In the post-Soviet period of economic transition from the previously predominant communist order to the new capitalist approach, two major models of economic reforms with opposing arguments were utilized. On the one hand, shock therapy as a reformation approach held that the shift to capitalism has to be instant and rapid. The improvements and stabilization were expected to occur with time in the aftermath of the reform, while free economy principles apply. According to Synovitz (2009), such a model of economic reforms was characterized by increased privatization that yielded significant losses in employment, income, and human life. The main argument made by the supporters of shock therapy was to implement a multitude of economic changes at once regardless of costs to transit to capitalism instantaneously. However, shock therapy was a problematic model that cost increases in deaths in favor of economic development.
On the other hand, the gradualist model was based in opposition to the shock therapy approach idea. It asserted that the economic shift from communism to capitalism should happen steadily in stages for better control and more effective outcomes. Contrary to the proponents of shock therapy, gradualists claimed that the quality of privatization and the development of economic industries overall was more important than the speed of implementation (Aslund, n. d.). As a result, the process of price liberalization and import changes was successful in Hungary, Poland, Estonia, and other countries. Thus, the main argument of the policy of gradualism was the slow yet effective and thought-through process of transforming national economies to reduce losses and facilitate long-term benefits.
In the post-Soviet South Caucasus countries, the level of quality of life was significantly diminished due to the transformation of the economy and social order. In particular, the relationship between the implementation of economic reforms for transitioning to a free economy and poverty was characterized by the diminishing level of the population’s financial well-being. Indeed, according to Cornell Caspian Consulting (2002), the three countries of the South Caucasus, namely Georgia, Azerbaijan, and Armenia, suffered from increasing poverty levels in the 1990s and later. The social development of these countries was higher than their economic development, although there were challenges associated with the movement of refugees due to the Nagorno-Karabakh conflict (Cornell Caspian Consulting, 2002). Thus, after obtaining independence from the Soviet Union, the countries of the South Caucasus experienced an increased level of poverty, challenges in economic transformation, and social development.
References
Aslund, A. (n. d.) ‘Transition economies’, Econlib.
Cornell Caspian Consulting (2002) ‘Social development, health, poverty’, in The South Caucasus: A regional overview and conflict assessment, SIDA, Department for Central and Eastern Europe, pp. 35-39.
Synovitz, R. (2009) ‘Mass privatization linked to the higher death rate in postcommunist transition’, Radio Liberty.