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Was Shock Therapy Consistent with Democracy?

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  • John Marangos

Abstract

The transition process in Russia and Eastern Europe was dominated in the literature and in policy making by the shock therapy process. However, shock therapy was short-lived. Governments that implemented shock therapy were not able to sustain the reform program since they lost power after the first term as a result of unfavourable electoral results. The new governments implemented gradualism. While after the first term shock therapy governments were substituted by gradualists, a government in favour of shock therapy never substitute any gradualist governments. The aim of the paper is to demonstrate that shock therapy was inconsistent with a democratic process of decision-making. Actually shock therapy was only consistent with a pluralistic political structure in the tradition of Hayek, Buchanan and Friedman. Foreign aid was inadequate to ensure the continuation of the shock therapy reforms within a democratic environment.

Suggested Citation

  • John Marangos, 2004. "Was Shock Therapy Consistent with Democracy?," Review of Social Economy, Taylor & Francis Journals, vol. 62(2), pages 221-243.
    • Handle: RePEc:taf:rsocec:v:62:y:2004:i:2:p:221-243
    DOI: 10.1080/00346760410001684451
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    2. Olivier Jean Blanchard & Maxim Boycko & Marek Dabrowski & Rudiger Dornbusch & Richard Layard & Andrei Shleifer, 1993. "Post-Communist Reform: Pain and Progress," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262023628, December.
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    Cited by:

    1. Ichiro Iwasaki & Taku Suzuki, 2016. "Radicalism Versus Gradualism: An Analytical Survey Of The Transition Strategy Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 807-834, September.
    2. Ilaria Petrarca & Roberto Ricciuti, 2014. "Synthetic ‘Real Socialism’: A Counterfactual Analysis of Political and Economic Liberalizations," Working Papers 11/2014, University of Verona, Department of Economics.
    3. Turhan, Ibrahim M., 2008. "Why did it work this time: a comparative analysis of transformation of Turkish economy after 2002," MPRA Paper 31158, University Library of Munich, Germany.
    4. Geoffrey M. Hodgson, 2006. "Instituciones, recesiones y recuperación en las economías en transición," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(15), pages 43-68, July-Dece.

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