Ukraine: Don’t repeat past mistakes

Mar 13 2014, 12:32 IST
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SummaryThe goal for Ukraine should be to under-promise and over-perform in the months ahead.

The events in Ukraine have now made effective external support for successful economic and political reform there even more crucial. The world community is rising to the occasion, with concrete indications of aid coming not just from the International Monetary Fund and other international financial institutions but also the United States, the European Union and the G20.

At one level, the Ukraine situation is unique—particularly the geopolitical aspects associated with Russia’s presence in Crimea and the issues raised by Ukraine’s strategically sensitive location between Russia and Europe.

At a broader level, the world community has seen many examples over the last generation where an illegitimate, or at least highly problematic, government was brought down and the world community sought to support economic reform and a new, presumably more democratic and legitimate one. Think of the transitions after the Berlin Wall fell or the Arab Spring.

As a broad generalisation, the support efforts have been constructive but the results have often fallen short of the global community’s aspirations. The Marshall Plan metaphor has been invoked close to a dozen times in the last quarter century. None was as successful as the original. It is true that well-functioning institutions cannot be imposed from the outside—countries and their peoples shape their own destinies. But experience does provide important lessons for the design of support programs.

Five lessons stand out.

First, immediate impact is essential. New governments will not last unless they deliver results that are felt on the ground. Conditions on assistance need to recognise political as well as economic reality. Resources must be delivered in a front-loaded way, where their impact is immediately visible.

For example, strengthening safety net programs and support for new businesses need to lead—not lag—the removal of subsidies. Too often the international community sets economically rational conditions that are more than the political process can bear, then fails to move aid and blames the country for its bad policies. This is surely a time for political concerns to trump technocrats’ fears.

Second, avoid “Potemkin money.” A combination of media excitement, recipients’ desire to maximise support and donors’ desire to appear visionary usually leads to the announcement of huge assistance packages, based on indiscriminate totalling of all project flows of all kinds. The result is disappointment followed by disillusionment, as recipients realise that not all assistance can materialise quickly or meet urgent local needs.

Remember, the Marshall Plan was announced without any figures or fact sheets. The

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