Question

Which one of the following is NOT a consequence of ‘Shock Therapy’ ?

• A. The value of the Rouble, the Russian currency declined.
• B. The economy of the entire region was ruined.
• C. The system of social welfare got strengthened.
• D. The collective farm system disintegrated.

Hint:

Shock Therapy caused economic ruin, currency collapse (Rouble devaluation), disintegration of collective farming, and the dismantling of the social welfare system. Anything stating social welfare improved or strengthened is false.

Answer 1

The Correct Option is C

Concept: 'Shock Therapy' refers to the painful and abrupt transition model from a socialist command economy to a market-oriented capitalist economy in Russia, Central Asia, and East Europe, influenced by the International Monetary Fund (IMF) and World Bank after the disintegration of the Soviet Union in 1991.

Step 1: Analyzing the actual consequences of Shock Therapy.
The immediate consequences of Shock Therapy on the former Soviet economies were disastrous:
• Devaluation of Currency: Inflation was dramatically high, causing the Russian Rouble to lose its value drastically. (Valid consequence)
• Economic Collapse: State-owned industrial complexes were auctioned off at rock-bottom prices (termed the "largest garage sale in history"). The overall economy of the region was severely ruined. (Valid consequence)
• Destruction of Social Welfare: The old social welfare system was completely dismantled as state subsidies were systematically withdrawn, pushing millions of people into poverty.
• Disintegration of Agriculture: Collective farms were disbanded and replaced by private farming without adequate institutional support, leading to food insecurity and food imports. (Valid consequence)

Step 2: Identifying the statement that is NOT a consequence.
Option (C) claims that "the system of social welfare got strengthened". As established above, the social welfare network was actually destroyed and dismantled, not strengthened. Therefore, Option (C) is NOT a consequence of Shock Therapy and is the correct choice.