Question

'Shock Therapy brought ruin to the economies of the former republics of the Soviet Union.' Justify the statement with any two arguments.

Answer 1

Particularly in former Soviet Union states following the fall of the USSR, the 'Shock therapy' refers to the quick implementation of market-oriented changes in once centrally planned economies.

1. Social Disruption and Unemployment: Shock treatment sometimes consisted of the sudden liberalization of prices, the elimination of subsidies, and the privatization of state-owned businesses, therefore upsetting social order and unemployment. Although these changes sought to quickly shift to a market economy, they caused substantial social unrest and unemployment. Often inefficient but using a lot of people, state-owned businesses were rapidly sold off or closed. Mass layoffs and financial difficulty for many people who were not ready for the abrupt change followed from this. Rather than the expected economic development, the resultant unemployment and societal discontent added to economic instability.
2. Collapse of Social Safety Nets: Shock therapy was rapidly applied without sufficient social safety nets in place to help people negatively impacted by the changes. Vulnerable groups such as the elderly, crippled, and low-income families were left without enough support when state-provided programs were cut back on or removed. This resulted in lowered living standards and rising poverty rates in many places. The shock treatment technique aggravated inequality and social divisions inside these countries, therefore impeding their economic growth, without appropriate means to minimize the negative effects of the change.