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

• The economic reforms implemented in Russia, Central Asia, and East Europe after the collapse of the Soviet Union were influenced heavily by institutions like the World Bank and the International Monetary Fund (IMF).
• This approach emphasized rapid transition from a centrally planned economy to a market-based economy.
• The model involved:
  • Sudden removal of state subsidies,
  • Privatization of state-owned enterprises,
  • Liberalization of trade and prices,
  • Opening up to foreign investment.
• This drastic and immediate approach was termed "Shock Therapy".
• Though it aimed at quick stabilization and growth, it often led to hyperinflation, unemployment, and social distress in the short term.

So, the correct answer is (B): Shock Therapy