The model of transition from a socialist system to a capitalist system in Russia, Central Asia and East Europe, advocated by the World Bank and International Monetary Fund (IMF) after the collapse of the Soviet Union is known as ____.

Shock Therapy

The correct answer is Option (4) → Shock Therapy

• After the collapse of the Soviet Union (1991), the World Bank and IMF pushed for a rapid transition from socialism to capitalism in Russia, Central Asia, and East Europe.

• This approach was called Shock Therapy, because it involved sudden and sweeping reforms like:

  • Ending state subsidies and price controls,

  • Mass privatisation of state-owned enterprises,

  • Opening markets to foreign trade and investment.

• It created economic hardship in the short run, including unemployment, inflation, and inequality.