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In Defense of Shock Therapy: Post-Socialist Transition of the Czech Republic

Journal of Governance and Regulation, Vol.1 (2): 75-86, 2012

26 Pages Posted: 5 Sep 2012 Last revised: 7 Dec 2015

Scott Alex Beaulier

Mercer University

Peter J. Boettke

George Mason University - Department of Economics

Leo Krasnozhon

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

Date Written: September 5, 2012

Abstract

Popov (2007, 2000), Kolodko (2000), and Stiglitz (1999) argue that a shock therapy approach has a negative effect on post-socialist transition. Their benchmark for shock therapy is a speed of market reforms. We propose that a more meaningful benchmark is the experience of the Czech Republic, Russia, and other transition economies which have adopted the shock therapy reforms, but have solved political economy problems of credibility and commitment differently. We compare the Czech Republic’s economic, political, and social performance to these benchmarks in all other post-socialist countries since they began their transitions. We find that the Czech transition is a consistent success because the Havel shock therapy has solved the political economy problems of reform’s credibility and state’s commitment to reform.

Keywords: The Czech Republic, shock therapy, transition economies, post-communist countries

JEL Classification: O52, P20, P27, P52

Suggested Citation

Beaulier, Scott Alex and Boettke, Peter J. and Krasnozhon, Leo, In Defense of Shock Therapy: Post-Socialist Transition of the Czech Republic (September 5, 2012). Journal of Governance and Regulation, Vol.1 (2): 75-86, 2012. Available at SSRN: https://ssrn.com/abstract=2142191

Scott Alex Beaulier

Mercer University ( email )

1400 Coleman Avenue
Macon, GA 31207

Peter J. Boettke

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-1149 (Phone)
703-993-1133 (Fax)

Leonid Krasnozhon (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
New Orleans, LA 70118
United States

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