What is meant by ‘Shock Therapy’? Explain any four consequences of Shock Therapy.

OR

Explain the idea of New International Economic Order (NIEO) for the development of Least Developed Countries (LDCs). Highlight any three reforms proposed by the United Nations Conference on Trade and Development in 1972 to improve the global trading system.

Shock Therapy was a process of transformation of an authoritarian socialist system to a democratic capitalist system.

1. The transition was inspired by the World Bank and International Monetary fund in Russia, central Asia, and Eastern Europe.

2. The therapy was a sudden change that transformed the state-controlled economy into a free market economy.

The consequences of the Shock therapy were:

1. In Russia, the state-controlled industrial sector lost 90% of its industries. The industries were sold to private individuals and companies.

2. Restructuring of industries took place on a large scale. Hence, industries were undervalued and sold at a minimum rate.

3. The value of Russian currency declined and hence the economy of Russia too declined.

4. Privatization divided the society into rich and poor.

OR

The Least developed countries are the nations that cripple with economic and social disadvantages. The people of these nations are deprived of basic amenities.

During the Cold War, the Non-Aligned Movement was formulated for preventing the nations from joining the blocs, i.e. USSR and US. These NAM nations did not shoe support to either of the blocs and focused more upon its own development.

After Colonisation the nations have to struggle economically and socially, so for the development, its independence was very important. This realization led to the formation of the New Economic Order( NIEO).

The three reforms purposed by UNCTAD were:

1. The LDCs must be given sovereignty over their natural resources that were exploited by the western nations.

2. Provide LDCs entry into the western market, so that they could sell their products.

3. Reduction in the price of technologies from western countries.

4. The LDCs to be provided a role in the international economic institutions.