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
Date Written: September 5, 2012
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: Suggested Citation