Shock Therapy
충격요법
An economic reform strategy that simultaneously implements price liberalization, mass privatization, trade liberalization, and tight monetary and fiscal policies to achieve a rapid transition from a planned economy to a market economy. Theorized by Jeffrey Sachs and others, its most notable application was the price liberalization launched by Yegor Gaidar in Russia on January 2, 1992 under the Yeltsin government. The idea of injecting market forces simultaneously without first building institutions led to output collapse, hyperinflation, and surging poverty; outcomes ranged from relative success in Poland to prolonged regression in Russia.
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Sources
- Wikipedia (EN) overview of shock therapy as an economic doctrine: simultaneous liberalization, privatization, stabilization; origins in post-war Germany, Chile 1975, Bolivia 1985, and post-Communist states including Russia under Gaidar.
- Wikipedia (RU) Russian article: defines shock therapy as radical economic reforms based on laissez-faire, with the Russian case (1992–1998) detailed as non-classical due to failure to control inflation.
- theguardian.com The Guardian obituary: Gaidar launched shock therapy programme in January 1992 by deregulating prices, removing barriers to private trade, cutting subsidies; dubbed himself part of an 'economic kamikaze team'.