Ukraine won’t only have to reclaim its sovereignty when its war with Russia is over, it will need to rebuild its economy. That’s why President Volodymyr Zelensky is already appealing to American and global investors to commit capital to restoring his country’s postwar economy. In a September op-ed for the Journal he emphasized Ukraine’s past industrial and scientific success, lauded the country’s particularly well-qualified STEM workforce, and identified $400 billion in opportunities for outside investors.
That’s all good news. The bad news? The U.S. government may no longer have the skills to help Ukraine effectively develop its economy.
At Mr. Zelensky’s request, the U.S. Agency for International Development is putting together a team of bankers and businesses interested in investing in Ukraine. The task, however, is far beyond the scope and competency of USAID, which has no experience in developing market institutions at the scale needed to revive an economy as big as Ukraine’s, let alone making commercial deals. USAID is a relief agency that distributes relatively small amounts of compassionate aid while advancing American concerns about global warming, food security and human rights.
The U.S. once had an effective model for rebuilding postwar economies—a field increasingly known as “expeditionary economics.” Inspired by Col. Irwin Hunt, who led U.S. reconstruction efforts in Europe after World War I and believed that officers needed training to “guide the destinies” of the communities under their “temporary sovereignty,” the Army’s School of Military Government opened in 1942 to prepare officers to manage the civil affairs of towns, cities and nations that had been, or were about to be, devastated. American officers learned how to set up banking and legal systems and how to re-establish hospitals, water and sewage systems, and transportation infrastructure.
Most important, the school’s graduates advanced the American model of entrepreneurial capitalism, helping to rebuild national economies by strengthening local markets without reference to a central plan. The postwar rebirth of economies in affected European countries reflected more on the importance of local initiative than specific directives from Washington, London, Paris or Bonn. Especially in Germany and Italy, U.S. officers worked at the local level to re-establish civic infrastructure including public utilities, banks, courts, and educational institutions.
American attitudes shifted after World War II. With the advent of the Cold War, the U.S. put its trust in the power of international institutions to prevent conflict. The School of Military Government closed in 1953. In hindsight, perhaps it should have stayed open. The U.S. would eventually face extended postconflict struggles in Iraq and Afghanistan. Partisans in search of political gain often derided these efforts as “nation building,” but some military expertise in the business of resurrecting shattered economies would undoubtedly have been useful.
Take Iraq. The Army’s reconstruction efforts deployed a “whole of government” strategy that engaged dozens of U.S. agencies. But the term “whole of government” relieves any individual agency of responsibility for the outcome. And after a half-century of dormancy in effective “expeditionary economics,” no government agency had any useful experience in rebooting a decimated national economy.
This is a valuable lesson for Mr. Zelensky and the U.S. in 2022. A top-down approach won’t work. It never does. People will form economies on their own in any situation. They will invent trade, production and systems to build elemental prosperity in their community. Expeditionary economics operates on respect for this kind of spontaneous organization.
A rebuilding program for Ukraine will start with establishing fundamental conditions for economic success. First, there must be peace and the country must have sovereignty. Second, the country’s postwar leadership must assure investors that their capital will be productively deployed.
Ukraine needs a Ukrainian entrepreneurial ecosystem, not a centrally administered carbon copy of Palo Alto, Calif. It has good prospects. The engagement of its citizen volunteers speaks to a deep entrepreneurial spirit that could create new businesses once peace comes.
Ukraine also has a promising comparative advantage in its highly trained technical workforce. Its mathematicians and scientists have made the country a center for nuclear engineering, for example. The country must work to support local capital markets ready to provide funds to small and medium-sized startups to ensure postwar success. An international mentoring program can give timely advice to fledgling entrepreneurs at the local level.
Laws that discourage commercial corruption must be put in place to help these entrepreneurs succeed. Specifically, the law must protect the property rights of inventors, entrepreneurs and investors in the innovations on which new businesses thrive.
If the U.S. commits to helping Mr. Zelensky rebuild his war-torn country, it must not repeat the mistakes of Iraq and Afghanistan. Expeditionary economics offers a guide to helping Ukraine emerge better off from a terrible destruction.
Mr. Schramm is a university professor at Syracuse and author of “Burn the Business Plan.” He oversees expeditionary economics research for Frontier Allies.
[Source: https://www.wsj.com/articles/ukraine-needs-expeditionary-economics-not-usaid-local-investment-russia-war-rebuliding-zelensky-postwar-11664722623]