Shock therapy, a medical term, was introduced into the economic field by Jeffrey Sachs, an American economist, in the mid-1980s. This was done by Sachs when he was hired as an economic adviser to the Bolivian government. According to Bolivia's economic crisis, Sachs put forward a set of economic programs and policies, the main contents of which are economic liberalization, economic privatization, economic stability and tight financial and fiscal policies.
Because the implementation of this economic program and policy has a strong impact, it may have a huge impact on social and economic life in a short time, and even lead to a state of shock. Therefore, people use medical terms to call this economic program and policy of stabilizing the economy and controlling inflation put forward by Sachs shock therapy.
Pursuing rationality
With the joy of winning the first battle, Sachs excitedly came to Russia and eastern European countries that had just experienced political upheaval and continued to promote his shock therapy. However, compared with the original shock therapy, the shock therapy he peddled this time added a new meaning, which not only completed the routine mission of stabilizing the economy, curbing inflation and eliminating the foreign debt crisis, but also shouldered the heavy responsibility of completing the economic transition.
Sachs summed up the shock therapy he peddled this time as three things, namely stabilization, liberalization and privatization. The so-called stability is to quickly curb hyperinflation, restore economic order and stabilize the macro-economy through strict tightening fiscal and financial policies and a series of mandatory measures to curb total social demand. The so-called liberalization means the liberalization of prices through one-step price reform, the liberalization of foreign trade through the abolition of state monopoly on foreign trade and the liberalization of foreign exchange.
Refer to the above content: Baidu Encyclopedia-Shock Therapy