Wars are won by economies, not armies, Ian Proud writes.
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Growing up on a British Army base in West Germany, I was conscious, even as a child, of being situated in a country that was booming. When the Berlin wall fell, the huge difference in economic development between West Germany and East Germany was something that could be elucidated not only through data, but also visually, by observing the drab buildings and beaten down citizens from the east. While it may be impossible to replicate the West German economic miracle today, a partitioned Ukraine can nevertheless move on to secure a brighter, more prosperous future for its citizens.
It is worth remembering that the very point of the Maidan movement which started in 2013, was to secure prosperity for Ukraine through greater economic integration into Europe and the wider world. That hasn’t happened, not just since 2022, but since 2014. It is no great surprise that Ukraine’s economy today is smaller than it was before war began. Yet Ukraine has received over $380bn in foreign aid during that time. Imagine Ukraine’s prosperity today, if the $190bn economy of 2019 has received a foreign injection amounting to 200% of GDP? Most of that money has vanished into thin air and the flames of war. Some of it will have gone into rampant corruption. Hardly any of it has gone into productive investment.
Yet investment was a key pillar of West Germany’s success. Investment alone contributed an average of almost 2.2% per year to GDP growth in West Germany in the 39 years before the Berlin wall fell. As I’ve reported before, investment is an issue that Ukrainian leaders have consistently failed to grip since 2014, when the policy of western-backed confrontation with Russia began. With cities and over half of its electricity generation destroyed, there is huge scope in Ukraine to generate catch up growth by investing in the basics of infrastructure. Indeed, it is the degradation of Ukraine’s infrastructure that is slowing the growth that it can create today.
Investment needs people. A major factor in West Germany’s success was the rapid increase in its population after the war. West Germany’s labour force rose by almost 44% in the decade from 1950-1960, with much of the labour coming from disaffected Germans in the east. Ukraine could benefit from that same windfall of labour should it decide to end the war, having seen huge depopulation since the outbreak of war of up to 10 million people. Agreeing a ceasefire would allow the slow process of Ukrainian citizens returning to their homeland including the at least 1 million men of fighting age who have avoided the draft. The return of citizens would also relieve the drag on Ukraine’s current account deficit from Ukrainians spending their money in foreign countries.
West Germany kick started business productivity and exports, seeing export growth average 17.5% between 1950-55 as businesses reformed and increased productivity. Germany remains, today, a global exporting powerhouse. Despite its productive agriculture, rich mineral wealth and talented workforce, Ukraine has been stuck in a toxic combination of low investment and import dependence (see my earlier article) since 2014. Ukraine’s Finance Minister recently said that 30% of businesses in Ukraine have stopped functioning while 45% have decreased production. This lack of a clear economic strategy from Ukraine’s leaders is not a factor of the current war; Ukraine’s leaders haven’t set out a clear strategy for growth over the past decade.
That lack of economic leadership will continue at least for as long as this war continues.
Yet the military facts on the ground have not changed significantly. That delicate balance, in which Russia is making progressive, but nonetheless small gains, is held in place both by Ukraine’s dire military logistical situation and by Russia’s decision not to go all in. There is a palpable sense from Russia military bloggers of the Kremlin wanting to avoid a large scale mobilisation, and steering clear of the extreme tactics that Ukraine has pursued to press gang men into military service. However, with Russia set to spend even more on defence in 2025, the imbalance in the two forces may shift further in its favour, whoever wins the U.S. Presidential election.
So the situation, inexorably, will continue to worsen against Ukraine. Having been fairly static for the past month, because of the distraction of Kursk, the front line in the Donbas is shifting westwards again at an increased tempo. The fall of Vuhledar in the south has precipitated a rapid (by the slow standards of the front line) push north, the Pokrovsk salient is broadening, and Toretsk is being gradually consumed.
Ukraine today has become locked in self-fulfilling militarism and a state of dependency on outside help, focussed only on the chimera of victory against Russia. Zelensky’s personal fate is closely linked to the continuation of the war, the cessation of which would bring a close to martial law in Ukraine, and the consequent pause in elections. Yet looking back, West Germany’s economic miracle, or Wirtschaftswunder, started when German leaders took back economic control; they did so after a period of disastrous military rule that saw cigarettes become a tradeable currency.
Ukraine is not at that stage, yet. However, it’s worth remembering that one of the reasons East Germany failed as a state project was that few people of working age wanted to live there. Indeed, it’s this feeling of being left behind which has fuelled a rise in popular support for the BSW and AfD parties. Ukraine needs its people to come home and to reengage in the reconstruction and political rehabilitation of their magnificent country.
Nothing, no Ukrainian victory plan, no injection of additional weapons or authorisation to strike slightly deeper into Russia, will change the basic mathematics of Ukraine’s disadvantage. Wars, after all, are won by economies, not armies. The cold, unpalatable reality is that some form of partition will be imposed on Ukraine when hostilities finally draw to a close. When that happens, Ukrainian leaders will need, finally, to refocus on their economy, as West German leaders did in 1949.
