The essentials
After the fall of communism, Russia, Central Asia and the countries of Eastern Europe began a transition from an authoritarian socialist system to a democratic capitalist system. The model of transition adopted in many of these countries, influenced by the World Bank and the International Monetary Fund, came to be called shock therapy.
Shock therapy meant a rapid and complete change. Private ownership replaced state ownership, collective farms gave way to private farming, state-controlled trade was replaced by free trade, and economies were opened to foreign investment. Ties among the former Soviet bloc countries were reduced in favour of direct links with the West.
Key points
- The large-scale sale of state enterprises in Russia has been described as "the largest garage sale in history", because valuable industries were sold at very low prices.
- The value of the Russian rouble fell sharply and inflation rose steeply, wiping out people's savings.
- The old system of social welfare was dismantled, and many people faced poverty; inequality between rich and poor increased.
- New constitutions and elections were introduced, but in several states power became concentrated in the hands of the executive.
- Conflicts arose in some regions: Chechnya and Dagestan in Russia; the break-up of Yugoslavia into several states, with conflict in Bosnia and Herzegovina and later in Kosovo; and a civil war in Tajikistan.
- Czechoslovakia divided peacefully into the Czech Republic and Slovakia in 1993.
- Central Asian states with oil and gas reserves attracted interest from outside powers.
Exam tips
Be ready to list the main features of shock therapy and its consequences. Questions often describe a situation (for example, the sudden sale of state industries) and ask you to name the policy.
Common mistakes
- Thinking shock therapy was a gradual transition. Its defining feature was speed.
- Assuming every post-communist break-up was violent; Czechoslovakia's division was peaceful.