Which of the following were the consequences of shock therapy administered in post-communist regimes?
(A) People lost their savings due to high rate of inflation.
(B) Valuable industries were undervalued and sold at throw away prices.
(C) Privatisation led to reduction of disparities between rich and poor regions.
(D) The withdrawal of government subsidies pushed large sections of the people into poverty.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (D) only
(A) People lost their savings due to high rate of inflation. Correct. The ruble declined dramatically.
(B) Valuable industries were undervalued and sold at throw away prices. Correct. This was called ‘the largest garage sale in history’.
(C) Privatisation led to reduction of disparities between rich and poor regions. Incorrect. Privatisation led to new disparities; post-Soviet states were divided between rich and poor regions.
(D) The withdrawal of government subsidies pushed large sections of the people into poverty. Correct.
NCERT (2025-26): “Consequences of Shock Therapy … Since the restructuring was carried out through market forces and not by government-directed industrial policies, it led to the virtual disappearance of entire industries. This was called ‘the largest garage sale in history’, as valuable industries were undervalued and sold at throwaway prices. Though all citizens were given vouchers to participate in the sales, most citizens sold their vouchers in the black market because they needed the money. The value of the ruble, the Russian currency, declined dramatically. The rate of inflation was so high that people lost all their savings. The collective farm system disintegrated leaving people without food security, and Russia started to import food. The real GDP of Russia in 1999 was below what it was in 1989. The old trading structure broke down with no alternative in its place. The old system of social welfare was systematically destroyed. The withdrawal of government subsidies pushed large sections of the people into poverty. The middle classes were pushed to the periphery of society, and the academic and intellectual manpower disintegrated or migrated. A mafia emerged in most of these countries and started controlling many economic activities. Privatisation led to new disparities.…” |