Question

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:

• A. Current Therapy
• B. Shock Therapy
• C. Fiscal Therapy
• D. Glasnost

Hint:

The economic transition model in Russia, Central Asia and Eastern Europe influenced by World Bank and IMF was known as Shock Therapy.

Additional Context:

• Implemented in the 1990s after collapse of Soviet Union
• Involved rapid privatization and liberalization
• Led to severe economic difficulties initially
• Different from Gorbachev's Glasnost (openness) policy
• Contrasted with more gradual reform approaches

Correct Answer: (2) Shock Therapy

Answer 1

The Correct Option is B

• Post-Soviet Russia, Central Asia, and Eastern Europe saw economic reforms significantly shaped by institutions such as the World Bank and the International Monetary Fund (IMF).
• This strategy prioritized a swift shift from centrally planned economies to market-based systems.
• Key components of this model included:
  • Immediate cessation of state subsidies,
  • Transfer of state-owned enterprises to private ownership,
  • Deregulation of trade and prices,
  • Encouragement of foreign investment.
• This rapid and abrupt policy was known as "Shock Therapy".
• While intended for rapid economic stabilization and expansion, it frequently resulted in acute inflation, job losses, and societal hardship in the initial stages.

Consequently, option (B) "Shock Therapy" is the accurate designation.