Review Paper on Stiglitz

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There are some countries that experienced the transition of the economy which includes China, Russia, other states that were part of the Soviet Union, and Eastern Europe and the countries mentioned above suffered problems in reforms and the adjustments used while experiencing the shift of the economy. During the time where the Soviet Union was still present, the premier of the Soviet Union in 1960 declared that the country would “Bury” the United States however the Soviet Union suffered stagnation. In the year 1989, most of the countries in Eastern Europe suffered collapsed Socialism and due to the collapsed Socialism and it was evident in the Real GDP Percentage Change Index of the Eastern European countries, but in around 1994-1995 some countries were improving and slowly gaining back. Russia was still dragging itself to improve, by the year 2004 it was still 80% to match their 1990 GDP percentage change index. There was a debate on why did Russia suffered an economic decline and Dudrick et al.’s (2003:220) explanation revealed that people are more inclined to the Soviet Union in terms of economic stability. Some economists argue on what to use in the transition of economies, and one pointed “shock therapy” which was a sudden transition to adjustment and the market as well. The “shock therapy” imposes on using “the whole reform package at once”. However there are other people that disagrees with the kind of therapy, Wachtel (1992:46–48) said that the “shock therapy” can affect small time private-sectors, banks, market reforms for agriculture, and funds for a “safe” for social programs and employment. Poznanski (1996:xix) also made a statement about the therapy, the therapy is a little dangerous to implement since remaking institutions can be costly and destabilizing. Not all people would disagree with “shock therapy”, Sachs believed that the therapy should be used since the economy of the Soviet Union was declining and also pointed out the United States and...
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