ABSTRACT
Russia and the other successor states of the Soviet Union are at a critical turning point. With Russia in the lead, they are changing ideological horses. Communism and the socialist command economy have been repudiated in favor of democracy and the market economy. The conversion to democracy has progressed rather more swiftly and successfully than the attempt to convert to a market economy, and many observers both in and outside the former Soviet Union fear that resistance by vested interests to marketization will ultimately undermine the democratization movement too.
This article focuses on the question: What is shock therapy and will it work in the CIS? Shock therapy is a highly conservative Western economic doctrine emphasizing monetary policy. Originally developed to stabilize and invigorate an economy with substantial capitalist aspects, it is here being modified to convert a command economy to capitalism.
The conditions for shock therapy to succeed are quite stringent. Moreover, the theory upon which it rests makes a number of questionable 35assumptions, especially for the Russian case. It is assumed by the theory that if monetary and pecuniary problems can be solved, production will be restored without central government intervention in production decisions.
The article explores the question of whether the market mechanism is still too weak in the CIS to carry the entire burden of allocation, production, and distribution. Enormous external assistance, both financial and educational, will be necessary to avoid failure of the economic transformation process and backsliding into another variant of the crisis administered economy. Russia and the other successor states of the Soviet Union will have to develop their own unique transformation strategies based on their own peculiar economic circumstances, histories, and opportunities. Economies are more like giant tankers than they are like rowboats. They cannot be maneuvered readily or turned about quickly.
