the system had no knowledge of actual performance, and in fact could never have, because of distorted price signals (Nove 1992, Gregory and Stuart 1981). The lag in actual decision making was sometimes extreme, and always unpredictable owing to the many hierarchies involved and the politicised character of the technological innovations. While some minor acquisitions, such as purchases of certain Western films, were decided by leaders of the 21

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Politburo after a late show in the Kremlin, some important questions of, say, a complicated technical character would take years to finalise in some cases, due to the incompetence and sheer number of ministry officials who had veto or negotiating powers and were involved in the purchasing process (Parrott 1985). The actual implementation of technologies, once selected, was problematic in terms of incorporation into Soviet production, not only in meeting quality requirements and reliability, but also in satisfying the ‘enclave’ character of imported systems, making further application of the acquired technologies difficult in related or analogous production. Soviet innovation projects, guided by state-owned monopolies rather than firms, had very little to do with variety and competitive selection. Feedback (the ‘gain’) from Soviet policy trajectories would alter institutional set-ups only within the system of monopolies working for the optimisation of already existing complexes of technologies rather than evolution by exposing innovations to competitive selection. Studying transformation Transformation of the innovation system The political economics of innovation resembles the management of an ecosystem or pool of innovations—an activity which, for institution building (creating incentives and constraints), needs not only strategies and policies for the evolving national system, but also a pool of varieties of both institutional and commercial entrepreneurship in which unexpected mutations may originate, some of which may become the first generation of micro-evolutionary innovations. The learning gained from being a host environment to innovative systems is thus partly a matter of wanting a certain trait to appear increasingly in the national system, and such desirability has a certain direction. Desirability thus works like a compass at the strategic crossroads: one road is selected on the basis of sense of direction but without a map—because under evolutionary change, there is a lack of knowledge about the evolving future. How, then, can the political economics of innovation be empirically studied? How can we detect evolutionary potentials in societies as ecosystems? The simplest way—if we believe in Darwinian rather than Lamarckian principles—is to look for competitive selection processes in trajectory phases after new technologies have been somehow generated, introduced and further diffused in the national system of study.

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Soviet-type technological change In the Soviet-type innovation system as an ecosystem, implants were intentionally imported and placed into rather poor ‘soil’, and given somewhat campaign-type ‘fertilisation’ typical of a ‘scarcity’ economy. ‘Fruit’ was harvested and distributed according to rationing principles using quotas and administered prices. No further ‘breeding’ efforts were made. Implants were left to grow without replacement by more productive implants. No new vintages were introduced if the first was more or less sufficient to avoid supply bottlenecks, or a new leader introduced a new campaign. The ‘gardener’ didn’t really care much about productivity in any case, because incentives never worked that way—except for the ‘harvest’ bonus which made him fulfil planned volumes—whatever the quality of the harvest. Under such conditions Darwinian competitive selection will obviously be almost totally absent in any form. The extreme variant is a monopoly producing only one product, but in any scarcity economy consumers will be happy to get any products at all. This will naturally stop any feedback from consumer preferences to producers, which forms barriers to learning what products and therefore production processes (the technologies once introduced) are fitter in the system’s habitat. In fact, focus in the planned system was product utility and quantitative flows in the industrial goods flow matrix rather than market-adapted cost-effectiveness. The Soviet-type economy therefore resembled a huge family household economy where innovations were only utilised for specific household purposes, not bred for improved market niche adaptation. To check that this was the case, one can study implants of innovation in the Soviet-type system (Hanson and Hill 1979, Sandberg 1989): they were installed, and more or less successfully implanted or transplanted depending on the degree to which decision-makers understood what end-users needed and the degree to which this understanding was compatible with the state planning commission’s input-output matrix and problems of bottlenecks it contained. The implants were used for the sake of utility, not sales, and the quality of production was therefore rather low. Diffusion was more or less absent, except in cases were military and other high-priority sectors were interested in imitation, which means that innovations seldom produced second generations, hardly ever mutated, and thus failed to create even a micro-evolution of innovations. Optimised versus evolutionary change Relying on Matthews (1984), the Darwinian evolutionary economist, we may use the term optimisation for this typically Soviet attempt to catch up through imitation, as opposed to providing for competitive selection

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mechanisms that explain the potential for creative, pioneering evolutionary innovations in capitalist or market economies. The post-communist challenge now is to shift from the centrally administered optimisation of innovation to an evolutionary innovation path driven by competitive selection. But how can this shift be detected? Matthews gives an important indication by making the distinction between the origin, the persistence and the spread of a new mode of behaviour, routine or technology, corresponding to our analogy of the implants, imported plants or dispersal of species into new habitats. The origin, persistence and spread phases are thus typical to the sequence in any change process (see Table 1.1). As soon as decisions are made with risk-avoidance and utility as primary concerns, then we have the optimisation of innovation as a principle for technical change. Optimisation and competitive selection interact in everyday life in a market economy; for example, firms may optimise when upgrading their administrative systems, while deciding product development strategies for increased adaptiveness to competitive selection. However, in the Soviet-type innovation system, risk-taking was seldom considered. If optimisation is typical for the administrative behaviour of bureaucracies in any societal context, then it was also typical for Soviet-type systems as a whole. When investigating transformation, one therefore must try to detect competitive selection in innovation trajectories—such as when new technologies are introduced. Origin, spread and diffusion in Soviet-type systems When optimising technological performance under hard currency constraints, the Soviets often chose ‘not to invent the bicycle again’, but to buy selected technologies from abroad, i.e. to innovate imitatively. This was particularly true for the first five-year plan 1929–34, the Khrushchev years

Table 1.1 Phases in the process of change

Source: Adapted from Matthews (1984:98) and Sandberg (1989).

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and the détente period. One question of concern to NATO countries, naturally, was the ability of the USSR to derive benefit from technology imports through imitation, i.e. to assimilate Western technology. Philip Hanson, perhaps the major specialist in Soviet assimilation of Western technology during the détente period, defined ‘technology assimilation’ as ‘the whole process of acquiring, utilising and deriving benefit from technology of foreign origin’ (1985). Evenson and Westphal (1994), defining the concept ‘technology assimilation’ in a more evolutionary context, emphasise the imitative essence of assimilating technology, i.e. ‘duplicating, understanding what exists elsewhere without adding to the stock of reproducible technology’. Imitative innovation—‘technology assimilation’—has indeed been studied in some former Eastern bloc countries. Hanson and Hill (1979) thus reported deficient use, problems of quality and extremely limited diffusion of Western technology in the USSR. The Soviet-type pattern of problematic technology assimilation in Poland required a reform ‘to remove harmful systemic barriers and obstacles to innovation’ (Fallenbuchl 1983:87). Similar causes for Soviet assimilation problems were found in a study of Soviet assimilation of Swedish plant transfers (Sandberg 1989). Soviet-type learning thus implied attempts to optimise under uncertainty, while selection procedures could never improve learning owing to a lack of variety. The Soviet Union, as an innovation system, was an extreme attempt at overall optimisation by central planning as translators of political guidelines.5 Quantitative figures of Soviet innovation, as those presented by Amann and Cooper (1986), tell very little about the origin in terms of imitation or initiation. One major and classic source indicated that imitation dominated in the USSR (Sutton 1968, 1971, 1973) even to design characteristics. And others described how this imitation was organised in a network of ministerial ‘research institutes’ engaged in reverse engineering (Medvedev 1978). From imitation to initiation Cohen and Levinthal (1990) considered the absorptive capacity to be the ability not only to assimilate or imitate, but also to commercialise: The ability to exploit external knowledge is (…) a critical component of innovative capabilities. We argue that the ability to evaluate and utilise outside knowledge is largely a function of the level of prior related knowledge. At the most elemental level, this prior knowledge includes basic skills or even a shared language but may also include knowledge of the most recent scientific and technological developments in a given field. Thus, prior related 25

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knowledge confers an ability to recognise the value of new information; assimilate it, and apply it to commercial ends. These abilities collectively constitute what we call a firm’s ‘absorptive capacity’. (Cohen and Levinthal 1990:128) Successful technology assimilation is considered by Cohen and Levinthal to be a necessary, though not sufficient, condition for creative innovation. The acquisition of an absorptive capacity is thus to commercially imitate— something which is essentially a matter of improving imitative innovation; i.e. going from a Soviet-type to a commercial imitation. Polish learning from environmental aid, as we will see in this book, indicates the degree to which post-Communism has already acquired this capability of commercial imitation, and has thereby overcome Soviet-type monopoly imitation. The second problem is to turn imitative innovation into initiative innovation. Such a technology assimilation process leads further into a novel technique. Enos (1985:49) has described such a connection between imitation and initiation: From the point of view of the developing country, six different events or stages can generally be observed throughout a complete process of technological incorporation: (i) determining the needs and objectives of the developing country, of the countries that are in a position to supply the new technology, of the organisations that participate in the process, and of the individuals within those organisations; (ii) surveying the alternative technologies and alternative suppliers; (iii) choosing a particular combination of technology, supplier, location, method of finance, etc.; (iv) absorbing the technology in its first application in the developing country; (v) disseminating the technology throughout the economy; and (vi) improving upon the imported technique. A seventh stage may sometimes be observed, namely, conducting research and development within the importing country, leading to a novel or superior technique (…). Do post-Communist countries take Enos’s seventh stage? If postCommunism has moved politicians from the driver’s seat of history to proponents of competing ‘domestication’ strategies, we need to look not only for productivity and competitiveness but for successful breeding. Greener post-Communism? While Marxism cannot help in understanding the unviability of Soviet-type systems and their post-Communist transition, Darwinism of innovations in 26

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my view can. The purpose of this initial chapter has been to give an evolutionary rather than revolutionary political economy a chance by trying to apply Darwinism to understand the political economic dynamics of institutions, the technological trajectories and the evolution within systems, including the role played by learning processes in organisations and national systems under institutional constraints. I have used some concepts of the ‘national innovation systems’ approach and Deutsch’s theory of nations as learning systems (1963) as a bridge to a ‘political economics of innovation’ from the increasingly successful institutional and evolutionary economics, and some of their analogies in biology. First, the focus of evolutionary and institutional economics on learning and intentionality at an organisational level calls for a rebuttal from a political science perspective. A more political approach to the economics of innovation implies a focus on national systems and institution level learning and intentionality. Intentionality in market economies, it is argued, is Darwinian rather than Lamarckian, and artificial rather than natural, i.e. it implies the manipulation—by way of policies under coevolving institutional constraints—of the Darwinian competitive selection mechanism that is allowed across organisations as systems of innovation. A second part then describes how the proposed link between learning and evolution—genetic assimilation and the Baldwin effect—makes possible an innovation trajectory leading into evolutionary innovation paths. This directly leads us into the cybernetics of Deutsch (1963), the third part, which proposes degrees of systems viability in terms of learning capacity, and systems steering along systems paths. Soviet-type pathological learning and steering of innovation programmes are given as examples of what Deutsch’s theory implies with regard to Soviet-type systems pathology, given its type of learning and steering. But Deutsch—Lamarckianly—focuses on will and learning at national systems level, rather than seeing the Darwinian competitive selection among innovations within the system. Finally, the chapter discusses how creative and evolutionary innovation can be detected in the actual trajectories of technologies introduced into national systems. I rely on Matthews’ (1984) classic proposition on how to distinguish between (Lamarckian) optimised and Darwinian innovation, as well as phases in innovation trajectories. Seen from this evolutionary political science point of view, it is argued that post-Communist transformation needs to change from an optimised to an evolutionary mode of innovation. This institutional path shift, required for a post-Communist transition into market economies, has to allow for competitive selection among economic agents and their innovations under adequate institutional constraints. There is a perspective that I have called an ‘evolutionary political economics of innovation’, from which Polish post-Communist learning from 27

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environmental aid can be understood as one test—perhaps more critical than we would initially think—of the ways in which East and Central European innovation systems now evolve. The rest of the book addresses these questions from an empirical point of view. Chapters will therefore focus first on Soviet benchmarks (Chapter 2) as a basis for assessing the post-Communist pioneer, Poland, as an institutional ‘habitat’ for environmental innovations and investments (Chapter 3). In Chapter 4, the evidence from recipients of the first aid projects of environmental equipment is analysed to see how they may produce new Polish or post-Communist innovation ‘fecundity’, i.e. further ‘green’ innovation. Chapter 5 is devoted to the scrutiny of the invading environmental aid projects in Poland—as an EST ‘load’ into the learning innovation system—and discusses how this aid has been ‘domesticated’ through policies and selection—i.e. produced systems ‘responses’ and ‘rewards’ in Deutsch terminology. The last chapter (Chapter 6) sums up the results and provides some additional data on the potential for post-Communist creative and greener innovation paths, particularly emphasising the importance of a post-Communist Deutschian ‘drive’ towards greener innovation.

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2 ‘SOVIET-TYPE’ IMITATIVE INNOVATION

Studies of Soviet-type technology assimilation reconsidered Assimilation (optimised imitation) studies Research on the assimilation of Western technology in the economies of the former Soviet bloc was initiated by Hanson and Hill (1979), and Röthlingshofer and Vogel (1979) on the basis of interviews from Western corporate experience. Earlier studies of Soviet innovation (Sutton 1968, 1971, 1973, Berliner 1976, Berry 1982) basically had relied on Soviet reports (secondary sources subject to censorship, but by Soviet scientists). However, the OECD also had initiated a set of studies on West-East technology transfer (Zaleski and Wienert 1980, Fallenbuchl 1983, Gomulka and Nove 1984). One of the OECD studies covered Poland (Fallenbuchl 1983). Some of the studies of Soviet and East European innovation and diffusion that had been made by scholars such as Berliner (1976), Gomulka (1985) and the Birmingham studies (Amann and Cooper 1982, 1986) are classic. Technology assimilation has been defined as ‘the whole process of acquiring and deriving benefit from technology of foreign origin’ in a classic study of Soviet assimilation of Western technology (Hanson 1985). Assimilation is imitative and may or may not lead to creative innovation, as we noted and defined in the previous chapter. Technology assimilation is therefore considered equivalent to Matthews’ (1984) optimisation as a mechanism for change as opposed to competitive selection, and as, in certain cases, technologies were assimilated for purposes of exports or military use, we can in fact speak of competitive selection at a nation-state level. Philip Hanson interviewed seven UK chemical plant companies on 32 projects, and Hill carried out interviews and case studies of eight UK machine tool exporters. I collected data from 15 Swedish plant exporters and about 60 to 70 plant transfers in a variety of industries ranging from 29

‘SOVIET-TYPE’ IMITATIVE INNOVATION

metallurgy to aviation control and from milk packaging to ice hockey helmets, i.e. all the Soviet plant transfer deals in Sweden at the time, including the accumulated experience of the suppliers of Soviet transfers. The following thus partly relies on interview data from Fallenbuchl (1983) on Poland, and Hanson and Hill (1979) on the USSR, but mostly on my own results (Sandberg 1989) on the Soviet assimilation of Swedish plant transfers between 1970 and 1985, which now, using an integrated approach, may be somewhat reconsidered from an evolutionary perspective. Also, the results can be considered as benchmarks of Soviet-type imitation when assessing post-Communist performance, such as in Poland. Life-histories of Soviet innovations From the perspective of Western standards, Soviet technological lags in enterprises receiving Western technology (in those cases in which no new enterprises were created) were estimated by the suppliers of that technology to be up to 35 years in the mid-1980s. This indicates that new technology was used under Brezhnev, Tchernenko, Andropov and Gorbachev to upgrade systems acquired during Stalin’s time and subsequently in the Khrushchev and de-Stalinisation period. The life-histories of innovations in the Soviet environment were—as a consequence of lacking depreciation rules, monopolies, scarcity, and administrative prising, i.e. lacking competitive selection pressures—extremely long and had extremely low fecundity values; they produced no or very few diffusion ‘off-springs’. There were even cases where life-histories of factories started in the late nineteenth century as remnants of early industrialisation. Innovations neither grew nor reproduced themselves. Since plant technologies in the USSR were not fertile due to a number of environmental conditions that will be discussed below, central planners would decide on implants or ‘grafting’ on existing plants. The data available (Table 2.1) on Soviet-type technology assimilation lead-times are derived from Hanson and Hill’s study of UK chemical plant and machine-tool transfers in the late 1950s to mid-1970s to the USSR (1979) and my own study of all major Swedish plant transfers in 1970–85 in various sectors (1989). According to explicit judgements from Western corporate experience, lead-times are substantially longer in the USSR than in other non-socialist markets for plant exports (Berry 1982 reports Soviet self-criticism on that point as well). Deutsch’s ‘lag’ parameter increased due to the complicated purchasing procedures and the sheer number of interests involved in the Soviet-type system. UK respondents assessed the Soviet excess lead-times, compared to Western countries, as 9–10 months on average for negotiations and 26–35 months for contract to start-up (Hanson 1981). Hill (1983) reports that, overall, Soviet lead-times are typically three times as long as 30

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Table 2.1

Project lead-times in Soviet technology assimilation: 7 UK (late 1950s to mid-1970s) chemical and fifteen Swedish (1970–85) plant exporters to the USSR (unweighted arithmetic means, months)

Source: Hanson (1981) and Sandberg (1989).

those with a West European customer. A third of the Swedish exporters also had the experience that Soviet lead-times were considerably longer than other recipients of similar technology. The mere number of months it took the old Soviet system to make the implant (creating a new enterprise) or ‘graft’ (adding to an existing industry), i.e. to assimilate an acquired technology, is therefore notable. A survey of all complete plant transfers from various Swedish sources to the USSR between 1970 and 1985 has shown that negotiations took as long as 132 months (11 years)! Delivery and start-up periods could take 5.5–6 years; the median figures were fortunately considerably lower, but were still far above the transfer times to non-socialist countries. The median value for the total proposal to start-up lead-time was 66 months (5.5 years) for the projects investigated. It is obvious to anyone that these excessively long lead-times for the acquisition of high-technology could never help to close the technological gap between the Western and Soviet-type systems (Sandberg 1989). It is not necessary to understand the theory of cybernetics to realise that the longer the cycles of investment, the longer the cycles of feedback and learning from implants and grafting. And the Soviets were well aware of this problem; available Soviet information from the 1969s and 1970s indicated that ‘Soviet lead times are too long, secondly that they are longer than those of other countries, and thirdly that they are longer than planned’ (Berry 1982:84). This applied equally to indigenous innovation. In a Soviet study of the machine-tool industry from the early 1970s, over 50 per cent of research projects took over 1.5 years, 69 per cent of development projects took over 1.5 years, 46 per cent of the technical and working projects took over 1 year, and 50 per cent of the prototypes took over 1.25 years (ibid.). The Polish (Soviet-style) innovation system confirms that prolonged leadtimes are systems inspired; they are not a national characteristic. Fallenbuchl (1983) could observe ‘that Polish experience shows a very serious weakness. The economic results of technology transfer were drastically reduced by 31

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delays in the utilisation of purchased technology, in the construction of plants, in the installation of imported machines and equipment and in the achievement of the full scale of production.’ Explaining slow innovation—systems parameters Berry (1982) made a comprehensive list of Soviet-style (as opposed to US and UK market economy-style) environmental values of factors facilitating or hindering innovation in general on the basis of Soviet literature. Perhaps the most striking difference Berry observes is the relationship between the producer industries and their related supplier industries (what Lundvall calls ‘user-producer relationships’, but what in biological theory rather resemble interactive populations in communities and asymmetric arms races). In the Soviet Union, there was a relatively low level of subcontracting; many components which, in the West, would have been imported were instead made at Soviet machine tool industries. There was little incentive for these suppliers of components to improve the quality or to cater for the special needs of the machine tool industry. The compatibility of ‘species’ was less of a consideration than in Western economies, since combines and production associations were, so to speak, adapted to the scarcity of resources in the Soviet-type environment; resources were secured by grafting innovations inhouse. In the USSR, in contrast to the West, an industry is expected to innovate while the demand is high. This serves to complicate the process of innovation owing to the lack of spare capacity and the pressure to maintain output during the changeover period (just as biological plants grow and reproduce in different seasons). On the other hand, there is no indication that low demand in the Soviet system would serve as a stimulus to innovation as is expected in a market economy. Although the greater investments in R&D appear at first sight to give the USSR an advantage, in practice this may not necessarily be the case. Soviet R&D might even be too extensive, leading, as Berry concludes, to higher levels of implementation at the earlier phases of innovation than later. He refers to a Soviet specialist, saying that ‘the productivity of our research and design organisations is much higher than the production possibilities of the industrial enterprises for the assimilation of new developments’ (1982:80). In conclusion, Berry writes that ‘in the West pressure from outside the industry plays a crucial role, while in the Soviet Union the possible advantage of more R and D is not necessarily put into practice’. In other words, competitive selection pressure was lacking, which in itself caused poor creative innovation, even in those cases where there were inventions to incorporate. The major Soviet as well as Polish difficulties of innovation were, according to Gomulka (1985): 32

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Table 2.2

Specific national level opportunities and barriers to machine-tool industry innovation in the Soviet-type NSI (as opposed to the US or UK market economy-type)

Source: Abbreviated and adapted version of Table 2.15 in Berry (1982).

•

•

•

Innovating firms were motivated primarily by the need to overcome supply difficulties, i.e. in my perception, utility driven (optimised) rather than market driven (driven by competitive selection). Process rather than product innovations dominated, which is logical as a consequence of the previous characteristic of utility-driven innovation. The financial incentive to undertake an innovation was weak, and

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•

although industrial R&D personnel have considerable freedom in their work, the decision-making freedom and the resources available to enterprises for implementing inventions were severely limited. This is where institutions failed in the Soviet-type system; there were limited incentives for innovation, again as a consequence of political resistance and the failure of systems to promote competitive selection. Soviet-type systems tended to be large scale and to trade off choice and quality for quantity. (The typical Soviet ‘gigantomania’ has, ironically, analogies in biological organisms evolving in low-temperature environments. Recent biological research has shown (Peck 1997) that organisms (both mushrooms and shellfish) in the Antarctic grow more slowly, have longer life-histories and are usually larger than related species further to the north!) As expressed by Gomulka, the life-history time lag between domestic invention and innovation was high and the subsequent spread of inventions tended to be slow. In the hybrid zone

Sexually reproducing organisms use ‘recognition systems’ when mating, just as commercial enterprises in market economies use marketing and marketing signals. The Soviet innovation system, however, places a number of barriers to potential and actual innovation transfers by manipulating the ‘recognition system’—to use the biological terms—between innovation ‘actors’ and ‘recipients’ that eventually, by new combinations of ‘off-spring’, will give life-histories of hybrid innovations in the new environment. Hanson and Hill (1979) summarise the Western corporate views on how the Soviet practice manipulated the ‘recognition systems’: • •

• • •

The separation of Foreign Trade Organisations and the end-user kept technical and commercial negotiations distinct. Initial inquiries were vague and unspecified, and only after some experience did suppliers cease to wait for further details and begin to acquire the habit of submitting initial proposals containing their own best guesses about some of the details in the Soviet requirement. Soviet requirements for detailed design documentation were exceptionally demanding, as were requirements for detailed operating instructions. Soviet inspection of equipment being shipped to the USSR led occasionally to delays. Standard Soviet procedural requirement for Soviet construction organisations required at least 80 per cent of the equipment to be delivered on site before the assembly and installation could begin. Delivery and installation times would normally—in Western countries—overlap more than this.

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•

•

Project planning and management obtruded in a number of cases; the plant location was changed occasionally, delays in construction were frequent, the construction labour force was liable to fluctuate unpredictably, etc. Skills were found to be low, compared to West European standards, for construction work, plant operation, maintenance, production engineering and middle management, although some individual engineers and managers were considered very competent.

Looking at this list of deficiencies in the ‘recognition system’ between ‘actors’ (Western suppliers of technological innovations) and ‘recipients’ (Soviet end-users of that technology), it is rather obvious why commercial ‘mating’ was neither frequent nor primarily based on recognition. Embargoes placed on some innovations acted as further barriers to ‘natural mating’. Two of the main Western institutions acting against such transfers of innovations were the US Department of Commerce and the NATO Co-ordination Committee (CoCom) which operated through extremely detailed and strictly enforced embargo regulations. The major Soviet response was to introduce formal union-level institutions to produce artificial and sometimes clandestine implants: the GKNT (the State Committee for Science and Technology), the branch Ministry FTOs (Foreign Trade Organisations), the Academy of Sciences, the KGB (the Committee for State Security—its ‘T-Department’) and a network of institutes which, to a great extent, were engaged in replication (for ‘grafting’) through reverse engineering (Medvedev 1978, Sutton 1968, 1971, 1973). The lack, on location, of creative and Soviet-adaptive innovation was significant. The Western suppliers, because of embargoes, often had to produce and redevelop Soviet-adapted solutions on the basis of Soviet technologies, i.e. in practice to replace American computers etc., with Soviet or other non-American items. Even the adaptation to Soviet conditions were thus not necessarily made in the USSR. There is a Lysenkian logic to this type of innovation transfer: by changing the physical construction of the new systems, one seemingly believed that, by this manipulation, the Soviet leadership could influence the ‘genetic’ code of technical knowledge in such a way that it would reproduce itself as a Soviet adaptation within the Soviet system. This, however, was a false belief, since the adaptation was made by the Western supplier. In addition to a failure to reproduce, this manipulation would further increase the duration of technical and commercial proposals and negotiation work (Sandberg 1989). The size of the project or plant, therefore, had little to do with such delays. Hanson (1981) even tested a regression analysis on lead-times and contract size and costs. The results suggested that the influence of contract size on lead-times is weak and that lead-times have not been reduced over 35

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time. A systems learning process leading to faster assimilation was not in evidence. A log-linear analysis revealed, however, that for contracts over 20 mUSD, the lead-times appear to fall on an exponential curve. There thus seems to be a vague capacity for systems learning from transfer experience. Delays and prolonged lead-times are easy to explain from features of the recipient innovation system, such as the factors reported by Berry, Fallenbuchl or the standard overarching explanation offered by Swedish and other Western suppliers who had been interviewed: bureaucracy. However, looking at the comparative figures for UK and Swedish technology transferred to the USSR it is obvious that arithmetic means differ (not to speak of cases within the samples). The same ‘bureaucracy’ obviously produces very different ‘delays’. The reason why this variance exists is the real question from our point of view, i.e. what factors determine the Soviettype assimilation of implants? Optimising imitations Requesting proposals Concerned with industrial obsolescence and mismanagement, all Soviets leaders have considered how to modernise Soviet domestic production technologies. Following Stalin during the first five-year plan and Khrushchev from the late 1950s, Brezhnev, in the late 1960s, decided to introduce more implants of technology adapted to Soviet conditions, mostly by approaching corporations with long traditions of commercial and technological exchange with the USSR (Parrott 1985, Sandberg 1989). Technological implants were ‘optimised’ in Matthews’ (1984) sense, as they were primarily utility-focused, i.e. used for eliminating bottlenecks in the centrally administered system. However, some implants were also formed with the secondary purpose of providing an export income, using turn-key plants such as Fiat technologies for the Togliatti works (Sandberg 1984). Soviet-type implants can ex post be analysed as resulting from four essential parameters: (a) factors of the technological innovation itself; (b) factors describing the characteristics of the supplier; (c) factors reflecting the way in which the transfers were made (the transfer modes); and (d) factors describing the characteristics of the selected end-user. Using project data in regression models one can separate out the influences of each of these factors. For example, in a study of Soviet assimilation, based on the experience of all major Swedish innovation implant suppliers, the following factors explained the variance in Swedish-Soviet proposal lead-times (Sandberg 1989; see Figure 2.1).1 The figure shows an intercept (environment-conditioned ‘base’) value of

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Figure 2.1 Proposal work lead-times (months) for Swedish-Soviet plant transfers 1970–85 (n=12) Source: Sandberg (1989:167). Note: Regression coefficients: * with a T-statistic of 0.2; * * with a 0.05 level of significance

22.5 months as an average in Swedish proposals for transfers of plant technology in the last decades before Gorbachev, other factors being equal. The explanatory power of the experience factor—by an average of not less than 20 months—indicates the degree of Soviet suspicion towards Western capitalists, and yet has the crucial role played by the Western supplier in creating Soviet-adapted innovations (most of the deals were of the turn-key type).2 Compared with the experience factor, embargoes and transfer modes were less important. Soviet requests for items which were covered by US embargoes reduced the proposal time by approximately one month. Contract size also added to the proposal time, but training programmes normally had little or no effect. Negotiations before choosing Negotiation lead-times can be analysed in a similar way (Figure 2.2). The figure specifies the ‘base value’ given the environment, i.e. the statistical ‘intercept’ (average given 0 on the rest of the variables included in the model) for the Soviet system’s ability to negotiate a plant transfer to 37 months (3 years). In those cases where negotiations on the transfer of technology included items that were subject to export controls (CoCom or US), the negotiations were on average extended for another 16 months probably to enable an alternative solution to be found, other things being equal. 37

‘SOVIET-TYPE’ IMITATIVE INNOVATION

Figure 2.2 Negotiation lead-times for Swedish-Soviet transfers 1970–85 (n=12) Source: Sandberg (1989:167). Note: ** Regression coefficients: * = T-statistic 0.20; ** = 0.05 level of significance

Soviet-accredited Western suppliers were able to reduce negotiation times; in their projects the negotiation time was reduced by more than 8 months (all other factors being equal). The experience of the supplier of similar exports to the USSR can be even more important, as it can reduce the negotiation time by as much as 19 months. Thus, in the Soviet system, longterm innovation relations based on a physical presence in the recipient market were extremely important in reducing negotiation lead-times.3 Persistence of the first generation Survival without struggle The incorporation of technology—i.e. the actual implanting of Western technologies in Soviet industry—encountered a number of very down-toearth problems, such as installation, maintenance, training, capacity levels, quality, ‘learning-by-doing’, and overall project micro-implementation. Incorporation is thus a process in which adopted technology, once chosen under optimisation, is introduced to and routinised by the end-users. The adopted technology was generally not incorporated to create competition, but to be used as a new monopoly. Under such conditions, it is not surprising that improvements through ‘learning-by-doing’—the adaptive increase of fitness—never occurred in the competitive selection and Darwinian sense in which we understand it. 38

‘SOVIET-TYPE’ IMITATIVE INNOVATION

Yet there is a slight variance in the Swedish project sample with regard to how the technological systems were actually utilised in terms of quality and capacity achievement. Qualitative aspects quantified: capacity achievement The survival of the adopted technology cannot be taken for granted just because the project is ‘implemented’ according to an aid donor or recipient partner, i.e. put into Soviet soil. Survival also requires actual use and application, which should also be modelled and tested with project data in order to detect why some adoptions were more successful in terms of firstgeneration persistence. One might, for instance, expect that export-oriented projects, as they are under political priority pressure, would have a high propensity to give rise to full capacity achievement. Likewise, one would think that factors of labour supply, personnel qualifications, and quality of domestic supply would reflect longer-term priorities to the industry in question. One could also hypothesise the positive effect of large training programmes—as included in the transfer mode—as well as exporter experience as a positive factor. The Swedish-Soviet sample (Sandberg 1989) indeed indicated that export orientation, as well as other indicators of longer-term industry priority such as manning levels and qualifications of personnel, do play important roles for capacity achievement. Longer-term priorities did provide better absorptive capacity in Soviet industry and experienced suppliers were considerably more efficient in implementing intended capacity achievement. However, it was also observed that those adopted plants with less dependence on local, high-quality supplies were more easily attaining their intended capacity levels. Training programmes, however, seemed to have no effect at all on capacity achievement. Qualitative aspects quantified: product quality Another crucial aspect of adoption persistence is product quality levels (under a lack of competitive conditions). A model for the Swedish-Soviet sample was created (Figure 2.3), which included a number of factors that could be argued to influence levels of quality, such as: • • • • •

export orientation of the production qualifications of Soviet personnel handling the plant number of trainees in the programme provided for the Soviets experience of Soviet deals of the Swedish supplier of technology quality of domestic supplies.

39

‘SOVIET-TYPE’ IMITATIVE INNOVATION

Figure 2.3 Product quality after installation of Swedish-Soviet transfers 1970–85 (n = l5) Source: Sandberg (1989:172). Note: ** Regression coefficients: * = T-statistic 0.20; ** = 0.05 level of significance

The result of this regression equation showed that, astonishingly, the only item that had an effect on quality levels was export orientation. The statistical ‘base value’ (the intercept) was close to minus 1, which means that the Soviet system always produced lower quality levels of imported plants than the country from which the technology originated, other factors being equal (and other variables of the model being 0). This is perhaps not so surprising, given the nature of monopoly structures and the scarcity of the economy. But the fact that the quality of domestic supplies, experience of the technology supplier in Soviet deals, training programmes and personnel qualifications had close to no effect on quality at all gives an indication of the lack of viability and imitative capacity of the Soviet system. Note that it is only when the competitiveness factor of international markets is included that quality improves to (more or less) Western levels! This is not only a neat result of a quantitative exercise, but a fact that worries anyone concerned with environmentally related transfers of technology; those transfers are seldom export-oriented. Do transferred environmentally oriented technologies actually work properly (according to the intended donor qualitative capacity) after commissioning? Similar conclusions are also made by Fallenbuchl, without the basis of disaggregate data: ‘Shortages of important inputs, or their poor quality, have reduced the ability to utilise imported licenses, machines and equipment and reduced the possibility of expanding industrial co-operation.’ From the perspective of Agenda 21, this factor is essential for promoting sustainable development. 40

‘SOVIET-TYPE’ IMITATIVE INNOVATION

From persistence to fecundity? Soviet-type ‘diffusion’ (clonal spread) Diffusion, as defined here, occurs within the context of the national system of innovation from the first adoptions to second-generation descendants. Any industrial, organisational and institutional innovation— or element of them—may diffuse to other industries, organisations and institutions. The type of diffusion we find in market-oriented national systems—under the conditions of competitive selection—has been studied from a variety of perspectives (Rogers 1995) and are not really the issue here. Even if some innovation and diffusion decisions are made centrally in a market economy, such as purchases of expensive foreign military weaponry, or new monopolising technologies introduced by the state, such as telecommunication networks, the distinguishing feature between markettype and Soviet-type systems is the centralised (and politicised) ‘push’ and optimised character of the latter. This refers to both primary adoptions and second-generation descendants of foreign technologies. In the Soviet-type system, diffusion has, therefore, nothing to do with Schumpeterian ‘entrepreneurial profits’ of innovators. Indeed, the whole concept of diffusion in the Soviet context is somewhat misleading and should only be interpreted as further domestic applications originating from an already (somehow) transferred foreign technology. This means that the vast body of literature on innovation and diffusion among firms within an economy is less relevant than studies of innovation and diffusion within organisations and firms, since the latter is also of centralised character. For instance, the classic study of Gerald Zaltman et al. (1973) turned the focal light from the adoption to the implementation of innovations within organisations. Yet neither Zaltman et al. nor the comprehensive review of international technology studies in Reddy and Zhao (1990) actually deal with diffusion in Soviet-type national systems. Western studies of the USSR suggested that military sector diffusion was considerable and often based on clandestine transfers (Hanson 1987).4 In the study of Soviet assimilation of Swedish technology transfers, plants were imported for civilian application, though some of the projects had potential military applications (for instance, the air traffic systems later used in the invasion of Afghanistan). Fallenbuchl (1983) refers to a Polish economist’s opinion that ‘awareness of the mechanisms and lack of institutional infrastructure for the diffusion of the licensed technology within the country limited the impact of imported technological progress’. Using the comparative projects approach to diffusion, somewhat different patterns of diffusion (or secondary adoptions) appeared (Figure 2.4).

41

‘SOVIET-TYPE’ IMITATIVE INNOVATION

Figure 2.4 Observed diffusion (replicas) from Swedish-Soviet transfers 1970–85 (n =15) Source: Sandberg (1989:180). Note: * Regression coefficients: * = T-statistic 0.20; ** = 0.05 level of significance

Figure 2.4 shows, using dummy variables for the observed diffusion, that experienced Swedish suppliers which supplied substitutes for embargoed items also were those that would have a higher propensity for observing diffusion (replicas or adapted versions of their equipment elsewhere) at a later stage. It could be argued that the experienced companies also had the opportunity to observe many of the Soviet replicas of their own products. But this is probably only part of the truth. It would seem that experienced exporters were actually substituting indigenous Soviet R&D. Foreign hightech producers were being used as ‘breeding’ development centres for later Soviet implants. This is also why some proposals tended to be longer, not shorter, with accredited companies. They simply bred innovations for the Soviets to adopt. Note that end-user selection and supplier experience are choice outcomes that greatly influence later diffusion! The conclusion to draw is that the diffusion of any adopted innovation, which is an optimised activity in the Soviet-type system, first started with suppliers adapting to Soviet conditions. This is particularly the case, it seems, from the Swedish-Soviet plant transfer sample, where export controls were at work or when projects were intended to create export revenue. In both cases such optimised diffusion more frequently occurred with technologies provided by suppliers with earlier experience of selling and/or adapting technologies for the Soviets.

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Modernisation or adaptations in primary adoptions The patterns of modernisation of previous innovation adoptions supports this conclusion. The general rule of Soviet-type modernisations is that ‘Once the project has (…) been constructed its modernisation is not a continuous process’ (Fallenbuchl 1983). But accredited Western suppliers seem also to be those involved in the modernisation of existing implants. Other factors being equal, accreditation alone will eventually lead to the modernisation of imported plants. Two other factors also promote modernisation: the high qualifications of personnel on site and the experience of the supplier. On the other hand, two factors that work against modernisation are: export controls on plant and equipment, and the export attitudes of the recipient factory. A Western innovator may be reluctant to modernise a Soviet plant on the basis that this could create undesired competition. Benchmarking Soviet-type imitations Summing up the evidence of Soviet-type NSI performance so far with regard to the assimilation of Western technology, we may group factors of particular interest (see Figure 2.3). The table summarises what are the Soviet-type values of various assimilation variables, such as lead-times, product quality and diffusion, on a very basic level. Lead-times are, according to respondents, generally longer in Soviettype recipient countries, diffusion is extremely rare, while simple modernisations occur to some extent. In general, embargoes may prolong lead-times, but also indicate highly attractive technologies likely to produce Soviet ‘offspring’, i.e. give higher diffusion rates. But selection outcomes are significantly altering assimilation outcomes. This means that the initial technology adoption choice may not only initiate certain trajectories of technology populations, but may also, in its details of suppliers, end-users, etc., influence the innovation life-histories. Some choices of suppliers and end-users may lead to shorter lead-times, higher quality, more diffusion, etc. The Swedish sample of plant transfers to the USSR 1970–85 indicates that Soviet-type bottom-line ‘base values’ (statistical intercepts) of assimilations are poor, make slow choices with poor incorporation and hardly any diffusion (though limited adaptive modernisation is observed). To some limited extent this could be attributed to international embargoes which prolong technical negotiations, since this extra time is used to substitute and adapt innovations to Soviet conditions. Once this is completed, however, these projects seem to be the ones that also lead to diffusion; co-operation in the engineering stage increases the capacity to

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Table 2.3

Note: *

Imitating by assimilating Western technologies in a Soviet-type system of innovation: sample of all Swedish plant transfers to the USSR, 1970–85

Intercept in the model specifications in figures above, i.e. average given 0 on independent variables.

diffuse replicas (produce offspring) in the mature stage of the adopted innovations. The ways in which the general weakness of the national system and the international barriers could be overcome was apparently to choose experienced suppliers, which would then in the long-term provide foreign partnerships in all of the stages of the Soviet initiation and implementation 44

‘SOVIET-TYPE’ IMITATIVE INNOVATION

of innovations. Exporters’ experience of Soviet transfers plays a role in reducing the learning lead-times and achieve the intended capacity and diffusion outcomes. The Western supplier really plays the role of a ‘change agent’ in the Soviet-type context (Rogers 1995). This does not mean that the traits of the recipient firm are irrelevent. The end-user’s export orientation and other variables indicating the level of long-term priority to the industry in question is also crucial. Higher technical qualifications, for example, are important in providing conditions for the achievement of the intended capacity of the transferred technology. Exposure to world market competition, however, is the single (!) variable that explains the improvements in the normally very low Soviet quality levels of products manufactured with imported plants. Basically, then, the Soviets tried to overcome generally very poor assimilation by creating close and long-term collaboration with a selected group of Western suppliers which would help them not only in the technical preinvestment adaptations, but also in reaching capacity levels and providing for further diffusion. The more advanced Soviet industries were, the more successfully they learned from this collaboration. But even if they persisted, implants never really thrived and flourished.

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3 POST-COMMUNIST POLAND AS HABITAT FOR GREENER INNOVATIONS Institutional transformation and environmental investment incentives

Opportunities for post-Communism Institutions—both international and national—provide selection environments for new technologies just as parameters of habitats provide selection environments for biological organisms. This is also true for Poland, now creating new post-Communist institutions, including private property rights on ‘means of production’. Several circumstances—not only institutions—coincide in providing opportunities for Poland in pursuit of sustainable development based on environmentally sound technology (EST) for a transformation into a ‘greener’ post-Communism. The post-Communist transformation indeed reduced the pollution from the worst ‘hot-spots’. And an emerging ‘international regime’, Agenda 21 and the other Rio Conventions, concurrent with the GEE transformation, channelled increasing provisions of international political, financial and legal coherence and co-ordinated commitment for long-term innovation based on ‘environmentally sound technologies’. The industrialised West, and notably the EU (with Phare as the major tool preparing for accession), has made long-term commitments in comprehensive and large-scale environmental assistance and aid, giving more to one pioneer country (Poland) than to any other CEE country. But most importantly from the point of nature is that the Communist system, while having devastating effects on the environment in some regions of Poland, in fact also spared some in their natural state (OECD 1995b). These are legacies of the previous Soviet-type system.

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Soviet-type legacy In the first two decades of the Soviet-type system, heavy industrial plants and an entire metallurgical industry were built almost from scratch, and engineering and shipbuilding industries were rapidly developed. Coal extraction and electrical power generation increased manifold from huge investments in the 1948–70 period. In this ‘Socialist’ or ‘Communist’ period natural resources, such as water, air, forests and mineral deposits had no prices and no value according to official Marxist ideology. The state alone had property rights to all natural resources. The command system of economic management, in which the authorities reserved the right to set detailed objectives and means of economic activity, obviously contributed to a ‘nature-intensive pattern of growth’. Doctrinal reasons, such as the Stalinist policy of forced industrialisation, together with the raw material base, determined this pattern of nature-intensive growth (Lubinski 1992). Environmental problems were—and will be for many years to come— marked by this legacy. Current surveys and official statistics of the situation after the post-Communist revolution reveal Poland’s serious environmental problems in terms of air and water pollution, waste management and nature conservation (EEA 1995, OECD 1995b, Zylicz 1994, UNEP 1993, Nowicki 1993, Lubinski 1992). Air pollution is still largely the result of the outmoded industrial technologies and the use of highly polluting fuels. Poland particularly suffers from high levels of SOX (sulphur oxides), NOX (nitrogen oxides) and CO2 (carbon dioxide). Damage is often concentrated in a number of pollution ‘hot-spots’ in which the technology is highly obsolete. The major source of pollution emanates from the energy sector, i.e. from the heavy reliance on coal and lignite. Large emissions of air pollutants are attributed to the high energyintensity of industrial production, the extensive use of fossil fuels with a high sulphur content, poor or few pollution-reducing devices, and obsolete manufacturing technologies. Mobile sources, i.e. transportation, yet play a minor role in relation to hot-spots, according to OECD (1995b). (Transportation will, however, be an increasing problem for air pollution as the number of cars per capita approaches OECD levels.) Problems in the 1990s Poland is a significant contributor to global warming. According to national and OECD statistics, it has the sixth highest level of CO2 emissions in Europe. Though per-capita emissions are only slightly higher than the OECD European average, emissions per unit of GDP are twice that of the highest OECD emitters. CO2 emissions have decreased since the late 1980s, due in part to the economic slowdown following the collapse of the Soviet-

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type economy in 1989. The economy is growing again, but the energy efficiency is also improving. The changing ratio of industry to services also has important implications for a reduction in CO2. In terms of water resources, Poland is one of the most scarcely endowed countries in Europe and available water per capita is one of the lowest. Poland uses the water it has in a very inefficient way according to studies; the country consumes two to three times as much water per unit of GDP as any other OECD country. Much of the water is heavily polluted, largely due to poor or non-existent waste-water treatment. Again, the closure of plants will reduce emissions and modernisation will help to improve the reduction of pollutants in waste water. Poland is one of Europe’s largest sources of industrial waste both in absolute terms and as a function of GDP. Almost all waste goes, without separation, to landfill sites. Hazardous waste generally is not being treated or properly handled, and thus provides great opportunities for modern environmental techniques and management. Industrial activities have thus led to devastating environmental results: 27 areas are described as ‘ecological hazard zones’. Paradoxically, however, more than a quarter of the total Polish territory is in a natural or almost natural state. Species diversity has remained fairly constant, though numbers and distribution seriously declined during the ‘socialist’ era. The post-Communist paradox The paradox underlying the environmental problem in Poland and, generally, all post-Communist countries is the simultaneous preservation of some parts of the natural environment and the devastation of others. This is explained largely by the legacy of Soviet-type, politically driven administration of industrial activities, which, in market economies, are managed mostly on the basis of economic considerations. The political priorities on some activities, such as heavy industry, and the neglect of others, such as forestry, in combination with the administrative inefficiency, had extremely hazardous effects on some parts of the environment while it protected diversity in others. Heavy industry priorities, for example, account for the devastation of the Polish natural environment in Upper Silesia and also for transboundary pollution in all wind directions. Particularly harmed is the ‘Black Triangle’ around the crossing of the German, Polish and Czech borders, where there is an almost total defoliation of trees. On the other hand, the Bialowieza forest reservation on, and across, the border to Belarus, dates back to 8000 BC and is the only remaining example of the forests which originally covered most of Europe. The Vistula is one of the largest sources of pollution for the Baltic Sea due to industrial waste discharged in its latter stretches, passing south-east and

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Central Poland’s industrial areas. Yet the Vistula and Warta rivers have the last large riparian stretches in Europe. The paradoxes are also exemplified by the fact that ‘inefficient’ (smallscale and low-mechanised) Polish agricultural systems helped to preserve the diversity of species because of the small fields, uncovered ditches, greater crop diversity and rotation, relatively lower reliance on mineral fertilisers and a number of horses (rather than Soviet tractors that would press the soil hard, thereby increasing fertiliser run-offs) and cattle that corresponded to the capacity of the soil area’s ability to absorb manure. It was in such a ‘pre-industrial’ agricultural environment—in Poland and, to a lesser extent, in Eastern Germany and the Baltic Republics—that a diversity of species was preserved, while at the same time species were being threatened with extinction in the fields of neighbouring West Germany, Denmark, Sweden and Finland. Poland has, in the last centuries, lost 15 species, including 3 of mammals, 11 of birds and 1 of fish, while the corresponding figure for Germany is 28 species; 7 of mammals, 19 of birds and 2 of fish (Zylicz 1994). All 17 national parks in Poland are on the IUCN list, and three of these parks are included by UNESCO in a network of biosphere reserves representing typical, well-preserved examples of the world’s ecosystems. Pioneer of post-Communism Poland can be considered as the pioneer of a market-oriented transformation among the European post-Communist countries. The first post-Communist government was formed there—the Mazowiecki government of 8 August 1989, which included the minister of finance and ‘the architect of the Polish reform’, Leszek Balcerowicz. Poland has also been among the most successful CEE countries in implementing market economic ideas.1 The paradox of the partial environmental degradation and the partial preservation of nature under socialism has now led to a concern with the ecological effects of the post-Communist revolution. Environmentally sound development required, and requires, ‘hot spots’ to be modernised or closed down. The newly adopted market economic principles in Eastern Europe have indeed been considered panaceas also for remedying environmental degradation as one legacy of socialism. Leszek Balcerowicz (1996) asserts in a chronicle: Radical economic reform proved capable of sharply reducing environmental pollution. For example, emissions of most air pollutants in the environmental hot-spots in Poland declined by about 50% thanks to industrial restructuring, reduced energy intensity and much more strongly enforced environmental regulation. The economic-ecological trajectory produced by radical 49

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reform is much better than the one which Poland, and other radical reformers, would have travelled had socialism continued. Bankruptcies and closures of inefficient production units based on obsolete technologies will help to reduce environmental pollution—and that has already happened. This is the positive effect of a Polish government programme, ‘creative destruction’ in a Schumpeterian sense. According to a review of the top 80 ‘hot-spots’, 7 plants have been closed and 22 were restructured towards more environmentally friendly profiles. Another 20 plants significantly reduced their emissions by installing abatement equipment. Sulphur emissions were reduced from 2,050,000 tonnes in 1980 to ‘only’ 1,498,000 tonnes in 1992 and nitrogen oxide emission from 1,500,000 tonnes to 1,250,000 tonnes in the same years. Several large steel mills did almost nothing, however, and one power plant even increased its emissions slightly (Zylicz 1994). But as post-Communist countries undergo political, economic and technological transformation, the still unexploited zones must be protected against an economically more efficient, and therefore geographically more comprehensive, pattern of resource use which may have devastating effects for environmental protection, rehabilitation as well as nature conservation, including biological diversity. Transforming institutions for investment Formal and informal institutional change ‘One gets efficient institutions by a polity that has built-in incentives to create and enforce efficient property rights’, concludes North from his Institutions, Institutional Change and Economic Performance (1990:140). To a large extent that is what the transformation process in Central and Eastern Europe attempts: creating and enforcing efficient property rights. But such fundamental institutional changes, like introducing property rights anew, are only directly linked to the actual technology-related practices among organisations and the environmental consequences of such practices. Those institutional changes that directly pertain to environmentally oriented innovation are not only property rights, privatisation and administrative changes in the state bureaucracy. Changing incentives for environmental investment—or reducing disincentives—is an outcome of complex institutional change and also creativity. To the intrinsic and informal institutions of post-Communist systems we need to add the curious combination of thinking and minds created during the formation of the Soviet-type ‘socialism’, i.e. the type of thinking that resulted from adaptations to previous institutional set-ups. In the 50

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Soviet-type system operating in Poland, these adaptations could, for historical reasons—such as relations to Russia as centre of the Soviet empire—be rather cynical. While there was a selection of the ‘most unworthy elements’ under the Soviet-type regime (Davies 1989:48), postCommunist shock therapy created an immense selection pressure favouring cynicism of a new commercial kind. This shift in cynicism as a mental adaptation to the selection pressure created by institutional transformation is the reason why we may speak of an initial ‘Wild East’ style of post-Communist capitalism. From a dynamic and historical point of view, the ‘Wild East’ style is not surprising; even the most devoted shock therapists would hardly expect a comprehensive institutional transformation to have instant results. New entrepreneurs in Central and Eastern Europe will not only have to innovate new businesses but will also have to contribute to the long-term institutional evolution of business ethics. It would thus be a severe mistake to note formal changes in postCommunist countries as simply institutionally significant transformations. Institutions are not only the governmental and legal instruments of power, habits, rules and traditions of economic transactions, but are also more generally the traditions, habits, rules of mind and thinking, all penetrated by—or rather adaptations for—mental survival to the official dogmatism under the previous regime. Informal institution-building of this kind is hard to grasp empirically due to a lack of hard data, and it is even harder to assess as there are factors involved in the business activities, such as those affecting nature. A debate on political culture some decades ago prepared the ground for understanding the informal institutional change that is now being discussed. Obviously the Soviet political culture rejected entrepreneurship as ‘speculation’ primarily due to experiences from the New Economic Policy in the 1920s. Institutionalised into Stalinism, such anti-speculation elements of thought diffused throughout the satellites after the war. But the copy is always a weaker image than the original; reluctance to ‘enriching oneself’, in Bucharin’s words, was not as strong in Central and Eastern Europe as it was in Russia. Previous Soviet-type ideological penetration as a Communist legacy should not be underestimated, however, as a variable discriminating between capabilities to institutionally transform: what I have in mind is not an explicit Leninist creed but rather patches of not yet erased Soviettype thinking. In particular, the Soviet-type attitude towards Western technology as a utility-focused remedy rather than a resource of embodied knowledge has been stressed, i.e. a bias towards the optimisation of implants, rather than a means of creating competitive selection in the domestic economy.

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Institutions work like collective memories in material and immaterial form, which is why institutional change is strongly ‘path-dependent’, i.e. it could reach adaptive peaks that might not be the most optimal. Institutional transformation is a matter of partially deleting what Deutsch (1963) called memories—i.e. abandoning an adaptive peak, and starting anew in search of increased institutional fitness by entering a path guided by other incentives. The major elements of post-Communist transformation Solidarity’ parliamentary group before the August 1989 elections felt that strong measures needed to be taken quickly to transform the Polish economy into a market system. Leszek Balcerowicz was selected to develop the key economic policies. The Balcerowicz plan combined stabilisation with immediate liberalisation of prices and trade. Stabilisation and liberalisation would thus immediately and economically impact on a Poland stuck in the heritage of Soviet-type institutions. Three policies were launched immediately. First, in order to gain control over inflation, nominal wage controls and a pegged zloty to a fixed foreign exchange value were introduced. Second, tight monetary and fiscal policies were introduced. Finally, most restrictions on trade were abolished in order to ‘import’ competition. Specific measures were set out in what became known as ‘shock therapy’ policy for the fiscal, monetary, exchange rate, wage and price, trade and privatisation areas (Johnson and Loveman 1995). The most important performance indicators at the beginning of the programme were the criteria set by the International Monetary Fund. The Balcerowicz plan performed ‘better’ than the IMF required in 1990 and, particularly, in the first half of 1990. Real wages fell more sharply than required and the government budget moved rapidly into surplus. A much greater reduction in domestic assets than that required by the IMF appeared and the foreign reserves of the banking system actually increased. There was a sharp fall in state sector industrial output, however. Unemployment also rose sharply, although there were no bankruptcies. The disappointments of the Balcerowicz plan—that the GDP fell by as much as 12 per cent and that the inflation continued to be higher than targeted—was blamed on state enterprises not adapting sufficiently (ibid. and OECD 1992). State enterprise privatisation Polish state-owned enterprises had worked as Soviet-type monopolies or branches of a state monopoly. The Soviet-type system allocated inputs and 52

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bonuses to managers in relation to their achievements in quantitative outputs rather than profits. Outputs were of poor quality because of shortages and monopolies, and innovation was extremely rare. Radical innovations were due to new plant constructions, mostly based on Western technology. These monopoly enterprises had—as executors of ministerial and centrally made production target decisions—never any need for marketing skill or departments. Foreign trade organisations negotiated on a state monopoly basis with foreign trader partners. Therefore, when the state-owned enterprises were less able to exploit market opportunities, they were also seriously in debt because of the loss in governmental support (as well as suffering from uncertainty with regard to management). They were in a weak situation to adapt to the new conditions provided by the Balcerowicz plan and market-oriented policies. In the first four years of transformation, businesses, including the state enterprises, were primarily oriented towards short-term gains and survival. Investments among state enterprises were thus hampered by high risks, taxes on fixed assets, preferential treatment of private businesses under the new economic policy, old debts and insufficient information as to the terms and possibilities of accessing funds as part of aid programmes (KarpinskaMizielinska 1994). The Polish privatisation programme, which formally began in August 1990 when the Privatisation Law came into effect, had to develop new ways and institutions without being able to rely on any experience. Learning-bydoing without relying on experience—even in institution-building— therefore characterised the transformation. The new legal framework allowed for: •

•

•

Commercialisation, i.e the transformation of an enterprise into a oneperson State Treasury company (or municipal company in case of communalised companies). The enterprise then took over legal status (corporate identity) as a limited liability company or as a joint stock company. It still remained Treasury property, though under the administration of an independent Supervisory Board. Privatisation, i.e. a part of all assets of an enterprise became the property of private, foreign or Polish capital with all its consequences for management, business operations, policy of employment, observance of the law on environmental protection, implementation of the programme of environmentally sound restructuring of the enterprise, etc. Liquidation, either by privatising, i.e. the transferring ownership rights to the whole or part of the company’s assets to a new owner by sale, or by granting its use during a specified period of time, or by reconstructing the enterprise economically, technically and organisationally (Stodulski and Starczewska 1993).

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The Polish government thus pursued a ‘multi-track’ approach to privatisation. The Ministry of Ownership gradually collected information on the domestic and world market positions of the enterprises—thus providing them with what is routinely collected by companies in developed market economies (OECD 1992). The most promising of the large enterprises, whose future value was considered to be both largest and most easily discernible to investors, were marked for privatisation by initial public offering. Smaller enterprises were sold or given to existing managers, workers or both (Johnson and Loveman 1995). The Mass Privatisation Programme, as it came to be called, implied a transference of shares at zero price to all Polish citizens over a specified minimum age. Citizens would own shares in a National Wealth Fund which in turn holds shares in all privatised enterprises. This centralised way of privatising was hoped to facilitate more efficient and radical restructuring (including liquidations and sale) of privatised enterprises. The management of the National Wealth Fund would be contracted to mainly Western financial services firms (!). Since these managers would be compensated largely on the basis of the performance of the enterprises, they would therefore be encouraged to take active part in the selection of management and implementation of enterprise development strategies (ibid.). However, the legislation of this highly complex and controversial privatisation programme took three years of discussion in the Polish parliament, thus explaining the important fact that very little actual privatisation took place in the first two years of reform. Only about one hundred of the thousands of large Polish state enterprises were privatised by mid-1994. This is why, two years after the economic reform was launched, large parts of the state enterprise sector were still in a critical economic situation. Difficulties were concentrated in the non-privatised sector. At the end of 1991, a third of the 8,200 state enterprises reported a loss before tax (41 per cent reported after-tax losses). In most branches output continued to decline although at a slower rate than in 1990, while unemployment increased. In contrast, the private sector continued to expand, though not to the degree to offset the decline in the state sector (OECD 1992). At the end of 1993, the private sector accounted for nearly half of the Polish economic activity, but that had little to do with the larger state enterprises being privatised. Rather the growth stemmed from the increased activities in smaller enterprises being privatised or in new businesses, especially in retail and wholesale trade sectors. The new private sector In the private sector, the fastest growth in number of a new generation of companies were in trade, construction and industry. At the end of 1993, 54

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34.8 per cent of domestic and 39.6 per cent of joint venture companies were registered in trade, while the respective figures for industry were 19.4 and 30.8 per cent and for construction 18.7 and 7.6 per cent. By the end of 1993 the private sector’s contribution to GDP had almost tripled compared to 1988, reaching 50 per cent and 60 per cent of total employment (9 million people altogether) (Rapacki 1994:160). Figures from the end of 1994 show that the share of the Polish private sector in GDP reached 55 per cent, and that 1,308 companies had been privatised (see Table 3.1). Several empirical studies of the corporate sector in 1991–93 suggest that adjustments to new market conditions initially focused on providing a cushion against the demand shock. Firms’ chief short-term goals shifted towards maintaining financial liquidity in order to avoid insolvency and bankruptcy. There was a widespread practice of delaying as long as possible the settlement of debts and obligations to suppliers. Later OECD statistics (1996c:59–60) shows that the private sector share in employment rose from 47 per cent in 1989 to 63 per cent in 1995. Sectoral differences began to appear as private sector shares of production were compared: the overall figure was 42 per cent in 1995, while in construction 87 per cent of production was private. In trade, 93 per cent of turnover was generated by the private sector that year. An interesting selective process took place in 1994–95 as some 20,000 to 30,000 entities sprang up every month, while some 10,000 to 25,000 disappeared! The greater viability of the smaller enterprises is reflected in the fact that the share in sales of larger enterprises, defined as employing more than 500 workers, dropped from 83 per cent in 1989 to 74 per cent in 1994.

Table 3.1

Privatisation in GEE countries, end of 1994

Source: Podkaminer (1995).

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Investments Due to limited availability of bank credit (high interest rates) and insufficient enterprise savings, the Polish corporate sector showed a low propensity to undertake long-term investment programmes. In the 1990–92 period the Polish economy suffered a ‘free fall’ of total investment outlays in real terms—in 1990 by 10.1 per cent and in 1991 by 8 per cent. Only in 1992 did the figures stabilise at the level of the previous year. In consequence, the obsolete capital stock and declining technological standards tended to deteriorate furrther after 1989. In 1993, the corporate sector showed signs of a slight recovery; investment outlays increased by 1.9 per cent, with the public sector displaying a higher propensity than the private. By industry, the highest growth rates of investments occurred in wood and paper, light industry, minerals, fuel and energy, and chemicals. A decline in investments was recorded in electroengineering and metallurgy (ibid.). While technological upgrading is once again increasing in the public sector, the growth of the new enterprise sector is not based on new technologies, but rather on small, flexible organisations, focused strategies, adaptive human resource practices and low fixed costs, i.e. a very small capital stock (Johnson and Loveman 1995:12). A recent survey of over 200 Polish firms shows, that de novo Polish private firms are those with the highest percentage new capital stock (see Table 3.2). The oldest technology is found in the state-owned joint stock and the traditional state-owned firms. The largest part of the technology that is used for upgrading Polish firms has been coming from the OECD area via direct purchases rather than joint ventures or outside investors. The bulk of technology still coming from the the CMEA (Council of Mutual Economic Assistance— the old Soviet-era organisation for Eastern Economic Co-operation) is acquired by the state-owned enterprises. Data from the survey shows, Table 3.2

Vintage of capital stock among 207 Polish firms by ownership

Source: Belka et al. (1995).

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logically, that the most successful companies, as well as the largest, are those that also acquire most of the new technology from the West (Belka et al. 1995). The level of foreign direct investments (FDI) are relatively low in Poland (see Table 3.3). This has been explained by the doubts in Poland on economic policies, compared, for instance, to Hungary where the privatisation strategy stressed sales of state-owned enterprises to foreigners (Brada 1996). The major beneficiary of GEE recipients of FDI is obviously Hungary, both in absolute figures (more than double Russia’s FDI) and relative GDP figures (more than double the Czech FDI). Environment, investments and institutional ‘learning’ Privatisation and environment The three privatisation techniques in effect treated environmental issues differently. •

•

Under capital privatisation, shares of formerly public enterprises were marketed to third parties, primarily domestic rather than foreign. By early 1993, over 100 enterprises had been privatised this way, and about 40 included an environmental audit (OECD 1995b). Unless otherwise stated in the privatisation contract, purchasers were liable for environmental damage associated with sites. Environmental audits provide basic information on potentially required clean-up. The absence of clearly defined clean-up standards, however, created uncertainty for the purchaser about the liability for polluted sites. Under privatisation by liquidation, the assets of state-owned enterprises were partly sold under the auspices of voivodships (‘counties’ or prov-

Table 3.3 Gross foreign investments in GEE countries

Source: Havlik et al. (1995).

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•

inces). By the end of 1992, about 1,500 out of a total of 9,000 enterprises existing in 1989 had ceased to exist. There were no compulsory legal provisions requiring environmental audits prior to liquidation. Legal coverage was important, however, as privatisation by liquidation had involved more environmentally problematic industries than capital privatisation. Unresolved issues also remained with respect to liability: often enterprises were split up for liquidation and environmentally risky assets tended to remain in public ownership. Under mass privatisation, shares of public companies were made available to the public, normally with investment funds serving as intermediaries. It has been estimated that between 200 and 300 facilities in the mass privatisation programme were potentially hazardous in environmental terms. The law governing mass privatisation did not provide for environmental consideration (ibid.).

In the initial transformation stage, the roles played by the Ministry of Environmental Protection, Natural Resources and Forestry and the Voivodship Departments of Environmental Protection were negligible in privatisation. The co-operation and co-ordination of activities failed, especially in formulating ecological conditions for the takeover of state enterprises by foreign investors. Until May 1992 the Ministry of Privatisation did not really deal with the environmental aspects of privatisation and liquidation. No training of Ministry personnel existed for aspects of that type. The Ministry of Environmental Protection, Natural Resources and Forestry made no initiatives, such as law proposals, organisational or institutional changes (Stodulski and Starczewska 1993). September 1991 witnessed the launch of a training programme on environmental audits financed by the World Bank. In November the same year, the Ministry of Environmental Protection addressed the Ministry of Privatisation with a proposal for co-operation. However, no major cooperation, either at central nor at voivodship level, could be observed in the preparation and implementation of privatisation and liquidation. In 1991, the total balance of the National Fund of Environmental Protection amounted to Zl. 1,490.2 billion. No special preference for the financial needs of enterprises undergoing privatisation or liquidation was ever made. Liquidators, interim receivers and official receivers of ownership, appointed mostly by branch ministries and voivods, openly admitted that the matters of environmental protection played a marginal role in their activity (ibid.). This was an opportunity for environmentally sound technology in the privatisation and creation of Polish enterprises, but initially these opportunities were never exploited.

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Unlearning unsustainability In the first stage of privatisation, the selection of Polish enterprises was made by ‘Nicom Consulting Ltd’ (!) The major criteria for selection were volume of sales, employment, net and gross profits and net fixed assets, and no criteria were related to environmental liabilities, or environmental degradation as a result of the enterprises’ activities or manufacturing. Four hundred enterprises were selected, 190 of which were recommended for first stage privatisation: 87 enterprises in the list of 400 are particularly burdensome to environment, and 17 were among the 80 most polluting enterprises in Poland (Stodulski and Starczewska 1993). Since the Ministry of Environmental Protection in 1990 had published a list of the 80 most polluting enterprises in the country, the State Inspectorate for Environmental Protection was dealing case by case with the listed enterprises, and formulated pollution abatement requirements for which the enterprises had to submit implementation plans. Seven enterprises were closed, and production was totally or partially halted in 22 others. According to Ministry evidence, the requirements led to a 60 per cent decrease in emissions of lead to air in the 80 enterprises, a 40 per cent reduction in gaseous emissions, a 10 per cent reduction in sewage discharge and a 40 per cent reduction in waste disposal. These figures were the gross results, however, and the reduction in output-related pollution needs to be separated from genuine improvements in emission efficiency (Table 3.4). A considerable share of air pollutants were reduced owing to improved efficiency in the 80 most polluting enterprises, especially for particulates (42 per cent in 68 enterprises), lead (31 per cent in 10 enterprises) and general gaseous emissions (20 per cent in 69 enterprises). Efficiency improvements

Table 3.4

Unlearning and learning: effects of output decrease and efficiency increase on emissions from the 80 most polluting enterprises, 1989–92

Source: Poland. State Inspectorate for Environmental Protection; OECD Environmental Performance Reviews. Poland. © OECD, 1995.

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were smaller for solid waste (12 per cent in 56 enterprises) and absent (or even negative) for waste-water discharges (OECD 1995b). As will be shown in Chapter 5, 17 of the 80 ‘hot-spots’ became recipients of foreign environmental and technical assistance. As a consequence of the high concentration of Polish industry in one area, just a few of the 49 voivodships account for the overwhelming majority of environmental pressures that arise from industrial activity. Katowice voivodship has one of the highest shares in such pressures; about one quarter of the enterprises on the ‘list of 80’ are there. In addition, 65 other establishments were listed by the voivodship. All but one of these enterprises have adopted pollution abatement programmes and, as a result, air emissions were reduced nearly by 50 per cent between 1989 and 1992, with similar improvements for sewage discharges. Most cement plants in the region have been closed down. In the iron and steel industry, there is a halt to the production of energy-intensive primary products which, by 1994, affected six major plants. Instead, conversion towards metal processing and an increased use of heat from high-temperature processes are being introduced. In the non-ferrous metal industry, there is a gradual departure from the manufacture of primary products and programmes for wastehandling are being established (OECD 1995b). In fact, among industrial sectors, iron and steel is the one that continued, even after 1991–92, to decrease its rate of production in comparison with 1988 output figures, indicating a shift from the outdated technologies introduced in the 1950s. In the steel industry, obsolete technologies, such as the use of open-hearth furnaces to transform pig iron into steel, led to a higher energy use per tonne of crude steel produced. The share of steel produced in Poland with this technology has, however, declined from 36 per cent in 1989 to 18 per cent in 1992. Industrial water abstraction fell by 12 per cent in 1990–92, reflecting both the decline in industrial production and progress in the efficiency of water use by power plants, steel works, paper mills and other facilities. Industrial plants with pretreatment facilities are rare, so a large percentage of toxic substances enters the municipal sewage treatment system with potential negative effects on the treatment capacity of biological treatment plants. The most significant sources of industrial noise are engine test facilities, compressors, ventilators and steam and gas outlets (OECD 1995b). Creative institution-building for environment Clear regulations can reduce uncertainty, such as in liability, thereby reducing the uncertainty for investors. The problem was recognised early in Poland and the establishment of an ‘interministerial unit’ by the Ministry of Environmental Protection, Natural Resources and Forestry and the Ministry 60

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of Privatisation in 1992 was particularly important for attracting foreign investments (OECD 1995b). Potential investors had understandable concerns. First, because administrative authorities have discretion in issuing clean-up orders, Western investors interested in purchasing industrial facilities feared that they would be forced to clean-up the legacy of environmental contamination left by state-owned enterprises. Second, in light of Poland’s interest in strengthening ties with the European Union, investors were concerned that Poland would adopt stricter environmental regulations in the future requiring expensive investment to refurbish installations. Third, the general environment of legislative reform, as well as inconsistencies in Poland’s environmental policy, create an institutional environment that investors find disconcerting. Investors are naturally concerned about the new environmental legislation imposing broad liabilities and obligations (Cummings 1994). In February 1993, representatives of the Ministry of Privatisation, the Ministry of Environmental Protection and the State Inspectorate for Environmental Protection agreed to creating the Inter-Ministerial Environmental Unit in the Department of Capital Privatisation. The Unit’s task was to implement and assist the resolution of environmental issues arising in other privatisation processes upon request. The Unit has been able to define more precisely the financial cost of environmental problems and minimise the estimation of environmental risk for assuming ownership of state-owned companies. It has also developed contractual clauses which provide for conditional, time-limited indemnities and cost-sharing which ensure that the State Treasury will only assume financial responsibility for legal obligations to clean-up (Cummings 1994). By institutionalising the consideration of environmental factors when a company is being prepared for privatisation, investors now know they have to consider a company’s environmental obligations while preparing their offers, both by specifying investments in pollution control and by adjusting their proposed purchase price in relation to environmental obligations. The new practice has also given recognition to planned environmental investment in a selection of offers. The work of the Unit has therefore assisted the Ministry of Privatisation to procure investment in environmental protection from those who wish to purchase shares in companies (ibid.). Creating incentives for greener investments Poland has been remarkably successful in mobilising financial resources for environmental protection despite economic problems (Table 3.5). The key institutions which constitute the financial structure of environmental protection and influence environmental investment are the 61

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Table 3.5 Polish environmental investments, 1990–92

Source: Poland. Central Statistical Office; OECD Environmental Performance Reviews. Poland. © OECD, 1995.

National Fund for Environmental Protection and Water Management, the voivodship funds with the same name, local funds (established by law but not yet fully operational), and the Bank for Environmental Protection. The Ecofund Foundation was established by the Ministry of Finance to manage resources generated in debt-for-nature swaps, using these to finance investments of international importance (REC 1995). The success is explained by the fact that environmental funds could be amassed from fees, which are used for all pollution issues and uses of natural resources, and fines, which are levied for non-compliance with pollution permits. After an increase in 1992, the levels of fees are relatively high and amounted to 5.939 bZl. Fines are assessed on the same pollutants as fees, but at significantly higher rates. National and Voivodship (County) Funds for Environmental Protection and Water Management—another important institutional innovation for Polish environmental protection—were established in 1989 but grew out of funds established in the early 1980s. In June 1993, regional and local funds became separate legal entities. Revenues from fees, fines and funds are disbursed in the form of grants and loans to implement the 1991 National Environmental Policy. By 1992, the funds had grown to account for 58 per cent of environmental investment. In contrast, enterprises account for 20 per cent, municipalities for 13 per cent, state budget for 5 per cent and foreign assistance 4 per cent (POLMEP 1993, OECD 1995b). If we compare Poland with other GEE countries in this respect, there are great differences. REC reports that while funds in Poland form the source of 58 per cent of the environmental expenditure, the figures in Hungary and the Czech Republic are only 11 and 10 per cent respectively (OECD 1995c: 80). 62

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A Polish Environmental Protection Bank was established in 1990, closely linked to the National Fund, which owns 44 per cent of its shares. In 1993, 60 per cent of its project portfolio was for environmental activities and 80 per cent of these were loans with interest rates subsidised by the National Fund amounting to 790.5 bZl. The bank also holds shares in companies working in the field of environmental protection (OECD 1995b). Most of the funds raised through fees and penalties provide a major source of revenue for regional and environmental purposes. Industry is therefore a net financier of environmental investment, contributing roughly two-thirds of a total outlay for environmental investments of about 12 bZl (OECD 1995b). More recent figures indicate that the National Fund concluded 1,606 agreements totalling 718 mUSD (85 per cent loans, 15 per cent grants). In the first quarter of 1994, a further 700 agreements gave a total value of about 67.7 mUSD (see Table 3.6). The main recipient areas were air protection (42 per cent), water protection and management (41.6 per cent) and surface soil protection (6.1 per cent). National Fund investments have been estimated to reduce annual emissions in 1990–93 by 246,000 tonnes of SO2 (which equals 9.0 per cent of the 1993 level), 5,000 tonnes of NOX (which equals 0.5 per cent), 129,000 tonnes of particulates (6.2 per cent) and 50,000 tonnes of CO (0.6 per cent of the 1993 level) (REG 1995). Zylicz, adviser to the Polish Minister of Environment, concludes (in REC 1994) that the National Fund plays a prominent role by channelling a substantial portion of public environmental expenditure. According to Zylicz, government agencies in the former centrally planned economies are not well prepared to ‘professionally (i.e. efficiently) administer funds with which they are now entrusted’ (REC 1994:103). The positive impact of these funds are thus accomplished through fees. Though the fees were often thought of as incentive measures, Zylicz argues that their effect has been to raise funds for environmental investments (Table 3.7). CEE environmental funds compared As one of the cornerstones of Polish environmentally-oriented institutional innovations, the environmental fund, thus shows the country to be a pioneer; the Polish fund was created in 1989, while the Czech and Slovak counterparts originated in 1991. The funds in Hungary and Bulgaria were created in 1993 (Table 3.8). There is, however, also one feature that makes the Polish fund different from those in other CEE countries—it is independent from the Ministry of the Environment. This means that the final decision-making authority over CEE environmental funds also differs: it is the supervisory board or fund directors who decide in Poland, while in the other countries it is the Minister of Environment. 63

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Table 3.6 Environmental fee rates in Poland (ECU/tonne)

Source: Markandya and Lehoczki (1994).

From Table 3.8 we can see that the Polish fund is also larger in terms of full-time staff and that it has a lot more to spend than other GEE funds. In relation to revenues the difference is vast: almost three times more than the Czech fund and close to 10 times more than other GEE funds. Regional and international institutions Networks for improved learning and coherent innovative action are not confined to enterprise level investments. There are regional networks 64

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Table 3.7 Financing environmental investments, 1992 (bZl)

Source: Poland. Central Statistical Office (1995); OECD Environmental Performane reviews. Poland. © OECD, 1995.

promoting specific investment purposes or specific institutional changes, such as the Environmental Action Programme for Central and Eastern Europe (EAP), endorsed by the Environment Ministers (including the Environment Commissioner of the European Communities). The aim of the EAP has been to ensure that scarce resources are used costeffectively, to encourage the prioritisation of environmental problems according to clearly defined criteria, and to develop ‘win-win’ solutions based on market and regulatory instruments, especially for low point of source emission and industrial pollution. The EAP contains principles designed to improve environmental management and help develop ‘a change of thinking, at a time of difficult economic transition’ (EAP 1995b:3). It was agreed by the Task Force work programme that a key method of implementing the principles of the EAP was for each country in the CEE and the NIS to develop its own National Environmental Action Programme (NEAP). In a Task Force document, NEAP is described as a ‘goal-driven process’—‘learning by doing’ (EAP 1995c:4). Essentially, the institutionalisation of EAP is a first step towards a coherent, yet autonomous CEE strategy of formulation and policy making. In early 1995, the reports of the Polish NEAP co-ordinator Agata Miazda—‘Assessment of the Implementation of the National Environmental Policy’ and ‘Executive Programme for the National Environmental Policy to the Year 2000’—were adopted by the Polish government. The ‘Assessment’ was prompted by the need to provide the Polish parliament with an assessment of the National Environment Policy of 1991, and focused on progress in the implementation of short-term policies (EAP 1995b). Seen from the perspective of environmental, legislative adaptation of the 65

Table 3.8 Key characteristics of five national environmental protection funds in GEE

Source: OECD Environmental Funds in Economies in Transition. © OECD 1995.

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CEE to the EU, Poland, according to REC ranking (Table 3.9), is the most ‘adaptive’ CEE country, followed by the Czech Republic. Poland holds the lead in the field of nature conservation and water protection. In air protection, biochemicals, industrial risks and biotechnology, and noise protection, Poland is second among the CEE countries in terms of adapting its legislation to EU standards. Aid for institutional imitation Institutional innovations Environmental investment in Poland is largely financed from domestic sources, with foreign assistance providing only 4 per cent in 1992 (and 1994). An innovative development is the first debt-for-environment swap involving public debt. The Polish debt, as of 1991, was 32 bUSD to the Paris Club (governments) and 13 bUSD to the London Club (banks). This debt was not only reduced by half and rescheduled, but members of the Paris Club also agreed in 1991 to provide voluntary exceptional relief for Poland. In addition, creditor countries agreed that up to 10 per cent of Poland’s debt could be further reduced on the understanding that the money made available would be used for environmental protection projects of international significance. Once the Polish authorities had agreed with creditor countries to reduce their international debt by 50 per cent, the environmental authorities were effective in persuading, first, the Ministry of Finance and then countries to swap a further part of their debt for environmental projects (Finland in 1990 Table 3.9 Compliance to EU Environmental Legislation (REC ranking)

Source: Computed from Table p. 2 in REC (1996).

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with 10 per cent of the debt, i.e. 17 mUSD; France in 1993 with 1 per cent of the debt, i.e. 48 mUSD; Switzerland in 1993 with 10 per cent, i.e. 52 mUSD; and the United States in 1991 with 10 per cent of the debt, i.e. 360 mUSD, of which 26 mUSD was made available to the Ecofund for three years). These agreements provide for 460 mUSD channelled through a special foundation, the Ecofund, established by the Ministry of Finance. The Ecofund disburses this amount in accordance with the debt repayment scheduled until 2010. Although the Ecofund budget is small compared with the National Fund, the money is disbursed as grants for up to 30 per cent of investments and so leverages other resources. It helps Poland acquire components, technology or financing from countries that pay into the fund. In 1993, 25 grants were provided, totalling 25 mUSD and, in 1994, a further 19 projects were considered. This mechanism thus enhances levels of technology transfers and makes it possible to handle more projects and more foreign aid. The resources are used for environmental projects of international significance. The Ecofund supports activities devoted to reducing transfrontier air pollution (SOX) by 30 per cent; reducing nutrient pollution of the Baltic Sea by 30 per cent; lowering emissions of greenhouse gases through fuel switching and CFC replacement by 30 per cent, and to conservation of biodiversity by 10 per cent of its financial resources (OECD 1995c). Aid and the environment During 1991–92, the net disbursement of financial resources to Poland from OECD countries and the EC amounted to 3.86 bUSD. In addition, multilateral organisations, such as the EBRD, the IMF, the UN Development Programme and the World Bank provided 1.04 bUSD. All in all, Poland received foreign assistance at the level of 3.2 per cent of its GDP. Part of the funding is used for activities such as modernisation of industry, transport or the energy sector, with direct environmental benefits. All projects financed by multilateral organisations are subject to analysis of their suitability from an environmental standpoint (OECD 1995b). In November 1993, total environmental assistance, including both bilateral and multilateral assistance, reached 230 mUSD used in 236 projects, as reported by OECD. The major donors were the EC (95.6 mUSD), the United States (36.3 mUSD), Denmark (30.6 mUSD), Germany (26.3 mUSD) and Sweden (19.2 mUSD). The major projects concern air protection (90 mUSD, 39 per cent) and water protection and water management (49 mUSD, 21 per cent) (OECD 1995b). The volume of foreign environmental assistance to Poland for the 1990– 94 period is presented in Table 3.10. Between 1990 and 1994, Poland received 318.8 mUSD, mainly in the form of grants and special debt swaps from foreign sources. Of this 69

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Table 3.10 Foreign environment assistance to Poland, 1990–94

Source: Klassen et al. (1995).

committed amount, not more than 240 mUSD were spent in 1995. In addition, loans from the World Bank to the amount of 736 mUSD that directly serve environmental purposes have been allocated in the same period. The assistance from bilateral donors and Phare has been used for: • • • •

studies, analyses and master plans: 38 per cent construction of installations and supply of equipment: 33 per cent training and education: 20 per cent measuring and monitoring equipment: 9 per cent. Institutional adaptation

In Essen, the European Council adopted a strategy for accession of the Central and East European countries to the European Union: The Phare programme is one of the cornerstones of the accession strategy and important steps have been taken in 1994 to allow the programme to focus on integration. In particular this has concerned the development of infrastructure, investment support and closer cross-border co-operation. (van den Broek and Brittan 1995) Poland is thus subject to Phare institutional aid after the Essen summit in 1994. This includes the harmonisation of Polish environmental laws with EC laws. The European Union will use Phare assistance as an instrument of integration for the accession of the CEE states into the Union. Environmental assistance to Central and Eastern Europe is channelled through a number of programmes with different targets, but, since Phare (to CEE countries) is the most important, environment projects are now subordinated integration targets (Table 3.11). The Life programmes and those that include co-operation with CEE, such as Bistro, Corine and Tempus, may also have environmentally related programmes and projects. 70

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Table 3.11 Phare environmental administrative support projects

Source: Poland. Ministry of Environment (1993), Berg (1995).

Administrative support is directed towards environmentally sound institutional practice, as in Agenda 21’s definition of EST: ‘Environmentally sound technologies are not just individual technologies, but total systems which include know-how, procedures, goods and services, and equipment as well as organisational and managerial procedures.’ The leading participants in the public administrative support programme have been EU-Phare, the Netherlands, the USA and the World Bank.2 In recent years, EU-Phare has put a great deal of emphasis on this type of environmental aid to Poland. Both regional (notably in Silesia) and central institutions have been supported (a 0.38 mECU Phare 1 grant to the National Fund for Environmental Protection; a 0.5 mECU Phare 2 grant on the definition of priorities and costs for the implementation of the mediumterm priorities; a 1.8 mECU Phare 2 grant for a national educational centre; and a 5 mECU Phare grant for assistance in governmental and public environmental activities. The support has also been in the spheres of legislation, information to the general public, environmental assessments (a 0.5 mECU Phare 2 grant) and the development of economic instruments, 71

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such as taxes and fees (a 0.6 mECU Phare 2 grant). A Phare adviser now also holds a position in the Ministry, and EU environmental legislation is translated into Polish. The USA has also contributed with administrative support at central and local levels. The Polish Ministry has received help with both deliveries of computer equipment and education of staff. An institute in North Carolina pursues a project on ‘local environmental management’ with four small towns in Silesia. The University of Minnesota gives recommendations in policy issues and in questions related to the development of the local and private environmental sector. The USA also supports the education and training needed for technology assessments and helps to create legislation. The Dutch administrative support is comprehensive, but mainly emphasising regional co-operation which results in regional plans for environmental action. Examples are Glogow-Middelburg (a 0.34 mNLG grant), Myszow-Eindhofen and Krakow province-Overijssel. A plan has been developed for environmental activities in By torn, including project management (a 0.585 mNLG grant). Polish experts also participate in regional environmentally oriented courses at Dutch universities (two grants: 1.69 and 2.46 mNLG). In 1990, the World Bank granted a loan for public administrative support in Poland. The 18 mUSD loan included administrative support not only to the central ministry, but also to regional environmental authorities in Krakow; Katowice, for example, was assisted in the development of a policy and strategy. In addition, evaluations of the Polish administration and its strategies have been made as well as recommendations for change. The UK’s support to Poland is to a large extent administrative: measures involve legislation and policy support, education of officials (a 0.18 mGBP grant), environmental technology assessments (a 0.09 mGBP grant) and the introduction of economic incentives. There are regional co-operation projects between Carlisle and Slupsk. Sweden supports regional cooperation programmes with local authorities in a number of Polish voivodships. In Kielce, Sweden has contributed with educational programmes for local administrators and experts (a 2.94 mSEK grant). Denmark has not taken any direct administrative measures of significance as far as data shows, but it is involved in the training of technicians within the framework of investment projects. Norwegian support consists of studies and seminars. Germany pursues support for the whole of Eastern Europe, but countryspecific administrative projects have been included in other projects, such as the knowledge transfer project on legislation in connection with the Odraproject. Nordrhein-Westfalen co-operates with Katowice in environmental issues. EBRD pursues a comprehensive educational programme for the whole of Central and Eastern Europe. Education is directed towards the private 72

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sector and the public administration and includes environmental technology assessments, legislation and policy support, as well as the development of environmental standards (a 0.18 mECU grant). The UN’s regional public administrative support for Central and Eastern Europe includes the development of institutions, legislative support, etc., and the UN has also educated local administrators in Poland. Poland has participated in regional activities of the OECD, European Council and REC (Regional Environmental Centre in Budapest). The European Academy of the Urban Environment in Berlin has organised seminars, workshops and expert exchanges with Warsaw and other cities in Poland. Hessen has contributed with an environmental centre in Krakow. An environmental centre for water management has been established in Gdansk with the support of France and EU-Life. France has also contributed to the creation of local water authorities. An educational and research centre has been established in Lodz with Swedish aid. Conclusion Poland has undergone drastic and far-reaching institutional transformations influencing the capabilities of EST investment. Such institutional transformations may be interpreted as ‘institutional learning’, as suggested by Dalum and Lundvall et al. (1992), but they are in fact both adaptive institutional changes as elements of integration into the world economy, the European Union, and other international regimes, such as the regime of environmentally sound and sustainable technological development, and indigenous institutional changes to facilitate and improve investment in EST. Poland has had a remarkably successful record in boosting domestic resources for EST investment. In fact, in 1992 only 4 per cent of investments were made possible through international assistance while 58 per cent were made possible due to funding from the national, voivodship and local environmental funds, i.e. the collection of fines and fees. Interestingly, unsustainable practices and knowledge of EST are differently balanced in the various areas of the environmental protection programme. Air pollutants are being reduced due to improved efficiency, while improvements in the reduction of solid waste and waste water are largely the result of reduced output. While IMF requirements have largely set the frames for Polish macroeconomic policies, it is the EU that puts the greatest pressures on Polish institutional reform and leanings towards EU environmental standards. This is the effect of the European agreement that was concluded between Poland and the EU, signed in 1991, and implemented in February 1994. Therefore, EU administrative support to Poland in the environmental field is crucially important. We can observe comprehensive programmes of projects from law 73

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making to technology management in the lists of EU environmental administrative projects in Poland, and while we also have major projects with the World Bank, EBRD, UN, NEFCO, as well as Denmark, the Netherlands and other important bilateral project partners, there is obviously a particularly adaptive, integrative element in the EU activities in Poland.

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4 FIRST ENVIRONMENTAL AID PROJECTS Seeds of greener innovations?

Persistence and fecundity? We know from Chapter 2 and Soviet-type experiences that successful reproduction and spread were not generally achieved under a central planning system. Imitation was slow and creative innovation was therefore more or less nil; projects survived but never thrived. But what about postCommunist Poland? Do greener technologies thrive, adapt to, and survive Polish conditions? Do they even reproduce and diffuse? Matthews’ (1984) three-phase model of origin, persistence and spread will be used as the structure of this chapter. Given the short time that has elapsed from the major transformation in comparison with the long periods needed for the fundamental changes necessary for the performance of new systems, this question can only be answered indicatively, on the basis of patchy and case study evidence. But initial data from the first Polish environmental aid recipients are now at hand; both descriptive statistics of aid projects and interview data from the first environmental aid recipients. Investigation design Data access and the study of ‘hard’ EST transfers Detailed data on project performance is not generally accessible, neither from the donors of aid, nor from recipient organisations in any country. In the Polish case, I managed to acquire the first list of aid projects compiled by the Polish Ministry for Environmental Protection, Natural Resources and Forestry (POLMEP 1993)—called the ‘the First Batch’ in this chapter. Later lists are de facto confidential and from 1995 were handled by the National Fund for Environmental Protection and Water Management. However, after my

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interviews with the hardware aid recipients on the 1993 list, I also managed to acquire the 1995 National Fund list—what I term ‘the Second Batch’. The first of the two lists was thus used as the basis for this investigation. The more recently released Second Batch data presents updated overall descriptive statistics on more recent projects. A mailed questionnaire was conducted on the Second Batch, resulting in some additional data on individual projects, such as lead-times. Interview data collection A questionnaire (see Appendix 2) was developed in correspondence with the major research themes of this study.1 The questions put to the Polish recipients of aid—apart from background data of the recipient firm and the aid project—included such themes as: • • •

The institutional setting of the aid project and its actors The assimilation (imitative innovation), including diffusion of the technology The firm’s R&D and other innovative activities (creative innovation). Delimitation: equipment transfers only

The POLMEP (1993) descriptive statistics on committed aid and implemented projects—the First Batch—was the source of the information used to determine the recipients of EST aid. The projects, which included combined ‘hard’ and ‘soft’ equipment transfers, were selected for personal interviews since the intangible dimension of soft technology is less feasible to evaluate as it is not a matter of physical artefacts (ex post studies have poor prospects of yielding valid results about transfers of knowledge or ‘knowhow’ since it is much more complicated to determine the origin of cognitive ‘artefacts’ than ‘physical’ ones).2 An additional reason for focusing on ‘hard’ rather than only ‘soft’ adoptions is that comparisons with Soviet-type assimilation—as reported in Chapter 2—cannot be made. A note on technology assimilation analysis of aid versus aid evaluation analysis The major distinction between an aid assimilation analysis and an aid evaluation analysis is the relationship between independent and dependent variables. In the aid assimilation analysis the focus is directed towards the interaction between the major dependent variables (aspects of origin, persistence and spread) and the independent variables, i.e. those in the environment of the assimilation, such as the recipient firm or country, including international conditions. We thus focus on the question ‘whether 76

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the receiving country’s social, political and economic environment can accommodate and make full use of the potential of the project’ (Carlsson et al. 1994). Cost-benefit analysis or aid evaluations, on the other hand, focus on the effects of the project on the recipient society, or even the attainment of the internal goals of the project. The major causal direction of assimilation and cost-benefit analyses are thus opposites, which is why aid evaluations are seldom of use for understanding what the recipients have learned from the aid. First Batch interviews Which were the first EST aid projects of hardware type? Data from the Polish Ministry of Environmental Protection and Natural Resource Management (POLMEP) indicates (see Table 4.1) that all international donor commitments to Poland in environmental investments amount to just a little more than half of all granted aid (53 per cent). This percentage, which is already low in terms of direct environmental effects of aid, also includes construction costs of facilities and installations, technical equipment acquisitions, and studies of previous installations, project descriptions and licence purchases, i.e. not only strictly ‘hard’ EST transfers. In a strict sense, therefore, actual ‘hard’ or equipment aid projects or transfers committed for environmental purposes comprise only 28 projects or 14 per cent of the total environmental aid commitments as of March 1993. But the 28 projects or 14 per cent are only commitments (decided by donors) and have not been implemented (signed by donors, suppliers and recipients). Table 4.2 lists the environmental aid projects that have actually been implemented, according to transfer forms. As we can see, the environmental aid that has actually been implemented in Poland as of 1993 is not more than 38 projects altogether—not just transfers of technical equipment. These 38 projects amount to 16.157 mUSD, i.e. less than 7 per cent of the total aid commitments of 233.202 mUSD. Looking at the ‘technical equipment transfers’ implemented (signed contracts but not installed equipment) at the time, the ratio is 4.285 mUSD of the total aid commitments of 233.202 mUSD. Thus, in 1993, the environmental technical equipment transfers were only implemented in eight projects—and less than 2 per cent of the committed aid! Apart from the astonishing number of priorities other than equipment transfers, and the great lag in actually implementing the committed aid, these figures also explain why it was possible to have interviews with all the Polish recipients of EST hardware aid as of 1993. There were only eight! (Table 4.3). 77

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Table 4.1 Forms of environmental aid (committed)

Source: POLMEP (1993).

Table 4.2

Transfer forms: environmental aid to Poland implemented as of March 1993

Source: Unpublished material from POLMEP (1993). Note: Actual technology transfers in bold

The EST equipment aid projects listed in Table 4.3 are located mainly in the northern, Baltic Sea coastal area (water protection in Gdynia and Krynica Morska) and in the southern, heavily industrialised, region of Upper Silesia (Laziska, Bedzin, Trzebinia and Krakow; mainly air protection). Inowroclaw and Torun are located between Warsaw and the Baltic Sea coast. 78

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Table 4.3

The eight environmental aid technical equipment transfers implemented as of 1993

Source: POLMEP (1993).

Five of the environmental aid projects are Finnish, two are Dutch and one is Swedish. The largest project amounted to 1.081 mUSD (the Swedish pre-insulated pipes for heating in Torun old town), while the smallest amounted to 50,000 USD (the Finnish equipment installed on a vessel based in Gdynia for removing crude oil from Baltic Sea water surface). The contracts were concluded in 1990–92 and installations were completed 79

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between December 1990 (Torun pre-insulated pipes) and December 1992 (ceramic filters for the Trzebinia mine). Thus, from the perspective of having an opportunity to step from imitation to initiation, the equipment had been installed some three and a half to five and a half years at the time of the interviews in July 1996—a reasonable perspective for evaluating persistence and even spread. Respondents and projects The First Batch projects thus included only eight potential respondents, and the following is a brief presentation of these companies, and their projects, based on material from on-site interviews. (1) Soda Matwy S.A.Chemical Plant This company, founded in 1881, is a producer of soda ash, sodium bicarbonate, calcium chloride, calcium carbonate, etc. The company exports 60 per cent of its production and has 1,840 employees (in 1996). The company is located in Inowroclaw. The overall aim of the aid project, concluded in 1990, was not only to use soda slurries (120 m3/h) for the production of calcium fertiliser, but also to save energy and reduce the use of coal and thereby emissions into air of dust and gases. During the whole history of the plant the waste slurry had been pumped into growing sedimentary ponds (called ‘the White Sea’ for their colour and size), which, by the time the new soda production processes were introduced in the early 1970s, had covered an area of 130 hectares. In 1979, equipment from the FRG and Switzerland had made it possible to utilise slurries for fertiliser production. There were two stages in slurry thickening: first gravity thickeners, then settling centrifuges. The dewatered slurry with a moisture content of 55 per cent was dried in fine coal-fired dryers. The finished product in grain form, with a 25 per cent water content, was sold to farmers to be used as a fertiliser for soil deacidification. However, with this method, the highest capacity reached was some 40,000 tonnes annually. Consequently, significant amounts of slurry were still pumped into ‘the White Sea’, energy consumption was high, and coal combustion led to air pollution problems (and thereby taxes). The Finnish filter presses—17 per cent of which was financed by Finnish environmental aid through the ‘eco-conversion’ agreement with Poland— make use of 95 per cent of the slurries, require no coal and thereby make no emissions into the air. Post-distillation slurries are being thickened in clarifiers and then pumped to the slurry buffer tank. From there the slurry is pumped to the filters. The filter cake obtained, which has a moisture content of up to 40 per cent and a consistency suitable for transportation (dry, easily 80

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disintegrated), is transported by belt conveyers to the storage. From the storage the product is directly distributed to end-users in agriculture, to be used as fertiliser. In sum, the reported ecological benefits were: the elimination of clarifying, cooling and storing of waste slurries in settling ponds, and the elimination of thermal drying which decreased the energy consumption by some 35 million kWh/year. (2) The Polish Ship Salvage Co. Established in Gdynia in 1951 as a state-owned organisation, and in 1974 as a rescue service and oil-combating unit in accordance with the Helsinki Convention of 1974, this company has 383 employees (in 1996) and a 39 per cent export share of sales of rescue and oil combating services in the year of the aid contract in question (1991). Since the 1983 Polish ratification of the Convention, the Ministry of Transport covers current expenditures and maintenance as well as supports investments. The technology for combating oil before the aid project were traditional oil booms and floating skimmer pumps from the UK and Scandinavia. The Finnish aid, provided through the ‘eco-conversion’ agreement with Poland, sponsored 17 per cent of the costs of installing two sets of oil-skimming equipment on Polish vessels. The equipment consists of cassettes with rotating brushes that skim off oil from the water surface, and pumps and tanks that collect the skimmed oil on board; they are being installed in existing vessels. The installations comply with the Helsinki Committee (HELCOM) recommendations of the Combating Manual and chapters 11– 13 of the Convention. The equipment was installed on two vessels at a shipyard in Gdynia; the vessels are stationed in Gdynia and Swinoujscie. The ecological effect of the project is to increase the standby capacity for combating oil in the coastal area of the Baltic Sea, co-ordinated at the Polish Emergency Contact Point in Gdynia. (3) Zaklad Energetyczny Krakow S.A. Established in 1905, with 2,546 employees in 1996, this company distributes electric energy in the Krakow area (Upper Silesia). The overall aim of the 1991 Finnish environmental aid project was to reduce dust and gas emission into the air by converting coal-based heating in apartment fireplaces with electric heating in the historic centre of Krakow. For that purpose, polyethylene dry cables from Finnish Nokia were installed (23 per cent subsidised with Finnish aid) rather than the traditional paper and oil isolation cables, in connecting the old town to the energy system with a sufficient supply and transmission capacity. No specified environmental goals were calculated, nor were investigations made of environmental

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benefits. Approximately 6,000 of 16,000 coal-fired heaters have been replaced by electric heating in 4,138 apartments (at July 1996). (4) Spolka Wodno-Sciekowa im. Andrzeja Wojtasika Based in Krynica Morska by the Baltic Sea, east of Gdansk, this sewage treatment company, established in 1983, had 3 employees in 1996. The firm was state-owned at the time the aid contract was signed, and personnel changes were made in connection with its privatisation. Before the aid technology was installed as part of a new sewage treatment system—i.e. one or two sewage pumps sponsored by Finland (aid amounted to 3 per cent of the total sewage system) as part of the ‘eco-conversion’ programme—lorries were used to pick up the sewage in the district and dump it into treatment facilities. Now the Soviet-equipped treatment plant has its outlet in the Vistula river bay. Environmental aims were neither specified nor investigated. (5) Zaklad Gornicze Trzebionka S.A. Trzebionka mine, in Trzebinia (Upper Silesia), was founded in 1950, had 1320 employees in 1996 and produces zinc and lead concentrates, a considerable share of which is sold abroad: 41 per cent in 1992, the year the aid contract was signed. The company is both a zinc-lead ore mine and a processing plant. The company took over a continuity of production and traditions from a galmai (oxide zinc ore) mine that had the same name and existed from 1885 to 1914 in the northern part of the present mining area. Today’s mine and mill were built between 1959 and 1964, but production facilities were expanded in the 1980s. The crude ore goes through two stages of a benefaction process: gravity separation and flotation. In the first, the ore is crushed and subjected to gravity separation in a drum concentrator. The received product is mixed with tailing from shaking tables and material from a secondary crusher. The mixture goes to ball milling (wet method). Flotation is carried out with the use of various additives, such as sulphates and alcohols. Two types of flotation concentrates are received: flotation lead and zinc concentrates, that need to be dewatered. Previously, Russian vacuum filters were used (from 1965). This is where the aid technology— dewatering, ceramic filters, sponsored through the Finnish ‘eco-conversion’ programme—replaces the old technology and is used for the treatment of the concentrates. The Finnish ceramic capillary filters (37 per cent paid by aid) create a drier product, which decreases transportation needs, eliminates the need for compressed air which caused much noise in the previous work environment, and reduces energy consumption by 85 per cent. In addition to these positive environmental effects, dust emissions are also reduced. The 82

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environmental effects are: (a) reductions in emissions from 4.6 to 0.6 mg/m3 dust and from 0.174 to 0.02 mg/m3 lead, and (b) a reduction of workplace noise from 90 to 77 dBA. (6) Huta Laziska Situated in Laziska Gorne, Upper Silesia, this ferro-alloy works employed 1,750 people in 1996 and was founded in 1945 (though the previous mine was opened in the nineteenth century). Approximately 25 per cent of the sales are exports, according to the respondent’s estimate. The technology used before the installation of aid equipment for dust reduction consisted of filter bags (installed in 1971) that worked under low pressure, i.e. ventilators were situated after the filter in the emission stream (as in a vacuum cleaner). The reduction of dust was 95 per cent, which was not enough in the light of the 1989 increases on fees on dust emissions. The 1992 aid project contract secured Dutch partial support for the new filter installations, namely the costs of 4,135 bags from French Filter Media for the new high-pressure Beckhaus filters (ventilators before filters in the stream direction). The new filters reduce 98.5 per cent of dust emissions from the alloy production process. The dust reduced, approximately 1,200 tonnes/year, is the major environmental aim and effect of the aid project. (7) Elektrownia Lagisza Lagisza Power Station in Bedzin, Upper Silesia, has provided electric energy and hot water for heating purposes since 1964, and employed approximately 1,200 people in 1996. The technology used before the 1991 aid project—the installation of a Dutch low-emission burner—consisted of seven boilers, two of which were also used for the hot water supply. It was in one of these hot water boilers that the Dutch aid technology was installed. Originally, in 1962–63, two English boilers had been installed. Later, in 1972, the Polish boiler producer Zamech in Elblag installed another five boilers using very similar solutions as the British boilers. The one boiler in which the Dutch burner was installed was of Zamech origin. Electrofilters were installed simultaneously, thus reducing the NOX emissions, which became costly owing to the emission fees that were introduced by the parliament in 1989 and implemented by the voivod authorities. The environmental aim of the project (70 per cent sponsored through Dutch aid) was the reduction of NOX emissions to 170 mg/GJ, as opposed to an emission level of 500 mg/GJ of NOX before installation, i.e. a reduction of 650 tonnes/year. However, only a level of 270 mg/GJ has been reached, owing to the substandard quality of the coal.

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(8) Przedsiebiorstwo Energetyki Cieplnej Spolka z o.o. Based in Torun, this is a district heating company that employed 267 persons in 1996. Its predecessor is the electrical supply unit founded in 1946. In 1976, as an effect of the administrative reform that split 17 voivods into 49, the voivod electrical supply authority was divided into two, one of which was made local for the Torun district. Like the Krakow project, the environmental aim was to reduce air emissions from local fireplaces and burners in the historical centre of the old town. In contrast to Krakow, however, Torun decided on pre-insulated pipes (46 per cent sponsored through Swedish aid) for hot water central heating. The technology used before the project was ‘canal’ technology, i.e. the pipe insulation was made during installation, directly in the ground, and prepared with special concrete canal leg constructions, then filled with mineral wool and plastic or mineral foam concrete, the whole construction of which required ground and surface water investigation. The preinsulated pipes can be installed without prior ground and surface water investigations, concrete constructions or insulation work under any weather conditions. Specified environmental goals were to reduce SO2 emission by 126.7 tonnes/ year, dust by 165.9 tonnes/year, CO by 329.6 tonnes/year, NOX by 9.2 tonnes/year, benzpyrene by 36.7 tonnes/year and ashes by 433.9 tonnes/year. The actual reduction from 53 burners in 1993 (a total of 200 in 1996) reduced emissions of SO2 by 98 tonnes, CO by 287 tonnes and dust by 155 tonnes in that year. First Batch in terms of ‘origin’ Initial search How were projects chosen or accepted for entry? Poland reacted to the foreign interest in financing environmental protection in a centralised way, at least initially. In 1989, POLMEP, in co-operation with the Ministry of Industry, prepared a list of preferential projects for environmental protection that they considered could be supported by foreign and international agencies and implemented by foreign firms. The list was explicitly linked with Polish priorities for environmental protection (institutional changes) as that list had been developed in the Solidaritygovernment ‘round-table’ discussions before the first post-Communist regime was in office after the August 1992 elections. This was also before the official environmental protection policy was accepted by the Sejm in 1991, and the Agenda 21 principles on environmentally sound technology, technology transfer and assistance were set up in 1992. The greatest interest of the Polish industry was evoked by co-operation in the area of production and application of fluidised boilers. One example is

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the 1988 agreement between the Machinery and Energy Equipment Producers’ Association MEG AT and Swedish ABB-Stal on the joint production of fluidised boilers.3 The Lignite and Energy Association made efforts to co-operate with ABB for the production of circulation bed boilers. Other Polish companies showed similar interests. Numerous other enterprises, including the second largest steel mill, Lenin (now the Sedzimir Works in Krakow) and the copper mill in Glogow, intended to buy Swedish technology for reducing dust and gaseous emissions. The recycling of industrial waste, sewage treatment and the desalination of mining water were other areas in which Swedish technology was considered. Foreign environmental assistance to post-Communist Poland started in 1990. Approximately 233 mUSD were granted by 13 international organisations and nations for the implementation of 198 projects. Donors included the European Union, the World Bank, the USA, Japan and nine European countries. The range of projects and acceptance procedure were ‘prepared under the supervision’ of POLMEP. (Figures of donor distributions are given in Table 5.3.) This aid was granted through intergovernmental contracts as well as on the legal basis of protocols with authorised Polish agencies and countries financially supporting the implementation of environmental protection projects. The Polish government concluded contracts with the European Bank for Reconstruction and Development (EBRD) as well as trustees of the World Bank and the governments of Belgium, Switzerland and Sweden. The Polish government also concluded financial agreements with the European Commission and with the government of Finland on ‘ecoconversion’ (which later proved effective in rapidly concluding a number of Finnish aid contracts). The Danish government granted subsidies according to an act from 1990 on support to activities in the field of environmental protection in Eastern Europe. Protocols and agreements, as well as common statements in co-operation programmes, have been signed by POLMEP and the adequate agencies and organisations in the Netherlands, Germany, Norway and the USA. Remaining bilateral aid was being implemented in accordance with individual decisions of interested governments, such as Japan and Great Britain. Official selection routines All the aid programmes mentioned above were ‘committed’ by donor country agencies, not ‘implemented’ through contracts signed between supplier, aid agency and end-user. In the case of aid granted by the European Commission and the World Bank, Poland thus ‘disposes’ of an assigned (‘committed’) amount of foreign currency which is made available according to an agreement with the aid agencies which also select suppliers on the basis of the tender rules (POLMEP 1993). 85

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Rules of tender were also used with regard to projects implemented with aid from such countries as the USA, Sweden, Switzerland, the Netherlands, Japan and FRG (the former East Germany). With the exception of Sweden and the FRG, these countries organised tender rules for the promotion of their own country’s firms to implement such projects. With regard to the other countries (Norway, Belgium, Denmark and Finland), committed amounts are finally granted for payment by decisions taken in ‘competent working groups’ or through ‘special contacts’ (POLMEP 1993). Aid source and supplier are thus strongly correlated as the outcome of a choice process in the sense that aid is given on the condition of an agreement with a specific supplier. In reality this also means that the type of technology selected is, to a large extent, conditioned by the supplier and aid source combinations (POLMEP 1993). Optimisation of EST innovation is thus made abroad offer by offer. The type and exact characteristics of a project (among competing sets of technologies, supplier and aid sources) to implement is then decided in a regulation of the selection process by the Polish side (POLMEP 1993). The choice among optimised solutions—aid projects—is made at home. We can note how institutions matter—institutionalised routines were as follows for aid projects to Poland. The suppliers’ project proposals were to be tested from the point of view of ‘consistency with the Polish government’s ecological policies and with consideration of the transfer of the newest know-how of environmental protection technology’. In the next step, project proposals were presented to relevant departments of ministries and the State Environment Inspectorate with the aim of determining their ‘technical attractiveness and usefulness towards improvement of environmental protection management or education values’. Parallel coordination with local authorities (state and municipal) was made with the purpose of determining whether the project is ‘in the region’s group of priority ventures’. Detailed attention is then devoted to the determination of the recipient’s degree of interest and preparedness for the project. On receipt of a positive opinion, the project is put forward for acceptance from POLMEP and put on the list of intensively promoted projects. This list then guides the aid agencies in question in granting aid. An informed EST choice? The informed choice of technology is emphasised in Agenda 21 as a means for enhancing the capacity of indigenous technological:

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34.8. The primary goal of improved access to technology information is to enable informed choices, leading to access to and transfer of such technologies and the strengthening of countries’ own technological capabilities. (Agenda 21) Aid offers by the competitors, rather than ‘informed choice’, is thus the essence of aid in the cases I have studied. Selection outcomes are also fundamentally interrelated, which is obvious from EST aid experience in Poland. A particular end-user’s choice of a specific supplier’s technology normally leads to immediate consideration of only one aid option, as well as certain forms of transfer. In the case of the first Polish recipients of EST aid, for example, the existence of an ‘eco-conversion’ agreement with Finland played the major role in reducing the costs for Finnish EST options. In a certain sense, therefore, aid works as an export subsidy or ‘discount offer’ for one particular combination of technology, supplier and aid package, thereby distorting the market for ‘rational’ or ‘informed choice’, as defined in Agenda 21 (34.8) quoted above. Without the technological capabilities necessary to solve the problem oneself, and suffering from limited investment capabilities, the organisation’s choice is generally between the immediate acceptance of a subsidised offer, or an indefinite period of waiting for a better offer. (This also depends, of course, on the extent to which taxes and fees on emissions put limits on the time an organisation can wait for new opportunities for technological change at acceptable costs levels. Time pressure of this kind was particularly heavy on air pollutants in the Katowice voivodship after 1989.) Interview evidence The picture from the interviews with Polish aid recipients is that technicians, generally organised into a project team within the firm or organisation, make some kind of assessment of technology alternatives, which also includes a ranking of suppliers. The chairman of the team of technicians may or may not be the managing director, but in any event, he—in all cases he!—is the one to whom the project team reports. The final choice is then made by the firm’s top leadership. It is therefore not only technical and cost considerations that are involved. In many cases, ‘promotions’ of different kinds were seemingly important. Several aid recipients openly admit that promotion, such as trips to the donor country before and/or after signing the contract, was the determining factor for their choice, as long as technical standards of the equipment were acceptable and the the price was competitive.

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Types of technologies adopted The technology adopted, except for the EST equipment itself, in most cases included seminars and courses, written materials, start-up assistance, service, maintenance and/or spare parts, and other forms of technology (installation supervision, instruction videos, brochures, a computer, etc.) Most project cases relied on on-the-job training after installation, while several also included supervision and control. Decentralised choice, international and domestic institutions One important example of how international accords affect the choice of EST was the case in which the Helsinki Convention of 1974, ratified by Poland in 1983, obliged the country to maintain oil-combating service using appropriate EST, in this case oil-skimming equipment. This is the most obvious example of the first eight Polish recipients of EST aid on how international regimes—institutions—directly influenced project adoption. Though very few respondents could actually mention any examples of how the domestic transformation process had influence in receiving aid, The National Fund for Environmental Protection and Water Management is obviously another example of the national transformation of institutions, by changing incentive structures and ‘institutional learning’, since it improves the Polish financial ability to implement the EST regulations (by providing donations or credits for environmental investments at low interest rates). Two companies were under direct pressure from the local voivod (province) authorities to reduce the emissions of dust and NO X respectively in accordance with POLMEP regulations and a Parliament decision in 1989. The decision of how these regulations should be implemented, however, was left to the companies themselves. The concept of authorising companies to make their own investment decisions, along with the availability of hard-currency accounts, is one of the major new features of the post-Communist reality that totally departs from Soviet-type assimilation patterns. Whereas, previously, the end-user of a technology transfer was chosen by Soviet-type ministries, the potential enduser now makes its own decisions, relying on its own currency rather than state funding. In the new market-oriented situation, company decision-making is thus influenced by both international conditions (in this case international regimes, aid support, foreign company promotion, etc.) and national conditions (such as institutional changes, company policies, pollution taxes and fees).

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‘Environmentally sound’ aid? There is a strong correlation between profitability for the recipient of EST and the granting of EST aid to Polish recipients. All aid projects had commercial significance for the recipient. For instance, one company looked for ways of utilising hazardous residuals. The aid subsidy to the investment in filters made it possible to manufacture a marketable secondary product by applying a process that simultaneously reduced the problems of hazardous waste. This is fully in line with Agenda 21, 34.1, that ESTs should ‘recycle more of their wastes’. It was obvious, however, that without the commercial expectations from this secondary product, the investment would never have been made. For instance, there were no plans to reduce the amount of chloride emissions into the Vistula (300,000 tonnes/year), though these emissions cost 5 mUSD per year in fees. The same was true for a second filter installation project; the residual had some kind of marketable value, which was decisive for the investment in the first place. Decentralised decision making in EST investments has thus had a very selective ecological effect; without revenues from the investments, they will not be made. This fact supports my view that EST investments must somehow be nationally regulated and co-ordinated, such as by the Ecofund, innovating ecologically as well as economically, in order to stop the emission of hazardous wastes that cannot be dealt with in a profitable way. In two other cases, the ‘environmental aid’ consisted of energy transmission systems for district heating; in one case by the use of electric cables, in another by the use of pre-insulated pipes for hot water. The argument was that by using electric or central heating systems the dust and gas emissions from direct coal-based heating in apartment fireplaces would decrease. On the other hand, there was no calculation of the overall effect, such as the increase in central power plant emissions, nor was any consideration given to alternative energy sources or technologies. In these cases the closest one comes to the Agenda 21 definition of environmentally sound technology is that they ‘are less polluting’, ‘use all resources in a more sustainable manner’ and ‘generate low or no waste’ (34.1 and 34.2). But, if so, there should be some estimate of how much less the acquired technology is polluting the environment. In the case of sewage pumps to a local system near the Baltic Sea, one can note that the pump itself helps to implement the installation of a sewage system that did not exist before. The overall effect may be positive or negative, depending on how the sewage was and is treated at the old Soviettype sewage treatment plant. The project may be argued to ‘recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes’ (34.1). But again, the investment was made without investigating alternative technologies or defining the term ‘acceptable’.

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Age and maturity of chosen EST aid The hypothesis of ‘mature’ EST being transferred with the help of aid is not entirely borne out by the first Polish recipients, as at least two aid recipients have installed newly developed products that are still under improvement by the manufacturer and supplier (the Finnish oil-skimming equipment installed on Polish vessels and the Finnish filters for soda manufacture residuals). However, evidence suggests that most technology choices are, in fact, of a ‘mature’ type, though adapted to new local, recipient conditions. The risks, but also the learning benefits for end-users are thereby very limited. The technology will most likely work as intended, but unfortunately—according to studies on the first recipients—will not improve the technological capabilities of the end-user or, in the long run, the national system. Proposal work and negotiation lead-times Proposal work and negotiation lead-times are characteristics rather than outcomes of this choice-decision process, but the two sets of variables involved are interrelated, of course, since lead-times depend on the technologies need to be developed and/or adapted, their form and how they are transferred, and by whom and with what intended end-user(s). Data from Soviet-type assimilation (see Chapter 2) showed the significance of supplier experience in producing Soviet-tailored proposals for the reduction of proposal work lead-times. This is an indication of the crucial importance of the supplier’s acquaintance with the old system. In the Soviet system, long-term customer relations based on a presence in the recipient market was also extremely important in reducing the negotiation lead-times. There is an interactive user-producer relationship: suppliers learn from recipients of aid. This was particularly the case in the Polish Salvage Co. in Gdynia, where continued co-operation with Larsen Marine (Finland) enabled them to improve the next generation of oilskimming equipment for installations subsidised with future aid assistance from Phare. The Polish recipients had, for instance, suggested how the oilskimming brushes should be installed in a way that made vertical flexibility and adjustment possible, something which was judged important for maintaining efficiency under all types of sea weather and wave conditions. The same ‘interactive learning’ between producer and user might also have been the case when Larox filters (Finnish aid) were installed in the Inowroclaw Soda Plant, probably the first Larox installation of that type of filter world wide. In this case, experiments were made with another type of filter, not the more expensive Larox filter, but one of domestic origin. This is

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the only example, incidentally, of user-producer relation-ship and interactive learning related to environmentally sound process technology that could be detected among the first eight recipients of environmental aid. Given the ‘mature’ type of technologies otherwise purchased, proposal work and negotiation lead-times were minimal. Some were close to instant shopping, like the equipment to Gdynia. No development work by the suppliers delayed proposal lead-times, and negotiations were limited because the essential decision normally was ‘yes’ or ‘no’ to an inexpensive, aid-subsidised offer. Generally, with this type of equipment transfer, recipients can catch up rapidly with the technology, but it will have little or no effect on learning beyond ‘learning by choosing’, i.e. it will not enhance the recipient’s chances of making an ‘informed choice’ in the spirit of Agenda 21 (34.9). The lead-times given in Figure 4.1 show that post-Communist aid proposal work and negotiation lead-times are considerably shorter than that experienced by Swedish and UK companies when dealing previously with Soviet recipients. Lead-times range from Gdynia’s shopping-type lead-times (0 months), to Laziska’s 3 years. The normal (mean) lead-time in the Polish post-Communist case is 12 months, compared with the 18 and 27 month lead-times, respectively, in the UK and Swedish transfers to the USSR. Comments The Polish experience is thus mixed. Some recipients obviously simply accepted the entry of dispersed aid, given these subsidies and additional promotions, while at least a couple of the first eight aid recipients made very thorough and impressive efforts to compare technological options for upgrading before the type of EST was allowed entry. Both international regimes and domestic institutions and policies obviously did affect Polish aid adoption, though some of the projects seemed harder to accept fully as ‘environmental’. Most cases were of the ‘mature’ type—i.e. ‘incremental’ rather than ‘radical’—and were basically equipment purchases, though, as in the Laziska case, some projects took a considerable time to adapt and negotiate. The general tendency towards decentralised decisions explains why proposal work and negotiation lead-times were shorter compared to centralised Soviet-type acquisitions. Learning therefore is limited, since the increasingly common shopping-type purchases require only user-oriented, rather than producer-oriented, technical knowledge. A unique case of interactive learning was discovered in which the foreign supplier learned from the experience of the Polish end-user. The general conclusion from the ‘origin’ phase of post-Communist environmental aid adoption, therefore, is that imitation is now decided more 91

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quickly than before. The ‘environmentally sound’ character of several environmental aid projects can be questioned, however. First Batch ‘persistence’ Installation of imitation lead-times In the present cases of EST aid transfers to Poland, lead-times from contract to start-up ranged from two months (the Krynica Morska sewage pumps installation) to 27 months (the Krakow cable installation). The two median cases (Gdynia and Trzebinia) took 6.5 months on average to start-up from the date of signing the contract. This median value is 10 and 17 per cent of the mean contract to start-up lead-times reported in the two studies of Soviet assimilation of UK chemical plant technology by Hanson and Hill (1979) and of Swedish plant transfers by Sandberg (1989) (see Figure 4.1). The average contract to delivery time was 5 months, i.e. 17 and 22 per cent of the UK and Swedish cases. In that respect, Poland, judged from the first eight lessons of environmental aid assimilation, seems to have overcome one fundamental characteristic of the Soviet-type system of innovation—the slow imitation of foreign technologies. This observation is further supported by the fact that proposal and negotiation lead-times have decreased, as noted above. The differences in mean times of contract to delivery and contract to start-up are perhaps even more significant, since that figure tells the time that was required for the installation, which to a larger extent can be argued to depend on the recipient’s learning how to use the acquired equipment. A typical observation from Soviet-type projects was the slow installation and the mass of un-installed machinery at construction sites. However, in the case of Polish aid installation, the figure is again significantly less, only 1.5 months (i.e. if installation is simplified to arithmetic means for start-up minus delivery time, 6.5 minus 5 months), while the corresponding figures for the Soviet deals in the UK and Swedish cases were 32 and 15 months respectively. It can, of course, be argued that, say, the introduction of one or two sewage purnps in Krynica Morska in 1990–91 cannot be compared with several UK chemical plant installations in the USSR in the 1950s. Can a few present-day Polish cases of technology assimilation be compared with a small number of Soviet cases? To the degree that the whole exercise of comparison is done with the purpose of providing support for why project characteristics give different assimilation outcomes this comparison can be justified. First of all, in relation to project size, the argument that the plant transfers studied by Hanson and Hill (1979) and Sandberg (1989) were larger, seems to be of very limited validity. The size of contract was of very

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Figure 4.1 First eight Polish recipients of environmental equipment aid: proposal work and negotiation lead-times (months), arithmetic means and comparisons with Soviet-type median values from UK and Swedish experience Source: Personal interviews conducted in Poland, July 1996; Sandberg (1989) and Hanson and Hill (1979).

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limited consequence when tested in regression analyses in these earlier studies. There is a factor of transfer complexity that has to be taken into account, however. It is much more complicated to prepare the transfer of a whole new system, adapt it for the recipient, and install it as a unique unit (as in the case of many UK chemical plants in the 1950s and 1960s), than just to provide a standard item for installation into an already existing system, like some, but not all, aid projects to Poland. This is also why the filter project in Inowroclaw took some time to adapt to specific local conditions (the special slurry content there), and also why the installation took some time in Bedzin; the Dutch burner had to be adapted to the Zamech boiler. In general, I would argue, the main difference making lead-times shorter in Poland today, except for the limited complexity of the transferred equipment, is the level and the way in which investment decisions are made. Company-level decisions decrease introduction lead-times in comparison with authority-made investment decisions. Particularly, it makes a difference for installation times. To that extent, Polish environmental aid incorporation has overcome Soviet-type, ministry-driven innovation behaviour. Figure 4.2 is powerful in visualising the reduction in installation times in post-Communist Poland as compared with Swedish and UK installations in the USSR. Contract to start-up lead-times have been reduced to almost a tenth: half a year rather than five years. The difference between delivery and start-up has been reduced even more: to a mean value of 1.5 months in Poland, compared with the horrifying 32 and 15 month differences in the Soviet studies. (Satiric drawings in the Soviet magazine Krokodil of rusting uninstalled foreign equipment comes to mind.) Capacity achievement Seven of the first eight Polish recipients of environmental aid reported full capacity achievement. The eighth recipient had problems in reaching full reduction of emissions due to quality problems of material inputs into the process. Yet another three could not report that the installed equipment fulfilled the environmental aims of the project. Why? The reasons given in the interviews indicate a discrepancy between technical and social implementation of the technology, or, to formulate it differently, the difference between recipient and end-user implementation. In three cases—namely, those in which the aid recipients control the local (monopoly) services for district heating or sewage treatment—the equipment was fully implemented, but many end-users, and many households, probably for economic reasons, have not been connected to the perfectly functioning, aid-sponsored heating and sewage systems. It is 94

Figure 4.2 First eight Polish recipients of environmental equipment aid: ‘incorporation’ lead-times (months), arithmetic means and comparisons with Soviet-type median values from UK and Swedish experience Source: Personal interviews conducted in Poland, July 1996; Sandberg (1989); and Hanson and Hill (1979).

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rumoured that clients need to pay extra, bribes or ‘black money’, directly to these monopolists before they can actually get connected to these services. Whatever the true reasons, capacity achievement does not, in fact, mean utility achievement. In Krakow, for example, only 38 per cent of the total connections planned had actually been made in July 1996. In Krynica Morska, the corresponding figure was 95 per cent for the sewage system, but in Torun only 45 per cent of potential customers were connected. Factors that need to be considered in project designs are thus whether local public service monopolies are recipients. If so, the question of corruption and social implementation is particularly important for reaching environmental as well as other goals, and ought to be subject to particular control. Economic rationality has to be based on legal economic behaviour. First Batch ‘spread’ Polish EST aid experiences Modernisation, such as the case of the Polish Salvage Co. relying on Finnish technology, is therefore as close as we can get to interactive learning, which, as is obvious from Soviet and Polish experience, is one of the great weaknesses of the Soviet-type innovation system in the sense that supplierend-user interaction is crucial for learning. The most important observation from the sample is therefore not that diffusion or modernisation is rare, but that the Soviet-type absence of inhouse research and development is still prevalent. In combination with the predominantly ‘mature’ type of technologies provided through aid, this gives a clear indication of the most fundamental barrier to creative innovation from environmental aid and learning about EST; the acquired technology does not relate to any in-house research and development efforts, whether environmentally sound or not. ‘User-producer’ relationships (Lundvall 1992), therefore, cannot give learning outcomes on a company level. In that sense, Poland still seems unable to overcome the Soviet-type barriers to evolutionary modernisation and diffusion through creative and greener innovation. One single project led to the type of diffusion that was prevalent in Soviet-type assimilation, i.e. reverse engineering, adaptation and replication. In the case of the burner technology provided to the Bedzin power plant (Lagisza) with the support of Dutch aid, a newly installed block of the plant was constructed by Rafako (Raciborz Fabrika Kotlow) on the basis of experience with the original, aid-financed, Dutch Stork burner. The diffusion lead-time, from installation of the Stork equipment to the erection of the new block, was four years. Rafako is the major R&D partner of the 96

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Lagisza power plant, and in this case Lagisza seems to have worked as a de facto test laboratory for Rafako for the re-engineering of the new bloc. In fact, Rafako was already involved in Lagisza’s choice of supplier (note above the reference to direct authority influence on choice), and had arranged for Dutch aid before Lagisza was advised to contact Stork. Rafako thus worked in a manner that is typical of Soviet-type diffusion. Comments This Soviet-type diffusion pattern is not very likely to continue under postCommunist conditions, given international patents and intellectual property rights. It is also not very conducive to modernisation; the replication, already mature at the time of signing the contract, takes time to install and an additional four years of reverse engineering. It is like inventing the bicycle anew. This way of indigenously modernising foreign technology will not produce a market leader; it will only produce ‘second-hand’ life cycles of the original technology.4 Market-type diffusion, driven by demand rather than decree, will have to be promoted. Second Batch data Introduction Since the July 1996 interviews of the first eight Polish recipients of EST aid (as reported above), some other data on environmental aid projects has been released. The list on environmental aid reported in 1994 (POLMEP 1995) gives names of projects, recipients, suppliers and amounts. In the statistical yearbook on environmental protection, the Central Statistical Office has released only the aggregate figures of projects undertaken up to 1994 (Poland 1995). This new information will be described as it focuses on the environmental aid projects that have been adopted in the 1991–94 period. New project adoptions The total number of projects in 1991–94 (i.e. both implemented and under preparation) had increased from 198 to 274, and from 233 to 279 mUSD according to the new data. The monitoring of the projects also had been transferred from POLMEP to the National Fund for Environmental Protection and Water Management from the fourth quarter of 1994 and its Group for International Co-operation. Table 4.4 indicates that, in 1994, 43 new projects of all types—13 Danish, 11 Phare 1, 6 Dutch, 5 Swedish, 4 Finnish ‘eco-conversion’, 2 Norwegian, 1 Belgian and 1 US—had been implemented. This is a 97

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Table 4.4 Implemented Polish environmental aid projects (all types) 1991–94

Source: POLMEP (1995).

Table 4.5 Implemented projects by type of environmental protection, 1991–94

Source: POLMEP (1995).

considerable increase and a break in the trend, since 1993 had shown very little increase on the 1992 level. Also, the average value of projects increased more than two-fold in comparison with 1992 and 1993. Obviously, some larger projects had been waiting in the pipe-line, due to prolonged proposal work and negotiation lead-times. By the end of 1994, a total of 113 projects had been implemented since 1991, while others were in different stages of preparation. New figures from POLMEP also show that, generally, a larger amount is spent on air and water protection: 57 per cent of the value of all 1991–94 projects was designated for these two environmental protection areas (Table 4.5). The most costly projects, however, were those acquired for purposes of monitoring (1.275 mUSD on average). Average projects costs in total was 0.528 mUSD. The new POLMEP report (see Table 4.6) also gives an indication that, so far, the EU dominates the financing of implemented environmental aid (36.3 per cent), though Denmark (21.9 per cent) still is the outstanding bilateral donor. Denmark generally spend aid on smaller projects (0.272 mUSD on average), while larger projects are preferred by the EU (1.206 mUSD on average) and especially Japan (1.947 mUSD on average). 98

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Table 4.6 Donor country distribution, 1991–94

Source: POLMEP (1995).

The most expensive projects are in monitoring and measuring equipment: 1.630 mUSD on average. Since these projects are listed under the heading ‘investments’, this category includes the most costly environmental aid cases. Investments also amount to more than a third of the total number of implemented projects, and it is therefore also logical that more than half of the total amount of implemented aid in USD terms refer to what Polish POLMEP statisticians call ‘investments’ (Table 4.7). New ‘hard’ EST adoptions It is among the ‘investment’ category that we find aid transfers of ‘hard’ EST which, in POLMEP (1995), is divided into two subheadings: ‘construction of installations and equipment’ and ‘technical equipment deliveries’. The first eight EST aid recipients presented from the POLMEP 1994 lists are included in these two categories. There are 3 projects of ‘construction of installations and equipment’ and 20 projects of ‘technical equipment deliveries’, making a total of 23 projects in 1994. Therefore, as our data related to only 8 out of a total of 23, there were another 15 EST aid projects in 1994. Data on these fifteen cases of EST aid is presented in Table 4.8. This table indicates in some detail the content of each project and its environmental aim. In that sense it is already an improvement on POLMEP’s earlier report. The new list also provides evidence of a real break in trend with regard to both numbers and values of environmental protection from aid. There are two priorities that are obvious from the new list of EST aid: new combustion technologies and sewage systems for water protection. The four sewage system projects in Warsaw, Oswiecim (better known by its 99

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Table 4.7 Forms of environmental aid in 1994 (implemented)

Source: POLMEP (1995).

German name Auschwitz), Somonino and Rewal are not only for treating and transporting sewage, but also for protecting vital water resources—the river Vistula from Warsaw sewage, the rivers Sola and Vistula from Oswiecim sewage, the river Raduna (drinking water intake for Gdansk) from Somonino sewage and, lastly, the Baltic Sea coastal waters outside Rewal. The major share of the projects, however, are directed towards environmentally oriented and energy-saving renewal and increased efficiency of combustion technologies and energy consumption. Dust filters, electrostatic filters, fluidised boilers and hearths, combustion optimisation instruments, and pre-insulated pipes are all examples of equipment that contribute to an environmentally sound application of the traditional, coalbased energy system. Two Danish projects, also related to combustion and energy, break a new path for Poland: the pilot project for the combustion of wood and forestry residue and the transfer of straw and wood chip. In the first case, 100

Table 4.8

The 15 additional environmental aid technical equipment transfers reported implemented as of 1994 (compare with Table 4.3, showing the first 8 EST aid recipients)

Table 4.8 cont.

Table 4.8 cont.

Source: POLMEP (1995).

Table 4.8 cont.

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the aid project involved traditional equipment transfers, while, in the second, the production technology and knowledge are also transferred for further application by two Polish boiler producers. (Apart from these two major priorities, two Larox dewaterisation filter projects were also implemented.) The label ‘environmental protection’ on the 15 projects listed in Table 4.8 is not always self-evident or may be partly contradictory to project descriptions. For instance, the Danish project to deliver technology for the combustion of wood chip, while undoubtedly interesting from an environmental strategy point of view, also included the delivery of forestry machinery which, to an extent—depending on use, of course—may produce environmental side-effects and threats to a diversity of species in the forests. The new sewage network to treatment plants may also have other environmental consequences for the water, but these effects of modernisation are seldom discussed. Deeper consideration of the environmental consequences of EST aid assimilation does not yet seem to characterise Polish reports on environmental aid projects. The ‘lag’—learning to process aid Learning, as has been repeatedly stated in this book, relates to the interaction between technologies and institutions. Comparing the speed in implementing projects from ‘first’ to ‘second’ lessons, we can notice a considerable improvement. The percentage of implemented projects in relation to committed aid has increased from 5.8 to 21.4 per cent (Table 4.9). This is an improvement of almost 370 per cent, indicating that the time required for implementing committed projects, what Deutsch would call the ‘lag’, has been radically reduced. This may be less significant than the change in percentage suggests, however, since commitment figures may, for instance, momentarily rise just before the calculation for projects implemented, thereby creating unfavourable ‘learning’ figures. Yet, it is fair to say that the ‘lag’ has been reduced significantly in implementing environmental aid in Poland. Recent statistics (Poland 1997) indicate that 57 per cent of all committed environmental aid from 1991 to 1996 (US$380.3 million) is now implemented. From a mail survey to all the 15 Second Batch recipients, using the same questionnaire as for the personal interviews of the First Batch, 9 responses were obtained.5 These responses indicated a further slight reduction in leadtimes, in particular in negotiations (see Figure 4.3). The graph depicts the increasing ability of Polish recipients to imitate more rapidly from environmental equipment aid. Compared to the Soviettype centralised assimilation pattern, this is approximately one-third or onequarter of the lead-times required in the USSR some decades ago in commercial plant transfers. 105

Source: POLMEP (1993. 1995).

Table 4.9 ‘Lag’ from committed to implemented environmental aid: Poland in 1993 and 1994 (mUSD)

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Figure 4.3 First and Second Batch Polish recipients of environmental equipment aid: lead-times (months, arithmetic means), and comparisons with values from UK and Swedish commercial technology transfer to the USSR Source: Mail questionnaire responses from 9 of the 15 Second Batch environmental aid recipients in Poland, personal interviews of all first batch recipients in Poland, July 1996; Sandberg (1989); Hanson and Hill (1979)

Summary and conclusions Previous research on technology transfers to post-Communist Poland and the former Eastern bloc, including Russia (see Chapter 2), suggested that environmental factors, including institutions, raised barriers to adaptive learning and technology assimilation in East European economies. Adoptions—to use the biological analogy—never fully thrived (at least were less adapted to the recipient’s environment), persisted, but seldom spread under Soviet-type conditions. In this chapter we looked closer into the project adoption and microimplementation of the environmentally sound technology (EST) aid projects reported in 1993, in particular lessons from the first eight projects, which involved the transfer of both ‘soft’ and ‘hard’ technology. Polish imitation or assimilation through EST aid was studied to explore not only the extent to which Soviet-type environmental barriers to imitation are being overcome, but also the new factors that may hinder the post-Communist learning of Western technology, in particular EST. In choosing EST aid projects Polish recipients were faced with donor commitments that were often tied to supplier-technology combinations that could not be altered by the prospective adopter. In that sense, aid agencies, in co-operation with Polish authorities, made centralised decisions—though 107

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in conformity with Polish environmental policies and programme administration (‘institutions’). Most of the projects adopted up to 1993 were financed by the EU (Phare), and most of these projects focused on air and water protection, as well as institutional support (Polish ‘institutional learning’). Projects did not always involve the transfer of ‘hard’ equipment, but to a large extent related to ‘soft’, invisible, technology transfers. Implemented projects at that time, however, amounted to only 7 per cent of commitments, which meant an initial severe lag between financing and project development. The first eight EST equipment aid projects—all EST hardware transfers in the first list issued by the Polish authorities and investigated in some detail here—amounted to less than 2 per cent of all committed environmental aid at that time! The severe lags in implementation in 1993 were thus combined with a very small ratio between hard and soft transfers. This is why aid had an extremely limited environmental effect in the short run and also why all hard aid transfers could be subject to personal interviews. The eight recipients interviewed were located in northern parts of Poland or in Upper Silesia, and interviews were made in July 1996. Primarily based on these interviews with the first eight Polish EST aid recipients, this chapter reports, as a general conclusion, that profitable EST aid projects were actually implemented, i.e. the installed equipment helped the recipient companies to produce secondary products from residuals, to provide oil-combating services, to sell more electric or hot water energy to local consumers, to save energy or to provide sewage treatment for certain charges. In that sense, Poland learned to overcome the Soviet-type lethargy in technological imitation and has indeed achieved rapid (see Figure 4.3), capacity-reaching and locally adapted EST innovation through a decentralised system of commercial choice and incorporation. One could also say that adopted innovations progress or mature much more quickly now under post-Communist than under Soviet-type conditions. The Polish ability to turn Soviet-type imitative adoption into creative innovation is less promising, however, and three factors are especially worth repeating in this respect. First, most EST aid projects were of a ‘mature’ type, they were ‘incremental’ rather than ‘radical’ and the equipment purchases made by companies were no longer centralised, but were based on aid and equipment offers. This decentralisation explains why proposal work and negotiation lead-times were shorter compared to centralised Soviet-type plant acquisitions. There were exceptions, such as the filter installation prepared for Laziska, where it took three years to sign the contract. Laziska was one of two cases in which the adoption decision was said to have been made under the direct influence of authorities. Second, in the equation for those aid recipients that provide local (monopoly) services for district heating and sewage treatment, full recipient 108

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and technical implementation did not equal total end-user connection to the installed systems. Technical and social implementations of the technology did not coincide and, for reasons of their private economy, many potential end-users were not connected to the system. This is obviously a problem of programme administration and project adoption. Such implementation should also consider the resources of recipients when determining the prices of services given through the aid system. Corruption among aid recipients must be controlled. Third, one single project led to observed diffusion, i.e. reverse engineering, adaptation and replication: the case of the burner technology provided to the Bedzin power plant (Lagisza) with support of Dutch aid. The newly installed block of the plant was constructed by Rafako (Raciborz Fabrika Kotlow) on the basis of experience with the original, aid-financed, Dutch Stork burner. This Soviet-type diffusion pattern is not very likely to be seen in future, given international patents and intellectual property rights, nor is it conducive to modernisation—the replica is never as good as the original. Obviously, judging from evidence presented in this chapter, the step-bystep withering away of the Soviet-type institutional—habitual and routine— barriers to both rapid imitation and generally creative innovation will certainly take some additional time. Though we have seen the first postCommunist lessons in assimilating Western technology in which Poland have succeeded in speeding up imitation, prevailing barriers include problems of creative innovation from aid. Several of the first respondents are already discussing, preparing or implementing new and improved EST aid acquisitions. The most troublesome fact is that there is a limited research and development resource base for generating new Polish EST on the basis of further aid. Aid, it was concluded from the first eight projects, may also subsidise export ventures in new and untested technologies, which was confirmed in the later list described in the Second Batch data, in which two Danish projects were providing technologies for wood chip combustion and manufacturing know-how. Such new paths would most probably not be tested were there no aid. The conclusion drawn from the list of the first eight Polish recipients— that aid transfers still had very little to do with indigenous EST development capabilities—may be increasingly less valid, depending on donor country policies in granting aid, Polish strategic interests reflected in policies towards aid, and Polish adaptation to international accords and accession to the EU. Catching up in indigenous EST capabilities is therefore made more possible the more aid is related to recipient in-house environmental R&D or new paths of EST introduction, such as new, or less traditional, energy systems. Instead of importing aged survivors from abroad, Poland would then produce innovations that were specific to post-Communist conditions.

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The origin of innovation Migration, Competition and Adoption In biological theory, when specialised individuals invade a habitat with no or less competition, they will initially become more generalist, i.e. widen their niches as they assimilate. For instance, one species of ground dove— Chalcophaps stephani—on New Guinea lived only in their niche of light forest, while another—Gallicollumba rufigula—dominated the inland rainforest. However, as the Chalcophaps stephani invaded the two islands Bagabag and Karkar, its niches widened, in the first island from the traditional light forest into the inland rainforest, and in the second also into the coastal scrub (Diamond 1975). Limited competition in the new habitat in a shorter perspective first leads to immediate generalisation—i.e. diffusion into other niches—but on an evolutionary time-scale it will rather lead to selection of individuals specifically fit for these new niches—thereby creating evolutionary bifurcations into new ecotypes, and eventually new species. This is exactly what Darwin found among islands in the Galapagos archipelago. However, ecotypes or new species of high local specialisation in islands without predators may be extremely sensitive for new invasions—like the extinct dodo, related to the pigeons, but flightless and clumsy, formerly inhabiting the islands of Mauritius and Réunion. Aid seen from a population perspective is a way to move species into habitats they would not have had the ability to reach themselves. But postCommunist technologies and monopoly industries are not always like dodos, even if they had few or no enemies. In fact some Polish industries have attracted Western corporations to form joint ventures. But traditionally they have survived because they were—and still often are—protected institutionally through governmental subsidies, monopolies, etc.

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Aid adoption and competition Where it is the case that intergenerational persistence and spread under the new conditions could be detected among the invading aid technologies in Poland, their future struggle for reproductive success in the new habitat would probably work according to the logic of biological interspecific competition; they would dominate, disappear, or co-exist as a consequence of factors like the ability to exploit scarce resources (‘carrying capacity’) and a degree of niche overlap under the sometimes rather harsh Polish institutional conditions. However, the obstacles to assimilation success seemed to be less located at population and competition level, judged from the results of the previous chapter, but rather in the life-histories of individual aid technologies. The aid technologies were too mature—say, less fertile or attractive—for reproductive success: they produced income rather than attracted venture dowries. The Polish post-Communist system opened its doors for invasion into technological niches—but also showed concern for the Polish environment. The invasion was not anarchic, but institutional, and guided politically as well as economically. International institutions or regimes In the absence of a ‘supra-national system’ of government and in contrast to an anarchy at international level, ‘international regimes’ work as ‘networks of rules, norms and procedures’, i.e. ‘sets of governing arrangements’ (Keohane and Nye 1977:19). International ‘institutions’, meaning ‘persistent and connected sets of rules and practices that prescribe behavioural roles, constrain activity, and shape expectations’ are created (Keohane et al. 1993). They may take the form of bureaucratic organisations, regimes (rule-structures that do not necessarily have organisations attached), or conventions (informal practices)’ (pp. 4–5).1 Many international institutions are in fact formal. A growing number of international regimes present constraints to technological choice on a national level. With the Brundtland Commission, its report Our Common Future (1987) and the Rio Conference 1992, guidelines had been set up for governments’ policies and legislation as well as bases for a new international regime, Agenda 21 and The Tokyo Declaration. Poland is part of the UNCED process and has committed to implementing the Rio Declaration on environment and development. It is also a member of the UN Commission on Sustainable Development and recently submitted a national report on implementation of Agenda 21. Poland has ratified the Montreal Protocol on Substances which Deplete the Ozone Layer and the Framework Convention on Climate Change. In the European context, the European Union is thus aiding Poland in

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national integration as an effect of the 1991 signing of a ‘European Agreement to Associate the European Communities and its Member States with Poland’. In the context of the Baltic Sea region, Poland has, since 1989, joined many bilateral and regional agreements to reduce air and water pollution. Agreements are now in effect with all neighbouring states. An International Commission for the Protection of the Oder River Against Pollution has been established, and the Baltic Sea Environmental Action Programme of 1992 has the purpose of restoring the Baltic through support to the development of legislation, economic initiatives and local financing. Together, these treaties, agreements, commissions and programmes provide a ‘network of rules, norms and procedures’ of an international regime, thereby setting ‘constraints to technological choice’. All in all, these international obligations will manipulate the national habitat’s parameters for competitive selection. Interdependence and asymmetry Aid agencies are governmental authorities, i.e. national, but acting internationally. Seen from that perspective, aid is of course a phenomenon at international level. Yet the projects are rather £raws-national, since technologies are (mostly) transferred from subnational level organisations, such as firms, to (mostly) subnational level end-users of that technology. Such international and transnational relationships taken together are often described in terms of what Keohane and Nye (1977) called ‘interdependence’: Interdependence in world politics refers to situations characterised by reciprocal effects among countries or among actors in different countries. These effects often result from international transactions—flows of money, goods, people, and messages across international boundaries. (…) We must also be careful not to define interdependence entirely in terms of situations of evenly balanced mutual dependence. It is asymmetries in dependence that are most likely to provide sources of influence for actors in their dealings with another. (…) When we say that asymmetric interdependence can be a source of power we are thinking of power as control over resources, or the potential to affect outcomes. (Keohane and Nye 1977:8–9, 11) Against the background of institutional and evolutionary theory, the concept of interdependence receives a richer potential: interdependence and asymmetry are characteristics of the evolution of national institutions and 112

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organisational routines to the increased knowledge and abilities of steering systems in a globalised context and technological evolution of transnational nature. The outcome of natural selection among institutions and routines across nations is not a rose garden. Not only do organisational carriers of technology-related routines struggle for their existence, but a struggle for survival of the fittest—or the most adaptable—goes on among rulers, the individual creators of institutions. The situation among national systems—unequally resourceful in terms of such knowledge, accumulated experience and institution-building powers— is one of asymmetry. It is truistic to say that the ‘power as control over resources’ in creativity terms in relation to EST is much greater in most traditional industrial Western countries than in, say, Poland. Aid and assistance is indeed the outcome of technological asymmetry among nations and their systems of innovations, a situation in which some systems have the technological resource power to confront others with the options of either imitation or stagnation—the asymmetric precondition for any type of diffusion. But once initial imitation is accepted, it can be exploited to achieve one’s own ends. Dispersal of innovations provide followers and laggards with the information needed to decide where to head, or which options are available. This is where the biological analogy can be combined with the learning systems analogy. Deutsch calls this data collection the ‘load’ of the learning system; what it senses, as opposed to what it later does, gains, and subsequently wants. And gaining is competitive among systems, thereby causing what Keohane and Nye called asymmetry. Asymmetry is the effect of capacities of national systems to gain—imitatively or creatively—from existing technologies. Asymmetry and the Polish technology transfer legacy The acceleration in Polish technology transfer at the beginning of the 1970s was part of the Gierek’s ‘new development strategy’ and its decline at the end of the decade was closely connected with the failure of that strategy. In Poland, as in other Eastern bloc countries at the time, the necessity for modernisation made regimes overestimate capacities to reform the industrial structure and increase R&D investment. The planners had hoped that Western imported technology would rapidly lead to the expansion in production of modern, efficiently produced commodities, utilising modern machines on the basis of Western licences or co-operation arrangements. The hope was also to increase exports in order to repay debts. Industrial co-operation links with Western enterprises had already been 113

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in existence from the mid-1960s, following Soviet examples in some types of production (notably chemicals under Khrushchev). In Poland, as much as 23 industrial co-operation projects involved production in accordance with specifications from Western firms. A few agreements established entire branches of industry (see Fallenbuchl 1983). The agreement between H.Cegielski in Poznan and Sulzer in Switzerland, for example, established the production of marine engines and was decisive for the expansion of shipbuilding efforts in Poland. An agreement with Fiat in Italy, signed in 1965 (concurrently with the Soviet-Fiat deal) involved the production of the Fiat 125p in Poland. This agreement had a fundamental importance for the modernisation and expansion of the Polish automobile industry. It also induced industrial cooperation with other Western firms, such as Bosch and Westinghouse for the production of various component parts, and created a basis for cooperation with the Soviet Union and Yugoslavia in the automotive industry. For the period 1969–76 approximately 200 agreements were signed with Western firms, mostly West German. A majority involved simple cooperation, but a limited number had significant importance for Polish industry. Co-operation in the production of concrete pumps and mixers with Stetter (Germany), cranes with Jones (UK), and various types of metalworking machines with Waldrich and Weway (Germany) involved important transfers. A governmental decree in 1971 provided incentives for further transfers of a similar type. In the 1970s, the most important co-operation agreements with West European firms were the agreements with Fiat in Italy (the new Fiat 126p car), Berliet in France (buses), Steyer-Daimler-Puch in Austria (trucks), Massey-Ferguson-Parkins in the UK (agricultural tractors), Voest Alpine in Switzerland (heavy industry), Menck in Germany (hydraulic excavators), Kockums in Sweden (dumpers), Siemens in Germany (presses), AEG Telefunken in Germany (electronics), Creusot in France (metallurgy), Sulzer in Switzerland (marine engines) and Stetter in Germany (concrete technology). Large US corporations also entered with Polish contracts, including Clark Equipment (heavy duty drive axles for wheeled construction machines and mobile cranes, 1972), International Harvester (crawler tractors 1972), Singer (sewing machines, 1973), Honeywell (production of industrial process control system, 1973, and electronic transmitters, 1974), and Corning Glass and RCA (component parts for colour television tubes, 1976). Serious problems appeared in the Polish economy as early as 1974, however, as the new development strategy did not bring the expected results. Imported capital goods could not be absorbed, and machines were left uninstalled. Investment, imported machines and licences to priority sectors never created profitable exporters, but, on the contrary, led to an additional dependency on fuels, material and parts, thereby creating balance-of114

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payment deficits. Fallenbuchl concludes that the main reason for the collapse of the ‘new development strategy’ was that it was simply too difficult to effect with a basically unchanged economic system. It was because of the existence of systemic obstacles that the transfer of technology was unable to bring about the expected results. Exports to the West, therefore, never grew as anticipated. Balance-ofpayment difficulties forced the planners to cut the investment programme. Forty-nine major projects were stopped and un-installed plant increased. The rate of the national income further declined and became negative for the first time in 1979. Facing foreign debt, planners introduced drastic reductions in imports, especially from the West. Difficulties in foreign trade and related shortages aggravated the crisis in 1980. The wave of strikes in August and September forced further changes in the party and government leadership. The independent labour union, ‘Solidarity’, and subsequently a labour union of individual farmers, ‘Rural Solidarity’, were established. Liberalisation took place and the party and government underwent several changes. Dominant institutional barriers Communist Poland could not absorb rapidly, effectively and fruitfully the inflow of Western technology, and the main difficulties of absorption had to do with a number of dominant institutions which, of course, also stopped institutional development in a market-oriented direction: •

•

•

The overcentralised command system of planning and management with its strong expansive nature created large investments and danger-ously high rates of growth of aggregate demand. Planners were far removed from the operational level in production and foreign trade. State enterprises were interested in foreign machines and equipment, licences and other forms of disembodied transfer to solve their short-run problems or to remove current bottlenecks rather than to stimulate longrun technological progress. Exports based on production from imported technology, however, required the existence of an adequate distribution network, and the application of modern marketing techniques, servicing and spare parts. The absorptive capacity of the Polish economy was reduced by shortages of labour, capital and materials. It was further weakened by the lack of sufficiently developed research and development facilities which were neglected in comparison to the facilities directly connected with production and construction. The sectors which were the main recipients of the imported technology were unable to utilise fully their newly created productive capacities.

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The need to un-learn and relearn There was a still persistent current account deficit in Poland for transactions in convertible currencies at the end of 1980, diminishing the possibilities of larger technology transfer programmes. Average Polish capital was therefore getting increasingly obsolete in the 1980s, both in absolute and comparative terms (vs. both GEE and FRG, Table 5.1). There was an increasing East-West divergence in technological age, the closer the post-Communist revolution when CMEA countries and FRG are compared. There is also an increasing divergence within CMEA, with Poland as the country suffering most from obsolete technology. Poland limped behind, as is shown in Table 5.1, largely because of passiveness in the 1980–85 period. For any country, writes Gomulka (1985), the innovation rate tends to be highest at medium levels of development, when the country in question still has much to learn from the outside world and, at the same time, has already developed the means—a high level of education, an R&D sector, an investment goods sector, an export capability—of transferring directly or being otherwise capable of absorbing outside knowledge. A country which has a highly inefficient economic system may still enjoy a high innovation rate, provided, Gomulka suggests, that the country compensates for inefficiency with larger quantities of labour and investment resources, and under the condition that the technological gap in relation to the most advanced countries is far from the international equilibrium gap, determined by relative institutional and resource factors. In the 1980s, Gomulka argues, the USSR entered the phase when the Soviet economy was near the international growth equilibrium, a situation impossible to alter without substantial efficiency-enhancing institutional changes.2 From the point of view of evolutionary economics, it seems, on the basis of what we know about Soviet-type learning, that the inefficiency crisis, the dominant institutional barrier to learning, was the major cause of the post-

Table 5.1

Age structure of equipment in Polish industry 1975–88 (share of assets under five years of age, per cent)

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Communist revolution. The inefficiency this incompatibility caused was increasingly perceived throughout society, as were the relative technological backwardness of neglected consumer industries, the decreasing growth rates of the Soviet system in relation to the West, and the great environmentally devastating effects of the Chernobyl accident. ‘We cannot live like this any longer’—as Gorbachev himself expressed it—is a good reason for attracting Western aid. The structure of the chapter The previous chapter focused on Polish environmental aid project lifehistories. The major tasks in this chapter is (a) to give a broader and more comprehensive picture of aid activities in Central and Eastern Europe and Poland in particular, (b) to look more closely into how Poland actually has been navigating its innovation system in adaptation to external and internal ‘greening’ of institutions, and (c) to see what Deutschian ‘gains’ environmental aid has in fact given for Poland. Sources of project level data Data on environmental aid from Western sources, such as basic descriptive project statistics, are only accessible up to 1995 as far as I know (Berg 1995, World Bank 1995b, POLMEP 1993). The very general facts of environmental aid to Poland is provided by Berg (1995). Unfortunately, he gives no indications in the text where that particular information has originated, and correlation with Polish ministry sources indicates certain gaps in the material, especially in the lists of bilateral projects. However, the Polish Ministry of Environmental Protection also provides data with information on Western suppliers. To a certain extent, data on agreements can be obtained from the donors themselves, such as the World Bank, EBRD, regional and national aid agencies. In some cases, data on the technology supplier is provided by aid agencies, but most frequently not. Aid agencies are reluctant to reveal full and comprehensive data on projects. The OECD register on technical assistance agreements is, for some reason, not accessible for research. The ‘load’ of Western aid General CEE aid While history definitely has not come to an end, the Cold War has. The postCommunist revolution in CEE from 1989 and the collapse of the Soviet Union in 1991 has reversed the Western policies towards the East. Help and assistance in transforming old command economy systems into market-economic ones 117

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has been a general goal of OECD countries together with programmes to improve environmental protection in CEE. From being indirectly technologically responsible for environmental degradation during socialism, through earlier exports of unsustainable technological styles to the East, and later highly restrictive to provide the most pioneering technologies for the next generation of technologies, the Western world is now inclined to integrate parts of the East and help it to upgrade its technological basis along with giving assistance to the restructuring of socio-economic institutions (Table 5.2). In this pursuit, there is now a large number of institutions granting aid and technical assistance in various forms to Central and East European (CEE) countries and the Newly Independent States (NIS) of the former Soviet Union. The World Bank, the European Bank for Reconstruction and Development, as well as regional institutions and national donor agencies have, since 1989, worked on programmes to support democratic and sustainable transformation in post-Communist Europe as well as Former Soviet Union (FSU). The share of financial flows to Poland is remarkable; from 76 per cent of total financial flows to CEE in 1990, to 45 per cent in 1993. In 1994, the figure was 52 per cent. Environmental aid Total environmental aid to CEE and FSU in the 1990–95 period amounted at least to 5.6 bECU according to 1995 OECD and UNECE figures (most of the figures for 1995 are not included in the total sum, see Table 5.3). The figures presented refer to aid donor commitments (not actual disbursements!) for environmental assistance and finance, and grants and loans are grouped together. Table 5.2

Disbursements of official development aid from all sources to individual CEE recipients (mUSD)

Source: OECD. © OECD, 1996 Geographical Distribution of Financial Flows to Aid Recipients.

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Table 5.3

Commitments (loans plus grants) of environmental aid to Central and Eastern Europe and former Soviet Union, by donors, 1990–95 (mECU)

Source: OECD / Task Force for the Implementation of Environmental Action Programme for Eastern and Central Europe, Integrated Report on Environmental Financing. Prepared for the Ministerial Conference Environment for Europe in Sofia, 23–25 October 1995. Note: n.a.= data not available

Table 5.3 is probably the closest we can get to a quantitative idea of the Western donor side of global West-East EST asymmetry, since data on aid is mostly confidential. Though many of the figures, especially for 1995, are non-available, Table 5.3 gives a list in descending order in terms of EST aid donors to post-Communist countries (both CEE and FSU). We cannot tell from table data what parts are given to CEE and FSU respectively, nor indeed what is given to Poland. But we can get an idea of which donors are more influential in providing post-Communist EST opportunities. We must then rely on country- and project-specific information about who and what actually has aided Poland. It is worth repeating, however, that ‘hard’ equipment appeared to constitute only a minor part of overall commitments (14 per cent in 1993 for Poland, for example, as we could see in the previous chapter), not to speak 119

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of implemented hard transfers, which, in the case of Poland, only amounted to around 2 per cent of total aid commitments in 1993 (Tables 4.1 and 4.2 in the previous chapter). Aid commitments to Poland Official statistics put the EU at the head of environmental aid committed to Poland; it accounts for one-third in the 1990–94 period (see Table 5.4). Germany, Denmark and Sweden, as neighbours strongly affected by Polish air and water pollution come next with approximately 15 to 13 per cent. In fact, judging from percentages, and ranking the distance from Warsaw to bilateral donor capitals, there is an obvious, strong rank-order correlation between the geographical distance of donor capitals to Warsaw and the value of aid provided by that donor. Exceptions are first the multilateral and non-European bilateral donors: Japan and the USA. Their aid has to be explained on other grounds, such as financial strength and export interests. Second, Switzerland and the Netherlands give more aid than they ‘should’ in relation to Finland and Norway. Finland and Norway may perhaps have decided to put priority to the Barents region and Russian trans-border pollution. In addition, the principle of geographical distance Table 5.4 Environmental aid commitments to Poland 1990–94 (mUSD)

Source: Poland (1995:390), but in descending order by value. Note: European donor capitals ranked in order of geographical distance to Warsaw (the lower the closer) * for Germany: Berlin

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cannot explain why Austria is not among the donors to Poland. Perhaps, in this case, they have a donor priority towards Hungary for historical reasons. In any case, the strong rank-order correlation (we need no statistical measure) between aid values and geographical distance suggests that certain factors are involved in the determination of particular donor-recipient aid value correlations other than recipient assimilation capabilities. The willingness of donors to offer, as well as the recipients’ appetite for aid, has very little to do with capabilities to assimilate. Environmental technology in export orientation, economic strength, and specific country priorities suggest themselves. These hypotheses, however, cannot be tested because of data access problems.3 Donors are thus generally geographically, politically or historically close to the recipient nations. Aid offers are thus a matter of helping thy neighbour, in one, but not always geographical sense. In order to indicate the immense efforts made, and opportunities accordingly, for Poland as recipient, I extensively use Berg (1995) in the following section. This is to depict the variety of aid dispersed or offered to Polish territories. Grants The European Union/The European Commission The Phare programme (Poland and Hungary Assistance to the Restructuring of the Economy) initially was only directed towards these two countries, but after the fall of the Berlin wall, the programme was extended to include all CEE countries, including the Baltic states. The Phare programme comprises all sectors of the economy and the environmental aid is thus only a part of the activities. In the legal text providing for the Phare programme, environment is a specified area of priority, however. Phare is demand driven in the sense that the recipient countries themselves decide to a large extent within which areas the Phare aid should be used. The aid is given as financial support with no obligations to repay, and is mainly focused on the transfer of knowledge, technical assistance and advisory services. The major share of Phare aid is given in national programmes, which form the bilateral programmes between the EU and the individual CEE countries. The multi-country programmes often include coordinated projects with several countries, while the cross-border programmes involve aid to co-operation in border areas between one EU and one CEE country. The responsibility for the Phare programme lies with the EC DG I, and the Commission decides how Phare allocations are made between the recipient countries. When the Phare budget is determined for the various countries, negotiations start with respective countries to establish a so-called 121

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indicative programme. In that programme, it is determined by the recipient country’s government what sectors and what types of investments are to be given priority before EC gives its approval. In 1994, the European Council in Essen adopted a strategy for accession of the CEE to the EU. The Phare programme was then made one of the cornerstones of the accession strategy and important steps were taken to allow Phare to focus on integration, in particular the development of infrastructure, investment support and closer cross-border co-operation, both between the EU and the CEE countries and among CEE countries. Phare should thus respond to the challenges of supporting the CEE countries in preparation for membership (Phare 1995). In this new perspective of Phare targets, it became clear that there is an increasing need for recipient countries to take the necessary steps in defining and managing their own programmes, provided this is linked to specific conditions established by Phare. This will lead to certain structural changes inside Phare. Many of the functions of task managers in Brussels headquarters will be transferred to the partner countries and activity in Brussels will focus more on strategic policy development and guidance. Before this can happen, however, ‘each partner will require to have certain elements in place, such as rules for public procurement, a legal basis for tendering and an effective system of public administration and financial reporting’ (Phare 1995). The programmes for the sectors of priority can range between one and three years and is allocated to a certain portion of the Phare grant. The recipient country also determines which specific projects are to be implemented within each sectoral programme and these are presented to the Commission which decides if the financing will be granted. In reality, the preparation of the projects is made in a specific unit in the relevant branch ministry in the recipient country in co-operation with local Phare advisers and the Phare office in DG I (see Table 5.5). Table 5.5 Phare environmental aid to Poland: project description and grant

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Source: POLMEP (1993); Berg (1995).

When the projects are finally decided, the question is: Who will implement it? In cases of projects with budgets less than 50,000 ECU, contracts can be signed directly with contractors. In other cases the calls for proposals and offers are made and the best offer is chosen. Registration in an EU or Phare country is required, and materials should be purchased in EU or Phare countries. Poland was, together with Hungary, among the two original East European participants in the Phare programme that started in 1989. The first environmental aid projects dealt with the environmental catastrophes, mostly in the severely polluted areas of Silesia. The three-year Phare 1 programme (22 mECU) of 1990 was focused on sewage treatment, reduction in emission of air pollutants and treatment of the environmentally hazardous coal-mine waste waters. In the next three-year programme (Phare 2, 1991, 30 mECU), long-term sector programmes were created and a portion was also allocated to administrative support, environmental monitoring and education. In 1992 the environment sector was given a three-year grant of 18 mECU (Phare 3) to projects in forestry, development of geothermal energy, environmental assessments, etc. In Phare 4 (1993), environment received no allocations. In Phare 5 (1994), Poland received only 12 mECU, for a forestry programme. The environmental aid as share of all Phare aid has constantly been reduced. In the recent Phare 1994 Annual Report, the Polish coalition government is blamed for having had difficulties in focusing priorities for Phare funding. Therefore, it is argued, ‘it took the government a 125

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considerable time to determine the priorities for Phare funding (…) Disbursement rates have also been slower than average with 46 per cent of funds contracted actually paid’ (Phare 1995). EU-Life EU-Life is a special programme for environmental action administered by the DG XI, the Environment Directorate, and has had a budget of approximately 100 mECU per annum. Five per cent of the budget may be used for environmental activities in areas bordering the Baltic Sea or the Mediterranean. In contrast to Phare, Life has been administered on the basis of applications. Projects in the Baltic Sea area have been large and involved Life administration. Life has assisted, in co-operation with French authorities and companies in the water research centre in Gdansk. As with the similar centres in St Petersburg and Riga, it is intended as a link between authorities, investors, donor countries and mass media, but should also provide advice and knowledge transfer to the authorities of environment. The first three years are financed by Life. Germany Investments have been made in western Poland and on the Baltic Sea coast as a consequence of the German Environment Ministry programme for border area activities. The cities of Warsaw, Gdansk, Krakow, Katowice and Koszalin are priority targets. Germany has initiated new types of aid, such as employment of Polish experts and consultants in other CEE projects as they feel direct aid and training should decrease as Poland enhances its environmental protection capacity. Germany may engage in debt-for-nature swaps in the future. There are environment co-operation programmes between Niedersachsen and the Poznan region in Poland. The given grants are only two, according to Polish data. However, several projects are under way. For instance, Germany has proposed, committed or granted aid projects to integrated district heating for Gliwice (some 45 mDEM), waste-water treatment in Swinoujscie and rural areas (0.2 and 1.48 mDEM respectively), waste treatment in Walbrzych (0.42 mDEM), and several seminars and training programmes. Denmark Denmark is one of the largest donors to environmental aid projects in Poland and environmental aid to Poland is also the major part of Danish aid to Central and Eastern Europe. This is so because Poland is the closest CEE country after the German unification and pollution in Poland directly affects Denmark. In particular, Denmark has granted projects around Gdansk and 126

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the Narew and Oder rivers. The number of projects is over 100, most of which seem directed towards water treatment, waste treatment and clean technologies. Sweden Poland is the largest recipient of Swedish CEE aid and major efforts have focused not only on sewage treatment, but also on energy, environmental monitoring and education. Projects include a demonstration plant for energy saving in Katowice (a 3.07 mSEK grant), the Torun district heating system (a 8.34 mSEK grant), grants for waste-water treatment in Koszalin, Nowy Targ, and Szczecin (15.6, 20.5, and 41.1 mSEK respectively), and a number of seminars, courses, studies, etc. Switzerland Switzerland is one of the countries that accepted debt-for-nature swaps with Poland and has granted projects to waste-water treatment in Cisszyn and Prodnik (3.5 mCHF), and Sochaszew (0.4 mCHF), as well as monitoring of air pollution in Lodz (3 mCHF). The Netherlands The Netherlands have had many important projects in Poland, in particular in administrative support, and also in waste handling and minor industry investments. The creation of national and regional action plans for environment is essential for these projects. Examples of Dutch projects are: renovation of Szczecin energy system (0.73 mNLG), low-emission burners for Lagisza Power Station (1.5 mNLG), dust filters for Huta Laziska (1 mNLG), a master plan for reduction of air pollution for Huta Ostrowiec in Kielce (1.67 mNLG), waste management technology for Warsaw (0.53 mNLG), ground-water monitoring in the upper Notec catchment area (1.42 mNLG), and monitoring equipment for Bydgoszcz, Wloclawek, Plock, Torun (0.49 mNLG) and Gory Izerskie (0.45 mNLG). Finland The Finnish aid to Poland is managed differently from the rest of Finnish environmental aid. The so-called ‘eco-conversion process’ with Poland works in the way that Finnish investors can get subsidies for local costs by up to 30 per cent of the Finnish share of the contract. The amount comes from a Polish fund of government subsidies. The Polish debt to Finland is then reduced by the corresponding amount. The programme is exclusively intended for industry and sewage treatment. 127

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Finnish projects in Poland include: equipment and training in heating, Warsaw (9.6 mFIM): district heating in Krakow (2.4 mFIM); grants to the Swiecie paper mill (8.8 mFIM); the Boleslaw mine (1.6 mFIM); filters to the Inowroclaw soda plant (4.6 mFIM); modernisation of boilers in the Czeczot mine and filters to the Rudna mine (9 mFIM); the Trzebionka mine (2 mFIM); the Rokita chemical plant for desulphurisation (5m FIM); and the Ostroleka paper mill (2m FIM). Waste-water projects included Warsaw (9.6 mFIM), Oswiecim (1.4 mFIM), Pruszcz (1.4 mFIM) and CzechowiceDziedzice (1.8 mFIM). Japan Japan contributed with a study of flue gas desulphurisation for the Kozienice power plant in Warsaw (199.3 mJPY), mine-water desalinisation at the Ziemovit mine (200 mJPY), and a master plan for solid waste treatment in Poznan, including training (180 mJPY). The World Bank (IBRD) The World Bank (IBRD) is the major international financial actor in which most countries are members. The first loans to CEE were given at the end of the 1980s to Hungary and then to Poland in 1990. Loans are given to projects in all sectors and often to investments. In the environmental field, a few larger loans have been given for each CEE country. Focus has been given to sewage treatment, energy and nature conservation. Often, there are other donors involved who finance parts of the project or feasibility studies. Poland became a member of the World Bank in 1986 and since projects were started in Poland in 1990, the bank has provided loans exceeding 3.6 bUSD. In the environmental sector, the bank started with administrative support and energy-related questions. Later, other sectors, such as forestry and sewage treatment have been given loans along with effort in the energy sector. However, grants have also been given through GEF, the Global Environmental Facility, such as for forest bio-diversity protection project in Bialowezy and Sudety National Parks (4.5 mUSD). Norway Norway had a formal co-operation agreement on environment already with the Communist government. Aid now consists of support to projects supplied by Norwegian investors, basically of already initiated projects in industry, education and environmental monitoring. Projects include energy conservation in industry (1.5 mNOK), an energy efficiency programme 128

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(2.25 mNOK), a coal-to-gas boiler conversion project with the IBRD (1 mUSD), treatment of saline waters from mines (6.2 mNOK), improvement of the Slupsk waste-water treatment system (1.7 mNOK), establishment of a GRID centre in Warsaw (6.3 mNOK) and an EMEP station for air assessment (2.6 mNOK). The USA Initially American projects concentrated on the severely damaged areas of Silesia. Environmental monitoring and energy projects were commenced in the region between Krakow, Katowice and the Czech Ostrova and in the ‘Black Triangle’ (the border area between Poland, the Czech Republic and Germany). As for the rest of CEE, the USA has emphasised monitoring, education and support to public administration. The US-based World Environment Centre (WEC) has pursued a clean technology project for industry. USAID (United States Agency for International Development) has given grants for some 20 pilot plants. Regional co-operation also exists, such as between Katowice and Pittsburgh. The USA is also one of the countries that accept debt-for-nature swaps with Poland. American projects include a desulphurisation system for the Skawina power plant in Krakow (10 mUSD), a ‘clean fossil fuel’ and energy efficiency project in Krakow (20 mUSD), more than 20 waste minimisation projects around Poland, waste-water treatment projects in Gizycko, Krakow, Bielsko-Biala, and several small municipalities in Silesia, as well as a water-quality project in Krakow. An American feasibility study on municipal solid waste has been granted to Warsaw (0.25 mUSD), and one on hazardous wastes to Lodz (0.2 mUSD). Environmental conservation in the Mazurian lake area (0.6 mUSD) and development of national parks (0.14 mUSD) are other examples, as well as air pollution monitoring in Krakow (1 mUSD). Belgium Belgium has granted projects on monitoring of heavy metals (3.65 mBEF), a mobile laboratory (48 mBEF), and improvements of the Gizycko district laboratory (9.5 mBEF). The UN The UN regional programme for Central and Eastern Europe involves education and administrative support (in Poland two projects) as well as handling of ODS (one Polish project) and hazardous chemicals (one Polish project). In Poland, several projects have been launched in agriculture. 129

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Other bilateral actors The Polish debt to OECD countries is large and some countries have decided to reduce the debt in exchange for environmental investments. This system of ‘debt-for environment-swaps’ implies a 10 per cent reduction of participating countries debts against corresponding payment to a fund (the Ecofund). These payments are then used for environmental investments. USA, France and Switzerland participate in this arrangement. Great Britain, Canada, France and Italy have also participated and supported environmental projects in Poland. Loans The European Bank for Reconstruction and Development (EBRD) The Bank was established in 1991 and founded by the OECD countries in co-operation with the CEE countries and the USSR. The EC and EIB and 57 countries are members. Its purpose is to foster the economic and democratic transition process and to promote private and entrepreneurial initiative in those countries through provision of loans, equity investments and technical co-operation. The bank is directed by its agreement to ‘promote in the full range of its activities environmentally sound and sustainable development’ (EBRD 1995). EBRD has, since its foundation, been active in Poland. Environmental projects have yet only included financing of feasibility studies for sewage treatment plants as well as projects in the energy sector. The educational programme has also included Poland. Environmental aid can thus consist of loans to investments and donor grants for technical assistance and education. Included in technical assistance we find financing of feasibility studies, project related analyses, advisory service and training. Applications for loans can be made directly to the bank. In order to grant applied projects, the business plan, and feasibility studies must be made, partners be contracted and letters of intent signed. The European Investment Bank (EIB) EIB has approved a number of loans to projects having favourable environmental effects in the energy and forestry sector. The bank was founded in 1958 to act as the EC’s financial institution. After 1990, loans can also be given to Central and Eastern Europe. Infrastructural investments are prioritised. EIB is also making feasibility studies for the HELCOM-PITF related to ‘hot-spots’ along the River Oder. These studies are financed by the EC.

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Other multilateral actors NEFCO (Nordic Environment Finance Corporation), the Nordic Council of Ministers (one evaluation for NEFCO, grant: 2 mDKK), Council of Europe (study visits, seminars) and the Regional Environmental Centre (support to NGOs, co-operation with local and central authorities) have supported several projects. ‘Domestication’ principles International constraints How, then, is Poland actually steering its innovation system in adaptation to external and internal ‘greening’ of institutions? Poland’s environmental policy, even in official documents from before the Rio Conference in 1992, indeed adheres to the ‘philosophy of sustainable development’. One of the long-term priorities (to be achieved by 2020) outlined in this policy is therefore the ‘introduction of environmentally friendly, modernised manufacturing techniques throughout all production processes with support being given to the implementation of clean technologies rather than to the construction of expensive “end of pipe” cleaning equipment’ (POLMEP 1991). There are further obligations related to other treaties and conventions on ozone-depleting substances, biodiversity, etc. At the national level, the most important institutional actors for developing and implementing environmental policies are the Ministry of Environmental Protection, Natural Resources and Forestry (POLMEP), and the Parliamentary (Sejm and Senate) Committees for Environmental Protection. There are two major advisory bodies: the Environmental Council, established by the President of the Republic in 1993, and the Council for Sustainable Development, established in October 1994 by decree of the Prime Minister. Other advisory bodies established by POLMEP are the State Council for Environmental Protection, the State Council for Nature Conservation and River Basin Councils (REC 1995). Policy implementation at the regional level is performed by the Voivodship (County or Province) Divisions of Environmental Protection, except for river basin management, which is performed by the Regional Water Management Authorities. Enforcement of environmental laws and monitoring of the state of the environment are the responsibilities of the State Inspectorate for Environmental Protection (SIEP), established in 1980, but receiving significant powers when the 1991 law on the State Inspectorate was passed. SIEP is composed of the Chief Inspectorate and Voivodship Inspectorates. It is the main source of information about the state of the environment in Poland.

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Polish ‘domestication’ aims Agenda 21 places an emphasis on the informed technological choice and its effects on domestic technological capabilities. As was noted in Chapter 4, Poland has realised this, as is obvious from the following official statement of the national environmental policy formulated by the Ministry of Environmental Protection, Natural Resources and Forestry and passed by the Sejm, the Polish parliament, in 1991: The rate of foreign assistance in the overall costs of environmental protection investments in Poland will not be large in financial terms, particularly in comparison to what Poland needs for restoring the environment. It is expected that it will not exceed several tenths of one per cent. Therefore, the methods and forms of utilisation of assistance should be an example and model for solutions to be implemented by our own means. The assessment of the feasibility of multiplication and distribution of acquired technologies, equipment and instruments, as well as know-how and experience, are to be regarded as the basic criteria for the selection of projects for implementation. (My italics.) (POLMEP 1991) The policy of ‘multiplication and distribution of acquired technologies’ is typically one of optimised imitation. There is thus a dilemma for Poland as technology recipient and national system of innovation to the extent that selection of late-stage technological EST systems is shown to be made, since such acquisitions will not promote the domestic capability build-up to the extent defined by the international regime of sustainable environmentally sound development and corresponding national policies. Soviet-type legacies have created a situation where postCommunism has to unlearn assimilation patterns in order to reverse the inter-NSI asymmetry, characterised by late and poor introduction of key factor technologies in some NSIs from technologically more powerful habitats. Policies are also very specific about the technological content of Polish sustainable and environmentally sound development. Among the ‘Main policies for particular spheres of the economy’ defined in 1991 we find the following 10 rather detailed goals related to environmentally sound technology of both ‘clean’ and ‘cleaning’ type (ibid.): 1

Modernisation of combustion techniques in coal-fuelled power plants and a switch to environmentally safe firing systems, such as: fluidised

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bed boilers, low emission burners, and application of emission reducing additives to fuels. 2 Installation of dust and gas reduction equipment and proper use of that equipment. 3 Reduction of energy, material and water demand by production processes, which will slow down the use of natural resources and in most cases emissions of pollutants. 4 Broader implementation of cleaner technologies (producing no or low waste) and the recirculation of water, utilisation of waste, and hermetic closure of production processes, which will reduce the amount of pollution rendered to the environment. 5 Creation of an industry that will produce equipment for environmental protection. (My italics.) 6 Installation and proper management of equipment for the reduction of pollution by specially trained services in industry. 7 Promotion of ‘clean’ transportation systems. 8 Machines with fuel engines characterised by low emission of pollutants, supply of fuel meeting international standards, reconstruction or elimination of engines requiring leaded petrol, and as well commencement with the manufacture of lead-free petrol and motorcar catalysers. 9 Modernisation of processing facilities and introduction of new technologies for the enrichment and purification of mined materials. 10 ‘Green’ methods of husbandry; and production of ‘healthy’ food. I italicised the fifth priority, the ‘creation of an industry that will produce equipment for environmental protection’, since this is obviously the crucial factor for implementing sustainable and environmentally sound innovation in Poland and also a crucial target for the choice of technological systems as well as the timing for introduction of EST production systems. But observe that the goal is to produce, rather than to develop, equipment. Again we find imitative rather than creative ambitions in the Polish environmental policy. The targeted uses for foreign aid, according to the same programmatic document, also include the domestic creation of an environmental industry sector: (a) Transfer of environmental protection technologies not applied within the country as yet (e.g. desulphurisation and denitrification of combustion gases, utilisation of toxic waste, desalinisation of water, etc.) including the construction of pilot installations. (b) Promotion of domestic production of environmental protection equipment, among others, through joint undertakings (joint venture).

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(c) Organisational assistance, improvement of management, and training of qualified staff, including assistance in the establishment of consulting enterprises. (My italics.) In case (a) this is a question of process and end-of-pipe innovations to be made on the basis of Western practice developed and marketed in the last decades. For instance, new combustion technologies and filters are probably mature technologies. With regard to (b) this is a question of international cooperation at the same, mature phase of the technology life cycle, since the idea seems unfortunately not to create new EST indigenously in Poland, but to promote imitative production. However, there is a space for interpretation of the terminology ‘promotion of domestic production’ through ‘joint undertakings’. Both (a) and (b) aid policies somehow need specification in order not to express the Soviet-type implant or ‘second hand’ type of introduction of mature and therefore already commercialised Western technologies. This is important because the Soviet-type mode is passive-imitative. The last target, i.e. case (c), to acquire organisational and management assistance, including assistance to create consulting enterprises, reflects specific technological needs, i.e. international adaptiveness, and may or may not help Polish aid recipients to overcome the passive or imitative cognitions. Much will depend on what assistance programmes will focus on and to what extent they can contribute to an earlier entry or introduction of environmental technology. ‘Near-time priorities’ When we come to the ‘near-term priorities’ specified in the national environmental policy it gets more interesting in two respects. First, these near-time priorities, as they were defined in the early post-communist years, should have been implemented several years ago, in 1994–95. In that respect, the implementation of the near-time priorities in time correspond to the data available on environmental aid, i.e. the committed aid of 1994–95. Second, given the international regime, environmental aid projects can be grouped as responses to these near-time priorities, thereby indicating (a) the role of EST from the West in Polish environmental protection policies, but also (b) what EST has been given in addition to the aid that reflects Polish policies and priorities (at least as they were originally formulated). In the latter case we thus have projects that can be called ‘imposed’ by the international regime somehow, either as a requirement of international treaties that Poland has signed, or, perhaps even more interestingly, as requirements from donors on Polish ‘institutional change’ or ‘institutional learning’. 134

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The ‘near-time priorities’, as formulated in the official Polish environmental protection programme in the early 1990s, include the following eight very specific technology-related tasks: (a) Abandonment or change of manufacturing profiles or implementation of protection measures under extraordinary circumstances (i.e. break-down) in industrial plants emitting dangerous substances into the air, disposing of toxic substances into waste waters or storing dangerous substances threatening to human health and life. This refers to the 80 industrial plants included in the countrywide list as well as 500 other enterprises which will be indicated by the voivodship lists under preparation. They should be subject to intensive supervision by the environmental authorities and the public. (The ‘hot-spot’ emergency priority.) (b) Implementation of the coal quality improvement programme (pyrite removal from sulphur-containing coal and rise in calorific value of pulverised energetic coal) and the adaptation of coal used for domestic purposes to the world standards as well as the utilisation of simple reserves (for instance the improvement of the efficiency of technical supervision, organisation and management aimed at the reduction of particulate and SO2 emissions into the air). This activity will initiate the implementation of environmental and economic programmes aimed at the improvement in energetic efficiency and in more efficient use of resources. (The coal and energy priority.) (c) Noticeable reduction of dust and gaseous emissions, particularly in Upper Silesia and as well in other regions where environment and public health is threatened (this refers especially to the reduction of low and dispersed emissions). (The air quality priority.) (d) Reduction of deficits in quality drinking water supplies for urban areas, mainly through the construction of sewage treatment plants along tributaries of Vistula, Oder, and Pomeranian Rivers, with simultaneous modernisation of waterworks systems and the increase in the water retention capacity as well as through improved water management (including realisation of water bills). (The drinking water priority.) (e) Radical reduction of the solid waste burden through the implementation of an adequate management system of industrial and municipal solid wastes and disposal of toxic wastes. (The solid waste priority.) (f) Gradual diminution of food crop production on soils affected by toxic substances, first of all in the Upper Silesian region (combined with the change in the profile in agriculture in those areas. (The food crop diminution priority.) (g) Initiation of the reduction of environmental effects caused by means of

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communication and transport. (The communications and transport priority.) (h) Improvement of ecological security on state borders through the extension of frontier monitoring systems (air, water, solid waste). (The border security and monitoring priority.) An important task is obviously to see to what extent these near-term priorities have been fulfilled with reference paid to international aid for their fulfilment—i.e. to what extent responses are followed by gains and rewards, to use Deutsch’s terms. Deutschian ‘gains’? Near-time policy implementation The ideal conclusion to draw from the analysis of Polish policy implementation from aid projects would be to establish clear indications of what technological systems or technological waves that were implemented through aid implies. For instance, it would be a great achievement for Polish EST development were the most recent technologies transferred and diffused throughout research and development centres of enterprises in a way that contributed to Polish capabilities in that sector. On the other hand, it would be discouraging to see technologies that are basically last stage remediation and end-of-pipe solutions to older generations of technologies. In the latter case, EST aid would not bring about more than a pollution reduction, since the process technology to which it was connected has more or less finalised its life cycle. The first near-time ‘hot-spot’ emergency priority The large coal- and oil-based power plants often create devastating environmental problems in the form of air pollution. These plants are mostly of the type that were installed in the post-war period on the basis of technology transfers from the USSR. To a certain extent these plants have closed either totally or partly. Since 1991, the State Inspectorate for Environmental Protection has formulated pollution abatement requirements for these enterprises. Seven enterprises were closed and production totally or partially halted in 22 others. The list led to decreases in emissions of lead to air, in gaseous emissions, and a reduction in sewage discharges and waste disposal. The Netherlands have helped to reduce gaseous and particulate emissions (a 1.5 mNLG grant for low NOX burners to the Lagisza power station and a 1 mNLG grant for dust filters at the Huta Laziska steel plants, see the previous chapter). Finland has helped to reduce emissions of air and water emissions from the paper mills in Ostroleka (a 2 mFIM grant). Further 136

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projects have been granted by Finland (a 2.7 mFIM grant for the modernisation of boilers in the Czeczott mine, a 1.6 mFIM grant to the Boleslaw mine), Germany (a 0.73 mDEM coal-mining study for the mines in Czeczott, Piast and Ziemovit) and EU-Phare (a 1.87 mECU grant for coal wash in the Piast mine). The desalinisation of mining water has engaged the aid programmes of Japan (a 200 mJPY grant for the Ziemovit mine) and EU-Phare (a 0.8 mECU Phare 1 grant for the Czeczott mine). The US World Environment Centre introduced cleaner technologies (waste minimisation) to reduce waste and emissions from approximately 20 plants in various sectors, including several ‘hot-spots’: waste minimisation in Oswiecim; the ‘Organika-Zachem’ plant in Bydgoszcz; ‘Hutmen S.A.’ in Wroclaw; the ‘Polchem’ chemical plant in Torun; the nitrogen works in Kedzierzyn; the ‘Blanchownia’ chemical works in Kiedzierzyn-Kozle; the ‘Boruta’ dyestuff plant in Zgierz; the ‘Viskoplast’ in Wroclaw; and the pharmaceutical works of ‘Polfa’ in Krakow and Grodzisk. We have thus a list of 17 ‘hotspot priority’ related aid projects. The second near-time ‘coal/energy priority’ International financing institutions have been the major actors in this sector. To some extent, this priority and the priority of ‘hot-spot emergencies’ and air pollution abatement are intertwined. This means that much of the coal/ energy projects exist as a result of obsolete Polish energy-related technology. On the other hand, we have more advanced combustion technologies involved in a number of projects, which therefore are not of ‘end-of-pipe’ type but rather process modernisation. This is also the case, when alternative sources of energy extraction have been introduced, such as geothermal energy and gas projects. In some cases projects are focused on more efficient energy distribution systems. The World Bank has (together with the EIB with a loan of 265 mUSD for energy resource development and EBRD with a 285 mUSD loan for heat supply restructuring and conservation) granted loans to the Polish energy sector. Projects grants have been aimed at installing more efficient and environmentally sound combustion technologies (a 120 mUSD loan for the co-generation and privatisation project and installation of low NOX burners in Krakow), to reduce energy losses at transmissions and to develop geothermal energy. In Zakopane and Pyrzyce, geothermal pilot projects are made in co-operation with EU-Phare and Denmark. District heating systems have been installed with the support of Germany (an integrated district heating system in Gliwice), Finland (a 9.6 mFIM grant to equipment and training in Warsaw and a 2.4 mFIM grant for district heating in Krakow) and Sweden (an 8.3 mSEK grant for the Torun district heating system and 1.6 mSEK for Krakow district heating). 137

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An increased share of gas-based energy production is the aim of projects supported by the World Bank (a 25 mUSD GEF grant with Norway on coal-to-gas boiler conversion), EBRD (a 0.58 mECU grant on Black Triangle gas conversion), EIB (a 50 mECU loan for gas production development), Norway (a 1 mUSD grant for coal-to-gas conversion with the IBRD) and Canada (a 1.7 mCAD grant for the development of a rural gas distribution network). An energy centre has been established in Krakow and Gdansk with Norwegian help (a 2.7 mNOK grant for knowledge transfer). Denmark has supported projects on alternative sources of energy (a 2.5 mDKK grant for strew and wood chips firing technology and a 3.1 mDKK grant to transfer of knowledge on biomass use for energy production). The third near-time ‘air quality priority’ More efficient energy production reduces air pollution. This is the rationale for projects supported by Norway (a 1.5 mNOK grant for energy conservation in industries, and a 2.25 mNOK grant to an energy efficiency programme), NEFCO (three loans: 3.33 and 2.47 mECU for two energy efficiency projects, and 2.47 mECU for reduction of energy related pollution), Sweden (a 3.07 mSEK grant for a demonstration plant for energy-saving in Bangow-Katowice and seminars in energy saving for 1.08 mECU; a 28 mSEK flue gas desulphurisation project at the Elblag power station is also proposed), USA (a 20 mUSD grant for clean fossil fuel and energy efficiency in Krakow) and the Netherlands (a 0.73 mNLG demonstration project of sustainable renovation in Szczecin). To a major extent, this priority thus coincides with the second. Modern or close to modern technologies are introduced with the double purpose of improving extraction efficiency and reducing air pollution. The largest Norwegian project (the establishment of an energy centre in Krakow for 2.7 mNOK, see above) includes education of Polish engineers in the use of cleaner technologies in industry. Some 200 engineers have been trained from around 90 Polish companies. Several countries have contributed to the environmentally sound abatement techniques: Denmark (a 15.9 mDKK grant for filters at the Dolna-Odra power station in Szczecin); Germany (a proposed grant to modernise the Turow power plant); USA (a 10 mUSD grant for a desulphurisation system at the Skawina power plant in Krakow); and Japan (a 199.3 mJPY study on flue gas desulphurisation at the Kozienice power station in Warsaw). EU-Phare was initially directed towards reducing emissions from coalbased energy production through the manufacture of cleaning devices (a 1.8 mECU Phare 1 grant for the production of desulphurisation installations for coal-fired electrical power, and a 3.1 mECU Phare 1 grant 138

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for the production of circulation fluidised bed boilers). The target industries again belong to this generation of plants. (Observe that the Phare project would lead to a domestic capacity to produce cleaning devices, which gives us further reason to pay special attention to this project.) To reduce air pollution from other than energy industries and the ‘hotspots’, several countries have given support in the form of filters and other measures: Denmark (a 6.6 mDKK grant for a desulphurisation project and renovation of the boilers at the Cukrownia Ropszyce sugar plant); Finland (a 5 mFIM desulphurisation project for the Rokitas chemical plant); the Netherlands (a 1.67 mNLG grant for a master plan for the reduction of air pollution at the Huta Ostrowiec in Kielce and a 1 mNLG grant for dust filters at the Huta Laziska steel plants). Finland has also helped to reduce emissions of air and water from the paper mill in Swiece (an 8.8 mFIM grant) and the soda factory in Inowroclaw (a 4.3 mFIM grant, including the delivery of filters). Several countries support environmentally rehabilitating measures in mining. Projects, except those already mentioned under the ‘hot-spot priority’, have been granted by Finland (a 9 mFIM grant for the delivery of filters to the Rudna mine, and a 2 mFIM grant to the Trzebionka mine), the Netherlands (a 0.5 mNLG grant for coal reclaiming in the Brzeszcze mine) and EU-Phare (a 7.6 mECU grant for a coal wash in the Jankowice mine). These are typical end-of-pipe projects, since the purpose is to reduce the salt content of mine outlets of water. The 1995 Regional Environmental Centre (REC) report on the Status of the National Environmental Action Programme (adopted by the Lucerne Ministerial Conference in 1993) states that the construction of installations for coal desulphurisation and enrichment has reduced SO2 emission by 71,000 tonnes/year, without explicitly indicating the share of aid in this achievement. Likewise, it is stated, without referring to aid, that in 1990–93 the modernisation or construction of filters at major industrial and power plants, as well as flue gas desulphurisation equipment, reduced SO2 by 15 per cent, NOX by 14 per cent and particulates by 23 per cent (REC 1995). The fourth near-time ‘drinking water priority’ As with the air pollution abatement priority, this is a technologically rather mixed area, though typically ‘end-of-pipe’. To some extent, it is also an effect of ‘hot-spots’ outlets. The outstanding donor is Denmark. A large amount (12 mDKK) has been granted by Denmark for the modernisation of the waste-water treatment plant ‘Wschod’ in Gdansk where EBRD and Germany have also been involved. Money has also been given to the two waste-water treatment plants in Slupsk (5.7 mDKK) and Grzybowo (5.2 139

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mDKK). A large regional effort has been made in the Rega area (15 mDKK), where smaller treatment plants are being built. Other examples of Danish projects are the waste-water treatment plants in Sitkowa Kielce (9.8 mDKK), Szczecin (10.3 mDKK), Wolin island (3.8 mDKK), Pultusk (3.4 mDKK), Zielona Gora (1.8 mDKK), Gryfino (3.6 mDKK), Lomza (2 mDKK for a study) and Kruswica (1.2 mDKK). Finland has also been active in this sector. One waste-water treatment plant is under construction in Czechowice-Dziedzice (a 1.8 mFIM grant); and in the cities of Oswiecim (a 1.4 mFIM grant) and Pruszcs (a 1.4 mFIM grant) the waste-water pipes are being modernised. To decrease the outlet volumes into the Wisla river, the Finns have delivered pumps to the Warsaw water supply authorities (a 9.6 mFIM grant). Norway has supplied studies of two larger waste-water treatment projects in By torn (a 3.8 mNOK grant) and Slupsk (a 1.7 mNOK grant). Projects include permissions analysis and transfer of competency as well as certain investments. Norway also supports the environmental cleaning up of the old Swoszowice resort, which involves waste-water purification. Swedish aid has been given to the waste-water treatment in Szczecin (a 41.1 mSEK grant), Koszalin (a 15.6 mSEK grant) and Nowy Targ (a 20.5 mSEK grant). In Warszawa-Czajka, Sweden has participated (with a 15.8 mSEK grant) in the management of solid waste and studies have also been made for the waste-water treatment in Pruszkow (a 1.78 mSEK grant) and potable water pipes in Sopot (a 3.15 mSEK grant). In the Mikulczucki area, Sweden has contributed to the local water management (a 3.95 mSEK grant). Sweden has also had an advisory function in the development of water and sewage treatment strategies and questions related to permits, norms and control. The waste-water treatment plant in Swinoujcie has been constructed with German aid (probably 0.2 mDEM). Germany has also proposed contributions to the waste-water treatment in Gdansk and participated in a project concerning water treatment in agricultural zones (a 1.48 mDEM grant). Switzerland has financed the final construction of waste-water treatment plants in Cisszyn and Prodnik (a 3.5 mCHF grant) and Sochaczew (a 0.4 mCHF). USA seldom sponsors waste-water treatment, but in connection with a nature conservation project for the Mazury lakes, a plant was finished in Gizycko (grant unknown). In a number of municipalities (Miedzna, Swieta, Katarzyna, Ziebice, Nowa Sol and Namyslow in Silesia, and in Krakow and Bielsko-Biala), the USA has provided prefeasibility studies and plans for treatment. EU support has also been given to the waste-water treatment plants in Krakow (a 0.6 mECU Phare 1 grant) and Warsaw (a 0.6 mECU Phare 1 grant to a study for Czajka) and there are plans to participate in the completion of the treatment plants in Katowice and Warsaw-Siekierki. An EIB loan to the latter is expected. The World Bank is planning a project to 140

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support the treatment of waste water in a number of Polish cities. Several actors are involved and pre-feasibility studies are being proposed to be financed by EU-Phare (Bydgoszcz), Great Britain (Wroclaw) and the USA (Krakow, see above, and Bielsko-Biala). A similar project is prepared together with EU-Phare in Warsaw and even in other cities, and similar projects may be implemented (Lublin, Torun and Wloclawek). EBRD has contributed to pre-feasibility studies related to waste-water treatment in Gdansk (a 0.37 mECU grant), Gdynia (a 0.15 mECU grant) and Lodz (a 0.24 mECU grant). Environmentally sound modernisation of paper industry plants (a 3.54 mECU loan) and slaughter houses (a 2.12 mECU loan) have been sponsored by NEFCO . The Dutch city of Hague co-operates with Warsaw in questions related to drinking water. The purification of drinking water has also engaged Canada to improve the supply of clean water in 12 polish villages (a 0.9 mCAD grant). The USA has contributed to raising the quality of water in Krakow (a 4 mUSD grant). The desalinisation of mining water, except for some ‘hotspot priority’ projects already mentioned, has engaged the aid programmes of Norway (a 6.2 mNOK grant) and a 0.48 mECU Phare 1 grant for a study at the Nawislanska hard coal mine). Denmark also supports the introduction of cleaner technology in certain specific industries, as for example fishery (a 5.4 mDKK grant). The national REC report states the construction in 1991–93 of 950 waste-water treatment plants with a total capacity of 2.3 million cubic metres per day and 8 water reservoirs with a total capacity of over 0.5 billion cubic metres without indicating the share of foreign assistance in these investments (REC 1995). The fifth ‘solid waste priority’ The ‘solid waste priority’ is also typical for the ‘end-of-pipe’ remediation stage of the treatment technologies already existing in the West. The most important actor in this sector is Denmark, which is having projects in Lodz (a 3.3 mDKK grant), Warsaw (2.1 mDKK grant), Szczecin (a 1.4 mDKK for phase 1, in co-operation with the Esbjerg city council), Bytom (a 1.2 mDKK grant for an action plan), Bydgoscz (a 1.2 mDKK grant for a solid waste recycling plan) and other places. Other donor countries that have contributed to pre-feasibility studies or the implementation of waste projects are the Netherlands (a 0.25 mNLG grant for a waste plan in Tarnow, and 0.53 mNLG for waste management in Warsaw, including technology, logistics and landfill), Germany (a 0.42 mDEM grant for waste treatment in Walbrych), Japan (a 180 mJPY grant for a master plan and training for solid waste treatment in Poznan), USA (a 0.25 mUSD grant for a feasibility study on municipal solid waste in Warsaw) and the EU (a 4 mECU Phare 2 grant for municipal waste management in Upper Silesia). In Zychlin, Denmark has 141

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provided support to a waste treatment (incineration) plant (a 6 mDKK grant) and studies for a similar plant in Warsaw have been made by the EU (a 0.5 mECU Phare 1 grant). When it comes to various types of solid waste from industry, the USA has, through the World Environment Centre, been very active in the introduction of cleaner technologies (waste minimisation) to reduce waste and emissions from approximately 20 plants in various sectors, some of which have already been listed under the ‘hot-spot priority’ (a 0.2 mUSD grant for a feasibility study on industrial solid waste management in the Katowice steel mill, waste minimisation in ‘ZCHO Chemicals’, in the ‘Silesia Metallurgical works’ in Katowice, in meat processing in Elblag and Lukow, in dairies in Gorwolin and Zakopane, in the ‘Bonarka’ inorganic chemical plant in Krakow, in the ‘Polchem’ chemical plant in Torun, in ‘Organika-Azot’ in Jaworzno-Katowice, in the ‘Boryszew’ polymer plant in Sochaszew, in ‘Koksownia Zdzieszowice’ in Katowice, in the ‘Kopalnia Krupinski’ coal mine in Katowice, and in the ‘Kopalina Wujek’ coal mine in Katowice). Many of them are located in the Katowice-Krakow area. Most of these projects are in the process of being implemented. Again, the technologies are related to previous generation processes which now require end-of-pipe solutions to abate pollution. EU-Phare has been the only significant actor in the treatment of hazardous waste. A study for a treatment plant in Bygdoszcz has been made (a 1.1 mECU Phare 1 grant for a study for an incineration plant for toxic chemical waste in Zachem). In Phare 2 it is one of the sectors given particular support (a 3.5 mECU grant). The USA (a 0.2 mUSD grant for a feasibility study on hazardous wastes in municipal sewage) and the Netherlands (0.225 mNLG on incentives for separate waste collection) have studied the waste handling in Lodz and Germany and Norway has made inventory studies of contaminated areas (in the Gdansk and Koszalin area). The REC report states the construction or upgrading of waste pumps with the result that, in 1991–92, 1,500 hectares of industrial waste dumps were reclaimed and 60 per cent of produced mining and power production waste was recycled (without indication of the aid share, REC 1995). The sixth ‘food crop diminution priority’ One Phare project has this content (a 2 mECU study of the elimination of food production in areas polluted with toxic substances within the Upper Silesia Regional Programme and supplied by Simon Environment, UK). The seventh ‘communications and transport priority’ No aid projects seem directly connected to this priority or, rather, these aid projects are not categorised as environmental projects by donors. Looking at 142

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the infrastructure as an aid category, one can notice a rather strong emphasis by the Phare programme. Almost 200 mECU of the 1,000 mECU total aid to Poland in 1990–94 was allocated to energy, transport and telecommunications. The initial purpose was to reduce emissions from passenger cars and trucks using catalytic emission control. The REC report indicates that, without noting foreign contributions, motor-car catalysers have started to be produced and the lead content of fuels has been reduced to 0.15 per cent in accordance with EU standards (REC 1995). The eighth ‘border security and monitoring priority’ The leading actor has been EU-Phare which has developed an environmental monitoring system and also had projects on monitoring air and water pollution, mostly in the worst damaged areas of Silesia (a 5 mECU Phare 1 grant for air pollution monitoring, a 0.12 mECU Phare 1 grant for Moravian gate air pollution monitoring, a 5 mECU Phare 2 grant for a state environment monitoring system, a 0.79 mECU Phare 1 grant for an Upper Vistula monitoring system). Grants to monitoring in Silesia have also been given by the USA (a 1 mUSD grant for air pollution monitoring in Krakow, and air quality monitoring in the Black Triangle of Silesia), Denmark (a 2.4 mDKK grant for environmental assessment for further actions in the Vistula lagoon, a 3.5 mDKK grant for monitoring and environmental action plans for Jelenia Gora, a 3.9 mDKK grant for surface water monitoring, a 2.9 mDKK grant for monitoring of the Narew river basin, a 2.5 mDKK grant for water information and training in Gdansk, monitoring in Bytom and an environmental study on air pollution in Upper Silesia), Germany (a 0.18 mDEM grant for Black triangle studies for future clean-up) and Norway (monitoring of Tatra mountain rivers and lakes). The ecological monitoring of rivers has also been supported by the Netherlands (a 1.42 mNLG in the upper Notec catchment area), Germany (a 0.385 grant for monitoring on the Polish bank of the Oder) and Sweden (a 3.12 mSEK grant to environmental impact study of the Leba river basin and integrated marine monitoring). Dutch support has been given to air pollution monitoring in Bydgoszcz, Wloclawek, Plock and Torun (a 0.49 mNLG grant). Niedersachsen has participated in the education of station staff for monitoring the air pollution in Poznan and Wroclaw. Switzerland has projects in Lodz (a 3 mCHF grant for air pollution monitoring in Krakow), Japan has helped to educate the monitoring staff. Belgium (a 48 mBEF grant for a mobile laboratory and a 9.5 mBEF grant for improvement of the Gizycko district laboratory), the Netherlands (0.45 mNLG grant for the equipment to an atmosphere pollution monitoring station in Gory Izerskie), Sweden (a 6.6 mSEK grant for visits to Swedish laboratories and support to laboratories in Tarnow and 143

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Katowice, a 3.6 mSEK education programme for using a geographical information system, and establishment of a European Monitoring and Evaluation (EMEP) station with Norway) and Norway (a 6.3 mNOK grant to the establishment of a Global Resource Information Database (GRID) centre in Warsaw, a 2.6 mNOK grant to the establishment of an EMEP station for air assessment) have all contributed to the acquisition of monitoring stations and laboratories. In certain cases, as for example the Danish project in Jelenia Gora, support has been given to monitoring and evaluation of the environment in order to determine the needed investments. Other projects have included monitoring of waste-water dams (Norway and EU-Phare). Poland also participates in the EU CORINE co-operation to create comparable environmental data. Aid launched with aims beyond the 1991 Polish policy The fact that a number of environmental aid projects do not neatly fall under the category of one of the eight Polish near-time policies of the early 1990s implies that Poland somehow changed policies or responded to new demands from international regimes or actors. For instance, not only Agenda 21, but the Convention on Biological Diversity and the United Nations Framework Convention on Climate Change were also signed at Rio in 1992. The agricultural run-offs of fertilisers into surface waters is a central issue for the countries that adopted the Baltic Sea Environmental Declaration in 1992. Poland has also ratified the Vienna 1985 Convention on Protection of the Ozone Layer and the 1987 Montreal Protocol on substances that deplete the ozone layer. These accords put pressure on Polish policies and their implementation. This should be kept in mind as the rationale for the following aid projects in nature conservation, reduction of ozone-depleting substances and agriculture and forestry. Nature conservation The World Bank has contributed to protect the biological diversity in the Polish forests (a 4.5 mUSD grant for Bialowezy and Sudety National Parks) and Great Britain supports the management of key areas of concern for diversity and for eco-tourism at the Mazurian lakes. In co-operation with EU-Phare (a 2.3 mECU grant for a foundation), the US EPA supports a project around the Mazury lakes (a 0.6 mUSD grant), that also includes administrative aid to the local government. The USA also contributes to the development of national parks (a 0.14 mUSD grant), while EU-Phare participates in a nature conservation project around the Wartas river (a 2 mECU grant). Sweden and EU-Life support the environmental protection of the Wisla and Odel lagoons.

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Ozone-depleting substances (ODS) The UN is in charge of a regional project related to the reduction in use of ozone-depleting substances. Agriculture and forestry In the EU-Phare programme for agriculture, support is given to reducing pollution from agriculture and the US Environment Protection Agency (EPA) has a project on studying pollution from agriculture around the rivers of Oder and Wisla. The UN also has agricultural projects with environmental implications; one example is FAO support of education on the environmental impact of agriculture. As in the Baltic countries, Sweden contributes to the development of environmentally sound agricultural practices (a 3 mSEK grant). A large forestry project is under way with the World Bank (a 146 mUSD loan), EU-Phare (a 9 mECU grant by Phares 3 and 5), EIB (a 13 mECU loan) and Denmark (a 7.9 mDKK grant) as actors. The project involves new plantations, environmentally sound forestry and monitoring systems. According to the REC report, in 1991–93, 6,600 hectares of degraded agricultural, forest and recreational areas were reclaimed. Administrative support This is the residual when explaining aid in terms of domestic policy implementation. The aid, in the form of administrative support, distinguishes itself in the sense that it has aims of institutional rather than technological learning. These measures were not included in the Polish environmental policy, but were obviously included in the packages offered, in particular, from the European Union (as described in Chapter 3, Table 3.2). Feedback and learning The role of feedback for institutional learning cannot be underestimated: we have no data on the technical and social gains of aid projects listed above. From the point of view of aid agencies there is of course a need for the evaluation of projects. However, such evaluations are seldom made beyond the measurement of project inner effectiveness, i.e. they are not made in relation to external effects, such as on the recipient technological capabilities. Paradoxically, the recipient system’s feedback needs are generally not under scrutiny. The critique against evaluations, such as from Wedel (1994), comes close to the problem from the aid agency perspective:

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Much project evaluation is misguided because it is based on narrow accounting and accountability criteria, which are capable of examining only part of the aid story. It is all too possible to imagine a situation in which ‘We have accounted for every penny and most of it was not well spent’. The problem is that the evaluations often fail to take into account local perceptions, realities, and responses. (Wedel 1994:333) Indeed the subsidy on the cure seems sometimes more important than the health of the patients, so to speak. But the proper question from the learning perspective is rather how the patient can know what he suffers from without professional diagnosis? Deutsch (1963) emphasised the crucial significance of feedback loops for learning in systems. In the Polish national system, the feedback function is in fact formally institutionalised. The Polish Commission for Sustainable Development, chaired by Stanislaw Zelichowski, the Minister of Environmental Protection, Natural Resources and Forestry, has the formidable task to: 1

2

3

4

5

carry out periodic reviews of compliance with sustainable development requirements in the following areas: industry, energy, transport, agriculture, space, municipalities, privatisation, health and other policies, development programmes, economic restructuring, existing law and fulfilment of international obligations; formulate opinions, recommendations, conclusions, and proposals for the Council of Ministers regarding sustainable development implementation; co-operate in the preparation of reports on the implementation of the Global Action Programme (Agenda 21) as requested by the United Nations, and promote Polish achievements and needs in this respect; prepare opinions on the actions undertaken within the international conventions ratified by Poland and other multilateral agreements in the field of environmental protection; and co-ordinate the preparations for the 1997 National Report on the implementation of Agenda 21.

In Appendix 1 there is a document showing the work done by this commission in the field of environmentally sound technologies as defined in Agenda 21. It is rather obvious that this function is under-utilised as means for channelling feedback into the Polish political-economic system. As we could see in the previous description of aid projects, there is a large number of aid project evaluations that should be made from the perspective of the recipient innovation system. None has been made so far from any system, let alone from a project perspective. If no drastic 146

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improvement in feedback is made in Poland, the innovation system simply cannot learn from experience. Comments and conclusion Evidence from aid projects so far indicates that they correspond to most of the Polish environmental priorities in the near-term perspective (up to 1994– 95) that were defined in 1991. Seventeen projects deal with ‘hot-spots’. There is a proportionally large aid effort implementing energy, air, water and waste priorities while transportation and soil remediation policies have gained less aid. International financiers have been the major actors in energy-related aid. A variety of international and national actors have helped in decreasing air pollution except from that related to energy efficiency. The largest donor to waste-water treatment is Denmark. Also in waste handling is Denmark dominant, while EU-Phare is the single important actor on hazardous waste. Judged superficially from the brief project descriptions available, these types of priorities are implemented using both process innovation and end-of-pipe solutions belonging to established technological traditions in the West. Responses to technological options are explicitly favouring optimised imitation as Matthews defined it (1984). There are also areas, however, which are not primarily motivated by Polish policies or aid assimilation, but rather by the international regime as defined by treaties and conventions ratified by Poland. Ozone-depleting substances (ODS) is one case, biodiversity projects another. Such aid is naturally ‘softer’ in character, though not necessarily more ‘modern’ (such as microelectronics, information and communications). International organisations, such as EU-Phare, UN agencies, and the World Bank, dominate these aid programmes in Poland. A third category is ‘modern’ in the form of monitoring technology, i.e. creation, communication and analysis of data on the status of the environment. Though there are many national actors in this field, EU-Phare is dominant. Lastly, a large number of aid projects involve administrative support, i.e. something that can bear upon particular adaptations Poland has chosen to make, such as to the EU through a ‘European Agreement’. Such projects provide opportunities for ‘institutional learning’. EU-Phare, the Netherlands, the USA and the World Bank are the dominating actors in this administrative support. However, a drastic improvement in the feedback function must be made in Poland, to enable the operators of the innovation systems to learn from experience in providing an institutional selection environment which, in the longer perspective, will increase the reproduction and spread of greener innovations.

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6 INNOVATION UNDER POSTCOMMUNISM Survival of the greenest?

Improved imitation This study has established some initial environmental aid project evidence that imitation from Western technology can now be effected more rapidly and more efficiently than under the Soviet-type conditions that previously existed in Poland. This improvement, is to a major extent, the effect of changing institutions—the ‘rules of the game’—since they now imply decentralised investment decisions. As the overwhelming part of technology transfers as aid is ‘soft’ rather than ‘hard’, the environmental effects are therefore limited (much more than the taxpayers of the member nation of the OECD probably think), and, to judge from the first assistance projects to Poland, there is hardly any indigenous spread of environmental aid technologies after they have been introduced in a country. Aid is perhaps inherently contradictory to creative innovation in the Schumpeterian sense, since it represents a flow of technical solutions that have already been generated elsewhere. Aid is, of course, intended to help to build the recipients’ capacities to help themselves, not to induce helplessness. But there is a danger that aid may become a panacea, a substitute or a turn-key remedy with limited learning effects for the recipient organisation and the new system. Aid must have something to offer in terms of knowhow or diffusion (‘fecundity’) in order to be reproductive. Aid, in order to induce creative innovation, must therefore present the absorbing organisation or innovative system with some critical, but missing, resources to permit ‘new combinations’ to be adapted locally. Let me state, in some detail, the points made so far in previous chapters, before discussing further evidence of—or prospects for—creative innovation generally in Poland and other countries of the former East European bloc with regard to environmental technology.

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Creative innovation in an evolutionary and national perspective Choice and ‘social capability’ I have argued that the ‘national systems of innovation’ approach in fact implies an unfortunate delimitation to micro-level (user-producer and network interaction) learning perspectives, rather than also comprehensively address national systems as whole systems. We also need answers to why and how national systems follow nation-level pathdependencies. No doubt, nation-level learning encompasses micro-level learning, but nation-level learning is more than the sum of subsystem learning. Abramovitz’s notion of ‘social capability’ and its adaptive dynamics comes to the point of what I have tried to suggest in interpreting the Polish conditions for learning: The content of education in a country and the character of its industrial, commercial, and financial organizations may be well designed to exploit fully the power of an existing technology; they may be less well fitted to adapt to the requirements of change. Presumably, some capacity to adapt is present anywhere, but countries may differ from one another in this respect, and their capacities to adapt may change over time. Next, the notion of adaptability suggests that there is an interaction between social capability and technological opportunity. The state of education embodied in a nation’s population and its existing institutional arrangements constrains it in the choice of technology. But technological opportunity presses for change. So countries learn to modify their institutional arrangements and then to improve them as they gain experience. The constraints imposed by social capability on the successful adoption of a more advanced technology gradually weaken and permit its fuller exploitation. (Abramovitz 1986:388–9) One must admire the eloquence of Abramowitz. Poland was in many respects adapted to Soviet-era technology requirements through the industrialisation of the early 1950s. As a post-Communist country, it has proved itself to be most adaptive to integration into the capitalist world economy. It has also shown that it has considerable adaptability in the ‘interaction between social capability and technological opportunity’, as Abramowitz calls it. CEE countries all ‘learn to modify their institutional arrangements and then to improve them as they gain experience’.

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In the first chapter propositions are made on how to address the ‘interaction between social capability and technological opportunity’ drawing on the growing body of evolutionary economic literature. David (1994:217) wrote: ‘Yes, institutions do “evolve” in a manner that shares important attributes with biological processes of evolution.’ But institutions are also to a great extent national, they work primarily within national systems, since they are often formalised by national governments. Why, then, is there only an evolutionary economic rather than a political science? Why is the national systems of innovation approach primarily economically oriented? I recalled some of the most important contributions by Deutsch (notably 1963), who might be considered a political science pioneer in this respect, and suggested a ‘new combination’ of Deutsch theory with some of the fundamental approaches of evolutionary economics and genetics. In particular, we noted Deutsch’s model of how nations as learning systems decide their fate (by wanting, sensing, doing and gaining) along developmental trajectories, much in the way that Waddington (1957), the biologist, described genetic assimilation along creodes or developmental canalisations. Competitive selection versus optimisation within national systems Matthews (1984), in a pilgrimage to Marshall’s Mecca, suggests choice by economic agents as a competitive selection process at work in a Darwinian analogy to the survival of the fittest. The competitive selection as defined by Matthews is, however, manipulated or guided by the national innovation system and their institutions; criteria for viability may be changed through incentive systems and other institutional instruments, i.e. selection is artificial, not natural. Not only may the intentional manipulation of selection be at work, but also unintended incentives or disincentives may exist. However, in manipulating or guiding selection through institutional change, national innovation systems also learn from experience, i.e. we do have institutional learning processes at national systems level. This implies that competitive selection mechanisms may become fundamentally reshaped as a consequence of the national innovation system and institutional changes. Selection mechanisms are at work in all phases of the learning cycle within trajectories of any technology, routine or mode of behaviour. Matthews distinguishes between (1) the origin, (2) the persistence and (3) the spread of a new technology, routine or mode of behaviour. Each trajectory of a technology, in the three phases of origin, persistence and spread, thus interacts with dominant and less dominant institutions, with very different results in different national systems. If natural selection processes are at work at the business level, the same is 150

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not true at the political level. Nations and governments are not selected, but some are elected for a period of political monopoly under certain systemsspecific institutional constraints. There is thus only one government at each point in time, i.e. there is a political monopoly creating new policy trajectories, not a set of competitive suppliers of political power or policies. Technologies, on the other hand, are selected by authorities, firms and individuals, i.e. undergo social selection processes in political and institutional habitats. For that reason, an evolutionary political science of innovation (a political type of economics) will have to combine notions of technological (which is seldom the same as organisational) competitive selection processes, and their interactions, with political and institutional environments. The institutional path shift From Soviet-type optimisation towards post-Soviet evolution? Soviet-type learning systems attempted to optimise processes under a cloud of uncertainty, while selection mechanisms never could improve learning due to the lack of variety. The Soviet Union as an innovation system was an extreme attempt at overall optimisation by central planning within the boundaries of political guidelines; the Matthews phases of origin, persistence and spread, therefore, were synonymous with administered choice, incorporation and diffusion.1 In the Soviet Union, the optimisation of origin (the choice of technology), when dealing with technological innovations and transfers, was predominantly made by the political leadership, sector ministries, State Committees, the Academy of Sciences, and so on, rather than independent enterprises. Consequently, the persistence phase of the optimisation process (the incorporation of the technology into Soviet industry) was a question of productive utility, rather than economic survival. Under optimisation, the spread (or commanded diffusion) was simply the organised replication or imitation of one item of technology into another production unit. Imitative innovation—i.e. optimised ‘technology assimilation’—has indeed been studied in some former Eastern bloc countries. On this issue, Hanson and Hill (1979) reported deficient use, problems of quality and extremely limited diffusion of Western technology in the USSR. The Soviettype pattern of problematic technology assimilation in Poland required a reform ‘to remove harmful systemic barriers and obstacles to innovation’ (Fallenbuchl 1983:87). Similar causes for problems of assimilation were found in a study of the Soviet assimilation of Swedish plant transfers (Sandberg 1989).

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Soviet-type barriers to learning from commercial plant transfers Chapter 2, in closer detail, describes the Soviet-type benchmarks of learning from Western plant technology through a centrally optimised imitation. These have been extracted from the only multivariate technology assimilation analysis known to have been made on the USSR (Sandberg 1989 on Swedish plant transfers 1970–85) and transfer project statistics and case evidence (Hanson and Hill 1979 on UK transfers 1950–70s). According to the suppliers, lead-times for negotiating, contracting and installing technologies in the USSR were generally longer than in most other market economy countries, and Soviet diffusion was rarely observed. Case study comparisons through regression analyses of transfer project variables indicate that typical Soviet ‘base values’ (intercepts in regression equations) of learning cycles are poor: slow selection, weak incorporation and hardly any diffusion (though limited adaptive modernisation is observed). To a limited extent this could be attributed to international embargoes which prolong technical negotiations since alternative solutions have to be developed. The ways in which the general weakness of the Soviet innovation system and the international barriers could be overcome was apparently to choose experienced suppliers for projects, which in the long run could provide or lead to foreign partnership in all stages of the contract: setting the agenda, defining the problem, implementing the appropriate technology, clarifying and routinising. Exporters’ experience of Soviet transfers played a role by reducing the learning lead-times, helping to achieve the intended capacity, and aiding the diffusion of the equipment. The Western supplier really played the role of ‘change agent’ (Rogers 1995) in the Soviet-type context. The Soviet end-user’s export orientation and other variables indicate that the level of longer-term priority to the industry in question was also crucial. Higher technical qualifications, for example, are important in providing conditions for the achievement of the intended capacity of the transferred technology. Exposure to world market competition, however, is the single variable that explains the improved Soviet quality levels of the products manufactured with imported plants! Basically, then, the Soviets tried to overcome substantial barriers to learning the complexities of Western plant technology by creating close and long-term collaboration with a selected group of Western suppliers which eventually would help them not only to become familiar with the technology prior to investment, but also to attain their capacity levels and provide for further widespread adoption development. The more advanced and prepared the Soviet industries were, the more successful they were in learning (imitatively) from this collaboration.

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Institutional transformation for environmental investments Poland has undergone drastic and far-reaching institutional transformations, which have influenced investment in environmentally sound technology (EST), as noted in Chapter 3. Such institutional transformations may be interpreted as ‘institutional learning’, or ‘routine mutation’ as suggested by Nelson and Winter (1982) and Lundvall et al. (1992), but they are in fact both adaptive institutional changes as elements of Poland’s integration into the world economy, the European Union, and other international regimes, such as the regime of environmentally sound and sustainable technological development, and institutional changes directed towards domestic restructuring, which facilitates improved ability to invest in EST. ‘One gets efficient institutions by a polity that has built-in incentives to create and enforce efficient property rights’, North (1990) concludes in his study of institutions and economic change. From that perspective one has to be impressed by the remarkably successful Polish record in boosting domestic resources for EST investment. Environmental investments grow in absolute figures and as percentage of GDP. While only 4 per cent of EST investments in 1992 were financed through international assistance, 58 per cent of investments were made possible due to funding from the national, voivodship and local environmental funds, i.e. through the collection of fines, and fees (OECD 1995c). This is thus an outcome of successful institutional build-up in a formal sense. Informal institutional changes are much trickier to grasp. Interestingly, unsustainable practices and learning of EST in addition have quite different balances in various areas of environmental protection. Air pollutants are being reduced due to improved efficiency, while improvements in the reductions of solid waste and waste water are largely due to reduced output. Sector differences in unlearning unsustainability are, to a great extent, the effect of comprehensive restructuring; decrease in some sectors and efficiency increase in others. While IMF requirements have largely set the frames for Polish macroeconomic policies, it is the EU that puts the greatest pressures on Polish institutional reform and learning towards EU environmental standards. This is the effect of the European agreement concluded between Poland and the EU, signed in 1991, and in force from February 1994. (After the Essen summit, Phare is also the major tool for pre-accession integration.) Thus, EU administrative support to Poland in the environmental field is of crucial significance. We can observe comprehensive programmes of projects from law making to technology management in the lists of EU environmental administrative projects in Poland. This does not mean, however, that other participants are passive. We also have major projects with the World Bank, EBRD, UN, NEFCO, as well as

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with Denmark, the Netherlands and other important bilateral project partners. The Environmental Action Programme for Central and Eastern Europe (EAP) also makes an important concerted international effort in this respect. However, there is obviously a particularly adaptive, integrative element in the EU activities in Poland. The first Polish lessons from EST aid assimilation Previous research on technology transfers to post-Communist Poland and the former Eastern bloc, including Russia, thus suggests that prevailing barriers to learning and technology assimilation may hinder East European economies from capitalising on existing opportunities for modernisation through aid. What ability does post-Communist Poland have to assimilate environmental aid? In Chapter 4 we looked closer into the project adoption and micro-implementation of the environmental aid projects reported in 1993, in particular lessons from the first eight projects that constituted all (!) environmental equipment transfers at the time and involved the transfer of ‘soft’ and ‘hard’ technology as a package. Polish learning by assimilating environmental aid was studied to explore not only the extent to which Soviet-type barriers are being overcome, but also the new factors that may hinder the post-communist assimilation of Western technology, in particular environmentally sound technologies. Aid agency commitments are, at least in Poland, often tied to specific supplier-technology combinations that cannot be altered by the recipient prospective adopter. In that sense, aid agencies, in co-operation with Polish authorities, make centralised decisions (as defined by Rogers 1995) in correspondence with Polish environmental policies and programme administration. The largest portion of projects adopted by 1993 (‘First Batch’) were financed by EU-Phare. Most projects focused on air and water protection, as well as ‘institutional learning’. Projects were not always related to the transfer of ‘hard’ equipment, but to a large extent involved ‘soft’, intangible technology transfers. At the time, implemented projects amounted to 7 per cent of commitments. The first eight EST equipment aid projects that were investigated in some detail formed 100 per cent of the environmental equipment actually installed at the time, yet it amounted to less than 2 per cent of all the committed environmental aid! Based on interviews with the first eight Polish EST aid recipients—i.e. thus all of those installed in 1993—and additional data on projects, this chapter reports that profitable EST aid projects are indeed being implemented, i.e. the installed equipment no doubt helps the recipient companies in producing secondary products from residuals, providing oilcombating services, selling more electric or hot water energy to local consumers, saving energy or providing sewage treatment for certain charges. In that sense, Poland has learned to overcome the Soviet-type technological 154

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learning barriers caused by centralisation and has achieved rapid, capacityreaching and locally adapted EST innovation through decentralised and commercial choice and incorporation. The Polish ability to overcome previous learning barriers is mixed, however. First, most of the EST aid projects were ‘mature’ and ‘incremental’, rather than ‘radical’, and the equipment purchases made by companies were based on aid and equipment offers. This explains why the proposal work and negotiation lead-times were shorter compared to the centralised Soviet style of plant acquisition. However, there were also some important exceptions from the predominantly ‘mature’ EST aid projects. Aid may obviously subsidise export ventures in new and otherwise untested technologies. In Poland, such transfers still have very little to do with indigenous EST development, however, since R&D is generally undertaken by the foreign supplier. Second, in those aid recipients that provide local (monopoly) services for district heating and sewage treatment, the technical and social implementation of the system did not coincide. For instance, the installation of pre-insulated pipes in the old town or Torun for the reduction of dust and SO 2 emission from local solid fuel heating systems was perfectly implemented from a technical point of view, but only 45 per cent of the households could afford to connect to the new heating system. Social implementation is obviously a feature that must be considered in future programme administration and project adoption procedures. (Learning in national systems may thus not equal the sum of learning among its organisations.) Third, the case of Soviet-style reverse engineering and diffusion—not very likely to be seen in the future, given international patents and intellectual property rights—is not conducive to catching up since obviously an existing technology is then ‘re-invented’. Obviously, judging from the evidence presented in this chapter, the stepby-step withering away of Soviet-type barriers to assimilating new technology will certainly take some additional time. We have, however, seen only the first post-Communist lessons in assimilating Western technology, in which Poland has succeeded in overcoming several Soviet-type barriers of learning. These barriers include the inertia that stems from a centralised system of technology adoption, as well as slow and often unsuccessful micro-level technical implementation. Seen in a longer perspective, the overcoming of further learning barriers will rely on these first experiences. Several of the first respondents are already discussing, preparing or implementing new and improved environmental systems. Later lessons may provide evidence of indigenous environmental technology research and development capabilities, depending on (a) the policies of the donor country in granting aid, (b) Polish strategic interests reflected in policies towards aid and (c) Polish adaptation to international agreements and accession to the 155

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EU. Catching up in indigenous EST capabilities is therefore made less unlikely if more aid is related to recipient in-house environmental R&D or if new paths of EST are introduced, such as new or less traditional energy systems. Thus, the major findings suggest that Poland has indeed overcome the previous Soviet-style of learning from optimised imitation. Purchases of technology have been decentralised, thus speeding up and more successfully adapting the implant of environmental aid. The use of technology, its maintenance and capacity levels benefit from end-users with financial resources and responsibilities. The widespread use of new technology, however, is hampered by the whole design of the aid under investigation; existing technologies, little or no in-house R&D at recipient or end-user level, etc. Reproduction and spread is still imitative or clonal, to speak in evolutionary terms. Steering towards ‘greener’ innovations? Evidence from aid projects so far indicates that they correspond to most of the Polish environmental priorities that were planned up to 1994–95 and defined in 1991. Seventeen projects deal with the ‘hot-spots’ that were defined in the 1989 Solidarity round table discussions. There is a proportionally large aid effort implementing energy, air, water and waste priorities while transportation and soil remediation policies have gained less aid. (To some extent, however, this can be a statistical issue; transportationrelated aid may not be considered to be ‘environment-related’.) There are also areas, however, which are not primarily motivated by Polish policies or aid implementation, but rather by the international regime as defined by treaties and conventions ratified by Poland. Ozone-depleting substances (ODS) is one case, biodiversity projects another. Such aid is naturally ‘softer’ in character (know-how rather than equipment), though not necessarily more ‘modern’ (based on high-tech, such as microelectronics, information and communications). International organisations, such as EUPhare, UN agencies, and the World Bank, dominate these aid programmes in Poland. A third category is ‘modern’ in the form of monitoring technology, i.e. creation, communication and analysis of data on the status of the environment. Though there are many national actors in this field, EU-Phare is dominant. Lastly, a large number of aid projects involve administrative support, i.e. something that can bear upon particular adaptations Poland has chosen to make, such as to the EU through a ‘European Agreement’. Such projects provide opportunities for ‘institutional learning’. EU-Phare, the Netherlands, the USA and the World Bank are the dominating actors in this administrative support. However, it is obvious that there must be a drastic improvement in feed156

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back in Poland, to enable those operating the innovation systems to learn from experience in creating institutions as selection environments that promote innovations in environmentally sounder directions. Canalising a ‘greener’ innovation path? Creative innovation? Perhaps aid is the form of transfer for which creative effects are hardest to find. Aid implies that the recipient organisation needs assistance, which in itself is not a promising starting point for the development of the kind of new combinations we call creative innovation. Indeed an investigation of aid to Central and Eastern Europe must consider its role in creating new paths for the national innovation system rather than importing—perhaps suboptimal—path-dependencies. The national innovation system is not fixed, but responds to increasing and evolving innovation needs. The more innovationdriven the economy, therefore, the more elaborate and specialised the system—and the less appropriate the modes of technology transfer that do not contribute to learning, creativity, and ‘new combinations’. Aid may be given in the form of technology transfer, sometimes of a ‘soft’, type (i.e. know-how). Technology transfer may take a whole variety of different forms, such as foreign direct investment, turn-key sales, licensing, joint ventures, subcontracting, software trade and document dissemination. Some of these forms or modes of transfer are adequate to different stages in the national system’s development. Kiebelas’s (1996) study of technology transfer and Polish structural adjustments follows Dosi et al (1990), Porter (1990) and Dunning (1981 with Narula 1993), and suggests those stages to be (a) factor-driven (Ricardian), (b) investment-driven (Keynesian), or (c) innovation-driven (Schumpeterian). In the factor-driven (Ricardian) stage, licensing, joint ventures and subcontracting will dominate as modes of technology transfer. In the investment-driven (Keynesian) stage, acquisitions and greenfield investments will dominate as modes of technology transfer. In Kiebelas’s view, this is where Poland is now. Foreign direct investments in Poland in 1993 were 46.4 per cent greenfield investments. The average of 36.1 per cent for Central and Eastern Europe as a whole indicates that Poland is ahead of other post-Communist countries in this respect. But Poland has not yet entered into the innovation-driven (Schumpeterian) stage. The existence of aid flows of an investment-driven character to Poland and other post-Communist countries thus supports the conclusion made by Kubielas (1996:18) on Poland: No clear signs of Schumpeterian restructuring could be found. This is not surprising, since Schumpeterian restructuring would require a 157

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fundamental reorganisation of the national innovation system, and of its core R&D sector, which has suffered particularly badly under transformation, both financially and in terms of the profound technological shock caused by the sudden opening-up of the economy. It will surely take time before enterprises, supported by the R&D infrastructure, can develop indigenous products and processes that will be competitive in world markets on account of high productivity and quality. Creative innovation—I agree—is thus still a phenomenon to hope for rather than to detect at present in Poland. Otherwise we would find the same green innovation diversity in Polish industries and municipalities as Darwin found variety among finches on islands in the Galapagan archipelago. Breeding of ‘greener’ post-Communism? There are no databases or systematic statistical sources describing the supply of environmental technology, products or services in East and Central European countries. Even the OECD has had to engage consultancy firms to acquire data on environmental investment and environmental markets in transition economies. The Regional Environmental Centre in Budapest has also been forced to produce a catalogue of environmental businesses in the region. Thus, an ECOTEC consultant (Haines 1996) reported to the OECD that East and Central European supply side for environmental products and services is characterised by few local firms, limited specialisation, limited expertise and a limited consultancy base. He had in mind the fact that, compared to the West, there are few local companies manufacturing or supplying pollution control goods and services, although the presence is stronger in Poland, Hungary and the Czech Republic. Manufacturers also tend to be generalists, often large enterprises, providing a range of equipment for the chemical and other process industries. The supply base is also strongest in the segments of basic technologies for particular abatement and for water treatment. Expertise in waste management, however, is particularly lacking, as well as all aspects of monitoring equipment. There is no Darwinian specialisation yet, obviously, from environmentally sound technology spread and adopted in post-Communist Central and Eastern Europe. Independent consultants, of course, were totally absent under the old system. Since the transitions started, some firms emerged, more so in East European countries, such as the Czech Republic, Hungary and Poland, than in the Independent States of the former Soviet Union. Poland was the most active pollution control market after East Germany in the early 1990s. However, in the words of the ECOTEC report, ‘the 158

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indigenous sector is immature’, and most technology and expertise is being found from external sources, either through purchase or joint-venture arrangements. There is a reported strength in some basic technologies, such as electrostatic precipitators and scrubbing equipment, but it is concluded that ‘the most effective technologies for the problems encountered are generally lacking’. The strongest sector is waste-water treatment, although improvements are possible in the aeration and sludge treatment technologies. Advanced treatment methods based on membrane techniques are not common. In the former Czechoslovakia, the pollution control equipment manufacturing industry was estimated to comprise about 150 firms in 1991. The strongest sector was waste-water treatment, but ECOTEC reports that the technologies in use tended to be limited to elementary treatment systems, such as sludge dewatering and aerobic digestion. The air pollution sector was weak in comparison, and the waste management sector virtually non-existent. After the velvet revolution, private sector consulting is still limited. Hungary had approximately 200 companies involved in the supply of pollution control equipment. The strongest sector was waste-water treatment, but there was also a reported expertise in basic air pollution control using venturi scrubbers, baghouses and electrostatic precipitators. There were no Hungarian manufacturers of incineration technology, however. Consultancy expertise is generally reported to be concentrated in research industries allied to the government industries. However, a small number of private consultancies are operating. Romania in 1991 had no identifiable pollution control equipment or consultancy sector. This reflected the fact that the country is less industrialised than most other East and Central European countries, and that environmental protection has had low priority both before and after the transition. Fewer than 100 companies were thought to be operative in 1991. Former Yugoslavia had only a relatively limited supply industry in 1991, with fewer than 100 firms manufacturing pollution control equipment. However, the firms that existed tended to be more specialised than elsewhere in Central and Eastern Europe, reflecting the traditionally more liberal regime (Haines 1996). In both emission abatement and effluent treatment, the range of technologies was extremely basic, and no local manufacturers of advanced equipment for waste disposal or treatment were reported. EST adoption of Central and Eastern Europe is limited and selective, it seems. However, the situation has changed rapidly. The ECOTEC report was based on data from 1991, a time when the number of environmental products and services companies in the whole region was around 700. Three years later, the Regional Environmental Centre (REC) reports estimate the 159

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same number of companies for Poland alone. The total revenue of the 150 environmental companies surveyed in Poland exceeded 110 mUSD in 1994—more than the combined total annual revenues in the 450 companies surveyed in Hungary and the Czech and Slovak Republics. Approximately half of the turnover of these major businesses were from environmental products. Evidence from the REC business survey suggested that the Czech Republic and Poland are more environmental product-intensive in their businesses than the Slovak Republic and, notably, Hungary, which are more technical services-intensive (Dzuray 1995).2 CEE environmental investment The OECD (1995d) has reported—in connection with the environment industry and markets in Central and East European countries—that governments in the region, while aware of the environment industry’s potential, have not pursued active policies to push its growth, and rely, instead, on private and foreign initiative to develop the industry. While, in the early 1990s, finance for environmental investments in the industry sector came mostly from state budgets and environmental funds, this is no longer the case. A later report from the OECD (1996b) indicates that in Bulgaria, the Czech Republic, as well as in the Russian federation, companies themselves primarily finance environmental investments (Table 6.1). Poland is unique in the way the country’s environmental funds provide the major source of financing. Only the Slovak Republic persists in a state budget financing system. Interestingly, while companies in the Czech Republic to a large extent finance environmental expenditures themselves, this system also sustains a high rate of environmental investments as percentage of GDP in a regional comparison (Table 6.2). The interesting Czech performance in investment as a percentage of GDP indicates a subject for further study. It may simply be a statistical artefact. Table 6.1 Sources of financing environmental expenditures in 1994 (per cent)

Source: OECD Environmental Indicators: A Review of Selected Central and Eastern European Countries. © OECD, 1996.

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Table 6.2

Environmental expenditures and investments in 1994 as percentage of GDP

Source: OECD Environmental Indicators: A Review of Selected Central and Eastern European Countries. © OECD, 1996.

The OECD (1995d) report states: The government’s estimate of total environmental investment (including construction costs), as a percentage of GDP, in 1993’, and ‘these figures are grossly overestimated’ (p. 44). However, asserts the report, ‘the completion of the “second wave” of privatisation will be a major milestone and increase Czech private sector’s contribution to the future environmental products sector and serve to provide a more typical balance between goods and services in the Czech industry’. In addition, the report finds that the future environmental market in the Czech republic will shift from the former focus on public investment in the air and water management sectors towards an increased emphasis in solid and hazardous waste management and soil and water remediation, and a greater role for the private sector. The driving forces for this shift are legislation regulating the activities of industrial and municipal waste stream generators, and the establishment of a Czech environmental fund. The general picture is thus one of increasingly implemented imitative environmental investments, rather than creative innovation. The major share of investments is directed, first, towards waste-water treatment and, second, towards air pollution control. Research and development plays a negligible role; instead, foreign investments are those in which new technologies are introduced. This involves both commercial and/or technical assistance and aid transfers of environmental technologies. In Poland, German (40 per cent of the total investment in the environmental industry), Dutch, Finnish, Austrian, Swedish, American, etc., enterprises are well represented in—mostly—equipment supply (75 per cent), and they are concentrated on water and waste-water treatment. In the Czech Republic, both domestic and foreign firms are operating. In Bulgaria, there is a nascent private sector which has established joint ventures with Dutch, Swedish, Swiss, Italian, British, and other companies (OECD 1996b).

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Innovation policy The emerging environmental industry is not the target of industrial or environmental policy support, yet the expected growth rate is in the range of 6–10 per cent, according to OECD estimates. What role should the Central/ East European policy maker have in the advent of EU accession? Obviously the Phare programme prepares the ground for environmental regulations and standards for industry and agriculture, waste-water treatment, air pollution abatement, and so on. An accession will certainly promote the further emulation of West European environmental regulations, thereby pushing for a process of imitative innovation accordingly. At the present stage of gross investment needs this might be the only successful route to pursue. In the longer run, the specific conditions and resources in Central and East European industry and technical resources must be thought of as niches for indigenous environmental innovation creativity giving fertile ground for specialisation into locally adapted EST innovation. In the shorter perspective, then, post-Communist policy must be to ensure the co-ordination of industrial, scientific and environmental policies with the requirements for EU accession. This is already under way and no doubt presents a strong institutional pressure on the accession states. Financial sources for environmental restructuring and innovation will be further accessible the closer the ties are to the EU. However, the local and private small firms with innovation potential must find appropriate niches in their struggle for survival in fierce competition with a growing foreign company sector, often in symbiosis with Phare as the EU accession machinery. Institutional conditions for an indigenous, creative rather than imitative environmental industry in Central and Eastern Europe constitute important stakes for the environment as the accession states enter into negotiations. The crucial first steps are taken now, on the basis of what is expected from the future in the EU regarding environment and innovation, perception of what is the domestic state of environmentally sound technology affairs, speed in fulfilling accession and innovation criteria, and actual gains from environmentally sounder innovation. Deutsch would call this the process by which ‘nations decide their fate’ based on what they want, sense, do and get. Even the simplest forms of viable learning require committed ‘wanting’, and committed wanting implies a certain direction for systems evolution. Deutsch, therefore, made the crucial point clear in stressing the combination of four words: ‘nations decide their fate’. If nations are not institutionally providing for technologically creative innovations, then they have to imitate, i.e. to follow creative pioneers. Initiators would then decide the fate of imitators. EU accession negotiations cannot blur this political-economic logic for any country, whether post-Communist or not. The important shift

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for post-Communist innovation systems is, then, to depart from Lamarckian and optimised intentions and imitations. The challenge is to ‘open up’ to a variety of non-optimised innovations and create the institutions which permit environmentally sound innovations to out-compete the unsound. Rather than Lamarckian imitation, post-Communist countries need variety, reproduction and adequate selection for greener innovations to evolve. Only then can they climb environmentally sounder peaks in the landscape of technological and institutional innovations.

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APPENDIX A Letter from Mr Haliniak, Secretary of the Polish Commission for Sustainable Development

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APPENDIX A

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Basic questions about the firm or organisation/recipient of aid Basic questions on the aid project The institutional setting of the aid project The assimilation and diffusion of the technology The firm’s R&D and other innovative activities

Some of the questions may be answered by referring to the annual report of the firm or organisation and evaluation of the project. Please provide data from the year of the aid project contract.

Questions will be either of multiple choice type or open. This means that some of the questions also provide the different possible alternatives and you have only to select one (or sometimes several) of them. Or they may be open, which means that you have yourself to give examples or specifications.

• • • • •

The questions in this questionnaire have been developed to improve the understanding of the process by which firms and organisations derive benefit from foreign aid in different forms. The themes of this questionnaire are:

About this questionnaire

Podstawowe pytania dotyczace firmy/organizacji (adresat pomocy) Podstawowe pytania dotyczace projektu pomocy Warunki instytucjonalne projektu pomocy Wdrazenie i rozprzestrzenianie sie technologii Dzialalnosc badawczo-rozwojowa firmy/orgamzacji oraz inne przedsiewziecia innowacyjne

Odpowiedzi na niektóre pytania beda wymagaly posluzenia sie rocznym sprawozdaniem finansowym lub innymi dokumentami firmy lub organizacji. Jezeli to mozliwe prosimy o dostarczenie tych danych poczawszy od roku zawarcia umowy o pomocy.

Pytania sa albo zamkniete albo otwarte. W przypadku pytan otwartych prosimy o udzielenie mozliwie wyczerpujacej odpowiedzi popartych przykladami. Na pozostale pytania prosimy odpowiedziec przez zakreslenie wlasciwej odpowiedzi lub, jesli jest to konieczne, kilku z nich.

• • • • •

Celem niniejszej ankiety jest wzbogacenie wiedzy na temat korzysci wynikajacych z róznych form pomocy zagranicznej otrzymywanej przez firmy i rganizacje. Ponizsza ankieta obejmuje nastepujace zagadnienia:

Informacje dotyczace ankiety

Questionnaire

APPENDIX B

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Glówne pytania dotyczace firmy lub organizacji

1. Nazwa i adres firmy/organizacji :

Imie i nazwisko osoby wypelniajacej ankiete, zajmowane stanowisko, tel./fax./e-mail:

2. Liczba zatrudnionych w roku zawarcia umowy (19_):

Liczba zatrudnionych w 1996 roku:

3. Rok zalozenia firmy/organizacji:

19_

4. Jezeli odnosi sie to do Panstwa firmy, jaka czesc eksportu byla skierowana do krajów rozwinietych w roku zawarcia umowy:

5. Prosimy o podanie ogólnej wartosci sprzedazy:

Basic questions about the firm or organisation

1 . Name and address of your firm/organisation:

Your name, title, tel/fax/e-mail:

2. Number of employees in the year of contract (19_):

Number of employees in 1996:

3. Year of establishment of the firm or organisation:

19_

4. If applicable, please indicate proportion of sales to developed economies to total sales at the year of contract:

5. What were the total sales in the year of contract ?

...................................................................................................................

6. Prosimy o scharakteryzowanie wytwarzanych wyrobów/uslug:

Przed rozpoczeciem projektu pomocy Panstwa firma stosowala technologie:

Czy istnieje podobienstwo miedzy technologia która firma posiadala i technologia oferowana w projekcie pomocy? Prosimy o podanie zasadniczych podobienstw lub róznic obu technologii.

6. Describe the products/services you provide:

The technology used before the aid project was:

Are there any similarities between the technology you had and the aid project technology? Please specify fundamental similarities, or differences:

.....................................................................................................................

7. Jakie byly calkowite koszty przedsiewziec innowacyjnych w roku rozpoczecia projektu pomocy?

Jaki byl udzial wydatków na prace badawcze i rozwojowe w roku zawarcia umowy (w procentach)?

W 1996 roku?

7. What was the total cost of overall innovative activity in the year of aid contract?

What was the R&D expenditure as a proportion of total budget expenditures in the year of contract (per cent)?

In 1996?

.....................................................................................................................

Subcontracted suppliers (names, addresses):

Contact person, tel/fax/e-mail:

9. Major supplier (name, address):

Overall aim of project (e.g. energy-saving or reduction of emissions):

Aid contract value:

Aid sources, addresses:

Basic questions on the aid project 8. Project title:

..................................................................................................................... Poddostawcy (nazwy, adresy):

Osoba kontaktowa tel/fax/e-mail:

9. Glówny dostawca (nazwa, adres):

Ogólny cel projektu (np. oszczednosc energii lub zmniejszenie emisji zanieczyszczen):

Wartosc projektu pomocy:

Zródla pomocy, adresy:

Glówne pytania zwiazane z projektem pomocy 8. Nazwa projektu:

Data pierwszego wniosku o pomoc od dostawcy zagranicznego (prosimy wskazac miesiac i rok):

11 . Data otrzymania pierwszej technicznej oferty pomocy od dostawcy zagranicznego (prosimy wskazac miesiac i rok):

12. Data otrzymania od zagranicznych dostawców i/lub agencji pierwszej oferty pomocy z podaniem kosztów (prosimy wskazac miesiac i rok):

10. Dates of your first request for proposal(s) from foreign supplier (please indicate month and year):

11. Date of first technical proposal from the foreign supplier (please indicate month and year):

12. Dates of first cost proposal(s) from the foreign supplier and/or aid agency (please indicate month and year):

.....................................................................................................................

__%

• other (please specify)

14. Date of contract signing (please indicate month and year):

100 %

__%

• own resources

Total =

__%

• government support/funds

__%

__%

__%

__%

= 100%

14. Data podpisania kontraktu (prosimy wskazac miesiac i rok)

Ogólnie

• pozostale (prosimy wyszczególnic)

• srodki wlasne

• srodki, fundusze rzadowe

• pomoc zagraniczna

• foreign aid

__% 1

13. Ocena kosztów projektu w momencie zawierania umowy. nominalna lub udzial procentowy)

13. Budget for the aid project at the time of contract (please indicate nominal values or ratio in per cent): (Prosimy wskazac wielkosc

.....................................................................................................................

15. Kto podejmowal jakiego typu decyzje w projekcie pomocy?

Kto podjal inicjatywe?

Czy inne projekty pomocy zostaly odrzucone?

Jezeli jeden projekt lub kilka projektów zostalo odrzuconych jaka glówna przyczyna o tym zadecydowala?

15. Who took what kind of decision about this aid project?

Who took the initiative?

Were other aid projects rejected?

If one or several projects were rejected, what was the crucial factor?

.....................................................................................................................

16. Jaka byla data pierwszej i ostatniej dostawy przewidzianej w kontrakcie (prosimy wskazac miesiac i rok)?

17. Jaka byla rzeczywista data realizacji pierwszej i ostatniej dostawy (prosimy wskazac miesiac i rok)?

16. What were the contractual dates of first and last delivery (please indicate month and year)?

17. What was the actual date(s) of first and last delivery (please indicate month and year)?

.............................................................

()

()

()

• under indirect influence of authorities, namely:

• under negligible influence by authorities, only by:

• pod nieznacznym wplywem wladz, polegajacym na:

• pod posrednim wplywem wladz, polegajacym na:

• pod bezposrednim wplywem wladz, polegajacym na:

W procesie wyboru lub akceptacji projektu pomocy (panstwa firma znajdowala sie):

In choosing or accepting this aid project, your firm was (tick one or several):

• under direct influence of authorities, such as:

18. Jak oceniliby Panstwo role Panstwa firmy w procesie podejmowania decyzji?

Warunki instytucjonalne projektu pomocy

18. How would you sum up your firm’s or organisation’s role in the decision?

The institutional setting of the aid project

..................................................................................................................... ()

()

()

19. Czy w procesie otrzymywania pomocy Panstwa firma byla przedmiotem oddzialywania rzadu przez :

• dotacje innowacyjne?

• standardy i zezwolenia ekologiczne i/lub oplaty/podatki?

• inne instrumenty polityki panstwa?

19. In receiving aid, were you influenced by Polish governmental policies, such as:

• innovation subsidies?

• environmental standards, permits or fees/taxes?

• other policy instruments?

.....................................................................................................................

20. In receiving aid were you affected by institutional changes related to transformation in Poland? Polsce?

20. Czy w procesie otrzymania pomocy na Panstwa firme wywieraly wplyw zmiany instytucjonalne zwiazane z transformacja w

.....................................................................................................................

21. Czy uwazaja Panstwo, ze projekt pomocy realizowany w Panstwa firmie wplynal bezposrednio lub posrednio (tj. poprzez oceny) na zagraniczne programy pomocy ekologicznej? Jesli tak, prosze podac w jaki sposób?

(Prosimy o dostarczenie oceny tych projektów, jesli znajduja sie one w Panstwa posiadaniu.)

21. Do you think that your particular aid project has influenced, directly or indirectly (i.e. through evaluations), foreign environmental assistance programmes? If yes, describe:

(Please provide any evaluations you may have.)

.....................................................................................................................

22. Jakie formy transferu technologii zostaly objete programem pomocy? (Prosimy zaznaczyc jedna lub wiecej odpowiedzi.)

• seminaria, kursy

22. What were the forms of technology transfer involved in the aid project? (Please indicate one or several.)

() () () () () () ()

• seminars, courses

• written matrials

• equipment/embodied

• installations including start-up assistance

• on-the-job training after installations

• after installation service, maintenance, spare parts

• other, please specify

• inne (prosimy wyszczególnic)

• servis, konserwacja, czesci zamienne

• pomoc techniczne w pierwszym etapie eksploatacji

• instalacja urzadzen lacznie z rozpoczeciem ekspoloatacji

• wyposazenie

• materialy pisemne

Wdrozenie i rozprzestrzenianie sie technologii

The assimilation and diffusion of the technology :

..................................................................................................................... ()

()

()

()

()

()

()

• zmiany procesu technologicznego • zmniejszenie emisjii zanieczyszczeñ • monitoring • inne:

• changes of the technological process • reduction of emissions • monitoring • other:

() () () ()

W jaki sposób transferowana technologia sprzyja osiaganiu celów w dziedzinie ochrony srodowiska:

How does the transferred technology (primarily) meet its environmental goal? Through:

() () () ()

() () () ()

• ochrona powietrza • ochrona wody • ochrona gleby • inne:

• air protection • water protection • soil protection • other:

() () () ()

23. Prosimy wskazac glówny cel ekologiczny osiagniety dzieki technologii programu pomocy:

23. Please indicate the main environment-related purpose of obtaining the aid technology:

.....................................................................................................................

24. Please specify, in detail, the goals of this technology (e.g. reducing 24. Prosze wyszczególnic cele tej technologii (np. redukcja emisji dwutlenku siarki o 80% w procesie spalania wegla lub 80 per cent of SO2 emissions from coal combustion, or monitoring nitrogen in sewage water): monitoring zawartosci azotu w sciekach):

.....................................................................................................................

26. Jaki rodzaj szkolenia zwiazany z projektem pomocy przeprowadzono w Panstwa firmie?

• szkolenie w pierwszym etapie eksploatacji • kontrola, nadzór • zarzadzanie • zadne z powyzszych • inne:

26. What type of project-related training was given in your firm?

• on-the-job training • supervision, control • management • none • other:

() () () () ()

Uwagi:

Comments:

• nowym procesem wytwarzania nowego produktu? • nowym procesem wytwarzania podobnego produktu? • podobnym procesem wytwarzania nowego produktu?

• a new process for a new product? • a new process for a similar product? • a similar process for a new product?

() () ()

25. Czy projekt pomocy jest:

25. Is the aid project:

..................................................................................................................... () () () () ()

() () ()

27. W jakim stopniu spozytkowano mozliwosci technologii pomocowej? (Prosimy wskazac wielkosc w procentach.)

Jezeli nie calkowicie, prosimy podac przyczyne:

27. To what extent has the capacity of the aid technologies been reached? (Please indicate percentage.)

If not completely, please indicate why:

.....................................................................................................................

If not completely, please indicate why:

Jesli nie calkowicie, prosimy podac przyczyne:

28. Was the intended effectiveness/quality of performance of the 28. Czy zostala osiagnieta zamierzona efektywnosc/jakosc dzialania transferred technology achieved? (Please indicate percentage.) transferowanej technologii (w procentach)?

.....................................................................................................................

Jesli nie calkowicie prosze podac przyczyne:

(Prosimy o dostarczenie oceny.)

If not completely, please indicate why:

(Please supply any evaluation.)

() () () () ()

• calkowicie • w wiekszym stopniu • w srednim stopniu • w mniejszym stopniu • wcale

• completely • to a major extent • to a medium extent • to a minor extent • not at all

() () () () ()

29. W jakim stopniu transfer technologii pomógl osiagnac cel w dziedzinie ochrony srodowiska? (Prosimy zaznaczyc jedna odpowiedz)?

29. In your view, how successful was the use of the technology in relation to environment-oriented project goals (please tick one)?

.....................................................................................................................

Prosimy podac, jakie adaptacje nastapily:

Czy adaptacje zostaly dokonane dla zwiekszenia walorów uzytkowych?

Czy adaptacje zostaly przeprowadzone dla podwyzszenia efektywnosci urzadzenia?

Please indicate the kinds of adaptations:

Have adaptations been made to enhance capacity?

Have adaptations been made to further improve effectiveness?

() () () ()

• w duzym stopniu • w srednim stopniu • w malym stopniu • w ogóle

• to a major extent • to a medium extent • to a minor extent • not at all

() () () ()

30. Czy po zainstalowaniu transferowana technologia byla modernizowana lub adaptowana w Panstwa firmie (Prosimy zaznaczyc jedna odpowiedz)

30. After installation, has the transferred technology been modernised or adapted in your organisation/firm (please tick one)?

.....................................................................................................................

Jesli zmodernizowane wersje juz istnieja, prosimy wskazac:

• co zostalo zmodernizowane

• jak zostalo zmodernizowane

• z jakim opóznieniem po zainstalowaniu u Panstwa technologii pomocowej (miesiac, rok)

• dlaczego zostalo zmodernizowane

If modernised versions already exist, please indicate:

• what was modernised

• how it was modernised

• with what delay after your first aid technology installation (months and years)

• why it was modernised

Nie ()

Tak ()

Yes ()

No ()

31. Czy otrzymana technologia jest obecnie przedmiotem modyfikacji w Panstwa firmie?

31 . Are you modernising aid technology at the moment?

.....................................................................................................................

No ()

How:

Why:

If yes, to which firms/organisations:

Yes ()

32. Has the transferred technology, as far as you know, been spread to other organisations/firms ?

..................................................................................................................... Nie ()

W jaki sposób:

Dlaczego:

Jesli tak, w jakich firmach/organizacjach:

Tak ()

32. Czy zgodnie z Panstwa wiedza transferowana technologia znalazla zastosowanie wsród innych firmach/organizacjach?

Jezeli takie istnieja prosimy podac:

Jakie to modernizacje i/lub repliki:

W jaki sposób (licencja, podrabianie, itp.)

Z jakim opóznieniem w stosunku do pierwszej instalacji (w miesiacach, latach):

If adapted versions exist, please indicate:

What kinds of adapted versions:

How (licensing, reverse engineering, etc.):

With what delay after your first aid technology installation (in months and years):

Nie ()

Tak ()

Yes ()

No ()

33. Czy zgodnie z Panstwa wiedza przygotowuje sie krajowe repliki lub modernizacje technologii pochodzacej z pomocy?

33. As far as you know, are there any domestic replicas or adaptations of aid technologies under way?

.....................................................................................................................

Prosze okreslic glówny cel ostatnich prac badawczorozwojowych:

• nowy proces wytwarzania nowego produktu • nowy proces wytwarzania podobnego produktu • podobny proces wytwarzania nowego produktu

Please specify the main purpose of the recent R&D:

• a new process for a new product • an adapted or new process for the same product • a similar process for a new product

() () ()

Na czym koncentruja sie prace badawczo rozwojowe?

What is the focus of your R&D?

Nie ()

Tak ()

Yes ()

No ()

Jesli tak, to czy zajmuje sie tym oddzielna komórka organizacyjna?

If yes, is it organised as a separate department within your firm?

No ()

Nie ()

() () ()

Tak ()

Yes ()

34. ls there any in-house R&D?

Dzialalnosc badawczo-rozwojowa firmy/organizacji oraz inne przedsiewziecia innowacyjne 34.Czy w Panstwa firmie przeprowadzane sa prace badawczorozwojowe ?

The firm’s or organization’s R&D and other innovative activities

.....................................................................................................................

If yes, what is the focus of your environmentally-oriented R&D?

Jesli tak, to na czym sie one koncentruja?

Nie ()

Tak ()

Yes ()

No ()

35. Czy w Panstwa firmie przeprowadzane sa prace badawczorozwojowe nastawione na ochrone, srodowiska

35. Do you have in-house environmentally-oriented R&D?

.....................................................................................................................

• ochrone powietrza • ochrone wody • ochrone gleby • inne:

• air protection • water protection • soil protection • other:

() () () ()

Zmiany technologii wplywaja pozytywnie na:

Changes in technology improve:

• zmiany procesu technologicznego • zmniejszenie emisjii zanieczyszczen • monitoring • inne

• changes of the technological process • reduction of emissions • monitoring • other:

() () () ()

36. Prosimy o wymienienie celu tych badan :

36. Please specify the purpose:

..................................................................................................................... () () () ()

() () () ()

No ()

With what benefits for you?

How?

If yes, which ones?

Yes ()

37. Is your firm/organisation systematically exchanging R&D-related information with other firms/organisations?

..................................................................................................................... Nie ()

Jakie przynosi korzysci Panstwa firmie?

W jaki sposób?

Jasli tak, prosimy wymienic z kim?

Tak ()

36. Czy Panstwa firma/organizacja systematycznie wymienia informacje zwiazane z przeprowadzanymi pracami badawczorozwojowymi z innymi firmami/organizacjami ?

Jaki jest cel tych nieformalnych kontaktów ?

Jaki rodzaj nieformalnych kontaktów nawiazala Panstwa firma z innymi firmami/organizacjami w dziedzinie prac badaczo-rozwojowych?

What kind of informal R&D contacts do you have with other firms and organisations?

What are the specific purposes of these informal contacts?

Jesli tak, prosimy wskazac cel tych projektów:

If yes, please indicate purposes of these projects:

Nie ()

Tak ()

Yes()

No()

38. Czy maja Panstwo formalne porozumienie o wspólpracy w dziedzinie badan i rozwoju z innymi firmami/organizacjami?

38. Do you have any formal R&D co-operation projects?

.....................................................................................................................

GLOSSARY

This glossary is intended primarily for those readers with a background in social rather than biological sciences. Within brackets I have suggested some translations of biological analogies into economic phenomena and terminology. Adaptation Alteration in trait or function as a consequence of having a lifehistory in a particular environment (the whole range of economic and technological systems, from macro- to microeconomic systems, products and processes all have traits and functions as a consequence of adaptation to the external and internal environment). Adaptive landscape As introduced by Wright in the 1930s, an adaptive landscape can mean two things: a surface in a multidimensional space that (1) represents the mean fitness of the population as a function of gene rival (allele) frequencies; or (2) a function defined in the genotype space. In the first case, the population is thus represented by a point on the surface, while in the second, the individual is represented by a point and the population therefore by a cloud of points. Adaptive peak A peak in the adaptive landscape, meaning that at this point, the individual or the population has higher fitness (higher probability of reproduction) than in the surrounding landscape. Adoption The act of choosing or taking as one’s own (in relation to policies and innovation this term is not controversial for social scientists). Ancestors Individuals of previous generations (innovations also have ‘ancestors’, such as previous versions of a software programme, or the typewriter keyboard, which is one—among many other—ancestors more remote in evolutionary time to the PC). Assimilation Absorption of external resources (technology assimilation is the absorption of external technological resources). Baldwin effect The adaptive mechanism by which learning increases the likelihood of reproduction (in economics, it may be argued that a production process, or its details, adapts by learning loops in a way which increases its survival and reproduction in the industry). 197

GLOSSARY

Bifurcation The point in evolutionary time in which population branches (‘clades’) depart from each other, i.e. the point where one species turns into two (in economics: e.g. while some railroad vehicles remained trains, others were adapted into trams/streetcars; rubber tyres likewise belong to the automotive clade, departing from the steel wheel branch or train technology). Breeding Artificial selection of individuals with desirable traits (such as political-economic policies allowing for some innovations to reproduce, while inhibiting or extinguishing others). Canalisation (of ‘creodes’) The phenomenon of change in the genotype due to drastic changes in environmental parameters (‘genetic assimilation’) so that Darwinian selection processes after a number of generations actually give pseudo-Lamarckian effects; see Baldwin effect (in economics, a drastic change in policies, such as shock therapy in postCommunist countries, will instantly ‘kill’ some innovations or prevent them from reproducing, thereby indirectly increasing resources available for others to thrive and spread—and over a number of generations, the surviving and reproducing innovation population will in fact create locally adapted ‘ecotypical’ innovation populations which quite fundamentally differ from the original survivors; they have then canalised into a specific, locally adapted path). Clines Environmental threshold values which change likelihood of reproduction. Clone An Individual having identical genes to its ancestor (in evolutionary political economics: imitation or imitative innovation). Communities Interacting populations which share partly or fully the same habitat. Competition The consequence of scarce resources for which species (interspecifically) and individuals (intra-specifically) compete (if customers’ purchasing power is the scarce resource, competition arises among available products and innovations; also within ‘innovation species’ in the way that customers choose how to satisfy needs, and within ‘innovation species’ in the way customers make priorities between types of purchases). Constraints Limitations of the environment: in terms of resources, other populations and environmental parameters. Darwinism The theory of evolution as a process caused by (1) variety among traits of individuals in a population, (2) some inheritance of such traits, (3) differences in adaptation to the environment, and (4) various reproduction values due to variety in adaptation among individuals. Descendants Individuals of subsequent generations or populations (see Ancestors). Domestication The result of artificial selection for ‘domestic’ purposes (see breeding). 198

GLOSSARY

Ecosystem A system formed by the interaction of a community of organisms with their environment (in economics: a system formed by the interaction of a community of innovations with their institutional environment—an ‘innovation system’). Ecotype Population of individuals specifically adapted to local conditions. Evolution Gradual change from one generation to another (see Darwinism and Lamarckism) Fecundity The degree to which offspring is produced (in economics: diffusion of innovations). Fitness Likelihood of reproduction (in economics: likelihood of diffusion). Gene The smallest unit of selection (in economics: analogous to ‘routine’, as defined in Lamarckian terms by Nelson and Winter (1982), or, in Darwinian terms according to Matthews (1984), the ‘mode of behaviour’; ‘meme’, as defined by Dawkins (1982) and (1989), is a more general analogy to the gene, applicable in the study of any human activities). Generalist Species adapted to a variety of niches (for instance, an industrial plant of low vulnerability to changing conditions of supply quality, reliability, etc. or any innovation perfectly applicable in most environments, such as solar-powered calculators). Generation The sequence from one parent to one offspring in terms of lifehistories (in evolutionary political economics, the time from ‘birth’ of an innovation or new version of a product, to ‘death’ as it is extinguished from the market and subsequently scrapped). Genotype The genes typical to one individual (in economics: modes of behaviour typical of one innovation). Gradients A value of an environmental parameter which influences the reproduction among individuals of a population (in economic terms this means that if production of a specific good varies in resource consumption as a function of one or many gradients, then that type of production is only found in particular habitats, i.e. under conditions defined by that same function). Grafting The transfer of a part of one individual of a population onto another individual of the same or another population (in politicaleconomics this is the case in technology transfers of any kind provided their already exists a recipient enterprise or organisation). Growth Increase in the number of individuals of a certain genotype, either as separate individuals or as new representatives of a clone (in evolutionary political economics: increase in number of individual innovations, either as new combinations or imitations). Habitat A typical territory for a species (in political economics: a typical territory for a type of innovation). Hybrid Offspring of a cross between individuals of (at least) two species (in the biological world there are only two sexes for specific evolutionary 199

GLOSSARY

reasons, which might not be at hand in the evolutionary economic world; for instance, many information technologies can be considered hybrids of telecommunications, computer and information industries in satisfying integrated needs of consumers). Implants Adoption of previously alien species (in economics: ‘inward’ technology transfers). Inheritance Gene transmission from individuals of one generation to individuals of a subsequent generation (in evolutionary politicaleconomics, the transmission of an idea, ‘routine’, ‘mode of behaviour’ or ‘meme’ from one version of a product or how to use it—the expression of that idea—to a subsequent product or way to use it). Intentionality Lamarckian mysticism saying that evolution is partly a matter of will (in evolutionary economics, Douglass North, Christopher Freeman and J.S.Metcalfe are representatives of the Lamarckian ‘mysticism’ of the intentionality of economic agents). Intercept Statistical term meaning the ‘base value’ given certain conditional values which are assumed then to be zero; i.e. the place in a regression equation where the line crosses the y-axis, given zero values of all other variables. Inter-specific competition Competition for scarce resources among individuals of different populations (see Competition). Inter-specific mutualism A relationship between two species in which both benefit (in economics: many cases of mutualism involve innovations of communication and infrastructure). Intra-specific competition Competition for scarce resources among individuals of the same population (see Competition). Lamarckism Evolutionary theory based—inter alia—on the mysticism of the will of organisms (intentionality) and inheritance of acquired characteristics. Learning Adaptive improvement during a life-history based on experience— something which requires, among other things, memory and a sensory system. Life-history Features of the life cycle of individuals of a population (in political economics: any life-history of an innovation). Macro-evolutionary Referring to evolutionary changes at a grand level, such as above the level of species and populations (in evolutionary political economics: long wave or techo-social transformations). Mating To bring together for breeding purposes; the process leading to sexual reproduction (in economics ‘mating’ can be argued to be the process by which certain production needs are met with the required new solutions, thereby leading to Schumpeterian new combinations, under conditions of certain institutions and the influence of specific innovation policies) (see Hybrid). Maturity The age at which reproduction should occur given favourable 200

GLOSSARY

environmental conditions (in economics this is the case when a product or process needs renewal by Schumpeterian new combinations for market survival in a longer run such as provided by engineering companies). Memory Function that makes learning possible by remembering experiences (in economics memory and learning are means for improved adaptation of processes in order to increase survival rates of products under market condition; memory is also essential at systems level for improving political breeding of desired innovations). Micro-evolutionary Evolutionary changes to the traits of a species—say better resolution of the eye—resulting in a change in gene frequencies within a population (in economics, micro-evolutionary changes correspond to product and process development which increases their survival and reproduction). Mutation An inherited change in the gene (in economics: a type of innovation, i.e. change of ‘routines’, ‘memes’ or ‘mode of behaviour’, as a consequence of random processes in the sense that there is no specific tendency for them to bring improved adaptation). Natural selection The opposite of artificial selection—used by Darwin to distinguish selection processes in nature from those of breeding under human control (in evolutionary political-economics ‘natural’ means anarchical, i.e. without control from higher systems). Niche A multi-dimensional space describing in resource dimensions how a species exploits resources (in evolutionary political economics: the adaptive improvement of a type of innovation). Offspring The result of sexual reproduction (perhaps best exemplified in economics by Schumpeterian new combinations, in which needs are met with new solutions). Optimisation ‘Rational intentionality’, the opposite of evolution and competitive selection. Path The same as evolutionary trajectory, i.e. the evolutionary change of genotypes in a population, generally between two bifurcations (in evolutionary political economics: the adaptive improvement of an innovation). Persistence Avoidance of extinction (an innovation may be argued to persist if it, like the ancient innovation of the plough, is not abolished). Population Individuals of a species (in economics: a product or innovation segment). Recognition system The system by which individuals in a population discriminate between environmental stimuli (in economics: marketing is used as a means to produce such stimuli). Reproduction Probability of survival, production of a new generation, or the process by which genes are copied (in economics: product or process diffusion). 201

GLOSSARY

Resource A parameter of the physical, biological or cultural environment (in economics: perhaps most importantly purchasing power). Selection Non-random difference in reproduction among individuals due to environmental parameters (either natural or artificial). Specialist Niche-specific population or resource-specific individual (or individual innovation). Species Mostly defined as a population of interbreeding individuals (or ‘populations’, say product segments, of innovations). Spread Reproduction and spatial diffusion of individuals (innovations). Survival Reproduction from a Darwinist point of view. Trait Character difference among individuals (innovations) or populations (types of innovations) which affect their reproduction (diffusion) in a specific environment. Trajectory The same as path; the evolutionary changes within a population, generally between two bifurcations. Viable/unviable The ability/incapacity of an individual (innovation) or population (type of innovation) to reproduce and persist either over a lifetime or several generations.

202

NOTES

1 Towards ‘greener’ post-Communism? 1

2

3 4

5

However, one might also consider issues (as do Carmines and Stimson 1989) the unit of selection, such as the greening of industry as it competes with other issues for political attention, or perhaps policies as those adaptations that fail or succeed in their implementation, i.e. are more or less ‘fit’ to the environment. Thinking in those terms, institutions are accumulated experience from issue and policy competition and adaptation, developing and evolving much like plant clones—they are territorially fixed, expand ‘vegetatively’ under long periods, while occasional mutations or sexually reproduced offspring may increase the next generation’s fitness and survival in that particular environment. On a more general level the approach advocated in this book is not only Darwinist but also ‘Dawkinist’ in the way that the projects, firms, agencies and innovation systems are considered (systems of) ‘extended phenotypes’ of innovative ‘memes’ (I go even further than Dawkins himself: see Dawkins 1982). Karl W.Deutsch, who died in 1992, was Professor of Political Science at a number of American Universities, the last being Harvard, and Director of Wissenschaftszentrum Berlin für Sozialforschung 1977–87. He was born in 1912 in Prague and emigrated to the United States in 1938. Lundvall (1992) and Johnson (1992) go back to Friedrich List (1841/1959) and Thorstein Veblen (1919) in tracing the roots of that idea. However, Deutsch adds, periods of pathological learning may on closer inspection turn out to be ‘periods of great fundamental growth and of the enrichment of the ensemble of learning resources and possibilities, which then in turn led to the emergence of novel and temporarily more relevant patterns’ (1963:171). The five-year plans even formally constituted laws, as they were accepted by the Supreme Soviet. 2 Soviet-type implants of innovation

1 2 3

For details of technical and statistical nature, see Sandberg (1989). Observe the fact that the accredited suppliers prolong the proposal work considerably (8 months), most likely because they receive requests much earlier than those companies having no local representation. Contract size and number of trainees, however, are of no significant importance. Similarly, spare part packages are normally included in export project deals like these, thus reducing negotiations by more than 8 months in the Soviet case. The

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expected application of the imported plant for exports prolonged negotiations further: another 8 months. KGB had a whole division only engaged in industrial espionage, as did the military intelligence, GRU (with residents at embassies and consulates). 3 Post-Communist Poland as habitat for greener innovations

1 2

See the analysis of stabilisation and growth in transition economies by Fischer et al. (1996), in which Poland was ahead of all other countries in transition in terms of inflation-growth correlation on average 1992–94. Most of the following data is from Berg (1995) and POLMEP (1993 and 1995) 4 First environmental aid projects: seeds of greener innovations?

1

The questionnaire was subject to seminar discussions at UNU/INTECH, was further commented on by Dr Anthony Arundel of MERIT (Maastricht Economic Research Institute on Innovation and Technology), and adapted to Polish conditions in co-operation with Prof. Adam Budnikowski of the Warsaw School of Economics and translated under his supervision. It is enclosed in Appendix A of this report. The personal interviews were made in July 1996 with the assistance of Tadeusz Szumanski, who made a great effort in writing and editing the Polish translation of the questionnaire, organising appointments and transportation, as well as meticulously clarifying and translating responses to the questionnaire. 2 In my view, a study of knowledge transfer has to be designed with control groups both after and before the transfer; i.e. comparison must be made with a representative non-exposed group both before and after a knowledge transfer project. Scientific rigour is much more important, since learning processes proceed with or without the specific knowledge transfer project and the nonexposed group will also learn along a parallel path. It will be very tricky to actually pinpoint cognitive elements and improved learning processes since control groups will also differ in other respects than the exposure to a knowledge transfer project. However, this is not the problem in this study. 3 One section of the POLMEP-MI list was a compilation of the names of all Polish firms which intended or hoped for co-operation with Swedish firms. Budnikowski (1996:117) writes in a recent publication: Sweden’s industry seemed to be specially well suited for broader participation in extending Poland’s capabilities in the arena of environmental protection in Poland for two specific reasons. Firstly, Swedish industry had a great deal of experience in the environmental arena. Secondly, Swedish policy-makers were interested in Poland’s environment. The reasons for the Swedish interest were both the large amounts of transboundary pollution affecting Sweden, the relatively lower marginal costs for improving environmental protection in Poland, and a substantial number of Swedish suppliers in that field (Sandberg 1992). 4

More interesting in terms of rapidly catching up and implementing the latest, environmentally sound boiler technologies are the Phare programmes 5 and 6 for the serial production by Rafako of flue gas desulphurisation plants for coal-

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fired power stations and the manufacture of atmospheric circulating fluidised bed boilers. With license agreements, Rafako will then be enabled to design, distribute, and manufacture desulphurisation and denitrification processes in energy production. Special thanks to Tadeusz Szumanski for his help in this work. 5 ‘Domesticating’ environmental aid in Poland

1

2 3

Though the concept of ‘international regime’ was introduced by Ruggie (1975), Keohane and Nye’s book (1977) gave the concept wider usage. Krasner (1983) defined ‘international regimes’ in a similar way; implicit or explicit principles, norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relationships. For a survey of ‘international regime’ literature, see also Andresen et al. (1995). Hodgson challenges Gomulka’s hypothesis on interesting empirical grounds (1996b). I have a number of titles in the topic ‘What factors determine aid?’, none of which I would like to mention here, since they either do not include geographical distance into regressions, or they include distance as a factor for journalistic consideration but fail to test it strictly as an independent variable. 6 Innovation under post-Communism: survival of the greenest?

1

2

Choice being the consciously induced—optimised—origin of an innovation, incorporation the consciously induced persistence, and Soviet-type push diffusion the consciously induced spread, to translate Matthews’ terminology (Sandberg 1989). However, reliability of REC data may be questioned on the basis of statistics reported by OECD (1995d), according to which environmental services approached 80–5 per cent of the whole environment industry in Central and Eastern Europe, the exception being Poland where manufacturing represents 75 per cent of the industry.

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Abramowitz, M. 19, 149 adaptive landscape, analogy to 12, 15, 18; peaks in 52 Agenda 21 11, 71, 84, 86–7, 89, 132, 144, 146 aid 3; against ozone-depleting substances (ODS) 145, 156; age and maturity of 90, 134, 155; as environmental technology transfer 77–107, 133–4, 154; as Polish choice 88–92; Austrian 119; Belgian 85–86, 97, 120, 124, 129, 143;bilateral 69–73, 77–107, 118–121, 126–30; Canadian 130, 138;capacity achievement in 94–6, Danish 86, 97–8, 100–1, 119–20, 123, 126–7, 138–9, 140–3, 145, 147, 154; ‘domestication’ of 110–147; Dutch 79, 83, 94, 97, 119, 120, 124, 127, 136, 138–39, 141–4, 154; environmental 69–73, 118–131, 154; environmental soundness of 89; environmental, by donor 99; environmental, by type 98, 133–4; feedback on 145–6;Finnish 79, 80–3, 85–6, 87, 90, 97, 101, 102–4, 119–20, 127, 137, 139–40; for agriculture and forestry 145; for ‘air quality priority’ 138–9;for ‘coal/ energy priority’ 137–8, for ‘drinking water priority’ 139; for ‘food crop dimunition priority’ 142;for ‘hotspot’ emergency 136–7; for nature conservation 144–5; for ‘solid waste priority’ 141; forms of environmental 78, 118–31; French 79, 119, 123–4, 130; German 119–20, 122–4, 126, 137, 140–1, 143; hardware projects

of 79; in terms of persistence of innovations 92–4; institutional and administrative 68–73, 145;investigation design and analysis of 76, 117; Italian 101, 122, 124, 130;Japanese 98, 119–20, 128, 137, 138, 141, 143; learning in processing 105–6; Norwegian 86, 97, 119, 120, 128, 138, 140–1, 143–4; personal interviews on sites of 76, 80– 97;project data access on 75–76, 117; spread of 96–7; Swedish 79, 85–86, 97, 101, 119–20, 127, 138, 140, 143–4; Swiss 85–6, 119–20, 127, 130; the ‘load’ of 117–131; UK 91, 101, 119, 122–4, 130, 142; US 86, 119–20, 129–30, 137–38, 141–2, 144 Arrow, K. 20 assistance, technical see aid automobile technology 9 Balcerowicz, L. 49–50, 52, 53 Baldwin effect 13 Baltic Sea 78–9, 81, 82, 89, 90–1, 92–6, 100, 112, 126 Beria, L. 17 biologism xiii Brezhnev regime 17, 30, 36 Bucharin, N. 51 canalisation, analogy to 13–4, 18, 157–163 Central and Eastern European (CEE) comparisons 55, 57, 62, 63–4, 117–20 commercialisation 53, 134 communication 9–10

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comparative analysis 7 cybernetics 13–22

Hodgson, J. xii ‘hybrid zone’, analogy to 10, 34–6

Darwin, C. 3 Darwinian evolution xi, 1, 2, 8, 9–11, 13, 22, 27 Darwinism, social xiii David, P. xiii, 150 Davies, N 51 debt swaps 68 Deutsch, K. xi, 4–6, 14–20, 30, 52, 146, 150, 162 diffusion 7, 41–2, 44, 96–7 Dosi, G. 5

imitations, analogy to 1, 4, 7, 134, 148 innovation, analogy to xi, 8– 9;pathological 15–8; Soviet-type barriers to 32–4, 148; persistence and ‘fecundity’ of greener? 75, 148–9; ‘innovation darwinism’ 1, 9, 26; creative 1, 4, 9, 12, 15, 25, 148, 157; imitative 1, 12, 15, 25, 29–45, 148, 157 institutions, concepts of xii, 2, 8–9, 12;as aid to Poland 68–73; as barriers to assimilation in Poland 115, 132; as ‘learning’ 8, 27, 73, 149, 154, 156; formal versus informal 50–51; in compliance with EU legislation 68; international 11–13, 64–8, 88, 111–113, 131; international asymmetry of 112–5, 132; path shift of 151–157; Polish 46–74; Polish creative building of 60; regional 64–68 Inter-ministerial Environmental Unit 60–61 International Monetary Fund (IMF) 52, 153 investments, Polish post-Communist 53, 56–60, 61; CEE environmental 160–61; financing of environmental 65; incentives for ‘greener’ 61–2, 148; transformed institutions for 153; ‘unlearning’ of 116; versus environmental aid 77 Iron Curtain, as evolutionary barrier 10

Ecofund 69, 89 Environmental Action Programme for Central and Eastern Europe 65, 154, 158–63 environmental fees 64 environmental policy 61, 62, 132–6 environmental problems 47–9; as industry emissions 59, 60, 63; postCommunist paradox of 48–9; Environmental Protection Bank 63 environmentally sound technologies 2, 11–2, 14, 46; investments in 58; in aid assimilation analysis 77– 107;Polish ‘informed choice’ of? 86–7; Polish policy for 132–6; Soviet-type legacy for 47, 132, 148 EU-Life 126 European Bank for Reconstruction and Development (EBRD) 69, 72, 118, 130, 137, 139, 153 European Commission 65, 85, 121–2, 125, 126 European Council 70, 122 European Investment Bank (EIB) 130, 137 Fallenbuchl, Z. 7, 25, 29, 114–5 ‘fitness’, analogy to 1, 2, 12 foreign direct investments (FDI) 57 Freeman, C. 5 ‘genetic flow’, analogy to 10 Gierek’s ‘new developmentment strategy’ 113 Gorbachev, M. 17 Helsinki Convention 1974 88

Khrushchev, N. 17, 21, 24, 30, 36, 114 Lamarckian evolution 8–11, 13, 15–25, 27 learning xi, 6, 8–9, 11, 14–20, 27;creative 15; pathological 15–8;viable 15; Leninism 18, 51 life history of innovations 30–2 liquidation of enterprises, Polish postCommunist 53, 57, 58, 59 Lundvall, B-Å 5, 32, 153 Lysenko’s theory of genetics 17, 35 Marwism 4–5, 26

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Marx, K. 3 Mass Privatisation Programme 54, 58 Matthews, R.C.O. 5, 23–5, 27, 29, 36, 75, 150 Mazowiecki government 49 memory 17, 51–2 Metcalfe, J.S. 9 micro-evolution 14, 18 microprocessors 10 modernisation 43, 44 modes of behaviour, analogy to 3 ‘mutations’, analogy to 1

pollution, solid waste 64; water 64 private sector 54–55, 56, 162 quality 34, 39–40 rational choice 18 recognition system, analogy to 34–5 reproduction barrier, analogy to 10 Ridley, M. 10 Rio Declaration 11, 131 routines 3 Sahal, D. 5, 13 Schumpeter, J. xi, 5–6, 157 selection 1, 10–11, 18, 23–5, 33, 51; among enterprises 55; among aid offers 87 shock therapy 52 Smith, A. 4 Solidarity 115, 156 speciation, analogy to 9–11 Stalin, J. 3, 21 Stalinism 16–17, 30, 51 systems steering 18–22, 27, 156

National Fund for Environmental Protection 58, 62, 63, 69, 71, 75, 88, 97 national systems of innovation, concepts of 5–6, 12, 14– 28;trajectories of 27, 149 National Wealth Fund 54 Nelson, R. xii, 153 new economic policy (NEP) 17, 51 North, D. xii—xiii, 8, 153 optimisation 4, 23, 25, 29, 33 ‘organisational genetics’ xii path-dependency 52 paths, analogy to 5, 18–22, 27, 148–9 perestroika 18 Perez, C. 10 Phare 70–71, 121–26, 138, 140–45, 147, 153–54, 156 Polish: Ministry of Environmental Protection, Natural Resources and Forestry (POLMEP) 58, 59, 60, 63, 64, 75–7, 84–6, 88, 97, 99, 117, 131, 132; Ministry of Privatisation 58, 61; privatisation 52, 54–5, 57, 59; State Inspectorate of Environmental Protection (SIEP) 59, 61, 131 political culture 51 political-economic evolution xi, 1, 8, 27

technology assimilation 25, 29– 45;analysis of 76; as environmental aid 76–107; barriers to in Communist Poland 115; 151–2, 154–5; in Communist Poland 113–115; technology culture 17 transportation 9 Upper Silesia 78, 81, 82, 83–4, 87, 94–6, 99–100, 142 Veblen, T. xiii, 8 Voivodship level environmental protection 58, 60, 62, 84, 131 Waddington C.H. 13, 18, 150 Winter, S.G. xii World Bank 58, 70–1, 85, 118, 128, 137–8, 145, 147, 153, 156

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