Shock therapy is an economic theory that suggests that sudden, dramatic changes in national economic policy can turn a state-controlled economy into a free-market economy. It is intended to boost economic production, increase the rate of employment, and improve living conditions. Shock therapy involves ending price controls, privatizing publicly-owned entities, and trade liberalization. It can also include policies to reduce inflation and budget deficits, or policies that reduce current account deficits and restore competitiveness.

Shock therapy was implemented in Russia, Central Asia, and East Europe under the influence of the World Bank and IMF. The model of transition from an authoritarian socialist system to a democratic capitalist system involved a complete shift to a capitalist economy, which meant rooting out any structures evolved during the Soviet period. It also involved a drastic change in the external orientation of these economies and a break-up of the existing trade alliances among the countries of the Soviet bloc.

The consequences of shock therapy were severe. It brought ruin to the economies and disaster upon the people of the entire region. Shock therapy resulted in the largest garage sale in history, declined value of Russian Currency, and increased unemployment. It caused civil unrest and had a negative impact on the economy.

In summary, shock therapy is an economic theory that suggests sudden, dramatic changes in national economic policy can turn a state-controlled economy into a free-market economy. It involves ending price controls, privatizing publicly-owned entities, and trade liberalization. Shock therapy was implemented in Russia, Central Asia, and East Europe under the influence of the World Bank and IMF. The consequences of shock therapy were severe, and it brought ruin to the economies and disaster upon the people of the entire region.