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Introduces the question of economic sustainability in the CIS region
Introduction
The transition to a market economy in Central, Eastern Europe and the former Soviet Union (CEEFSU) was dominated by the shock therapy process of transition. The shock therapy model of transition involved: immediate price liberalization, immediate privatization, immediate establishment of an independent central bank, immediate achievement of a balanced budget, immediate introduction of free trade and immediate establishment of a fully convertible flexible currency. Jeffrey Sachs - an adviser to the Polish and Russian governments who guided the shock therapy process in these countries - stated that: 'Poland's goal is to establish the economic, legal, institutional basis for a private-sector market economy in just one year' (Sachs, 1990: 19).
The supporters of the shock therapy model argued that the elements of the model would have ensured growth at full employment with low inflation and stability. In summary, the shock therapy model was a neoclassical model of transition advocating the immediate implementation of the necessary reforms to establish a free market capitalist economy. Non-capitalist participatory alternatives were not considered by mature market economies, the International Monetary Fund and the World Bank, which made sure that the only alternative for transition economies was to transcend towards market capitalism.
The shock therapy process did not deliver the promised high living standards to the people in transition economies. Instead, economic collapse, stagnation, inflation and unemployment were characteristics of the process, accompanied with the familiar outcomes of poverty and crime. Could it be argued that, in actual fact, the shock therapy process had the aim to create capitalism in CEEFSU at any cost? Could it be argued that the only way to create immediate capitalism in transition economies required the cooperation of the established elite? Lastly, could it be argued that the only way to gain the cooperation of the established elite was by providing the means for the elite's personal enrichment at a cost to the standards of living of the average citizen? The paper aims to answer these questions by demonstrating that shock therapy and the immediate establishment of capitalism was motivated by the self-interest of the capitalist classes in mature market economies, using the IMF and World Bank as enforcement agents, which required the transformation of...