The Second World War (WWII) was the biggest war in history, killing around 60m people. It also destroyed 20-40% of housing in Europe’s largest cities, along with transportation systems, farm facilities and industrial infrastructure.

The COVID-19 pandemic has possibly been the most traumatic global event since. But it has left homes and infrastructure unscathed. Economic activity has declined not because industries switched into wartime production, but because people have had to stay at home – which has temporarily affected spending, production and supply chains.

while the crises themselves differ, some of their impact and solutions are similar

Yet while the crises themselves differ, some of their impact and solutions are similar. So, for the fourth blog in my series, I’ll be looking at what governments today can learn from the reconstruction of Europe post-1945.

Sustainable economic recovery with a dose of politics

Now, as in 1945, countries are facing huge levels of public debt and lack the capital they need to invest.

Post-WWII, the solution was the Marshall Plan, which saw $13b of aid flow from the US to 16 European countries between 1948 and 1951. Its aims were to stimulate economic growth, develop a stable world economy and prevent the spread of Communism. Mechanisms for achieving this included project financing and the US Technical Assistance and Productivity Program (TAPP).

Today, the response to economic disruption caused by the COVID-19 pandemic has mostly consisted of deficit spending by national governments to safeguard jobs and support affected businesses. There are also big international stimulus packages, like NextGenerationEU and the G7’s Build Back Better World (B3W).

The Plan’s successes still influence policymakers today

Overall, the Marshall Plan was a success: GNP in recipient countries rose by 33%. Agricultural and industrial production outperformed its growth goals, core industries were modernized and trade liberalization began.

From this, governments have learned valuable lessons they can apply today, including:

• The importance of private sector co-funding and Public Private Partnerships (PPP) in helping countries invest in infrastructure for a sustained recovery.
• The value of countries collaborating to set goals and allocate funding, while playing an active role in their own recovery.
• The need to provide technical help and training, as well as investment.

The COVID-19 pandemic has undone progress in gender parity

Where the pandemic has differed from WWII is in its impact on work.

First, WWII saw many women go to work for the first time in factories, on the land or in the armed forces. Significant numbers also remained in work after the war ended. This explains why female labor participation, already on the rise, grew steeply from the 1940s until the turn of the century.

The pandemic has, temporarily at least, reversed much of this progress. Female labor participation globally fell to 46.9% in 2020, down from 51% in 1990. What’s more, of the 1.1m who left the US workforce in September 2020, 80% were women – suggesting a link with the need to support home working.

Second, technology developed rapidly during both crises. But during WWII, it was to support the war effort (think radar and the V2 rocket). In this crisis, it’s been to accommodate mass home working, as well as to develop treatments and vaccines.

over two-thirds of Europeans said they supported a universal basic income

This had led to a shift in how we think about work and reward, and brought previously fringe ideas to the fore. Governments including Japan, Spain, New Zealand and Finland are considering or trialing four-day work weeks, and in 2020, over two-thirds of Europeans said they supported a universal basic income.

Adapting lessons from the Marshall Plan

So, what does all this mean for governments rebuilding from the pandemic?

First, they should adapt lessons from the reconstruction of Europe. That means focusing on retraining the workforce for the transition toward a digital economy and more sustainable practices. The Brazil Skills Accelerator Initiative, for example, aims to reskill and upskill 8m Brazilian workers to meet the demands of a digitalized economy. In 2019, 56% of the world’s investment in education technologies took place in China. 

It also means mobilizing private sector capital for investment in future-facing infrastructure, like renewable energy and digital/5G.

Second, they should rethink the role of work in a healthy economy. Is increasing labor participation really the most important thing? If it is, should we be using technology to re-engage groups you’d otherwise expect to drop out of the workforce, like those older than traditional retirement age? Could technology or re-training also help women return to work?

Then there’s the question of what makes people productive. When Microsoft mandated a temporary three-day weekend in Japan in 2019, productivity increased by 40%, while electricity consumption and printing dropped. These benefits would accrue if organizations – including governments – were to adopt a hybrid model, with time split between home and the workplace.

An unmissable opportunity to realize a forward-looking vision

The Marshall Plan has one final lesson for governments looking to rebuild.

That the winners post-pandemic will be those countries that treat investment funding as an opportunity to truly modernize

The largest recipient of Marshall Aid, the UK government, used it not to stimulate the economy but to bring down public debt and maintain its global status. As a result, its economy didn’t recover until the 1950s.

Meanwhile, West Germany (as it was then known) invested in industry and infrastructure, contributing to its current position as the world’s fourth largest economy.

The takeaway for today? That the winners post-pandemic will be those countries that treat investment funding as an opportunity to truly modernize and create a long-term, sustainable, forward-looking vision.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.