This phenomenon of change without transition is manifested in both the supply of and demand for science in the Russian economy. It can be seen, for example, in (i) the patterns of S&T spending, (ii) the evolving structure of the S&T labor force, and (iii) the evolving structure of R&D institutions (the supply side of the equation) as well as in (iv) the demand for scientific output by Russian enterprises.

(i S&T Spending. R&D spending from all sources as a share of GDP decreased from 2.03% in 1990 to 0.93% in 1998 before rising slightly to 1.06% in 1999. It is now far below the OECD average of 2.4%. It is important to keep in mind that GDP was falling during most of this period, so in absolute terms the decline was even more significant. For example, in constant 1991 prices, federal government budget appropriations on S&T declined from RUR 25 million in 1991 to RUJR 4.56 million in 1999, a decline of nearly 80% in real terms.<sup>16</sup> In view of the fact that only a portion of appropriations resulted in actual expenditures, the published appropriations data may actually underestimate the severity of the decline.

As a result, Russian S&T spending on a per capita basis is far below the levels observed in most OECD countries. According to the Government's economic reform program, "In 1998 domestic spending per capita on R&D in Russia was $61, compared with $794.40 in the United States, $715 in Japan, and $510.60 in Germany. Consequently, by 1999 in terms of spending on science Russia found itself in a group of countries with little scientific potential (Hungary, Greece, Portugal and Poland)."''<sup>7</sup> Russia's relative situation is even worse when measured in terms of government spending per scientist. In 1996, for example, total R&D spending per scientist amounted to $189,000 in the US, $148,000 in Japan, $177,000 in France, approximately $150,000 in Germany and the UK, and $5000 at the Russian Academy of Sciences, the pinnacle of the Russian scientific establishment.'<sup>8</sup> At the same time that the quantity of spending has declined, the source and quality of spending has not adapted to the requirements of a market economy. In 1999, for example, the Russian government was still financing 54% of R&D expenditures (compared to an OECD average for government R&D financing of 35%) and Russian industry was financing 35% of total R&D outlays (compared to an OECD average of 62%).'

- 16 S&T at a Glance. 2000. Center for Science Research and Statistics, Ministry of Industry, Science and Technology, Figure 4.1 and Figure 4.3.

- 7 For details see, Development Strategy of the Russian Federation Until 2016, Chapter 3.3, "The Innovation-Based Development of the Economy," Moscow, 2000.

- **18** Quoted in Natalia Zolotykh et. al., Creation Of Legal, Organizational And Economic Conditions For Innovation Activity As A Factor Of Activation Of Effective Modernization Of Branches Of Industry, Report On The "Analysis Of The Status Of The Innovation System Of The Russian Federation" Prepared Under Contract N ERB IC15-CT98-1002, stage N 1, 1999, p. 89.

- **'9** International grants accounted for the remaining portion of Russian R&D funding. All data are from Daniel Malkin, "Science and Technology in Russia: Trends and Policy Challenges," unpublished OECD manuscript, 2001. Malkin asserts that the reported share of business R&D spending in Russia