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Financing Ukraine’s economic recovery will pay off for Europe in the long run
- When the war finally ends, Ukraine must begin the much longer and costlier process of reconstruction, and for that it will need the help of its European neighbours
- Yet, as was proved when the US helped to rehabilitate Europe after WWII, economic support strengthens regional stability, without which peace would be fleeting
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Nancy Qian, professor of managerial economics and decision sciences at Northwestern University’s Kellogg School of Management, is a co-director of Northwestern University’s Global Poverty Research Lab and the founding director of China Econ Lab.
Nine months after Russia invaded their country, Ukrainians are seizing back their territory and raising hopes of a military victory. But, when it comes to long-term peace and prosperity, a military victory would be only the end of the first phase. The next phase – reconstruction – will be much longer and harder, and it will require continued, extensive economic support from Ukraine’s friends and allies.
The Ukrainian economy is expected to have contracted by a third in 2022. Some 13 million civilians have been displaced and 700,000 Ukrainians (mostly young men) have left the labour force to serve in the armed forces. Factories and homes have been destroyed, and the Kyiv School of Economics estimates that Ukraine’s infrastructure losses total US$115 billion.
Some of these problems will be resolved naturally whenever the war ends, but most will not. Many of the displaced will not have homes or jobs, and the reconstruction of housing, schools and hospitals will bring massive costs. Ukrainian economists estimate that restoring the lost infrastructure will cost at least US$200 billion – and the longer the war lasts, the larger the bill will be.
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