“Jeffrey Sachs and the Costs of Capitalism. Shock Therapy in eastern European Transition Economies”

Abstract

This thesis examines economist Jeffrey Sachs’s implementation of shock therapy in transition economies from 1985-1994. Analysis begins with the foundation of the practice in Bolivia, and examines the changes in the approach and evolution of thinking that impacted its execution in Poland and subsequently post-soviet Russia. This thesis argues that the successes and failures of this economic practice are heavily dependent on two determinant factors – international backing for debt forgiveness, and the amount of cohesive national support for the effort. Ultimately, Russia failed to see the economic growth following Sachs’s intervention that Bolivia and Poland experienced; however, their individual successes also came with significant drawbacks in the form of rioting and a constitutional state of siege in Bolivia, and deindustrialization and unchecked increases in unemployment in Poland. This thesis concludes that current economic and historiographical interpretations of these transitions are too narrow in their analysis, and that the discrepancies behind Jeffrey Sachs’s, among other economic advisers’, ability to fully implement these policies from nation to nation contextualizes their effects on macroeconomic stabilization.