Building Back Ukraine Better

American Purpose

To read in full

The reason is simple. Post-war reconstructions are primarily about politics, not about finance or technocratic modalities of aid. If post-war politics goes right, all else will fall into place; if it goes wrong, everything else will go down the drain too.

The post-war stories of Japan and Germany illustrate the point. In 1956, Japan’s per capita GDP was higher than in 1940, before the war. By the time that Marshall Plan funding started flowing to Germany and Western Europe in the late 1940s, much of the continent’s infrastructure had already been repaired.

During the occupation period, U.S. financial assistance to Japan, worth $2.2 (a little over $30 billion in today’s dollars) represented several percentage points of Japan’s post-war GDP—comparable in relative size to, say, the EU’s funds flowing to “new” member countries—and primarily took the form of food assistance in the initial years. That assistance was quickly tapered off in the 1950s. The Marshall Plan was even smaller as a proportion of Western European economies—certainly far too small to make a macroeconomic difference.

In both cases, what mattered was the broader political package that the assistance was a part of, which all together facilitated a new social contract that imposed itself through the fact of U.S. victory in the war, and which was conducive to democratic capitalism, albeit with local characteristics.

To return to Ukraine: The success of its post-war reconstruction and the amount of aid it might require from Western donors is not a question that can be tackled independently from the outcome of the current war.

The putative “federalization” of Ukraine under the Minsk agreements would have achieved the same outcomes through formal means: The two “people’s republics,” of Luhansk and Donetsk, while under Russian control, would get a seat at the table in Kyiv, including in the Verkhovna Rada. If the infamous deal were to have been implemented, Ukraine could have forgotten about EU and NATO membership

I’ve omitted some of the over the top rhetoric opting to stick to the bare bones facts- you can, of course, read the article for yourself-

Should the ongoing war in Ukraine result in anything other than a complete expulsion of Russia from the territories (except for Crimea) it occupies, it is almost guaranteed that the resulting dynamics would press against Kyiv’s efforts to get Ukraine’s social contract right.

Getting Ukraine’s social contract right.. Recall the description of social contract?

a new social contract that imposed itself through the fact of U.S. victory in the war, and which was conducive to democratic capitalism, albeit with local characteristics.

That does not mean that all of Ukraine’s problems would vanish. Iraq and Afghanistan provide examples of when an overwhelming military victory by the United States did not feed into a straightforward process of reconstruction and reform. The main reason there, arguably, was the lack of a genuine buy-in among the local population and elitesa non-existent problem in Ukraine, where the local population and increasingly also its economic elites have stood united in their embrace of deeper ties to the European Union and to the West.

Getting the Russian military threat—and the Russian economy—out of the picture as much as possible is a necessary condition for progress within Ukraine, including on questions of the independence of its judiciary or domestic crony capitalism, involving Ukrainian oligarchs with ties to the Ukrainian government.

In short, the rate of return on military assistance now exceeds by several orders of magnitude the rate of return Western donors can ever expect to receive on their aid once the war is over. If Ukrainians win this war, they will eventually be able to borrow internationally at tolerable rates, possibly even making future aid superfluous.

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