Planet Money Indicator: NPR




This is THE PLANET MONEY INDICATOR. I am Paddy Hirsch.


And I’m Wailin Wong. Before being invaded by Russia in February, Ukraine was a $200 billion economy. It was one of the largest agricultural exporters in the world and a key producer of iron ore and other metals.

HIRSCH: And all of that makes Ukraine a big problem in the global economy. It is therefore not surprising that the devastation of Ukraine’s infrastructure, its agricultural and manufacturing capacity, and of course its people, is of deep concern to its neighbors and trading partners.

WONG: No one knows how the war with Russia will end, of course, but some people are already planning ahead. They are thinking about how to rebuild Ukraine and make it once again a fully functioning member of the global economy.

HIRSCH: And a lot of these people are talking about using another plan to rebuild an economy as a model or at least as an inspiration for Ukraine’s eventual recovery – talking about the Marshall Plan, which played a big role in the regeneration of the European economy at the end of the Second World War.

WONG: So on today’s show, the Marshall Plan – what it was about, what it might look like in Ukraine, how much it might cost, and what the risks might be. It’s after the break.


WONG: When World War II ended in 1945, Hitler’s Germany had been defeated, but the global economy was in shambles. Its reconstruction began with Europe.

HIRSCH: But to get back on its feet, Europe needed money and cooperation, which were lacking after almost six years of war. He also needed direction and leadership. In short, we needed a plan.


UNIDENTIFIED PERSON: To save Europe from this disaster, General George C. Marshall, Secretary of State of the United States…

RACHEL ZIEMBA: So the Marshall Plan was an effort to help the European allies rebuild after World War II…

HIRSCH: Rachel Ziemba is a senior fellow at the bipartisan think tank Center for a New American Security.

ZIEMBA: …Allowing these countries to recover and be viable trading and economic partners for the United States.

WONG: The Americans under Marshall brought Europe together except for Russia and the Eastern bloc. In four years, the Marshall Plan injected 13 billion dollars – that is 150 billion in today’s money – into the European economy.

HIRSCH: And everyone got a piece of it. Britain got the most out of the deal, getting around $3 billion, followed by France and finally Germany, which got around $1.4 billion.

ZIEMBA: It was a package of grants and loans and a major effort to stabilize these economies. And it also supported other institutions and underpinned a whole set of trade practices or liberalization. And it was also an attempt to strengthen liberal capitalist societies instead of laying the groundwork for communism to become more attractive.

HIRSCH: There’s a debate about how big a role Marshall Plan money played in Europe’s recovery, but there’s no doubt that it helped. But the most effective part of the plan might have been intellectual, not financial – the so-called technical assistance program, by which European companies were educated in the manner of American industry.

WONG: The result of this combination of money and technology transfer has been a surge in productivity and prosperity. Since then, the term Marshall Plan has been used as a sort of shorthand for large-scale economic rescue programs, such as rebuilding Ukraine.

ZIEMBA: There are at least two talks about financing Ukraine going on at the same time. There is funding to keep the war machine going, to get budget funding, which is quite important. And then there’s this picture, when there’s some sort of conflict resolution, what rebuilding and rebuilding will look like.

HIRSCH: Now, the United States and other nations and organizations like the World Bank have already poured over $100 billion into Ukraine so far this year. This money has been used to finance everything from the Ukrainian army to paying the country’s pensions.

WONG: But with a country facing an estimated 45% economic contraction in 2022, Rachel says a post-war reconstruction effort could cost the international community even more.

ZIEMBA: There have been figures in the order of $100 billion, maybe even more, to rebuild the infrastructure that was destroyed and put things in motion, but also to deal with the type of debt that Ukraine has accumulated.

WONG: Rachel says Ukraine didn’t have the most sustainable debt profile even before the war, and the conflict only made it worse. The country had debts of $129 billion in February and continued to borrow. The IMF predicts that its debt-to-GDP ratio could reach 86% this year.

HIRSCH: Now, that might sound like a lot, but it’s actually not that much in the grand scheme of things. All of the G7 countries – that is, the most advanced economies in the world – have debt-to-GDP ratios of over 100%. The difference is, however, that these countries all have fully functioning economies, so they can easily pay the interest on their debt. Ukraine cannot.

WONG: In fact, things have gotten so bad for Ukraine that international lenders have given the country a two-year payment freeze, and any recovery plan for the country will have to take those payment delays into account.

HIRSCH: So at least $100 billion for reconstruction, additional billions for debt repayment and eventual debt forgiveness – where will all that money come from? Now, at the end of World War II, the money came from one place – the United States. It won’t happen this time.

WONG: When it comes to rebuilding Ukraine, everyone will have to contribute – everyone in the G7, at least, and many more, including those who neither supported Ukraine during the war nor condemned Russia, what Rachel calls the countries of the gray zone.

ZIEMBA: There are a lot of questions coming up, questions about what role some of these regional players who operate in the gray area should play. These are countries like Turkey, of course, China, India; you know, sort of a number of countries in the region that depend on those trade ties or that, you know, might be well placed with companies and others to implement some of those measures.

HIRSCH: Finding consensus among all these donors on how much to give, how to give it, and how to monitor it once it’s been given is going to be a huge challenge. On the one hand, says Rachel, not everyone thinks Ukraine should receive so much largesse, not when there are so many other countries – Pakistan, Nepal, Haiti, the Philippines – that desperately need help right now. And then there’s the fact that no donor wants to see their money wasted or stolen, which they might be.

ZIEMBA: Whenever there’s a big amount of money going into anything – you know, concerns about corruption. Yes, historically Ukraine has had problems with corruption.

WONG: She’s right. Ukraine has struggled with corruption since the end of the Soviet Union. It was rocked by tax fraud in 2013 and a banking crisis fueled by a Ponzi scheme in 2014. Transparency International in 2018 ranked Ukraine the second most corrupt country in Europe after Russia.

HIRSCH: So it’s no surprise, says Rachel, that anyone thinking about a Marshall Plan for Ukraine is looking for ways to offset this risk of corruption by creating reliable and independent structures to oversee the distribution of loans or subsidies while implementing structural reforms.

ZIEMBA: It would probably also be anchored by the long and difficult process of joining the European Union and adopting these rules, and probably adopting some of the other standards and trade dynamics that the United States is trying to achieve. to establish with allies around the world.

HIRSCH: Any operational plan will probably involve international organizations such as the International Monetary Fund, the IMF and the Organization for Security and Cooperation in Europe, the OSCE. But Rachel says it will likely involve private industry as well.

ZIEMBA: Whether it’s pension funds or sovereign wealth funds, you know, private equity funds – Ukraine, of course, quite involved in the technology sector, for example, and there is already small funds entering despite the conflict.

WONG: There is one last possible source of funding – Russia itself. The United States, EU member countries and others have frozen billions of dollars in Russian assets since the February invasion.

ZIEMBA: Many G7 countries have taken steps to increase legal authority not only to freeze assets, but also to seize them and possibly transfer them to some sort of trust fund.

HIRSCH: Does that mean that Russia itself could participate in an effort to rebuild Ukraine? Well, Rachel says there is no easy answer to this question. She says it will be legally difficult to transfer those assets into a trust. But if Russia persists in the continued devastation of Ukraine, there may well be a legal case to be made to use these assets as reparations.


WONG: This show was produced by Noah Glick, with engineering by Maggie Luthar. Kathryn Yang checked the facts. Viet Le is our main producer. Kate Concannon is editing the show. And THE INDICATOR is an NPR production.

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