ABSTRACT
This chapter provides a set of primary and secondary elements of the shock therapy model of transition. The primary elements include the shock therapy model is based on neoclassical marginalist economic analysis. The shock therapy model explores the interdependence and mutually supportive and interactive character of economic relationships, implying that reforms should be introduced simultaneously. The speed of the transition process would have been negatively correlated with the continuance of output decline and positively correlated with the intensity of output recovery. Furthermore, the political prerequisites of the transition process demanded the establishment of a political structure that constrained the employment of political power in the market, regardless of who exercised it. The secondary elements include the price liberalization and stabilization were preconditions for a successful reform process. In addition, privatization was a means of increasing popular support for the whole reform program.
