Shock Therapy Essay

After the dissolution of the Soviet Union in 1991, the question of economic reform was extremely prevalent. Since the Soviet Union had been “defeated,” Communism was consequently defeated. This resulted in Western powers, particularly the United States, and Western banks debating what should be done to the post-Soviet economies. At the same time, however, non-Soviet states were also undergoing economic transitions. The two main modes of economic reform were Shock Therapy and Gradual therapy. Shock therapy consisted of a rapid-fire shift from a Communist economy to a capitalist one. Shock therapy was notably practiced in Russia and Poland, with tremendously different results. The most well-known gradualist transition may have been China, but

Gradual therapy proponents, on the other hand, favored a considerably slower approach. They believed that Communist states lacked the structure to maintain a rapid shift to Capitalism, and it would just result in extreme poverty and anarchy. The debate was not restricted to immediately after the fall of the Soviet Union, but has continued into the twenty-first century. Jeffrey Sachs, Martha De Melo, and Anders Aslund were all advocates of the Shock Therapy approach. Others such as Vladimir Popov, Thomas Hall, John Elliot, Andras Koves, and Vivek H. Dehejia focused more on analyzing the debate and did not seem to focus on taking a side. Advocates of gradual therapy include Joseph Stiglitz, Katherine Verdery, and Jessica

Ronald Grigor Suny addresses these concerns when discussing the shock therapy transition of Russia. Suny postulates that the economic hardships that accompanied the transition undermined public support. Due to the lack of support, Yeltsin had to make concessions, which then undermined the transition itself. As Sachs and Hale said, the transition had to be done in full, without half measures. Furthermore, the Central government of Russia had been breaking down ever since the dissolution of the Soviet Union. The country had broken down into many loosely formed feudalistic icebergs, as Katherine Verdery defines it. Mob lords and other similar practices of corruption ruled the suzerainties. Because of this complicated dichotomy, there was never a unified front of cooperation that existed to advance the shock therapy