Support 100 years of independent journalism.

  1. Ideas
21 April 2022updated 22 Apr 2022 2:33pm

Does Ukraine need a Marshall Plan?

There is no miracle fix for rebuilding a post-conflict Ukraine: it will need the huge investment, hard grind and tough political bargaining of postwar Europe.

By Adam Tooze

Amid the twisted girders, ruined walls and underground tunnels of the Azovstal plant, Ukraine’s defenders are making their last stand in the siege of Mariupol. The steel factory dates to 1933 and the era of high-Stalinism. It was ruined by Hitler’s Wehrmacht before his forces retreated in 1943, and restored in the postwar period as one of the hubs of Soviet industry. Now the steel plant is being ruined again, this time by Russian forces. Assuming it is returned to Ukraine, will Mariupol’s steel complex become the site for a Ukrainian revival fuelled by Marshall Plan aid from the West?

That is what Azovstal’s owner, the billionaire oligarch Rinat Akhmetov, is asking for. “We will definitely need an unprecedented international reconstruction programme, a Marshall Plan for Ukraine,” Akhmetov declared to CNN. “I trust that we all will rebuild a free, European, democratic and successful Ukraine after our victory in this war.”

Azovstal Iron and Steel Works. Mariupol, 2016. Photo by Petro Shyrochenko/Alamy

Vladimir Putin’s war against Ukraine has unleashed a revival of Cold War liberalism in American and European political discourse and punditry. Nato is back. The West is rallying. Against that backdrop it was only a matter of time before the call went out for a Marshall Plan for Ukraine. America’s fabled aid programme is widely credited with kick-starting western Europe’s miraculous recovery after 1945. It provided the material foundation for the era of so-called embedded liberalism – the synthesis of normative principles and institutions that underpinned the postwar order.

But the association between the new Cold War with Putin and the Marshall Plan is at this point largely coincidental. In the intervening decades since 1947 much of the specific ideological trapping of the original plan – anti-communism, Keynesian growthmanship, a commitment to European integration and so on – has been stripped away. Today “the Marshall Plan” stands simply for a generous, government-led solution to a big problem. There have been calls for a Marshall Plan for climate change. In 2017, Germany launched a Marshall Plan with Africa. In 2021 activists even launched a campaign for a Marshall Plan for Moms to address America’s appalling lack of childcare and parental workplace rights. The Marshall Plan stands for power employed wisely and on a large scale.

Ukraine today is in desperate need of an economic miracle. Following the Russian attack, its economy is in free-fall. As of 24 March, the Kyiv School of Economics put the damage in terms of destruction of property at over €60bn. The toll rises every day that the fighting continues. Full rehabilitation, according to one estimate, could cost between €200bn and €500bn euros. Ukraine’s GDP before the crisis was around €155bn, so the economic loss is immense.

When peace comes, the task of rebuilding the country will be huge and it will require a large-scale solution. But does the experience of the Marshall Plan really provide a model for contemporary action?

The common vision of the Marshall Plan is as much myth as historical reality. Historical myths can be inspiring. They can energise action. But they can also mislead us about what’s really possible. They may even refer us to the past when what is needed is something radically new.

Content from our partners
Why ports are the gateway to growth
We are living longer than our predecessors – policy must catch up
Getting Britain building

Though the original Marshall Plan was dubbed the European Reconstruction Program (ERP), it was not an immediate postwar project. It was launched in 1947, two years after the end of the war. The relief that was most directly addressed to immediate reconstruction – to keep people alive, return displaced persons to their homes and start rebuilding economies – was disbursed through UN agencies in 1945 and 1946. As the iconoclastic historian Alan Milward showed nearly 40 years ago, by 1947 the European economies were by some measures recovering fast. That was part of the problem. They were sucking in imports, creating a huge need for dollar funding. The aim of the Marshall Plan was to provide those dollars and enable the recipient economies to overcome bottlenecks more rapidly.

The reconstruction investment that did take place in Germany, France, Italy and the Netherlands after 1947 was financed not directly by American money but by counterpart funds raised through the sale of American Marshall Plan goods such as raw materials and machinery to European consumers and investors. American funding was therefore matched by a substantial domestic mobilisation of funds.

American cartoon by Daniel R Fitzpatrick, 1947, on the Marshall Plan for the post-Second World War recovery of western Europe.

When we talk about the Marshall Plan today the first thing we think of is its size. The funds disbursed between 1948 and 1952 came to $13.2bn. This sounds like a lot, but as commonly presented it gives no sense of scale. Placed in relation to US GDP at the time it came to 1.1 per cent. The notional UN target for rich countries’ development aid is 0.7 percent. For the lucky states who received it, Marshall aid was significant. At their peak between 1948 and 1949, Marshall aid flows were as much as 14 per cent of GDP in Austria, 10.8 per cent in the Netherlands, 6.5 per cent in France and 2.5-2.6 per cent in West Germany and the UK.



Britain received the most funding but its economy was also in the best shape so it was proportionally least important. The funding West Germany received was also relatively modest. Giving money to Germans was still controversial in 1947, and Hitler’s war effort had bequeathed the country state-of-the-art factory equipment. Overall, France was the key beneficiary of the plan. That made sense given its pivotal role in the project of European integration and the strength of the French Communist Party, the largest French party at the time and a threat to US influence in the Cold War. Considering the spending over the entire course of the Marshall Plan across all the recipient countries, it came to a rather more modest average of 2.6 per cent of those countries' GDP. In relative terms that is what ambitious European Nato members like the UK or Poland aspire to spend on defence. It is substantial, but less than what the US currently spends, and certainly far from an all-out effort.



The Marshall Plan did what it was intended to do. It eased key shortages of machinery, fuel and raw materials, all of which had to be bought with dollars. It locked western Europe into an alliance with the US. It provided, in the words of historian Stephen A Schuker, the “crucial margin” that allowed postwar governments to square commitments to welfare with investment for growth. In enabling the convergence between liberals, social democrats and Christian democrats, and excluding both the communists and the far right, the Marshall Plan helped to give European democracy its distinct Cold War coloration.

Politics as much as economics were vital to the Marshall Plan. In geopolitical terms the aim was to consolidate the anti-Soviet front. To that end it was always intended as a cooperative programme. But it took work to produce that effect. The internal debates in the Marshall Plan committees were factious. How would coal be allocated and at what price? Who would receive US funding for new steel plants? Nursing a European programme into existence required constant attention. Not only were the Americans engaged in Europe long before the launch of the Marshall Plan. They remained engaged afterwards too.

To provide a stable currency framework within which the European economies could prosper, the US sponsored the European Payments Union and hustled the French into opting for European integration. Through Article 5 of the Nato Treaty, which says that an attack on any member of Nato is an attack on all its members, Washington made an unprecedented and to this day unique commitment to European security. Combined with President Eisenhower’s turn in 1953 to the “new look” strategy of massive nuclear deterrence, this security system helped to keep military spending down. But, despite all this effort, it was not until the late 1950s that Europe’s currencies became fully convertible against the dollar and private American capital began to flow at scale. The relaunch of the European economy was not a matter of months or years. It took well over a decade.  

Given this history, when people propose a new Marshall Plan to fix a contemporary problem – that is, a gigantic economic package to transform the situation at a stroke – they are operating in the realm of myth, not historic reality. And in Ukraine we are already eight years into a period of deep Western involvement. Judged by the actual scale of the original ERP, the sobering fact is that between the Russian annexation of Crimea in 2014 and Vladimir Putin’s invasion in February 2022, Europe, the US and the IMF already delivered a “Marshall Plan for Ukraine” and the results have been underwhelming.

The €17bn euros in funding that the EU appropriated for Ukraine amounted to more than 10 per cent of the country’s GDP. The US added at least another $5bn in civilian and military aid; $1.88bn came from Japan. The IMF provided a loan facility of $17.5bn. Compared to pre-crisis Ukrainian GDP these are substantial sums.

The funds were not disbursed all at once. The great majority took the form of loans rather than grants. But in terms of economic impact, the precise mode of financing is less important than the scale of the injection. Ukraine did grow after 2014 and its trade reorientated towards the EU, but the results were far from western Europe’s postwar trente glorieuses, or even Poland’s experience since the 1990s.

The Marshall Plan had the effect that it did not only because of America’s sustained military, political and economic commitment, but because of the place where it was applied. Other than the US, the west European economies were the most sophisticated in the world. Early 21st-century Ukraine is a very different proposition.

If one believes the purchasing power parity (PPP)-adjusted GDP figures of the World Bank, Ukraine’s production per capita in 2019 was still below late-Soviet levels. Given Ukraine’s performance in the war, it is clear that measure tells only part of the story. There is more to state-building than PPP GDP growth. As we are seeing, the Ukrainian public administration is capable of remarkable feats of improvisation and society, as regional notables and even oligarchs have rallied around the government. But the GDP numbers do matter. They capture the flow of income from which taxes and debt service must be extracted.

The first Marshall Plan for Ukraine was not merely disappointing, it has left bad blood. With large-scale foreign assistance comes high expectations and this does not necessarily make for easy relations. By 2020 many Western commentators, including some who are now staunch advocates of absolute solidarity with Ukraine, had lost patience with Kyiv. The Swedish economist Anders Aslund, writing for the Atlantic Council in November 2020, expressed widely held suspicions towards Ukraine and President Volodymyr Zelensky in particular.

“If the Ukrainian government does not fundamentally revise its current economic policy and political trajectory, it is unlikely to receive any IMF, World Bank or European Union funds for as long as Volodymyr Zelensky remains president," Aslund declared. He added that Zelensky was flaunting the IMF’s conditions and effectively lying to his financial backers: “How can the IMF trust him and his government when they persistently claim that they have carried out reforms when they have not?” By this point, as Aslund remarked, the West had “seen this movie before”. In its relations with the IMF, the Zelensky team was behaving "increasingly like Ukraine’s 2010-14 Yanukovych government”. As president of Ukraine, Viktor Yanukovych had concluded a standby agreement with the IMF in the summer of 2010, but then failed to meet its requirements and was denied further funding. It was Yanukovych's subsequent manoeuvring between the EU and Russia, driven by the search for money, that led to his ouster by the Maidan Revolution in 2014. As far as Aslund was concerned, Zelensky seemed headed in the same direction. Rather than taking seriously the Fund’s injunctions, the Ukrainians chose to hear only what suited them. Aslund believed that called for tough medicine. “I often wish that IMF staff would raise their voices in order to be better understood.”

Aslund's article was not untypical of Western commentary before 2022. Nor is he unusual in having his mind changed by the war. That has happened to many of us. Presumably, no one now would openly call on the IMF to bully Zelensky into line. But the point goes beyond personalities. When it comes to money, foreign assistance and Ukraine, there is history and it is ugly.

If the problem of accounting for foreign aid was tough before the invasion, it is now far worse. In the event of a serious effort to reconstruct Ukraine, the sums of money involved will be gigantic. In modern money the entire Marshall Plan for all of western Europe came to circa $130bn. Given the losses sustained in the war so far, Ukraine could swallow all of that.

The US Congress is fickle. So far it has been generous towards Ukraine. But the chances of substantial long-term funding from the US do not seem particularly good. The most significant actor is, presumably, the EU, and the relevant scale is provided by the EU’s budget. Between 2021 and 2027, Poland is set to receive €76bn from the European Union's cohesion policy and from its Equitable Transition Fund. Add in payments through the Common Agricultural Policy and Poland will receive in excess of €100bn. Poland’s economy is far larger than that of Ukraine, but that is the scale on which Ukraine will need to be supported. The impact of EU membership and financial flows on the Polish economy has been remarkable. But that was achieved after a tough 15-year period of transition. Ukraine’s situation is different and the war will not make things better.

Nevertheless, this comparison helps to bring our historical imagination down to earth. Rather than the magic wand of a “Marshall Plan”, think the trench warfare of EU budget negotiations and bitter stand-offs between Warsaw, Brussels and the rest of western Europe. That is what the politics of a future assistance package for Ukraine might look like. If it is not to become a free-for-all for “disaster capitalism”, something to be exploited by Western contractors and local oligarchs, it will require intense oversight, and that is a recipe for fraught relations between Ukraine and its supporters in the West. It will be a 21st-century struggle, but it will have far more in common with the actual Marshall Plan of 1947 than the myth of later making. This is what high-stakes international political economy has looked like all the way back to the peacemaking after the First World War. Less deus ex machina and more hard grind.

Select and enter your email address Quick and essential guide to domestic and global politics from the New Statesman's politics team. A weekly newsletter helping you fit together the pieces of the global economic slowdown. The New Statesman’s global affairs newsletter, every Monday and Friday. The best of the New Statesman, delivered to your inbox every weekday morning. The New Statesman’s weekly environment email on the politics, business and culture of the climate and nature crises - in your inbox every Thursday. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A newsletter showcasing the finest writing from the ideas section and the NS archive, covering political ideas, philosophy, criticism and intellectual history - sent every Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy
THANK YOU