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The war in Ukraine is far from over. But it has certainly entered a new phase.
While Russia has reorganized its forces to intensify its offensive in the east,
the fact is that Russian troops have withdrawn from Kyiv.
Still the Ukrainian capital continues to be shelled and many of you will think
that it is too early to talk about rebuilding the country.
But after two months of war it is clear that the conflict has not developed as the Kremlin had
originally planned. The Russian army has not been able to take control of a large part of Ukraine.
Everything indicates that the west and the center of the country will not fall into Putin's hands.
For this reason, some people are already thinking about what will happen after the war. Take for
instance the words of the European Commissioner for Budget and Administration, Johannes Hahn.
(Ukraine needs new Marshall Plan after Russian invasion – EU Commission)
We are facing the greatest devastation in Europe since World War II. That is
why it makes sense to talk about what would be a kind of new Marshall Plan.
We are of course talking about a multi-billion dollar investment.
But also a great opportunity for the West. Because attracting the bloc of
liberal democracies to a country like Ukraine, the second largest on the European continent,
would be to score a goal right in the corner of the Kremlin's goal.
Ukraine is blessed with very fertile soils and has more than 40 million inhabitants
and a well-educated population that is not so old. It is worthwhile to help Ukraine to
move forward and make it possible for many private investors to invest in Ukraine.
In this video we are going to tell you how much it would cost to rebuild Ukraine. So the question is:
what kind of figures are we talking about? Where could all that money
to rebuild Ukraine come from? What lessons can we draw from the former
Marshall plan? Today on VisualPolitik we are going to answer these questions.
But before we take a look at a bit of History,
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(THE MARSHALL PLAN)
Everyone thinks that the United States launched the Marshall Plan right after the end of World
War II. However, that was not the case. The war in Europe ended in May 1945 and the Marshall
Plan was not launched until it was approved by US President Harry Truman in early 1948.
The truth is that in 1945 the Allies were about to make the same mistakes
as at the end of the First World War. The Treaty of Versailles had imposed
such harsh conditions on Germany that they eventually led to the rise of Nazism to power.
There was one man in the United States who took notice. We are talking about General
George Marshall, at that time Secretary of State in the Truman Administration.
Well, Marshall was convinced that economic recovery in Europe
would be a good thing for the United States. The war had brought about an
extraordinary industrial effort. But it had also brought the country to full employment.
Maintaining it in peacetime was a challenge. US companies needed to keep exporting. Now,
with European countries completely devastated after six years of conflict,
who was going to buy their products?
That was the question to which Marshall responded by subsidizing Europe’s recovery.
The goal was for the United States to gain a market in which to sell its products.
A mercantilist policy that sought to avoid, as far as possible, companies having to lay off workers.
And here is one of the key aspects: 90% of the Marshall Plan was non-refundable aid.
Uncle Sam was handing out dollars primarily to buy his products.
In its first year, 60% of the Marshall Plan was spent on food. Gradually more was invested
in machinery, in restarting industry and in completing reconstruction work.
In the end, it is estimated that 30% of Marshall Plan funds were
spent on raw materials and semi-processed goods,
another 30% on food and fertilizers, 20% on machinery and vehicles and 15% on fuel.
The Marshall Plan also served a political purpose. It was perfectly framed within
the Truman Doctrine. This policy of President Truman stated that
the United States should provide economic and military support to any country in the world
in order to contain the spread of communism or Soviet forces.
Now, many of you will be thinking: but, whenever there is an abundance of aid and money,
there is always the risk of mismanagement. Washington thought the same thing.
So they created the ECA, an autonomous agency that would monitor the process
before releasing the money. Each country could decide how to use Marshall Plan funds,
but first it had to talk to the ECA.
During the four years of the Marshall Plan, Europe experienced the highest
period of economic growth in its history. Industrial production
increased by 35%. Agricultural production surpassed pre-war levels by far. And Europe
had two decades of unprecedented growth ahead of it, which boosted private investment.
Okay, the Marshall Plan alone was not the architect of Europe's recovery,
but it did contribute to the political and economic stability of the old continent. And
during a time as turbulent as the Cold War, the benefits probably outweighed the costs.
And I know what you're all wondering at this point. This is all well and good,
but... How much did it cost?
The Marshall Plan cost $13 billion. Thirteen billion dollars in the middle of the 20th
Century. We are talking about 2% of the US GDP at the time to rebuild the whole of Europe.
The big question is whether we would now be willing to make such an effort for a
country like Ukraine. We cannot ignore the fact that the United Kingdom and France...
at the end of the day, they were countries with many ties to the United States.
But with Ukraine we are talking about a country that until
four days ago we cared less about than Will Smith's private life before the
big slap. So are we in the West willing to pay for the reconstruction of Ukraine? How
many zeros are we talking about? We are going to look at that right now.
(THE UKRAINIAN BILL)
Let's be clear: Ukraine was already the poorest country in Europe before the war.
Why were they so poor? We have several videos where we explain it. But,
while things were already bad in January 2022,
two months later the situation was 1000 times worse: the Russians had devastated the country.
And the truth is that, until the war is over, it is useless to make damage assessments because the
damage will continue to increase. But there are those who already dare to make some estimates.
Check out for the President of the World Bank, David Malpass:
This estimate is slightly lower than the one indicated by the Kyiv School of Economics,
which spoke of about $68 billion.
Half of these figures correspond to the cost of restoring damaged infrastructure.
We are talking about $28 billion in damages to roads. To that should be
added the bridges, ports and railway facilities affected.
Then there is the $20 billion of damage to residential buildings between those that
have been directly destroyed and those that are about to fall down. Other damages do not
reach such high figures but are of great value for the future quality of life of Ukrainians.
The rebuilding of 200 health care facilities would cost another $2 billion.
And repairing the affected educational facilities would also require a few hundred million dollars.
But wait a minute, because as the World Bank president pointed out,
this is only the physical damage that we can quantify. According to Ukraine's Prime Minister,
Denys Shmyhal, the actual reconstruction bill will be considerably higher.
These figures would be slightly higher than those provided by a team from the
London-based Centre for Economic Policy Research. They offer a very wide range,
from $200 billion to $500 billion. The Marshall Plan cost the United States
equivalent to 2% of its GDP. This would be roughly $450 billion today. The question is:
Is the West really willing to pay this bill? Is it really worth it? We are about to find out.
(RASA TABLE)
In 1991, Ukraine and Poland were two very similar countries. Both had just emerged from communism,
both had around 40 million inhabitants and both had a similar GDP per capita.
From that point on, any comparison is tedious. Take a look at this graph.
So you see! The only area where Ukraine has been more successful
than Poland is in their record in the Eurovision Song Contest. So
what have they done in Poland that they haven't done in Ukraine, you may ask?
The difference is that in Poland, power fell in the hands of Lech Walesa,
who did not hesitate in dismantling the communist regime and making a
firm commitment to democracy and the liberalization of the economy.
Just the opposite from the first leaders of independent Ukraine, descendents of the Soviet
Communist Party. Since then, the differences between the two countries have been enormous.
In 1995 Poland had already privatized most of its economy. Ukraine had not even liberalized the
sale and purchase of agricultural land. In other words, they were in the preschool of capitalism.
In 2004, Poland was ready to join the European Union. The data speaks for itself:
Poles are three times richer than Ukrainians.
The question is, could Ukraine become a new Poland? Of course! But for that
it has to get closer to Europe and distance itself from Russia.
Not only in trade relations but in its political system.
To give you an idea, Ukrainian labor legislation dates back to the 1970s, when
the country was still part of the Soviet Union. The country's two main banks are State-owned.
The liberalization of the sale and purchase of agricultural land was approved only two years
ago. And hyper-corruption continued in all spheres of the State right up until the war.
However, the war is not only destroying the country's infrastructure. It is also taking
with it the whole tangle of vested interests and corruption. And there is one thing where
Zelensky has already got it right: betting everything on joining the European Union.
Let's be clear: if Ukraine manages to meet all the requirements to join Europe,
it means that it is going to be heading in the right direction, but not only that!
It would also mean a very significant source of income. Let's go back to the case of Poland:
during its first 15 years as a member of the European Union,
Poland received no less than 160 billion euros, almost US$168 billion, in EU funds.
Now: as we have seen, Ukraine needs much more than that. Earlier we talked about about $500
billion. Where could the rest come from? Well, we are going to look at that right now.
(HISTORY IS WRITTEN BY THE VICTORS)
Ukraine has already created a Fund for the Reconstruction of the country. It is
structured in four different funds. One is focused on repairing the destroyed infrastructure; another
to meet the country's financial obligations and pay its debts; the third to support SMEs to
restore normality in the private sector; and the fourth is dedicated to modernizing the country.
Ukraine has a very interesting IT sector, with well-trained
professionals. Even before the war, Zelensky was already betting on this. Check it out.
(We want to transform Ukraine into a country of start-ups. We expect the
technology share of GDP to grow from 4 to 10% by 2025, up to 16.5 billion US dollars,
making us the largest tech hub in Europe – Volodymir Zelensky, President of Ukraine)
Of course this statement is from before the war. But Zelensky's intention is clear. And
Ukraine has the talent to be able to quickly rebuild its IT sector. Also,
let's be frank: Ukrainian salaries could be very competitive for Western
companies. Put another way: cheap labor for European and US startups.
Now: the Ukrainian state still needs even more money. Who can
provide it? From Kyiv the answer is clear: RUSSIA.
Yes, you heard correctly: Russia.
From Kyiv they are pushing to take over the frozen assets of the Russian State
and its oligarchs. At this point in time, this presents some very obvious problems.
On the one hand, expropriating the frozen reserves of the Russian central bank could
call into question the very role of the dollar as the world's reserve currency.
If the United States and its allies can expropriate the wealth of a State so easily,
countries such as China or Saudi Arabia
among many others may decide that keeping their reserves in dollars is far from safe.
Then regarding the private wealth of the oligarchs;
the problem is that the Russians have been preparing for such a situation for years and,
contrary to how it may seem, not that many assets are being seized.
For example, the Swiss authorities have acted on some $8 billion.
In theory this is not bad, but it is not enough when the employers' association
indicates that Swiss banks hold more than 200 billion dollars of Russian wealth.
In Spain, the notaries are asking the Government for new legal measures as they consider that,
under present laws, they cannot act against the Russian oligarchs. And Portugal...
well, all we can say about Portugal is this:
(Portugal only freezes one Russian account that totalled 242 euros - Swissinfo)
Then, another problem is that we are dealing with measures
that violate private property. It is clear that Russia must pay for the damage done in Ukraine,
but to what extent is it fair that the oligarchs pay for it?
Should Europe and the United States violate their own principles? It is food for thought,
because a precedent is being set and you never know where it may end up. And,
as happened at Versailles, it would not be the first time that imposing
very harsh conditions for peace ends up triggering an even greater conflict.
In any case, now the question is over to you: do you think that Europe should support Ukraine and
finance its reconstruction, or do you think that Russia and its oligarchs should be forced to pay
for all the damage that the invasion is causing? You can leave me your answer in the comments.
If you liked this video, give it a LIKE and see you in the next one. Take care and see you soon!