Russia is waging a war of attrition. They master artillery shells and logistics. If both parties hold to their will, economic resilience is likely to determine the outcome.
Moscow’s economy has faltered, but Russia’s commodity sales will keep Vladimir Putin’s regime supplied with the necessities of war for a long time to come. Ukraine’s productive capacity, on the other hand, it has collapsed between 40 and 50 percent. Almost 13 million Ukrainians have fled their homes. Kyiv cannot export most of its harvest to earn foreign exchange. Best guesses are that Ukraine needs between $5 billion and $6 billion in aid each month just to stay afloat. However, the heroic Ukrainians have managed to maintain basic government functions while supporting an army at war.
The G-7 must create and commit to an economic plan worth hundreds of billions of public and private dollars to do much more than simply meet Ukraine’s immediate humanitarian needs. An economic mobilization of that size would signal to Moscow that Russia is in financial competition with a coalition it cannot defeat. Such a commitment, combined with a recovery and reconstruction plan, would offer Ukrainians hope.
The Center for Economic and Policy Research, a London-based network of economists, recommends three phases: emergency aid; rapid restoration of critical infrastructure and services; and laying the foundations for rapid and sustainable growth. The work anticipates the human costs of divided families, workforce disruption, and children’s loss of education, in addition to physical infrastructure needs. The European Union’s path to Ukraine’s future membership guides the integration of infrastructure, standards, foreign private investment and supply chains.
Ukraine should be a co-owner of the plan. In doing so, Ukraine must tackle the obstacles that have hampered reforms since independence in 1991: corruption, the rule of oligarchs who resisted competition, manipulation of the energy sector, and the emigration of talent. Transparency and the use of mobile applications for procurement, supported by international judges during a transition, can counteract corruption and theft. Fiscal decentralization will connect spending with local citizen watchdogs.
When security conditions allow Ukraine to look beyond emergencies, assistance must foster rapid recovery, conditional on accountability and the achievement of measurable and verifiable milestones. To revive economic life, Ukraine, like Europe in 1948, needs basic shelter and housing, transportation systems, social infrastructure such as schools and medical facilities, and primary inputs for production. The aid must be through grants, not loans; about 90 percent of marshall plan support were grants.
With a solid recovery, Ukraine’s reconstruction offers great potential. The country enjoys high levels of education; the world has witnessed Ukraine’s powerful technological and digital capabilities. Modern production capacity, designed for a zero-carbon future, will serve the world well.
The G-7 in Bavaria must agree on an agency to coordinate this effort in partnership with Ukraine. The European Commission, the International Monetary Fund, the World Bank, the European Investment Bank and the United Nations humanitarian agencies should be involved, but someone must be in charge. A central organizer will help avoid unnecessary confusion and overlap, save time for Kyiv officials and ensure accountability. The Marshall Plan created an independent agency that closed when its work was done; the EU should consider establishing such a model.
The G-7 needs to integrate the economy with a geopolitical strategy. The open transit of the Black Sea is vital for today’s global food supply, as well as for Ukraine’s future economic geography. The G-7 and Turkey should propose and, if necessary, secure and protect neutral passage for food supplies; Looking ahead, any agreement must guarantee Ukraine’s right of maritime transit. The coalition should also encourage China to help finance reconstruction and thereby distance itself from Russia’s blunder. The G-7 must also support developing countries facing food, energy, climate, covid-19 and other threats to resilience. Otherwise, the Global South will conclude that G-7 sympathies only extend to people who look like the G-7.
North America and the EU have already authorized large sums. However, the G-7 leaders must decide whether they want Ukraine to survive, and eventually prosper, as an independent and sovereign democracy. Their legislatures and public are more likely to remain resolute in wartime if governments can explain how aid now contributes to a coherent plan for Ukraine’s ultimate victory.
Finally, the G-7 should declare that Russia owes Ukraine compensation under international law.
During world war II, loan helped US allies defeat a common enemy. The G-7 needs to capitalize on that experience by resolving to give Ukraine the means to win the military and economic campaigns.
Reference-www.washingtonpost.com