Shock Therapy in Post-Communist Regimes
- The collapse of communism was followed in most of these countries by a painful process of transition from an authoritarian socialist system to a democratic capitalist system.
- The model of transition in Russia, Central Asia, and East Europe that was influenced by the World Bank and the IMF came to be known as ‘shock therapy’.
- Shock therapy varied in intensity and speed amongst the former second-world countries, but its direction and features were quite similar.
- Each of these countries was required to make a total shift to a capitalist economy, which meant rooting out completely any structures that evolved during the Soviet period.
- Above all, it meant that private ownership was to be the dominant pattern of ownership of property. Privatization of state assets and corporate ownership patterns were to be immediately brought in.
- Collective farms were to be replaced by private farming and capitalism in agriculture.
- This transition ruled out any alternate or ‘third way’, other than state-controlled socialism or capitalism
- Shock therapy also involved a drastic change in the external orientation of these economies. Development was now envisaged through more trade, and thus a sudden and complete switch to free trade was considered essential.
- The free trade regime and foreign direct investment (FDI) were to be the main engines of change. This also involved openness to foreign investment, financial opening up or deregulation, and currency convertibility.
- Finally, the transition also involved a break up of the existing trade alliances among the countries of the Soviet bloc.
- Each state from this bloc was now linked directly to the West and not to each other in the region. These states were thus to be gradually absorbed into the Western economic system.
- The Western capitalist states now became the leaders and thus guided and controlled the development of the region through various agencies and organizations.
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Consequences of Disintegration| Class 12 Political Science Notes
The disintegration of the Soviet Union in 1991 was a major event in world history. It marked the end of the Cold War and the beginning of a new era in international relations. The consequences of the disintegration were far-reaching and are still being felt today. The collapse of the second world of the Soviet Union and the socialist systems in Eastern Europe had great consequences for world politics. In this article, we will discuss the consequences of the disintegration of the Soviet Union in detail.
Table of Content
- The End of Cold War Confrontations
- Power Relations in World Politics
- The End of the Soviet Bloc
- Shock Therapy in Post-Communist Regimes