By Ron Ye
(Image: Creative common license)
It has been more than 10 months since the Russian invasion of Ukraine. Although it is uncertain when the war will end, it is certain that the amount of destruction is staggering. Russia has, in recent months, begun targeting Ukrainian infrastructure. In September, Russian missiles struck a dam that caused flooding in Kryvyi Rih, the 7th most populous city of Ukraine. Now, Ukraine faces a constant barrage of missiles from Russia that aims to take out their energy infrastructure. This is done in order to further increase the suffering of Ukrainians during the winter.
The Cost
The cost to rebuild will be tremendous. In September, the World Bank claimed it would require $349 billion to rebuild Ukraine. Ukraine has suffered an estimated $97 billion dollars worth of physical damages from the start of the war to the beginning of June. However, the damage to its economy is more staggering and is estimated to be at $252 billion. In addition, this $350 billion figure was only the amount calculated if the war ended in September 2022. Ukraine announced that it has estimated, using unknown parameters, that it would need $750 billion in order to rebuild itself at the end of the war.
How It Will Be Done
Although the actual cost of rebuilding is unknown due to the war being still ongoing, it could range from $350 billion to $750 billion and possibly even more. With multiple countries already providing military aid, the same countries should also hold the responsibilities of providing economic aid. After spending so much effort to prevent Ukraine from being defeated just to have it become a failed state would be shameful. In addition, countries that have provided aid include the G7,an intergovernmental political forum that consists of the world’s largest advanced economies and liberal democracies (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States). The G7 by themselves account for more than half of the global net wealth and nearly half of the world’s GDP. Compared to the current situation, the Marshall Plan helped all of Western Europe rebuild and was led by a single country. If the US itself could provide $150 billion dollars of aid to Europe after World War 2 then why can’t the modern US along with the European Union provide even more to Ukraine to help it rebuild?
The aid must do two important things. The first thing that must be done is the stabilization of the Ukrainian government. Various government needs such as payment of government workers, provision of important public services, and many other vital roles require large amounts of money. Because of the war, the finances of the Ukrainian government is in a precarious situation. Ukraine has spent large amounts of money on the war and has lost tax revenue as well.
Countries are able to take on debt and be completely fine. An example is the United States with its $31 trillion debt that is still growing. Debt can be good because it can be used to finance investments and development that generate future wealth to a country. However, too much debt is still an issue. Ukraine’s debt from the war will be massive. In addition, instead of investments they have put most of their money into funding the war. It is important that during the time that Ukraine rebuilds that essential government functions are kept running.
The second thing that must be done is to fund the rebuilding of the infrastructure and cities devastated by the war. Russia has done missile strikes after missile strikes against Ukrainian infrastructure. Cities have been devastated during Russian sieges and assaults. All of this destruction will be too much for Ukraine to pay for by itself.
The Caveat
It is important to keep in mind that it is possible to give too much or to give incorrect aid. Aid that may disrupt the economy of Ukraine is not recommended. For example giving food aid, can be harmful to the farmers in Ukraine. It is important that the free market functions. It is also important that this aid helps Ukraine become economically independent and not dependent on the help from other countries. With a functioning government and cities full of people, demand for goods and services will come naturally. This process should not be disturbed by aid since it could prevent Ukrainian businesses from reviving. However, this does not mean that the private sector will not be helped at all. Private investments seeking profit are also possible to help Ukraine rebuild Western companies should work with Ukrainian ones. These investments will help raise the living standards of the Ukrainian people and modernize Ukraine.
Just like the Marshall Plan, this aid will act like a stimulus and jump start the revival of the Ukrainian economy. In the end, it will depend on Ukraine itself to completely rebuild and prepare itself for integration to the EU. Since Ukraine was considered one of the poorest countries in Europe before the war, it is not enough for Ukraine to just recover.
Concerns
The loss of human capital is a concern. In addition to the death toll, there had been a mass emigration of Ukrainians. This will have a negative effect on the recovery of Ukraine. According to UNHCR, 7.9 million Ukrainians have so far fled the country. The civilian and military deaths due to the war are uncertain. It is important to encourage the return of Ukrainians to Ukraine. The recovery of the Ukrainian economy needs people.
In addition, although I have compared the future aid plan with the Marshall Plan, not everything will go as the Marshall Plan did. Unlike Western Europe during the 20th century, Ukraine does not have the previous groundwork of a rich nation. It was one of the poorest and most corrupt countries in Europe. In addition, the current global economic situation is not ideal. The US economy at the end of World War II was booming. The current status seems to be of a recession. This has led people in the West to be unwilling to send aid to Ukraine.
Conclusion
Even with these concerns, It will not be a fruitless effort like Afghanistan where the United States spent more than $2 trillion and failed. Afghanistan was a country fractured by religious extremism and had no previous democratic government. As shown during the collapse of Afghanistan after the withdrawal of the West, there were few people willing to defend the democratic institutions of Afghanistan. In comparison, the Ukrainian people are united and have fought staunchly in the defense of their nation. Morale and support of the people is just as important as the monetary contribution.
The Ukrainians have protected the ideals of the West with blood, sweat and suffering, it is up to the West to help rebuild its country. Those of the West who decry the aid to Ukraine puts shame to the warriors of their own country who have fought to maintain the freedom, wealth, and prosperity of them and their children.
