ECFR’s new report, “Survive and Thrive”, is an important contribution to the debate about how to take forward European support for Ukraine. Since the start of this year, we have been working with Ukrainians to develop research and policy responses to Russian aggression. We have launched a Ukraine team as part of LSE’s work for PeaceRep (‘the Peace and Conflict Resolution Evidence Platform’) and have held regular online discussions with Ukrainian activists.
In many respects, our initial conclusions align with those of the authors. We certainly share their democratic values and commitment to Ukraine’s defence. One of several points we agree with are the innovative proposals for European security guarantees for Ukraine, which are carefully framed “not to solidify a permanent divide between the West and Russia”. The ideas put forward on building partnerships in the armaments industry are also very helpful.
However, we argue that Ukraine rapidly needs to move away from neoliberal economic policies in order to prevent the kind of intractable conflict observed in other places and to provide more social support for the Ukrainian population. We consider this to be incompatible with immediate full membership of the single market. Indeed, it could hugely complicate Ukraine’s accession to full membership of the European Union, which we enthusiastically support.
We have grown used to ‘long wars’: How do we stop this becoming one?
The “Survive and Thrive” report is far too categorical in its claim that Ukraine is facing a “long war”. The more this narrative is repeated the more it risks becoming a self-fulfilling prophecy. It may well be the most likely scenario, and certainly the EU and Western states should be ready to make a long-term commitment to Ukraine. However, the strategy that they pursue has to be calibrated to the possibility of multiple scenarios. As we write, the Ukrainian army is making significant progress on the eastern front and the Russian forces there may be collapsing. Whether this comes to pass or not, the balance of forces can change very rapidly.
The risk of a “long war” is that the conflict takes on the characteristics of intractable conflicts (“forever wars”) that can be observed elsewhere in the world. Such conflicts are typified by state fragmentation, a criminalised war economy, and the construction of sectarian politics; a range of state and non-state actors increasingly acquire a continuing economic and/or political interest in the reproduction of violence. These wars tend to be the outcome of economic liberalisation in the context of authoritarianism. They occur in situations where both income and production fall dramatically, both because of the war and because of neoliberal policies and where individuals can only survive through participation in violence.
Ukraine’s successes on the battlefield have everything to do with morale and what might be called its ‘civic spirit’. The role of volunteer networks in meeting social needs has been extraordinary and exceptional. (It should be noted that, in all contemporary wars, it is largely civil society that fills the gap in social provision.) This active civil society was born of the Maidan experience, but it is difficult to see how this can be sustained over a long period without far-reaching changes in the economic situation. The Ukrainian economy is set to contract by about a third this year, leading to a dramatic spike in its previously low rates of extreme poverty. Unemployment hit 35 per cent in July. Ukraine is running a deficit of around $5 billion a month – and has resorted to printing money, risking hyper-inflation.
Two steps are needed to address this crisis. Firstly, Western states must dramatically scale up their direct support for the Ukrainian economy. Secondly, Ukraine must restructure its economy to harness all available resources for the war. State intervention should make up for the collapse of demand and Kyiv should use centralised planning to set prices and allocate resources. While in the post-Soviet space such methods are associated negatively with communism, Britain and the United States both used them during the second world war.
Unemployment should not be a problem in a war economy when all resources, including the labour force, are centrally allocated to support the nation’s defence. (In Britain, during both of its ‘total war’ experiences the size of the labour force actually grew.)The state needs to be directing investment in infrastructure and industry. Private property may need to be requisitioned by the military or government ministries to facilitate the war effort under emergency powers; historically wars have been a mechanism for tackling corruption and building stronger state capacity. The government should take immediate steps to reform Ukraine’s flat tax system in order to place the burden of financing the war on those most able to pay. Similarly, to ensure workers’ ongoing support for the war’s sacrifices, a partnership should be struck with the trade unions to negotiate terms and conditions (this should include U-turning on the Ukraine government’s recent controversial labour reform). All of these methods and more were used by the allies in the fight against fascism.
Single market membership is not in Ukraine’s interests
“Survive and Thrive” argues that immediate membership of the single market (‘everything but the institutions’) “would create enormous development opportunities for Ukraine within a few years”. But the report offers no evidence for this and, in our view, Ukraine should reject the offer were it to come. The rapid entry of a country at war into one of the world’s largest and most integrated free trade areas has no precedent in European or global history. Ukraine could not plausibly compete on the EU’s ‘level playing field.’ Exposing the country to this level of competition and market liberalisation could worsen its socioeconomic collapse.
Ukraine has also introduced capital controls, avoiding the mistake made in the 2014-2015 economic crisis (prompted by Russia’s first invasion and its annexation of Crimea), when billions were lost to capital flight. While the European Commission has the power to suspend single market rules on “freedom of capital”, Ukraine needs fully preferential economic terms. So it should be allowed to introduce protectionist measures such as tariffs, as required by the war, without losing its tariff-free access to the European single market.
Perhaps most obviously, the planned economy that Ukraine needs to establish would breach the most elementary principles of the European single market. It is because we share the authors’ pro-European values that we are moved to reject their proposal so strongly. The economic damage that entry into the single market would do to Ukraine (and its direct negative impact on its capacity to fight the war) could only harm the EU’s long-term interests.
These new and dangerous times call for much more flexible thinking.
Luke Cooper is the director of PeaceRep’s Ukraine programme and a senior research fellow at the LSE.
Mary Kaldor is professor emeritus of Global Governance and director of the Conflict Research Programme at the London School of Economics and Political Science. She is also a Council Member of ECFR.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.