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.