Shock Therapy Vs.

State Capitalism

Group Members

Arslan Nawaz
L1F11MCOM2165

H. M. Umer L1F11MCOM0149

Okasha Safdar L1F11BCMH2023

M. Umer L1F11BCMH2022

Mohsin Khan L1F11MCOM0156

Qaiser Ayub L1F11MCOM2158

What is Shock Therapy

The term shock therapy originates from Bolivia in 1985. Economist Jeffrey Sachs is widely associated with shock therapy Shock therapy refers to the phenomenon that takes place when actions are taken that generate immediate and rather drastic reforms in the economy. It changed national economic policy from state-controlled economy into a free-market one. Cure of hyperinflation, shortages and other effects of market controls in order to jumpstart economic production, reduce unemployment and improve living standards. Potential to drive the economy downward as it does to move it upward.

Poland and Shock Therapy

1952 to 1989 Soviet Union had much influenced polish state. By the mid-1960s, Poland began experiencing increasing economic, as well as political, difficulties. Early August 1980, founding of the independent trade union "Solidarity" by electrician Lech Wasa. 1989 Poland became democratic state.

Balcerowicz Plan and Poland

Shock therapy plan was adopted. 1.1 million workers at state-owned firms lost their jobs. Although inflation seemed to be out of control, the Polish economy gradually started to get back on track. By 1992, more than 600,000 private companies had been set up, providing jobs for approximately 1.5 million people. Most economists agree that without this shock therapy, which sacrificed short-term gains for long-term growth, modern Poland would be a much poorer country.

Russia and Shock Therapy

Soviet Union was communist state that existed between 1922 and 1991. On 12 June 1991 Yeltsin was elected by popular vote as a President of the Russian Soviet Federative Socialist Republic (SFSR) On 25 December 1991, the USSR was dissolved into 15 post-Soviet states. On 26 December 1991, Russia was internationally recognized. Yeltsin remained in office as the President of the Russian 2 January 1992, Yeltsin ordered to implement shock therapy. Through the 1990s, Russia's GDP fell by 50 percent, vast sectors of the economy were wiped out, inequality and unemployment grew dramatically, while incomes fell.

What is State Capitalism?

State capitalism is the ownership and control of corporations by a sovereign government. It occurs frequently in energy, natural resource, and military technology markets. Advocates of state capitalism sometimes argue it is necessary in developing countries, where profits from national assets like oil reserves must be directed toward domestic growth and employment, and only the government can ensure this. Critics have called these arrangements monopolistic and "crony capitalism," noting how often authoritarian regimes have such firms, and the ease with which friends of rulers and members of the governing class profit from and direct these businesses.

China The Capitalist State

State-owned companies dominate the global hydrocarbons sector. National oil companies (NOCs), as they are referred to, hold a staggering 77% of the worlds oil reserves. The biggest oil company in the world is Saudi Arabias Saudi Aramco. China as a country has very significant mineral and metal reserves. Chinese State capitalism is characterized by State-owned central holding agency The State-Owned Assets Supervision and Administration Commission State-owned companies have accounted for 80% of Chinese foreign direct investment.

South Africa and State Capitalism

South Africa is a long-standing State capitalism. State is the biggest shareholder in national telecommunications and insurance sector. Petroleum, Oil and Gas Corporation of South Africa (PetroSA) African Exploration, Mining & Finance Corporation (AEMFC), under the Central Energy Fund (CEF), as a first step in the creation of a State-owned mining company.

What to Privatize and What to Not?

The transfer of ownership of property or businesses from a government to a privately owned entity. Reasons for Privatize Raise revenues from privatization process Improved quality of product/ services. To reduce nepotism. To reduce political influence. Improvements in the level of efficiency in the production processes. Reduction in the debt burden of the government and fiscal deficit. Encourage competition, specially by abolishing the monopolies and promote integration of the domestic economy into the world economy Decrease the opportunities for misuse and corruption of public property by government officials and public sector managers.

What to Privatize and What to Not?

We are considering two SOE of Pakistan and take a rationale decision to privatize them or not. In case of Pakistan 51% to 70% share should be held by Government of Pakistan. Pakistan Railway
Approximately 65 million passengers annually travel through Pakistan Railways, Losses more than Rs 52 billion in the last three years, Only 140 locomotives out of the 528 are functional, 70 locomotives are awaiting spares at Pakistan Locomotive Factory, Risalpur since 2004.

Pakistan Ordnance Factories

Pakistan Ordnance Factories is the largest defense industrial complex under the ministry of defense production, producing conventional arms & ammo to international standards. POF Board headquarter is at Wah Cantt. Presently POF comprises of 14 ordnance factories and three commercial subsidiaries. In addition to meeting the demands of Pakistan Defense Forces, POF products are in service with over 40 countries, in Europe, Asia, the Middle East and the Americas. No Privatization

Should Privatize