What is shock Therapy? What were it's consequences.

Consequences of the Shock Therapy

The shock therapy ruined the economies of Russia and east European countries.

• About 90% of industries in Russia were put up for sale to private individuals and companies
• Since restructuring was carried out by market driven forces and not by the government implement policies, there was a disappearance of almost all industries in the region. Valuable industries were undervalued and were sold at throwaway prices. This came to be known as “the largest garage sale in history”.
• The value of the Russian currency, ruble declined considerably. People lost all their savings because of high rate of inflation.
• The collective farms disintegrated leaving people without any food security. Russia began to import food. Its old trading structure broke down without any alternative in its place.
• The government withdrew subsidies on various goods and services which further pushed people into poverty. In such a situation mafia began to control economic activities in Russia. Privatisation led to greater inequalities among the people
• Establishment of democracy was not given a priority. Constitutions of the former republics of the USSR gave wide powers to the President. The President in some eastern European countries became dictators.