Question

Q. With reference to the World Politics of the 20th Century, what is meant by 'Shock Therapy '?

• A.
  A transition Model from Socialism to Capitalism in former Communist Countries.
• B.
  Economic Reforms initiated in Decolonized Nations during early phases of development.
• C.
  It was a rapid transition towards Nuclearisation by non Nuclear States.
• D.
  Disintegration of Cold War blocs as a result of the USSR policies of 'PERESTROIKA 'and 'GLASNOST

Answer 1

The correct option is A

A transition Model from Socialism to Capitalism in former Communist Countries.
Explanation:

The collapse of communism was followed in most of these countries by a painful process of transition from an authoritarian socialist system to a democratic capitalist system. 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 ‘shock therapy’. Shock therapy varied in intensity and speed amongst the former second world countries, but its direction and features were quite similar. Shock therapy also involved a drastic change in the external orientation of these economies. Development was now envisaged through more trade, and thus sudden and complete switch to free trade was considered essential. The free trade regime and foreign direct investment (FDI) were to be the main engines of change. This also involves openness to foreign investment,financial opening up or deregulation, and currency convertibility.