Last summer, we called for the development of a Polish strategy in connection with the law adopted by the Verkhovna Rada releasing the land market in Ukraine, and we described the announcements of a great privatisation formulated by Zelensky’s team. If the authorities of the Polish Republic had picked up at least some of our proposals and started taking action, today the situation, including Polish interests, could have looked a bit better.
The war changed a lot, also by abruptly improving Poland’s strategic and political position in relations with Kyiv, as evidenced by, for example, the law adopted by the Verkhovna Rada granting citizens of the Polish Republic a special, privileged status. Thousands of personal testimonies and public opinion polls show that Poland and Poles, in the eyes of Ukrainian citizens, have become the closest, unique, partner, ally and friend. It is also obvious that without the military and logistical support of Poland, the continuation of the fight by the Ukrainian armed forces would be much more difficult, if at all possible. This is one of the important lessons of the war in Ukraine. Currently, Ukrainian entrepreneurs, preparing for the reconstruction of the country, talk about the need to build alternative logistics channels to those that have so far led through the Black Sea ports. For obvious reasons this also increases the importance of Poland. The ties of sympathy, political capital, logistical importance and direct military support are all factors that can increase the possibilities for Polish entrepreneurs during the upcoming reconstruction of Ukraine. Already now, as noted by one Financial Times commentator, we should begin to prepare for this, because reconstruction plans must be drawn up before there is even peace. Such, in his opinion, was the way during the Second World War, when the framework of the Marshall Plan was being built. Similar actions were taken during the Korean War. However, the difference between the present situation in which Ukraine has found itself and historical reconstruction plans is fundamental. The authorities in Kyiv calculate that the recovery of the country from the present devastation will “cost” at least $750 billion, while the scale of the economic involvement of the West, both in connection with the Marshall Plan and the reconstruction of the potential in South Korea after the war was much smaller. Financial Times analysts have calculated that in the reconstruction of Europe after the devastation of World War II, the Americans under the so-called Marshall Plan committed $156 billion in today’s prices. Various forms of aid for Afghanistan have reached a total value of $195 billion, and for Iraq $292 billion. This means that the scale of needs will be greater than ever in history, and this means both greater opportunities and much more serious challenges.
At Strategy&Future, we are convinced that Poland cannot miss this opportunity. The reconstruction of Ukraine, in which we should engage, gives us the opportunity to overcome the geostrategic consequences of the fall of the First Polish Republic, which can only be achieved by permanently pushing Russia out of European politics, and from a generational perspective, it enables us to make an economic and civilisational leap, offering a chance to rebuild relations with the EU so that they are more partnership-based and for our homeland to enter into the group of 20 most powerful economies in the world.
For this reason, we decided to initiate a new project within the framework of S&F, which we have tentatively titled Poland in Ukraine. We appeal to our subscribers, readers and listeners, especially entrepreneurs, to formulate tasks for public administration when describing the realities of the industries in which they operate and the previous experience related to attempts to enter the Ukrainian market. We want to show that Polish companies, both private and public, are already large players on a European scale that, independently or by creating capital consortia, can think about permanently establishing themselves on the Ukrainian market. We have experience, we have knowledge, we have capital and staff. What we lack, compared to our rivals from Germany or France, is that usually we are not, I mean our entrepreneurs, consistently supported by the Polish state. And that’s what we want to change. We want to write what the public administration in Poland, our state, should change in its policy, but specifically without a general ideology, so that the participation of Polish companies in the reconstruction of Ukraine would be beneficial, both from the perspective of Kyiv and for our economy to become a factor accelerating the development, modernisation and growth. Therefore, we appeal for participation in our project.
Why is the prudent involvement of the Polish state in this work of supporting private capital investment in Ukraine necessary? Let’s start with the theoretical issues. Michael J. Mazarr, a former researcher at the US Army War College, now at RAND, has — for the past 15 months, along with a group of other researchers — been looking for answers to the question of what makes certain nations grow faster, achieve a better position on a global scale and win the ongoing competition as others lose. These analyses were commissioned by the Office of Net Assessment, a key unit of American strategic planning, which, incidentally, makes us realise that Anglo-Saxon strategy is much more than just military matters. The result of their work is a very extensive report, 406 pages long,[1] which means that probably hardly anyone in Poland will read this work, and in political circles, both governmental and the more oppositionist, certainly no one, but Mazarr has published[2] in the prestigious Foreign Affairs magazine, a much shorter article on the same topic, the reading of which is a convenient starting point for looking for an answer to the question of what causes some nations to win in international, historical competition, while others fail. The main conclusion drawn by American scientists in their report is as follows – in their opinion, “In the fight for supremacy between world powers, it is not military or economic power that is of decisive importance, but the basic features of society: the characteristics of the nation that generate economic productivity, technological innovation, social cohesion and national will.” Historical winners, Michael Mazarr argues, can lose battles, even wars. They can lose allies, they can fight alone, and yet they can ultimately turn out to be winners. According to the RAND experts, who for this purpose conducted a series of analyses of historical cases, political science and economic research, the historical advantage is determined by a combination of several, and precisely seven factors that play a key role. These are: ambitions and will to act, strong identity and national cohesion, a common view on opportunities and areas of success, an active state, effective institutions (both social and state), a society that learns and easily adapts to new situations, as well as a culture of competition and pluralism. Each of these factors is important and it is a suitable mixture of them, in which synergistic effects will lead to increasing the possibilities of a given nation. A society internally at odds and divisive in terms of diagnosing the best political strategy in the long run, not temporarily, will not achieve much in historical competition. But even the greatest degree of unification of national goals and efforts will not do much if we do not have an efficient, modern state that will actively and intelligently strengthen and promote national goals.
The Americans strongly emphasise the well-structured balance of these factors, arguing that “competitive societies tend to be open, tolerant, full of intellectual energy and commitment to science; have a strong sense of their role in the world and a sense of mission or will to act; they almost always use strong public and private institutions, as well as a state apparatus that actively promotes their advantage; they embody the pluralistic clash of ideas and the ability of people from all walks of life to offer their talents and be successful. We call this specific mixture of features the spirit of the Renaissance.” If the energy and ambition of society is not accompanied by a strong and active state, the chances of success in international competition in the historical dimension will be lower. Thus, what counts is the area of will, the sense of a community of goals and aspirations, as well as political and national ambitions that must support strong and efficient public institutions. This mix is just the beginning of success, of course: not its guarantee, but the lack of a sense of community, divisions, internal conflicts, lack of agreement as to the most optimal great national strategy, is a sure source of failure.
As Mazarr argues in his article, “perhaps the basis of all forms of relative national strength is some version of national ambition.” It is about a sense of mission that motivates individuals and the whole society, the common pursuit of a goal that binds the nation and the will to achieve success. Of course, it is easy to get led astray in this area. History knows many examples where the belief in one’s own uniqueness and striving to take a privileged place in the family of nations led to tragedy on a global dimension. These dangers must always be kept in mind, but that is not what this is about. I think the American researchers mean a common goal that unites the efforts of an entire generation and motivates society to make greater efforts. Mazarr writes that “to develop national ambitions requires the involvement of the entire nation in gaining knowledge about the world and a common will to influence it: discovering and controlling, understanding and guiding. This impulse can easily go wrong. Excessive national ambition is a common path to defeat, be it through destructive wars of choice or imperial conquests that unduly distract the nation’s resources and provoke negative reactions. But without such ambitions, countries rarely build efficient “economic” and technological engines or win the competition for power.” Ambitions do not guarantee success if it is not accompanied by an inclusive, open society that creates favourable conditions for the development of human capital. Excessive hierarchy, systems of inheritance of influence, importance and position, the advantage of the corporate approach, but also excessive income inequality in the long run reduce social vitality, preserving the structures of power and influence, and thus weaken the power of the state. As the RAND analysts argue, “highly competitive societies also benefit from some version of an active state: a cohesive, powerful, goal-oriented and effective government that invests in national capabilities and beneficial social characteristics.” Thus, it is not the “free hand of the market”, the liquidation of the state, or its gradual withdrawal to the position of the “night watchman” that is the source of historical success, but on the contrary — an active state defending national interests (although not necessarily omnipotent, wishing to solve all problems) is the source of success. And again, as in the previous areas, it is about finding the best, individual model in which synergies can be realised, meaning that the strength and dynamism of society would be supported and not limited by a strong and efficient state. Such a rational system of equilibrium must be based on efficient institutions, both social (family, school) and public, although not necessarily the domain of the state or administration (parliament, the judicial system, the financial system). This should be accompanied by social respect and appreciation for learning and the learning process itself.
In this context, we must also see the announcements of positive changes in Ukraine, the awareness of the fundamental decisions facing the local political class and the numerous opportunities that, if properly used by us, can program the development of both Poland and Ukraine for years. I’ve written recently at S&F about the reform plans announced by Deputy Prime Minister Julia Swidirienko, which, if successful, will be a free-market breakthrough.[3] Now the Ukrainian government is announcing the acceleration of its universal privatisation program.[4] The Supreme Council passed a law on rapid privatisation,[5] and already this month the government announced the liquidation or sale of 420 enterprises. Ultimately, out of the current 3.5 thousand state-owned enterprises (1.8 thousand of which are no longer working, although they still have assets) about a hundred are to remain in state hands. Julia Swidirienko also declared the government’s readiness to accept, in the case of new foreign investors, the jurisdiction of the British legal system in order to guarantee the security of trading and investments. It should also be noted that Ukrainian journalists specialising in economic issues, supporting the privatisation plans of Zelensky’s team, justify the necessary radicalism and the need to carry out deep and not mock changes with the needs of the country’s reconstruction. Gleb Kanewskij, head of the StateWatch organisation, wrote[6], that the privatisation of public property should be a method of mobilising Ukraine’s own resources in connection with the reconstruction needs and fears, or the international funds that Kyiv is going to obtain will prove to be adequate to the needs. Balázs Romhányi, director of the Budapest Fiscal Responsibility Institute, published an article in Dzerkalo Tyzhnia, which aroused a discussion in the Ukrainian expert and political environment, and the presented proposals were taken seriously, as one of the possible institutional options for how Ukraine should start reconstruction and win the favour of capital markets. Romhanyi proposed that Ukraine relinquish some of its economic sovereignty for a while.[7] He meant Kyiv’s voluntary submission to the supervision of international “steering committees” composed of representatives of countries providing aid to Ukraine, as well as the adoption of all EU regulations, mainly anti-corruption ones. In this case, it is not about implementing all the proposals of the Hungarian financier into the Ukrainian legal system, but about the willingness of the political class in Kyiv to consider such far-reaching ideas in terms of rational political options. The war also changed the way Ukrainians themselves think about the future of their country. They want to be firmly rooted in the institutional world of the West, to move away from the oligarchic system, to equalise development opportunities, also in the social sense, and to break with the tradition of building an economy based on arrangements, networks and connections. Therefore, it seems that this type of social pressure may constitute, if properly strengthened and directed, a necessary guarantee of accelerating and consolidating changes in Ukraine.
In the context of the opportunity for Polish business, it is worth mentioning two more phenomena. Europe is facing the most serious energy crisis in decades. This is not about the energy rationing perspective, but the changing price relations that will affect the competitiveness of European economies. If currently the price of electricity in Germany is 1000% higher than the average for 2010-2020, it is hard not to expect revolutionary changes. How does this relate to Ukraine? Well, today Ukraine produces more energy than it consumes and is therefore ready to export 30% of what it produced, the more so as it has four times lower costs due to the developed nuclear energy sector.[8] We have a similar situation on the labour market. The unemployment rate in Ukraine rose to 35% in the second quarter of this year.[9] Real incomes are therefore expected to decline by 27% by the end of the year,[10] and at the end of 2024 they will still be lower than before the war. This means that in the foreseeable future, the migration pressure from Ukraine will not weaken, and Poland, with the lowest unemployment rate in the European Union (besides the Czech Republic) and due to its geographical and cultural proximity, will be the main direction of movement of Ukrainian citizens. The Polish industrial sector is already working for the needs of the Ukrainian market, both in terms of consumer goods and others, including military goods. Logistics systems are connected, there are talks about joint ventures, including a Polish-Ukrainian “drone valley”.
If the economy is developing because it has cheap energy, a large and absorbent market, investment potential and a young, educated and willing-to-work workforce, then Poland and Polish entrepreneurs, together with their Ukrainian partners, are now able to have all these advantages. They only lack the rational support of the state, which should build institutional conditions, investment security and our competitive advantages. We would like to initiate a project at S&F, Poland in Ukraine, which forces our country to make it easier for our business to take advantage of the historical opportunity that the reconstruction of Ukraine may be for it, and to some extent “by the way” to modernise itself.
[1] https://www.rand.org/pubs/research_reports/RRA499-1.html
[2] https://www.foreignaffairs.com/articles/united-states/2022-06-21/what-makes-a-power-great)
[3] https://www.pravda.com.ua/rus/columns/2022/07/8/7357131/
[4] https://www.epravda.com.ua/rus/columns/2022/07/30/689818/
[5] https://www.epravda.com.ua/news/2022/07/28/689753/
[6] https://www.epravda.com.ua/rus/columns/2022/08/2/689906/
[7] https://zn.ua/macrolevel/ekonomicheskij-suverenitet-poslevoennoj-ukrainy-ni-shaha-nazad.html
[8] https://www.epravda.com.ua/rus/publications/2022/07/11/689052/
[9] https://zn.ua/article/print/ECONOMICS/iz-za-ahressii-rf-uroven-bezrabotitsy-v-ukraine-dostih-35-nbu.html
[10] https://zn.ua/article/print/ECONOMICS/zarplaty-ukraintsev-po-itoham-hoda-upadut-pochti-na-tret-nbu.html
Autor
Marek Budzisz
Historian, journalist specializing in Russian and Post-Soviet East. Recently he published (in Polish) "The End of the Russian America. The Thoughts on why Russia Sold Alaska”.
Strategy&Future
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