Question

9. What was Shock Therap? Was this the best way to make a transition
from communism to capitalism?​

Answer 1

Answer:

In economics, shock therapy is the sudden release of price and currency controls, withdrawal of state subsidies, and immediate trade liberalization within a country, usually also including large-scale privatization of previously public-owned assets.

This was not the best way to make a transition from communism to capitalism due to the following reasons :

(i) It brought ruin to the economies and disaster upon the people of the entire region.

(ii) In Russia, the large state-controlled industrial complex almost collapsed. There was the largest garage sale in history, as valuable industries were undervalued and sold at throw away prices.

(iii) The value of the ruble- the Russian currency declined.

(iv) People lost all their savings due to high rate of inflation.

(v) The collective farm system disintegrated and people were left without food security. Russia started to import food.

(vi) The old trading structure broke down with no alternative in its place.

(vii) The withdrawal of government subsidies pushed large section of the people into poverty.(viii) Privatisation led to new disparities between rich and poor regions.(ix) The democratic constitutions of these countries were prepared in a haste and therefore, includedmany defects. For example in Central Asia, the presidents had powers and some of them became authoritarian.There was no independence of judiciary in some countries.

Answer 2

Answer:

Shock Therap is a painful process of transition from the an authoritative socialist system to

a democratic captilist system after the collaspe of communism.

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