Expert names measures to put economy on "war footing"

At the same time, it is necessary to rely on the experience of the United States and Great Britain during World War II. Oleh Pendzyn, an expert of the Economic Discussion Club, said this on Ukrainian Radio, Ukrinform reports.

According to him, we are talking about such unpopular measures as the introduction of salary payments only to state employees, freezing social standards, import restrictions, creating labor armies, and restricting consumption in society.

The expert reminded that putting the economy on a "war footing" is a set of measures aimed at maximizing the concentration of society and the economy to fulfill military goals. "You should always start with money. This is the consolidation of all public finances in one place, regardless of whether it is local taxes or central budget taxes. The existence and financing of local government expenditures should be carried out through the budget approved by the Ministry of Finance and exclusively within the framework of priority tasks, such as, for example, providing salaries for teachers, state-funded doctors, some minimum expenditures for the housing and communal sector. And that's basically it. There are no questions about landscaping, paving, or other things that are really extremely important for local communities, but they are definitely not relevant in a time of war," he said.

According to Pendzyn, another step is to freeze social standards, as their growth means additional budget expenditures. "Any areas related to putting the economy on a "war footing" are fantastically unpopular with the public, with people who feel the deterioration in the overall level of consumption. We have the experience of the great democracies that won the Second World War, including the United States of America and the United Kingdom. And after the victorious end of the war, in the elections following the war, as a rule, according to the experience of these countries, opposition forces always came to power," the expert reminded. According to him, the forces that led the country to victory usually lost the elections: decisions related to the transfer of the economy to a "war footing" are extremely unpopular in society.

The next step, according to the expert, is to limit imports to critical imports only. He cited data that in 2023, Ukraine's trade balance was minus USD 36-37 billion: "That is, we bought 38 billion more imported goods than we sold our own. This difference is covered by external borrowing, by foreign exchange reserves. We bought a lot of new cars and phones."

Penzyn reminded that during the Second World War, one of the most powerful sources of domestic financing for the American economy was borrowing from the population: "The state borrowed very actively from the population, thus creating large enough investment resources to deploy new weapons production facilities. The entire economy was in a system of very strict economy and control over the use of resources, because the resource, especially the one that comes in through imports, is exhaustible. And this is extremely important."

In addition, according to the expert, mobilization should be carried out not only to the front, but also to the labor army. He explained that there is a shortage of working professions in Ukraine, so rapid training and acquisition of production skills by people and their mobilization for specific production is also an element of putting the economy on a "war footing."

The last step is to limit consumption in society. "There should be six taxpayers behind every mobilized person. When we talk about the mobilization of 450,000 people, it means that 3 million additional taxpayers should work in the economy. Before the war, we had about 18 million people who were characterized as labor resources and were of working age. Now, according to various estimates, we have 12.5-13.5 million. Out of these millions, we have 6.5 million who work in business, and we have 3 million state employees, including military personnel. Today, about 9.5 million people pay taxes, including personal income taxes. In order to provide funds, based on internal reserves, for 450,000 to 500,000 people who need to be mobilized - and they absolutely need to be mobilized - we need to add 3 million more taxpayers from business to those 6.5 million," the expert summed up.

As Ukrinform reported, at the final press conference in December 2023, President Volodymyr Zelensky said that the military had proposed to him at the Supreme Commander-in-Chief's Headquarters to mobilize 450-500,000 people. He also said that mobilization in this format would cost Ukraine an additional UAH 500 billion.