NPR’s Mary Louise Kelly speaks with Ukrainian economist Yuriy Gorodnichenko about the cost of rebuilding Ukraine after the war.
MARY LOUISE KELLY, Host:
In fits and starts, Russia penetrates Ukraine. The city of Mariupol is now in Russian hands. Even as the war progresses, Western governments are already trying to figure out how to rebuild the country after the war is over one day. The European Commission has released a plan to fund that process through a mix of grants and loans.
Here to tell us more about what it will take to rebuild the country is UC Berkeley economist Yuriy Gorodnichenko. Welcome.
YURIY GORODNICHENKO: Thank you.
KELLY: I want to start with the damage Ukraine has already done and what it would cost to rebuild it. I can imagine it’s a staggering number. Can we even put a baseball number on it right now?
GORODNICHENKO: One way to look at this is to take an inventory of damaged bridges, buildings and so on and calculate the replacement costs. That would easily be somewhere between $100 and $200 billion. It’s a huge number.
We can also look at other measures and also, you know, similar efforts that have been made in the past. For example, what was the cost of rebuilding Iraq or Afghanistan? If you look at the size of those countries, the extent of the damage, and scale everything up to the Ukrainian cause, you get to somewhere in the range of $500 billion, maybe $1 trillion.
KELLY: And I understand you’re arguing that there’s an opportunity here to eventually rebuild Ukraine better than before, to build better public transportation and housing while you’re at it, to focus on features like carbon neutrality. That all seems a long way off with the war still raging, but do you believe it’s possible?
GORODNICHENKO: Yes, of course. There is no point in rebuilding Ukraine as it was. We had a lot of old buildings and everything from the Soviet era, which was very energy inefficient. We really need to rebuild Ukraine to modern standards. And this will not only be good in terms of climate change and the like, but Ukraine will be less dependent on Russian energy, oil and gas.
KELLY: Who pays for all this?
GORODNICHENKO: Basically you can find multiple sources to do this. One would be Russian assets, which are now frozen in the US and other countries. It will probably be a pain to make it available to Ukraine, but the European Union’s proposal suggests that the European Union itself is willing to pay most of the cost, and it is clear that other countries are welcome to contribute if they have resources to do.
KELLY: And Russia, which has done all this damage – is there any way to get any kind of aid, contribution from them?
GORODNICHENKO: Well, so confiscated assets is an option. Another example, based on the precedent we had before when Iraq invaded Kuwait, is to effectively tax Russian energy. And a fraction of that tax goes to Ukraine to pay for their reconstruction.
KELLY: Are there any models from the past that can be instructive – the Marshall Plan, for example, which rebuilt Europe after World War II?
GORODNICHENKO: We can learn a lot from the Marshall Plan – the way it was organized, the way conditionality was applied, the way coordination was established on the ground between the American authorities and the European authorities. That will, I think, really be a template for a successful reconstruction of Ukraine.
However, one thing will be different: Ukraine has the ambition to become a member of the European Union. And so it is natural to align the reconstruction of Ukraine, you know, the physical infrastructure with the modernization of the country in terms of institutions, so that at some point Ukraine will become a member of the EU family.
KELLY: That makes sense – so that reconstruction is integrated with accession and politically more aligned with Europe.
GORODNICHENKO: Yes, that is correct.
KELLY: The last question, which is, is speed essential here? Is there any evidence that aid, whether in grants, loans, or any other form, is more valuable when delivered early than the same amount held up by months and months of bureaucracy?
GORODNICHENKO: Yes, absolutely. That is why those talks about rebuilding Ukraine should take place now. And again, going back to the Marshall Plan, remember that aid did not flow to Europe immediately. It was a few years between 1945 and when the Marshall Plan really started to help Europe. And these were very, very difficult years for Europe. We must learn from our mistakes and ensure that there is no unnecessary suffering in Ukraine.
KELLY: Yuriy Gorodnichenko is an economist at UC Berkeley. Thank you so much for talking to us.
GORODNICHENKO: Thank you, Mary Louise.
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