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"Shock Therapy" Results

 

The results of ďshock therapyĒ were controversial. Gaidar and his circle, the media who supported him and the individuals who benefited from the reforms, appraised them very positively. They pointed out that the release of prices brought the country closer to a balance between supply and demand. Free prices brought most basic goods back on the shelves, putting an end to the omnipresent lines that were a major part of the consumerís life in Soviet Russia.  

 
Photo: ITAR-TASS

The market mechanism was started. Despite the horrendous rate of inflation, the rouble recovered its function as money, as a means of circulation and payment, that it had nearly lost in the Soviet economy. This helped to restore links between enterprises. Without this, a complete stoppage of production would have been inevitable.

The basic institutions of a market economy have appeared with astonishing speed. Until the end of Gorbachevís presidency in 1991, most forms of private business were still illegal. Since then, Russia has seen the rise of a vigorous financial services industry, with hundreds of newly created commercial banks and investment funds.

A structural transformation of the economy took place in the early 1990s, with cuts in defense spending. Even as Russiaís manufacturing and military industries lay paralyzed, the services sector experienced remarkable growth, rising from one-third of the gross domestic product in 1990 to nearly two-thirds in the late 1990s. For the first time since Stalinís industrialization, the production of services exceeded the production of goods. The reforms gained a self-sustaining character. Powerful interests were now bound up with the continued marketization of the economy.

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