Even in the middle of the war, we need to plan how to rebuild – and fund – Ukraine

The war in Ukraine is approaching its one year anniversary, and even now, there is little sense of when it will finish or how it will end. But minds are already beginning to turn to the question of the post-war reconstruction of the country.

The same thing happened in Britain during the Second World War. Eighty years ago the German army surrendered to the Russians in the titanic battle for Stalingrad. But in the Pacific, in North Africa and in the Soviet Union, February 1943 simply marked the date at which the German and Japanese capacity to advance had finally been contained.

Despite the grim progress of combat, much of the thinking about the post-war social and economic settlement in the UK had already taken place. The NHS, state education and the welfare state were already well advanced in their planning.

So now is exactly the time to envisage the reconstruction and revival of Ukraine.

The Germans may need their time to make decisions when it comes to the military sphere, but they have been timely and bold in thinking about how their economic strength can help when the war ends. In June last year, the Chancellor, Olaf Scholz, explicitly called for the adoption of a Marshall Plan for Ukraine.

The Marshall Plan was a massive American economic and development aid package to Western Europe in the late 1940s and early 1950s. It also required recipients to sign up to liberal democracy. Along with NATO, it laid the foundations for the prosperity and security of Western Europe.

Through the Plan, the money was almost entirely given as grants rather than as loans. The Americans realised that adding new debt to countries already heavily indebted as a result of a major war made no economic sense.

Dov Bachman, convenor of the National Security Hub at the University of Canberra, believes the successful redevelopment of Ukraine will be crucially dependent upon reducing corruption. Ukraine ranked 122nd out of 180 countries, according to Transparency International’s 2021 Corruption Perceptions Index.

Further, both private property rights and the rule of law more broadly need to be strengthened. International bodies such as the IMF or the World Bank could act as monitors. The release of funds over time would be conditional on satisfactory progress.  

Bachman recognises these institutions are often perceived as heavy handed by the domestic populations, which is why he proposes just a monitoring role for them. The funds would be supplied by a consortium of Western countries.

The real challenge is to supercharge the transformation of Ukraine, to turn it from a poor country into one with living standards close to those of Western Europe within a relatively short period of time.

The potential exists. The country needs rebuilding more or less from scratch, so the most modern technologies and capital equipment should be installed and preferred over older generations of technologies.

The capital stock of German industry, for example, was destroyed to a much greater extent than that of the UK in the Second World War. But the ability to install modern technology meant that German GDP per head went from just 55 per cent of that of Britain in 1950 to the same in just over a decade.

Ukraine is even further behind. The logistics problems alone are formidable. But with political resolve and funding, a new Marshall Plan could see the country reach European living standards by the end of the 2030s.

As published in City AM Wednesday 1st February 2023
Paul Ormerod
Image: Flickr

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