question_answer

What is meant by 'Shock Therapy'? Explain any four consequences of Shock Therapy.

Or

Explain the idea of New International Economic Order (NIEO) for the development of Least Developed Countries (LDCs). Highlight any three reforms proposed by the United Nations Conference on Trade and Development in 1972 to improve the global trading system.

 

Answer:

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?. It was a painful process of transition from an authoritarian socialist system to a democratic capitalist system. The ?Shock Therapy? varied in intensity and speed amongst the former Second World War countries, but its direction and features were quite similar.

Consequences of Shock Therapy were:

(1) Russia, the large state controlled industrial complex almost collapsed, as about 90 percent of its industries were put up for sale to private individuals and companies. This was called ?the largest garage sale in history?, as valuable industries were undervalued and sold at throw away prices.

(2) The value of ?Rouble? the Russian currency, declined dramatically due to high rate of inflation and real GDP of Russia also declined between 1989 to 1999.

(3) The old system of social welfare was systematically destroyed. The withdrawal of government subsidies pushed to the periphery of society, and the academic and intellectual manpower was disintegrated or migrated.

(4) Post-soviet states, especially Russia, were divided between rich and poor regions. Unlike the earlier system, there was now great economic inequality between people.

(5) The construction of democratic institutions was not given the same attention and priority as the demands of economic Tran?s formation. Dissent or opposition was not allowed.

Or

The idea behind the New International Economic Order (NIEO) was to ensure the sustainable economic development of the Least Developed Countries (L.DC). The United Nations Conference on Trade and Development (UNCTAD) brought out a report m 1972 entitled ?Towards a New Trade Policy for Development?.

The report proposed a reform of the global trading system to:

(a) Give the least developed countries (LDC) control over their natural resources exploited by the developed western countries.

(b) Obtain access to western markets so that the LDCs could sell their products and therefore, made trade more beneficial for the poorer countries.

(c) Reduce the cost of import of technology from the Western countries.

(d) Provide the LDCs with a greater role in international economic institution.