SYLVIE DOUGLIS, BYLINE: NPR.
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PADDY HIRSCH, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Paddy Hirsch.
WAILIN WONG, HOST:
And I'm Wailin Wong. Before it was 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 kind of a big deal in the global economy. So it's no surprise that the devastation being wrought on Ukraine's infrastructure, its agricultural and manufacturing capacity and of course its people is deeply worrying to its neighbors and its trading partners.
WONG: No one knows how the war with Russia is going to end, of course, but some people are already planning ahead. They're thinking about how to rebuild Ukraine and how to get it back to being a fully functioning member of the global economy.
HIRSCH: And a lot of those people are talking about using another plan to rebuild an economy as a blueprint or at least an inspiration for Ukraine's eventual recovery - talking about the Marshall Plan, which played a big part in regenerating Europe's economy at the end of the Second World War.
WONG: So on today's show, the Marshall Plan - what it was, what it might look like in Ukraine, how much it might cost and what the risks might be. That's coming up after the break.
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WONG: When the Second World War ended in 1945, Hitler's Germany had been defeated, but the global economy was in ruins. Rebuilding it started with Europe.
HIRSCH: But to get back on its feet, Europe needed money and cooperation, both of which were in short supply after nearly six years of war. It also needed direction and leadership. In short, it needed a plan.
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UNIDENTIFIED PERSON: To save Europe from this disaster, General George C. Marshall, the United States Secretary of State...
RACHEL ZIEMBA: So the Marshall Plan was an effort to help European allies rebuild after the Second World War...
HIRSCH: Rachel Ziemba is a senior fellow at the bipartisan think tank the Center for a New American Security.
ZIEMBA: ...By allowing these countries to recover and be viable trading partners and economic partners for the United States.
WONG: The Americans under Marshall brought Europe together with the exception of Russia and the Eastern Bloc. Over four years, the Marshall Plan pumped $13 billion - that's 150 billion in today's money - into the European economy.
HIRSCH: And everyone got a piece. Britain did the best out of the deal, getting roughly $3 billion, then France and then Germany, which received about 1.4 billion.
ZIEMBA: It was a set of grants and loans and significant effort to stabilize these economies. And it was also supportive of other institutions and underpinned a whole set of sort of trade or liberalizing practices. And this was also an attempt to bolster liberal capitalist societies as opposed to sowing the groundwork for communism to become more attractive.
HIRSCH: There's some debate about how big a role the Marshall Plan money played in turning Europe around, but there's no doubt that it helped. But the most efficacious part of the plan might have been intellectual, not financial - the so-called technical assistance program, whereby European firms were schooled in the way of American industry.
WONG: The result of this combination of money and technology transfer was a burst of productivity and prosperity. Since then, the term Marshall Plan has been used as a kind of shorthand for large-scale economic rescue programs, like the rebuilding of Ukraine.
ZIEMBA: There are at least two discussions about financing for Ukraine that are going on at the same time. There is financing for keeping the war machine on the road, getting budgetary finance, which is quite sizable. And then there is this picture of, when there is some sort of resolution to the conflict, what rebuilding and reconstruction will look like.
HIRSCH: Now, the U.S. and other nations and organizations like the World Bank have already plied more than $100 billion into Ukraine since the beginning of the year. That money has gone to fund everything from Ukraine's military to paying the country's pensions.
WONG: But with a country facing an estimated economic contraction of as much as 45% in 2022, Rachel says a postwar rebuilding effort could cost the international community even more.
ZIEMBA: There have been numbers in the neighborhood of $100 billion, perhaps even more, of rebuilding the infrastructure that was destroyed and setting things in motion but also dealing with the sort of debt that Ukraine has built up.
WONG: Rachel says Ukraine didn't have the most sustainable debt profile even before the war, and the conflict has only made things worse. The country had debts of $129 billion in February and has continued to borrow. The IMF predicts its debt-to-GDP ratio could rise to 86% this year.
HIRSCH: Now, that may sound like a lot, but it's actually not that much in the grand scheme of things. All of the G7 nations - that's the world's most advanced economies - have debt-to-GDP ratios of more than 100%. The difference is, though, that those countries all have fully functional economies, so they can easily make the interest payments on their debt. Ukraine cannot.
WONG: In fact, things have gotten so bad for Ukraine that international lenders have granted the country a two-year freeze on payments, and any recovery plan for the country will have to take those delayed payments into account.
HIRSCH: So at least $100 billion for reconstruction, billions more in debt repayment and possible forgiveness - where is all of this money going to come from? Now at the end of the Second World War, the money came from one place - the United States. That is not going to happen this time around.
WONG: When it comes to rebuilding Ukraine, everyone will be expected to chip in - everyone in the G7, at least, and many others besides, including those that have neither supported Ukraine during the war nor condemned Russia, what Rachel calls countries in the gray zone.
ZIEMBA: There's lots of questions ahead, questions about what role some of these regional players that operate in the gray zone should play. Those are countries like Turkey, of course, China, India; you know, sort of a number of countries in the region either which are reliant on those trade ties or who, you know, could be well positioned with companies and others to implement some of these measures.
HIRSCH: Finding consensus among all of these donors about 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. For one thing, Rachel says, not everyone thinks that Ukraine should receive so much largesse, not when there are so many other countries - Pakistan, Nepal, Haiti, the Philippines - in desperate need of help right now. And then there's the fact that no donor wants to see their money wasted or stolen, which it could be.
ZIEMBA: Any time when there's a large amount of money going into anything - you know, concerns about corruption. Ukraine historically, yes, has had corruption issues.
WONG: She's right. Ukraine has struggled with corruption since the end of the Soviet Union. It was racked by tax fraud in 2013 and a Ponzi-scheme-fueled banking crisis in 2014. Transparency International in 2018 ranked Ukraine the second most corrupt in Europe after Russia.
HIRSCH: So it's no surprise, Rachel says, that everyone mulling a Marshall Plan for Ukraine is looking for ways to offset this corruption risk by creating reliable, independent structures to oversee the distribution of loans or grants while implementing structural reforms.
ZIEMBA: It would likely also be anchored by the lengthy and difficult process of European Union accession and adoption of those rules, and probably adoption of some of the other standards and dynamics of trade that the U.S. is working to set with allies around the world.
HIRSCH: Any functioning plan will probably involve international organizations like the International Monetary Fund, the IMF, and the Organization for Security and Cooperation in Europe, the OSCE. But Rachel says it will also likely involve private industry.
ZIEMBA: Whether it's pension funds or sovereign wealth funds, you know, private equity funds - Ukraine, of course, quite involved in the tech sector, for example, and there already are small funds that are going in despite the conflict.
WONG: There's one last possible source of funding - Russia itself. The U.S., member EU nations and others have frozen billions of dollars' worth of Russian assets since the invasion in February.
ZIEMBA: Many G7 countries have been moving to increase the legal authority to not just freeze assets but seize them and potentially move them into some kind of a trust fund.
HIRSCH: Does this mean that Russia itself could become part of an effort to rebuild Ukraine? Well, Rachel says there's no easy answer to that question. She says it'll be legally difficult to move those assets into a trust. But if Russia persists in the ongoing devastation of Ukraine, there could well be a legal case to be made to use those assets as reparations.
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WONG: This show was produced by Noah Glick, with engineering by Maggie Luthar. Kathryn Yang checked the facts. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.
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