SHOCK THERAPY IN POST COMMUNIST REGIMES
Shock Therapy in Post Communist Regimes
- The model of transition from an authoritarian socialist system to a democratic capitalist system in Russia, Central Asia and East Europe which was influenced by the World Bank and the IMF came to be known as ‘Shock Therapy’.
- It also involved a break up of the existing trade alliances among the countries of the Soviet bloc.
- Largest Garage Sale.
- This process of transition was due to the Collapse of Communism.
- There was a need to make a total shift to a capitalist economy which meant rooting out completely any structures evolved during the Soviet period.
- Shock therapy also involved a drastic change in the external orientation of these economics.
Consequences of Shock Therapy
- Ruined Economies and disaster upon the people of the entire region.
- ‘Ruble’ declined. People lost all their savings due to high rate of inflation.
- The government withdrew subsidies which pushed large sections of the people into poverty. The middle classes were pushed to the periphery of society.
- The construction of democratic institutions was not given the same attention and priority as the demands of economic transformation.
- Most of these economies, were not able to revive their economies.
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