Practicing Success
Which engines of change were considered essential in the shock therapy model in post-Soviet countries? |
State-owned enterprises Trade restrictions Free trade regime and foreign direct investment (FDI) Collectivization |
Free trade regime and foreign direct investment (FDI) |
The main engines of change in the shock therapy model were the free trade regime and foreign direct investment (FDI). Shock therapy also involved a drastic change in the external orientation of these economies. Development was now envisaged through more trade, and thus a 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 involved openness to foreign investment, financial opening up or deregulation, and currency convertibility. Finally, the transition also involved a break up of the existing trade alliances among the countries of the Soviet bloc. Each state from this bloc was now linked directly to the West and not to each other in the region. These states were thus to be gradually absorbed into the Western economic system. The Western capitalist states now became the leaders and thus guided and controlled the development of the region through various agencies and organisations. |