Who Will Pay For Ukraine's Marshall Plan? | Opinion

In late April, Ukrainian President Volodymyr Zelensky stated that his country would require up to $7 billion in support per month in its ongoing fight against Russia's invasion. This does not include the utterly colossal amount of money (potentially trillions of dollars) that it will take to rebuild Ukraine after the war's end. A variety of commentators, including Ukraine's richest oligarch, have called for a "Marshall Plan for Ukraine," noting that there is otherwise no possible way the country will be able to recover.

While this assessment is correct—entire cities have been leveled, factories lie utterly demolished and millions have fled due to lost livelihoods—it also naturally raises a rather uncomfortable question currently occupying the minds of many policymakers, experts and Ukrainians themselves: Who is going to pay for all this?

Ukraine's economy was already lackluster—to put it mildly—before Russia began its "special operation" in February. Ukraine's pre-war GDP per capita (in constant PPP) was 20 percent lower in late 2020 than before its independence from the USSR in 1991. Its pre-war national currency was embarrassingly described by economist Adam Tooze as "a fragile ward of the IMF." Unemployment was at around 10.6% late last year, with even many young ultranationalists conceding they'd emigrate abroad because it would be easier to find a job. Anders Åslund, a senior fellow at the Atlantic Council and as pro-Ukraine as they come, stated early last year that though the county's economic stability appeared healthy, "few dare to invest in Ukraine. Without judicial reform or an increase in investment, there is little reason to expect any economic growth beyond the gains arising from the anticipated post-coronavirus rebound." The Kyiv Post more or less confirmed this at the end of 2021, summing up the situation with the blunt subhead: "GENERAL FEELING: IT'S GETTING WORSE."

The war has obviously made the entire situation a lot worse—the World Bank thinks Ukraine's GDP will fall by around 45 percent this year. An early reconstruction blueprint, put out on April 7 by the Centre for Economic Policy Research, offers an initial estimate of the damage: somewhere between "€200 billion to €500 billion" ($211 billion to $527 billion), with the number expected to rise with every additional day of war (and at an increasing rate). Come summer, pending further destruction, the upper band of that figure could reach as high as a trillion dollars.

So it's not surprising to hear people talk about the need for a Ukrainian Marshall Plan. Unfortunately for advocates, however, there are two major problems with this proposal.

A stove is seen among the ruins
A stove is seen among the ruins of house on May 2, 2022 in Fenevychi, Ukraine. Alexey Furman/Getty Images

The first is that modern Ukraine in 2022 is decidedly not the same as post-World War II Western Europe from 1948 to 1951. Yes, the Marshall Plan did help Western Europe rebuild. But the continent's economic recovery was already underway by then. The Marshall Plan was, to quote Harvard historian Charles Maier, "like the lubricant in the an engine—not the fuel—allowing a machine to run that would otherwise buckle and bind." Furthermore, this spending served a primarily political purpose: convincing wary post-war Western Europeans to economically integrate with each other and turn away from Communism. By contrast, even if Ukraine's war ended tomorrow, not only would it take longer to rebuild, but its negative underlying structural conditions have not yet been solved. Ukrainian oligarchs may be united right now, but that is because it is in their interest. After the war—when it comes time to compete again for political power, international aid money and resources—who knows?

The Ukrainian bureaucracy is still systemically corrupt, and pre-war efforts to fight such entrenched unscrupulousness were wanting. In fact, the country was in the midst of a constitutional crisis before the war broke out, as Ukraine's Constitutional Court—the highest court in the land—struck down in 2020 key parts of the post-2014 anti-corruption legislation, and curbed the powers of the National Anti-Corruption Agency. Zelensky and the Court were still at each other when the war broke out. The list of troubles goes on; both Western policymakers and investors can be forgiven for worrying that any money directed to Ukraine might end up wasted, misused or simply stolen. Before any serious international financial aid or investment can be made available, Kyiv will have to quickly implement a number of bold reform measures—and even then, success is far from guaranteed.

The second problem is even simpler: Where will the money for a Ukrainian Marshall Plan come from? America in 1945 had the benefit of being incredibly wealthy: It not only held half of the world's gold and currency reserves, but also produced slightly more than half of the world's manufactured goods and enjoyed an enormous agricultural surplus. And things then were only looking up. The United States today is still rich, but the situation is far less rosy. Inflation is running hot; energy prices, and correspondingly, the price of everything else, are expected to soar; major banks are warning that a "major recession" is on the horizon.

Americans are less inclined to be generous under these circumstances, especially after two decades of wasteful spending on foreign wars. The Biden administration and members of Congress may be sounding generous now, but with midterms in November and a long re-election campaign ahead leading up to 2024, that could quickly change. The European Union is in an even less favorable position; not only does it have the same problems as the United States (worse in some respects), but it must account for budgetary realities. Germany, for example, can't simultaneously fight the incoming recession and pledge to increase its military spending by €100 billion and wean off of cheap Russian gas and give Ukraine the billions it needs. At some point, European leaders will sit down, look at the budget, admit that they can't afford everything and quietly realize that Ukrainians don't vote in European elections.

So who will pay for Ukraine's Marshall Plan? Today, the answer is nominally "the West": the United States, the EU, the World Bank and so on. Tomorrow, though? That is the uncomfortable question hanging in the air above every policymaker's head right now.

Carlos Roa is the managing editor of The National Interest.

The views expressed in this article are the writer's own