Consequences of shock therapy (Russia 1992)

cold war russia

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As per CBSE Class XII Examination point, “What was the consequences of the shock therapy 1992 in Russia?” is a very important questions.

In economics, shock therapy refers to the sudden release of price and currency controls, withdrawal of state subsidies, and immediate trade liberalization within a country, usually also including large-scale privatization of previously public-owned assets.

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In History such situation occurred in Russian during the cold war in 1992 when Russia made a sudden switch in their ideology. Consequences of shock therapy were-

  1. A large state owned industries were put up for sale at throwaway prices. This was known as the ‘largest garage sale’.
  2. The value of the Ruble (Russian currency) declined.
  3. Collective farm was removed with no food security.
  4. The old trading structure was broken without any alternative.
  5. The old system of social welfare was destroyed and the government stopped all subsidies.
  6. The middle section people in the society suffered those who were educated either migrated to different countries or disintegrated.
  7. A new Mafia emerged which tried to control economic activities by forces.
  8. Privatizations widen the gap between rich and poor.
  9. Domestic industries that were installed were not strong and were not even accountable.

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