ABSTRACT
The critical phrase in the Sachs definition of shock therapy, namely “an abrupt tightening of monetary conditions,” provides a clue to the search for the shock element in the transition package. Shock therapists rule out the need for a political consensus, which characterizes “hesitant democratization.” The program also floundered because of its politically untenable assumption of massive foreign assistance which it failed to procure. The speed with which inflation could be controlled by slashing government outlays was conditioned not only by the economic and political realities of Russia but also by the external support that could be mobilized for the purpose. Massive aid inflows to cushion the burden of unemployment and decline in living standards resulting from deficit reduction in Russia had to be ruled out. Domestic savings in Russia had increased from 5 trillion rubles in January 1994 to 15 trillion rubles in July.
