As we move beyond the second anniversary of Russia’s full-scale invasion of Ukraine, the resilience and indomitable spirit of the Ukrainian people have been starkly evident. This period has not only been a testament to Ukraine’s fortitude in the face of adversity but also a clarion call for a broad economic and social transformation on the path to EU integration.
“Please, strengthen our economy, and we will strengthen your security,” President Volodymyr Zelensky compellingly stated in his 15-minute address at the opening of the 2024 Annual Meeting of the World Economic Forum at Davos. This plea highlights the need for economic strengthening as a foundation for security. Herein lies a critical and dual challenge for Ukraine: not just managing defense, but also fostering a self-sufficient economy in the face of prolonged conflict and reconstruction. This approach marks a move from dependence on external support to building internal resilience, a strategy that is vital for Ukraine’s enduring stability and, consequently, for broader global security.
The path towards building a robust economy during war requires confronting urgent ground realities, one of which is the widespread issue of landmines. The pressing issue of landmines extended beyond formal dialogues at Davos conference center and Munich Security Conference, dominating discussions across corporate and governmental gatherings, and highlighting its gravity and complexity. Palantir Technologies, who has collaborated substantially with the Ukrainian government on software and reconstruction needs, hosted a panel on “Clearing the Path to Growth: Ukraine’s Technology-Driven Strategy for Humanitarian Demining.” The discussion, moderated by the IEP’s Deputy Director for Europe and MENA, underscored the urgency of clearing over 150,000 square kilometres of mine-contaminated land, as well as the need for innovative and collaborative approaches, and transparent mechanisms to monitor and coordinate the efforts among many actors.
During the panel, Deputy Minister of Economy, Oleksii Sobolev, announced the upcoming launch of an innovative marketplace for humanitarian demining services. This initiative aims to integrate the acute demining needs with the private sector’s capabilities, further necessitating legislative changes and local community support. It also emphasises the strategic role of integrating global technological advances with local innovations. To fully maximise the country’s potential in this realm, additional legislative and community engagement are vital.
Nina Levchuk, co-founder of Ukrainian NGO Impact Force, emphasises the significance interest of local entrepreneurs in deeper engagement in community impact initiatives: “In our first Ukraine Impact Business Accelerator pilot program, 84% of entrepreneurs aimed to integrate social goals into their business models. This demonstrates a profound recognition that their success is interlinked with the welfare of their communities”.
Embracing a community and impact-driven approach for demining efforts, Ukraine can effectively lay the groundwork for an economy that transcends traditional reconstruction. By integrating a social angle in technology, as well as other vital sectors such as agriculture, health and services, Ukraine can position itself as a model for more equitable, resilient and inclusive growth. Furthermore, this approach can help align its recovery with the European Union’s vision of a social or impact economy where progress is measured not just in financial terms, but in societal and environmental impact as well.
Alexandre Lourie, International Managing Director of Groupe SOS, a leading association of social enterprises in Europe and part of the Secretariat of the Pact for Impact Alliance, emphasises already proactive nature of Ukraine’s rebuilding efforts.
“There is a misunderstanding. Some tend to consider that Ukraine’s reconstruction challenge will happen after the war ends. They are in denial,” Lourie said. “The reconstruction started the same day the war started. Beyond the war frontline, Ukrainians have kept creating and running companies, with more creativity and innovations than ever. There are countless examples of fantastic, mostly woman-led social enterprises contributing to the economic recovery and development. It is urgent to accelerate this movement.”
In this framework, the social entrepreneurs, SMEs with impact models, and private associations can emerge as a pivotal force in rebooting the nation’s economic and social dynamics, especially considering the public sector’s intense focus on ongoing war efforts and its likely constrained capacity for rapid post-war reconstruction.
A social economy, where “putting people first, producing a positive impact on local communities”, constitutes around 8% of the EU’s GDP and exhibits a growth trajectory. This model champions a more equitable economic system, underscored by its active inclusion of women. Ukraine’s economic landscape has already shifted and became increasingly women-centric – with every second small business in Ukraine now initiated by women, a trend highlighted by Valeriia Ionan, Deputy Minister for European Integration of Ukraine. This trend, however, is not only a testament to a structural economic transformation but also a reactive adaptation to the reduced availability of men due to ongoing conscription, adding complexity to understanding these changes as a blend of circumstantial response and deliberate strategic shift.
At the same time, there is no doubt that the role of women will only continue growing. As stressed by Aslihan Ozcan, UN Women Partnerships Specialist “sustaining inclusive economic growth is essential for Ukraine’s early recovery and post-war reconstruction, emphasizing the significance of women’s participation across all sectors of the economy, particularly in traditionally male-dominated sectors, as it defines the country’s reconstructive capabilities”
If Ukraine decides to embed social and impact economy as the flagship of the recovery efforts, the EU’s roadmap and the UN’s 2023 resolution on Social and Solidarity Economy offer valuable frameworks for setting the targets. Supporting this transition are alliances like Pact for Impact, advocating for four pillars of the social economy: promoting UN SDG-aligned solutions, scaling social innovations, giving prominence to Social and Solidarity Economy in global politics, and bolstering local organisations. However, the path to implementing a Social and Solidarity Economy in Ukraine involves navigating complexities. These include legislative reforms, adapting market mechanisms to prioritise social impact, fostering public-private partnerships, and ensuring broad-based community engagement.
The Institute for Economics & Peace, through its Business and Peace Report, underscores the intrinsic link between peace and prosperity, emphasising how resilience, bolstered by the eight pillars of Positive Peace, is a significant predictor of economic performance. In this context, Ukraine may present a unique case study.
Ukraine has incurred significant economic setbacks, with its economy shrinking by 30% and losing 3.5 million jobs as a direct result of Russian aggression as per the Feb 2024 reports from the Ukrainian Government. IEP’s own analysis also reveals a 27% decrease in GDP per capita since 2014 compared to a scenario without the Crimean annexation.
Nonetheless, Ukraine has proven to be significantly more resilient than expected in both economic and societal terms. The most recent estimates predict 2023 real GDP growth nearly doubling initial forecasts, with most of the growth coming from construction and retail sales. Industrial manufacturing – the industry expected to gain most from the war – only grew slightly.
Furthermore, a recent study highlights Ukraine’s exceptional societal resilience, outperforming neighbouring countries – Lithuania, Poland, Slovakia, Czech Republic, and Estonia, in aspects of community strength, hope, and coping with distress, despite experiencing lower levels of well-being. This unique societal fabric of resilience and optimism underscores the potential for leveraging these attributes in rebuilding efforts, suggesting a pathway towards an inclusive economic model.
The IEP’s Positive Peace Index (PPI) serves as a valuable tool for measuring societal changes in countries aiming for peace and resilience. Prior to the onset of the war, Ukraine had shown commendable progress in its Positive Peace score, advancing from 76th to 74th place in the 2022 report. This improvement was marked by strides in areas such as corruption control and government effectiveness. Despite the improvement, even before the war, the country faced challenges, with declines noted in sectors like Equitable Distribution of Resources and High levels of Human Capital. The conflict now threatens to exacerbate these issues. Thus, the emphasis on research & development investments, access to services and social innovation emerges as critical for Ukraine’s reconstruction and systemic growth.
To grasp the full potential of the social economy as a catalyst for Ukraine’s transformation, fueled by a strong sense of community, it would be essential to conduct a comprehensive evaluation of the current landscape, the pivotal role of women, and the capabilities of the private sector. A study focusing on the Social Economy and Ukrainian resilience could outline various scenarios for reconstruction, each contributing significantly to the broader EU economy. By positioning a social and impact economy at the forefront of recovery initiatives, Ukraine can bolster its stature as a valued and equal economic player in the EU team.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of the Institute for Economics & Peace and/or Vision of Humanity.
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