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The Political Economy of Shock Therapy


  • John Marangos


The collapse of the centrally administered economies gave rise to a transition process towards economic systems based on market relations. Nevertheless, the transition process is not restricted to the economic field. The political and ideological aspects of the transformation are fundamental. As such an analysis of the shock therapy model requires the exposition of what I define the primary elements of the shock therapy model which are: 1) The body of economic analysis used by the shock therapy model. 2) What structure of society the shock therapy model desires to achieve? 3) The speed of the reforms. 4) The political structure consistent with the model. 5) The consistent ideological structure. After the identification of the primary elements of the shock therapy model the next’step’is to identify secondary elements, the desired changes with respect to: 1) ’Price liberalisation–stabilisation. 2) Privatisation. 3) Institutional structure. 4) ’Monetary policy. 5) Fiscal policy. 6) International trade and Foreign Aid. 7) ’Social policy. The analytical framework developed makes possible to understand the shock therapy model from a new and more enlightening perspective. We are better able to comprehend the complexities involved and the disagreements about the reform process.

Suggested Citation

  • John Marangos, 2002. "The Political Economy of Shock Therapy," Journal of Economic Surveys, Wiley Blackwell, vol. 16(1), pages 41-76, February.
  • Handle: RePEc:bla:jecsur:v:16:y:2002:i:1:p:41-76
    DOI: 10.1111/1467-6419.00159

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    Cited by:

    1. Jan Svejnar & Joanna Tyrowicz & Lucas van der Velde, 2015. "Productivity and Inequality Effects of Rapid Labor Reallocation – Insights from a Meta-Analysis of Studies on Transition," Working Papers 2015-11, Faculty of Economic Sciences, University of Warsaw.
    2. Joanna Tyrowicz & Lucas Velde & Jan Svejnar, 2017. "Effects Of Labor Reallocation On Productivity And Inequality—Insights From Studies On Transition," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 712-732, July.
    3. Judit KAPà S & Pál CZEGLÉDI, 2007. "What Does Transition Mean?: Post-socialist and Western European Countries Paralleled," The Journal of Comparative Economic Studies (JCES), The Japanese Society for Comparative Economic Studies (JSCES), vol. 3, pages 3-28, December.
    4. Yağmur Sağlam & Hüseyin Avni Egeli, 2018. "A Comparison of Domestic Demand and Export-led Growth Strategies for European Transition Economies," Foreign Trade Review, , vol. 53(3), pages 156-173, August.
    5. Roberto Dell'Anno & Stefania Villa, 2013. "Growth in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(3), pages 381-417, July.

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