The term "shock therapy" refers to a set of radical economic reforms aimed at rapid economic stabilization, liberalization, privatization and the opening of the economy to international trade. Shock therapy was pioneered in Bolivia and was then carried over to Poland and Russia with varying degrees of success. The policies of shock therapy provoked much debate that centered on whether or not the final achievements justified the pain that accompanied such radical restructuring. Below, the key architects of the reform in the three countries reflect on pros and cons of shock therapy and compare the results.

Participants

Gonzalo Sanchez de Lozada
President, Bolivia

A Bolivian economist (and later Bolivia's President), under whose guidance shock therapy was instituted, Gonzalo Sanchez de Lozada saw the chief significance of Bolivia's reform in showing the rest of Latin America that hyperinflation could be successfully conquered in a democracy.

Moises Naim
Editor, Foreign Policy Magazine; Former Venezuelan Minister of Industry and Trade

Editor of Foreign Policy magazine and a former Venezuelan minister, Naim maintained that by conquering hyperinflation, Bolivia "changed the subject" for the rest of Latin America: it showed that chronic hyperinflation was, in fact, a curable disease.

Jeffrey Sachs
Professor of Economics, Harvard University

As economic adviser to the governments of Bolivia, Poland, and Russia at the time of reform, Jeffrey Sachs believed that shock therapy was the only feasible solution in the face of these countries' deepening economic crisis.

Leszek Balcerowicz
Former Deputy Prime Minister of Poland

As Deputy Prime Minister and Minister of Finance, Leszek Balcerowicz was the chief architect of Poland's shock therapy policies. He believed that if Poland had chosen the gradualist approach in preference to shock therapy, it would have been condemned to failure.

Yegor Gaidar
Former Acting Prime Minister of Russia

For former prime minister Gaidar, the Polish experience of shock therapy provided a preview of Russia's economic transformation. The overnight lifting ("unfreezing") of price controls in Russia was preceded by extensive debate over whether or not it would put an end to Soviet-style "shortage" economy.

Mikhail Gorbachev
Former President of Russia

Having overseen perestroika in the Soviet Union, former President Mikhail Gorbachev believed that shock therapy in Russia had been applied incorrectly and without the proper preparation.

Joseph Stiglitz
World Bank Senior Vice President and Chief Economist, 1997-2000

Economist and former World Bank official Joseph Stiglitz believed that the shock therapy policies as applied to Russia had been flawed, setting up conditions for crony capitalism.