The Phenomenon of the “Post-Apocalyptic” Economic Miracle

Global and uncontrolled pandemics, major natural disasters and bloody wars are factors that can change both people's lives and economies in unexpected ways. But beyond the tragic consequences, material damage and destruction of niches and markets, there is another side to every disaster. In the long run, black swans also lead to what is known as “post-traumatic” renewal – a sharp leap in recovery and development. 

For example, the Great Fire of London in 1666, which destroyed two-thirds of London’s buildings and left nearly 70,000 people homeless, led to an explosion of uncontrolled urban development. It also led to a number of progressive changes: the demand for craftsmen loosened the restrictions of the guilds; the demand for property insurance created a niche for lawyers and insurance agents; and new architectural standards contributed to safer development.

The damage caused to Ukraine by Russia’s war of aggression is devastating. The aggressor country is deliberately destroying Ukraine’s infrastructure, displacing human potential and making recovery impossible. One year after the full-scale invasion, Ukraine’s GDP has lost a third of its value. According to the EBRD, in modern history such huge annual losses (25-50%) have usually been seen only in countries that surrendered or were crushingly defeated in war. Germany, Austria, Japan and Iraq, for example. Or in countries where hostilities took place on the majority (over 50%) of the territory (Bosnia and Herzegovina). Despite enormous losses, some of these countries have managed to recover quickly and become examples of post-war economic miracles.

Values of the survivors

The Black Death, a plague pandemic that swept through Asia, Europe and parts of Africa in the mid-14th century, led to fundamental changes across the European continent.

Although the total human cost of the pandemic is difficult to estimate, it is clear that the spread of the plague in 1347-1353 and subsequent smaller waves of the deadly disease in the 14the and 15th centuries caused a demographic crisis that took at least a century and a half for European countries to overcome.

According to data collected by the Italian historian Paolo Malanima and quoted by the BBC, between 1300 and 1400 the population of England and Wales fell from 4.5 million to 2.7 million, Scotland from 1 million to 700,000, France from 16 million to 12 million, the Italian states from 12.5 million to 8 million, the Spanish states from 5.5 million to 4.5 million and Germany from 13 million to 8 million.

Paolo Malanima estimates that 20-25% of Europeans died during the pandemic, and that the total population of Europe – including the Hundred Years’ War and famine – fell from 78.7 million to 56.85 million, or about 28%.

One of the foundations of the recovery was a reassessment of values. Those who managed to avoid death began to value the chance to live above all else. After the pandemic ended, people married and had children. In the long term, given the high birth rate at the time, Western European countries were able to rebuild their pre-pandemic populations.

During the years of the pandemic, the representatives of the wealthy accumulated capital. During the plague there was simply no place to spend money, and the survivors inherited the wealth of their deceased relatives.

After the plague, the aristocracy rushed to make up for lost time, causing overspending and even devaluation and inflation. The cost of crafts and labour doubled.

Peasants, who had a better chance of survival than those living in densely populated cities, realised the value of freedom, equality and the real value of their own labour. Despite the restrictions imposed by kings and feudal lords to return to the ‘pre-plague’ situation, peasants demanded fair payment for their produce and sought to move to the towns and receive artisanal training.

The post-plague stagnation and subsequent effects of the Black Death significantly changed the direction of economic development in the countries of the European continent.

It should be added that these changes were not uniform. While in Western Europe the plague pandemic gradually led to a kind of decentralisation and a desire to preserve and increase human capital, in the East it led to increased hierarchy and serfdom.

Japan’s post-war recovery 

Japan lost the Second World War and its economy was virtually destroyed. 70% of its industrial facilities were destroyed. The country lost its sources of raw materials, fuel and food. At the time, the United States was looking for partners in Asia and was prepared to invest in this ‘friendship’. The US committed more than $3 billion to create a strong, successful ally in Asia.

The first stage of Japan’s post-war recovery was demilitarisation and liberalisation. First, the influence of the industrial cartels that monopolised Japan’s military-industrial complex, the main driver of the country’s pre-war economy, was eliminated.

Next, the agricultural sector was stimulated: the government redistributed available farmland among farmers. People who could work were given resources for development and began to invest in technology.

A number of other reforms followed, including tax reforms that reduced the financial burden on corporations and introduced the previously unavailable personal income tax. As a result, GDP per capita grew at an average annual rate of 7.1% between 1945 and 1956. By 1956, real GDP per capita had exceeded the pre-war level of 1940.

The devastated Japanese economy quickly rose from the ashes of World War II, and the first wave of recovery was followed by an era of rapid growth.

After 1951, the country developed its own uniquely Japanese model of economic development, based on the peculiarities of Japanese culture and lifestyle. And the results have been phenomenal.

In 1973, Japan's GDP per capita was 95% of that of the UK and 69% of that of the US. It was the last year of the so-called rapid growth era, but the Japanese economy continued to grow at a relatively rapid pace for almost two decades.

The Marshall Plan for Europe

In 1945, at the end of the Second World War, Europe lay in ruins: 5 million buildings had been destroyed and thousands of people had been deprived of their livelihoods.

The Soviet Union, on the other hand, was claiming new territory in the east of the continent, and the vulnerability of the war-weary countries of Western Europe to such expansionism was obvious.

On 5 June 1947, US Secretary of State George Marshall gave a speech at Harvard University in which he proposed that European countries should develop a plan for economic recovery and that the United States should provide economic aid to help implement it.

In the spring of 1948, the Recovery Act was signed into law. And the European Recovery Programme, which went down in history under the name of US Secretary of State George Marshall, began to function.

Over the next four years, Congress allocated $13.3 billion for European recovery. 20% of the amount was in the form of low-interest loans, while 80% was in the form of gratuitous financial assistance, particularly for the purchase of industrial and agricultural products from the United States.

In general, most of the funds were spent on goods from the US: $3.4 billion on imports of raw materials and semi-finished goods, $3.2 billion on food, feed and fertilisers, $1.9 billion on vehicles and equipment and $1.6 billion on fuel.

The money could also be used for investment in reconstruction and to pay off government war debts.

The reconstruction programme was intended for sixteen European countries, but 2/3 of the funds were allocated to the UK, France, Italy, West Germany and the Netherlands.

This aid provided the financial and material resources that enabled Europeans to rebuild the continent’s economy.

The United States, in turn, gained new markets for American goods, new reliable trading partners, and support for democratic governments in Western Europe.

***

World history has examples that clearly show that rapid post-war recovery and transformation of Ukraine is possible. However, it should be added that “stress factors” such as plague, Covid, world wars, earthquakes or man-made disasters change the global development trajectory less than long-term, sustainable factors that have been influencing the development of countries and territories for centuries. Ultimately, human-centred values, the provision of basic rights and freedoms, and independent, balanced investment can do truly amazing things.