Russia, Central Asia, and Eastern Europe were required to make a complete shift to a capitalist economy, under the influence of the World Bank and the IMF, rooting out structures evolved during the Soviet period. Which term best defines this transition?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Shock therapy
The model of transition in Russia, Central Asia and east Europe, influenced by the World Bank and the IMF, came to be known as ‘shock therapy’: each country had to make a total shift to a capitalist economy, rooting out every structure of the Soviet period.
Option (2) Globalization Incorrect. Globalisation is about worldwide interconnectedness created by flows of ideas, capital, commodities and people across the world. It is a much wider process, not the name of this particular model of transition imposed on the former Soviet bloc.
Option (3) Mercantilism Incorrect. Mercantilism is an old trade policy in which a state tries to export more than it imports and to pile up wealth, with heavy state control of trade. It is the opposite of a sudden opening to a free capitalist market.
Option (4) Welfarism Incorrect. Welfarism is the idea of the ‘welfare state’, which carries out welfare functions directed at economic and social well-being of its people. Shock therapy went the other way: state-controlled structures were rooted out, private ownership became the dominant pattern, and the market, not the state, was to decide economic priorities.
Note: The concept in Option (3), ‘Mercantilism’, is not in NCERT (2025-26); explained here for the benefit of the students.
NCERT (2025-26): “Shock Therapy in Post-Communist Regimes … The collapse of communism was followed in most of these countries by a painful process of transition from an authoritarian socialist system to a democratic capitalist system. The model of transition in Russia, Central Asia and east Europe that was influenced by the World Bank and the IMF came to be known as ‘shock therapy’. Shock therapy varied in intensity and speed amongst the former second world countries, but its direction and features were quite similar. Each of these countries was required to make a total shift to a capitalist economy, which meant rooting out completely any structures evolved during the Soviet period. Above all, it meant that private ownership was to be the dominant pattern of ownership of property. Privatisation of state assets and corporate ownership patterns were to be immediately brought in. Collective farms were to be replaced by private farming and capitalism in agriculture. This transition ruled out any alternate or ‘third way’, other than state-controlled socialism or capitalism.” |