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:

Consequences of Shock Therapy: - Economic collapse & hyperinflation. - Destruction (NOT strengthening) of social welfare nets. - Rise of mafia & economic inequality. - Collapse of collective farming.

Answer 1

The Correct Option is C

Concept: 'Shock Therapy' refers to the painful, abrupt transition model from a socialist, state-controlled economic system to a free-market capitalist system encouraged by the International Monetary Fund (IMF) and World Bank in Russia, Central Asia, and East Europe following the collapse of the Soviet Union in 1991.

Step 1: Analyzing economic outcomes of Shock Therapy.
- Decline of Currency: The Russian currency, Rouble, dramatically lost its value due to hyperinflation. Prices soared, wiping out savings of ordinary citizens.
- Economic Collapse: Industrial output plummeted by nearly 90%, leading to the "largest garage sale in history" where state assets were auctioned off at rock-bottom prices to private oligarchs.
- Agricultural Ruin: The old collective farming system collapsed without an immediate functional alternative, leaving rural populations destitute and causing severe food insecurity.

Step 2: Analyzing the Social Welfare System.
Under the Soviet system, state subsidies guaranteed universal healthcare, education, housing, and social security. With Shock Therapy, the state dismantled government subsidies. Consequently, large sections of the population fell into poverty, real income declined, and the social welfare system was completely destroyed—not strengthened. Therefore, Statement (C) was NOT a consequence of Shock Therapy, making it the correct option.