War is a nasty business with immense cost that can be measured in human lives and the destruction of private and public infrastructure. As I write this blog, Ukraine has endured an unjustified war with Russia for nearly three months. We’ve all witnessed horrendous human rights violations, shocking war crimes, and terrible physical destruction.
When war comes to town it is time to get outta Dodge
War not only destroys lives, property and infrastructure, it forces many to flee their country (becoming refugees), and others to move to safer locations within the country (internally displaced people or IDPs). According to Worldvision, the Syrian civil war which began in 2011 sets the bar for highest number of displaced at 13.5 million people – over 61% of the population. Adding the estimated 600,000 civilian casualties results in 65% of the total Syrian population directly affected over the past 11 years.
Unfortunately, Ukraine is about to set a new record for human upheaval. Russia invaded Ukraine on February 24, 2022 and in less than three months 7.1 million people have fled to safer areas of the country (IDPs), and another 6.3 million people have fled the country.
33% of Ukraine’s population have been forced to flee their homes. What took 11 years for Russia to accomplish in Syria, took less than 90 days in Ukraine. Horrifyingly, it seems that war is getting more efficient at destroying the lives of innocent people.
So how do we prevent another Syria or Ukraine from ever happening again?
Preserving Peace by putting a cost on War
Human rights violations were rampant in Syria so many NGOs marshalled hundreds of brave volunteers to document them. Despite this, Amnesty International reports the same is occurring in Ukraine every day.
Human rights violations and war crimes are barbaric acts and the perpetrators must be punished. However, the process can take years or even decades as evidence is collected, courts are convened, and appeals heard. In the meantime, dictators with delusions of grandeur are still committing atrocities against their own people and those of other nations with impunity because they know that even if they lose, they will likely never face justice since the glacial process won’t reach completion during their lifetime. Autocrats don’t live forever, especially 69-year-old ones like Vladimir Putin, so what do they have to lose?
If you want their attention kick them in the wallet
War not only destroys human lives, it destroys homes, property and infrastructure. Physical property has a cost that can be measured in dollars and cents. Perhaps if Putin was forced to pay for the rebuilding of Syria and Ukraine because of the destruction he caused, he might think twice or three times before invading a sovereign nation or intervening in a civil war.
Some back of the napkin calculations
Over the last 90 days Russian armed forces have looted and destroyed large cities like Mariupol and Kharkiv, as well as countless smaller towns and villages. Critical infrastructure like roads, bridges, rail and power lines, water and sewer mains no longer exist in many parts of Ukraine. All this infrastructure must be restored before people can even consider rebuilding homes, schools and hospitals.
While it was not as destroyed as Ukraine is likely to be, the rebuilding of the former East Germany can be used as a proxy. For over 20 years, German reunification resulted in the largest construction project in the world, and I’m sure that rebuilding Ukraine will be even more challenging.
According to Deutsche Welle it cost €300 billion to upgrade the infrastructure of East Germany to West German standards. Inflation adjusted dollars converts to approximately €460 billion just to rebuild the infrastructure.
Napkin Number 1: Cost to rebuild Ukrainian infrastructure – €460 billion
Before you can restore critical infrastructure, you must remove all the landmines, booby traps, unexploded bombs and cluster munitions. It has cost an estimated €30 million per year and taken 25 years to de-mine Cambodia which is roughly 1/3 the size of Ukraine.
Napkin Number 2: Cost to clear mines & munitions – €2.25 billion
Once the infrastructure is rebuilt, all the homes and contents destroyed need to be replaced. According to Ihor Nikonov, founder of Ukrainian developer KAN, the pre-war cost to build a home was $1,000 per square metre. A residential building of 100 apartments is about 6,500 square metres, so the average unit is 65 square metres. Let’s assume only half of the displaced Ukrainians will need to have their home rebuilt.
Napkin Number 3: Cost to rebuild 6.5 million homes – €425 billion
Now that all the new homes are built, what about all the stuff inside? TVs, computers, appliances, furniture, food, clothing etc. According to the Association of British insurers, the average household content in the UK in 2018 was worth £35,000. Let’s be conservative and assume it’s half the cost to replace the contents in Ukraine.
Napkin Number 4: Cost to replace contents of 6.5 million homes – €134 billion
Finally, let’s consider the economic impact of Ukraine’s productivity loss as people await the rebuilding of their homes so they can restart their lives and jobs? According to Denys Shamal, the President of Ukraine, the country’s GDP was €190 billion in 2021. 33% of Ukraine’s population is displaced and let’s assume they are unable to contribute to the country’s GDP for 5 years as the country re-builds.
Napkin Number 5: Cost of lost productivity – €317 Billion
Total cost of the war
My estimated minimum cost of rebuilding Ukraine – €1.3 trillion
Please take these numbers with a large grain of salt as I’m not an economist, accountant or contractor. However, I’m a sales guy so I’m very familiar with back of the napkin calculations and more often than not, they are within the ballpark. If I were Vladimir Putin and knew that, win or lose, it would cost Russia over 1 trillion Euros to rebuild Ukraine, I might think twice before invading a sovereign nation.