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 ____.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Shock Therapy
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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.
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This approach was called Shock Therapy, because it involved sudden and sweeping reforms like:
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Ending state subsidies and price controls,
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Mass privatisation of state-owned enterprises,
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Opening markets to foreign trade and investment.
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It created economic hardship in the short run, including unemployment, inflation, and inequality.