For Zhang Jiashi, the stability of the national economy was the key to maintaining the recovery of the Qin Empire's national strength and even the foundation for victory in the war at this time.

However, Zhang Jiashi is not an immortal, and he can't do it at all in the current situation.

Military spending, investment in restoring people's livelihood and agricultural production are the country's overall budget that Zhang Jiashi cannot cut at the moment.

This time is no better than the later generations, because in the words of the later generations, there is even a kind of "shock therapy" to make up for the lack of state finances.

Shock therapy is one of the earliest medical treatments. But on the economic side, there is also a concept of shock therapy.

The medical term "shock therapy" was introduced into the economic field by the American economist Jeffrey Sachs in the mid-80s of the 20th century. It was done when Sachs was hired as an economic adviser to the Bolivian government

。 Based on the problem of Bolivia's economic crisis, Sachs put forward a set of economic programs and economic policies, the main contents of which are economic liberalization, economic privatization, and economic stabilization. The implementation of a tight monetary and fiscal policy will have a strong impact due to the implementation of this set of economic programs and policies, and may cause tremendous shocks in the economic life of society in the short term, and may even lead to a state of "shock."

Therefore, people borrow medical terms and call the economic program and policies proposed by Sachs to stabilize the economy and control inflation "shock therapy".

Bolivia is a small and economically backward country in South America, due to the long-term political turmoil and the government's economic policy mistakes, the resulting economic problems accumulated and unresolved, and finally led to a serious economic crisis. In 1985, the Bolivian government had a budget deficit of 485.9 trillion pesos, about one-third of GDP, and inflation was 24,000 percent.

Its external debt in 1984 was $5 billion, and the interest payable was nearly $1 billion, exceeding its export earnings. During the period of 1980~1985, the living standards of residents fell by 30%, and the national economy was almost on the verge of collapse.

It was precisely in the face of such a sinister economic situation that Sachs, who was hired at a time of crisis, boldly put forward a set of economic programs and economic policies, the main contents of which were: the implementation of a tight financial and fiscal policy, the reduction of government spending, the abolition of subsidies, the liberalization of prices, the implementation of trade liberalization, the realization of exchange rate stability through currency devaluation, the further reform of the administrative and taxation systems, the privatization of some public sectors and enterprises, the reorganization of debts, the acceptance of foreign aid, and so on.

Generally speaking, shock therapy is aimed at the serious imbalance of total social supply and demand, starting from the control of aggregate social demand, adopting strict administrative and economic means to forcibly and drastically reduce consumption demand and investment demand in a short period of time, so that the total supply and demand of society can reach an artificial balance, so as to curb hyperinflation and restore economic order. This kind of policy regulation and control has an obvious emergency nature.

Because of the balance between aggregate social supply and demand, it is not only necessary to control the excessively strong aggregate social demand, but also, more importantly, to stimulate the effective growth of the sluggish aggregate social supply. The practice of macroeconomic operation has proved that the former is easy to achieve in a short period of time, while the latter requires a long period of effort to achieve results. Because the regulation of shock therapy focuses on the aggregate needs of the society, and the implementation of measures is relatively strong, it is easy to achieve good results.

The difference between "shock therapy" and the gradual approach lies not in the content and goals of the transition, but in the sequence and intensity of the reforms. Specifically, in the area of macroeconomic policy, "shock therapy" is more stringent in fiscal austerity; in terms of economic liberalization, "shock therapy" advocates a one-step approach to the liberalization of prices, foreign trade, and the free convertibility of currency; and in the area of privatization, it emphasizes rapid realization, and does not hesitate to adopt the method of gratuitous distribution.

Jeffrey Sachs is a well-known expert on global development issues, a professor of economics at Columbia University, director of the Center for International Studies at Harvard University, a senior adviser to former United Nations Secretary-General Kofi Annan, and the father of "shock therapy".

He has been named one of the "100 Most Influential People in the World" by Time magazine for two consecutive years and "the world's most important economist" by The New York Times.

Jeffrey Sachs has received numerous awards and honors, including a fellow of the American Academy of Arts and Sciences, the Harvard Graduate Association, and a fellow of the World Econometric Association. He is a member of the Brookings Group of Economists, the Advisory Committee of the Chinese Economists Association, and many other organizations. Universities received honorary degrees from the University of Pacifico in Peru in 1997, Lingnan College in Hong Kong in 1998, Varna University of Economics in Bulgaria and Iona University in New York in May 2000.

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But shock therapy is not a panacea.

Russia's choice of "shock therapy" to pay a more terrible price is the most typical example of the opposite.

At the end of 1991, the Soviet Union collapsed and the Russian Federation became independent, inheriting most of the family background of the former Soviet Union. Yeltsin's rich inheritance made Yeltsin happy, but the poor family was too poor to manage, and a large number of half-dead enterprises, plus 1 trillion rubles in domestic debt and $120 billion in foreign debt, also made the new president sleep at night. As an opposition member of the former CPSU, Yeltsin believed that the reforms since the 50s of the 20 th century, piecemeal and tinkering, have ruined the future of the Soviet Union in vain.

Having learned from the pain, Russia should avoid repeating the mistakes of the past, reinvigorate the majesty of a great power, and no longer be an old lady with small feet, but should take drastic measures and carry out profound changes.

At this time, the 35-year-old Gaidar did what he liked, and under the influence of Sachs, concocted a set of radical economic reform programs, Yeltsin "discerned the pearls" and promoted him to prime minister of the government, and in early 1992, a reform based on shock therapy was fully rolled out in the Russian Federation.

The main and first step in shock therapy is to liberalize prices.

The Russian Government stipulated that, from 2 January 1992, 90 per cent of the prices of consumer goods and 80 per cent of the prices of means of production would be liberalized. At the same time, restrictions on income growth were lifted, salaries for public servants were increased by 90 per cent, pensioners were raised to 900 rubles per month, family allowances and unemployment benefits were also raised. In the first three months of price liberalization, the results seemed to be immediate, and the results were obvious.

The long shopping queues are gone, the shelves are full of goods, and the Russians, who are accustomed to long queues with ticket supplies, seem to see the benefits of the reforms. It didn't take long for prices to skyrocket like a kite with a broken string, and by April, the price of consumer goods had risen 65 times compared to December 1991.

The government originally wanted to stabilize prices through state-run stores, but unexpectedly, black-market vendors and state-run store workers colluded to resell goods and make huge profits. Due to the premature liberalization of fuel and raw material prices, the production costs of enterprises have increased sharply, and by June, the wholesale price of industrial products has risen 14 times, so high prices have made buyers daunted, the consumer market continues to be sluggish, and the demand is not strong and in turn inhibits supply, enterprises have compressed production, and market supply and demand have entered a dead cycle.

The second step of shock therapy is the introduction of fiscal and monetary "double tightening" policies and price reform almost simultaneously.

The main reason for fiscal austerity is to increase revenue and reduce expenditure. Tax incentives are abolished, and all goods are subject to 28% value-added tax, while excise tax on imported goods is added. Along with the revenue increase measures, the government cut public investment, military spending, and office spending, included extrabudgetary funds in the federal budget, and restricted local governments from using bank loans to cover deficits. Tight monetary policy, including raising the central bank's lending rate, establishing a reserve requirement system, and implementing loan limit management, is used to control money flows and curb inflation at the source.

This time, however, the government miscalculated. Due to the excessive tax burden, the production of enterprises has shrunk further, and the number of unemployed has surged, and the government has had to increase relief subsidies and direct investment, and the fiscal deficit has risen instead of falling. Tight credit has led to a serious shortage of working capital for enterprises, mutual arrears between enterprises, and increasingly serious triangular debts. The government was forced to loosen monetary policy, and in 1992 it issued an additional 18 trillion rubles, 20 times the amount issued in 1991. Amid the roar of the money printing press, fiscal and monetary austerity was aborted.

The third step in shock therapy is large-scale privatization.

Gaidar believes that the main reason why the reform is full of dangers and crises is that the state-owned enterprises are not the main players in the market, the competition mechanism does not work, and the price reform is like building a tower in the sand, which will collapse with a bang as soon as the wind blows. In order to speed up the privatization process, the Government's initial approach was to give it away on a free basis. According to the assessment of relevant experts, one-third of the total value of Russia's state-owned property is about 1.5 trillion rubles, and the population is just 150 million. As a result, each Russian received a 10,000 ruble privatized securities, which he could purchase freely with a certificate.

However, by the time the privatization was officially launched, it was already October 1992, and time had passed, and 10,000 rubles at this time was only enough to buy a pair of high-end leather shoes. Therefore, this measure has caused a large number of state-owned enterprises to fall into the hands of the privileged stratum and nouveau riche, and what they are most concerned about is not the long-term development of the enterprises, but the fact that they will change profits as soon as possible; the workers and workers will not receive dividends and will not have the right to participate in decision-making. In December 1992, Gaidar's government was dissolved.

The failure of shock therapy has almost halved Russia's GDP, which is only 1/10 of that of the United States. Significant changes have also taken place in the structure of the economy, with the fuel, electricity and metallurgical industries becoming key sectors of the national economy, accounting for about 15 per cent of GDP, 50 per cent of total industrial products and more than 70 per cent of exports. The labor productivity of the real economic sector is extremely low, if the labor productivity of the raw materials and energy sectors is close to the world average, other sectors are far lower than the similar indicators in the United States by 20%~24%. More than 70% of the production equipment has a service life of more than ten years, which is twice as high as that of economically developed countries.

This situation is a direct consequence of the significant reduction in domestic investment, particularly in the real sector of the economy. Foreign investment is reluctant to enter Russia, and the total amount of foreign investment absorbed is only $11.5 billion. Russia's spending on scientific and technological development has been reduced in an all-round way, its investment is insufficient, and its lack of attention to innovation has made it possible for Russia to have fewer and fewer products with competitive prices and quality in the international market, especially in the civilian market for scientific and technological products, which are crowded out by foreign competitors, and Russian products still account for less than 1 percent of the market.

The standard of living of residents has plummeted. By the end of 2000, the total monetary income of Russians was less than 10% of that of Americans, and their health and life expectancy were deteriorating. Some experts estimate that it will take 15 years for Russia's GDP per capita to reach the level of Portugal or Spain, and the GDP will grow at a rate of 8% per year.

"If the skin does not exist, the hair will be attached". "Shock therapy" copied and copied the practices of others, completely departed from Russia's national conditions, and failure was inevitable. This is the most fundamental mistake made by the reformers of the Russian democratic faction in the process of Russia's economic transition.

Giulietto Chiesa, an Italian who spent nearly 20 years as a journalist in Moscow, commented: "It is because the Russian democratic reformers have discarded the Russian spirit and copied the controversial neoliberalism and modern monetarism of the West, regardless of Russia's own traditions and characteristics, that Russia has fallen into the disastrous situation it is in today."

Due to the failure of the reforms, Russian Deputy Prime Minister Gaidar had to be forced to resign on January 16, 1994. Yeltsin was also forced to announce in his February 1994 State of the Union address that he would abandon the "shock therapy" reforms, and in the 1996 election he admitted that "it was wrong to try to copy the Western economy in the past in the reforms."

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And "shock therapy" has also derived the concept of seven oligarchs.

The Russian "oligarchs" refer to the big capitalists who became rich overnight during the privatization of the 90s of the 20th century. One day in March 1996, Yeltsin secretly summoned seven financial oligarchs.

They are Berezovsky, President of Union Bank, Gusinsky, President of Bridge Bank, Vinogradov, President of International Commercial Bank, Smolensky, President of Capital Sberbank, Friedman, President of Alfa Bank, Khodorkovsky, President of Menajet Bank, and Malkin, President of Credit Bank of Russia.

An agreement was reached: bankers provided financial support to secure Yeltsin's re-election, and Yeltsin promised to safeguard the economic interests of the oligarchs.

Since then, a new political vocabulary has emerged in Russia: the "seven oligarchs".

In the evolution of the political situation in Russia, the "seven oligarchs" once called for wind and rain.

These 7 people are all "elites" with flexible minds and daring to take risks, almost all of them graduated from university, aged between 40~50 years old, some have won national bonuses, and some are also corresponding academicians of the Academy of Sciences. These people, together with Chubais, the president of the Unified Power Company, basically controlled the country's oil and gas, power, metallurgy, and financial industries, and manipulated public opinion to a certain extent.

Not only are they turning things up in the economic sphere, but they are also hollowing out their minds to engage in political speculation. Former Russian Deputy Prime Minister Yegor Gaidar once said: "At its worst, the Russian government was surrounded by about 7-10 businessmen, and they could even remove the prime minister at will." ”

Russians have a deep hatred for oligarchs. Therefore, as soon as President Putin came to power, he set a rule, that is, not to deprive the oligarchs of their existing property, but the oligarchs must operate legally and must not interfere in politics. Whoever breaks the rules of the game will pay the price. But money and power are sisters, and the oligarchs, who are already rich and rival the country, want to make a difference in politics. Anyone who has this idea will not end well.

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