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What were the Consequences of the shock therapy in Russia 1992?

As per CBSE Class XII Examination point, “What were the consequences of the shock therapy 1992 in Russia?” is a crucial question.

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

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

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