Although the fighting in Ukraine is still far from over, it is crucial to create a plan for the country's recovery. The need for such a plan is now a central topic of many discussions among politicians and organizations around the globe. And although the Ukraine Recovery Conference, hosted in the Swiss town of Lugano at the beginning of July, came with the first official outlines of the post-war reconstruction process, numerous questions still remain to be answered. For instance, what should become the main driving force of Ukraine’s recovery, and what can kick-start its economy to prosper?
According to the basic economic theory, there are four sources of GDP growth: three of them (land, labor and capital) are exogenous and one (total factor productivity) is endogenous. The latter can be explained by the four additional factors – innovation, entrepreneurship, education, and infrastructure. All eight factors are valuable; however, innovation and entrepreneurship will serve as the driving force behind Ukraine’s recovery and thriving economy.
While exogenous factors (occupied land, fleeing or dying labor, and insufficient capital) paint a pessimistic picture in Ukraine, there is still light at the end of the tunnel. Harvard University and London School of Economics Professor Philippe Aghion states that “existing paradigms have proved inadequate to explain major trends and to solve the enigmas of growth and the wealth of nations.” Thus, other paradigms are needed.
In many ways, innovation and entrepreneurship are how the outmanned, outgunned Ukrainian military has fought the Russians to a standstill: “The Ukrainian military has proved not only motivated and well-led but also tactically skilled, integrating light infantry with anti-tank weapons, drones, and artillery fire to repeatedly defeat much larger Russian military formations. The Ukrainians are not merely defending their strong points in urban areas but maneuvering from and between them, following the Clausewitzian dictum that the best defense is a shield of well-directed blows”, concludes Eliot Cohen, a professor at Johns Hopkins University.
“A senior US defense official said that Ukraine had been ‘very creative’ in how it used its defenses, and the country’s forces were staging a much fiercer resistance than Russian intelligence expected. “They [Ukrainians] are putting resources where they’re most needed [and] they’re doing it quickly. They are being adaptive and nimble . . . in almost a sort of a hit-and-run kind of style,” reports the FT.
Timothy Ash makes an important bridge between the Ukrainian war strategy and the path to its postwar prosperity: “The way that Ukraine has conducted the war, with bravery, intellect, innovation, and real skill/honor/grace, suggests that this nation can be truly successful - drawing the comparison to the State of Israel how, when faced with huge external threats and challenges, it has risen to the challenge as a nation and innovated to survive, because it had to.”
Can this also apply to Ukraine's post-war reconstruction? Read the article below to learn more.