Ukraine’s post-war recovery cannot be limited to rebuilding destroyed facilities. Schools, hospitals, roads, housing, energy systems and infrastructure must be restored. But the key question of the next stage is broader: what kind of economic system are we building after the war — at the national, regional and community levels?

Ukraine needs more than infrastructure reconstruction. It needs a renewal of its economic logic: greater freedom for entrepreneurship, fair rules of competition, responsible government, strong communities, development of small and medium-sized businesses, quality social services, and a clear link between economic growth and people’s well-being.

It is in this context that Ukraine Support Team views community development not as a set of separate projects, but as the formation of new managerial and economic capacity at the local level.

UST is working on an approach that can be defined as a model of social market capacity for communities. It is a set of criteria and practical tools that allow a community to be assessed not only by the existence of strategies, investment ideas or recovery plans, but by its ability to create prosperity, fair rules, jobs, social services and long-term economic resilience.

Ludwig Erhard’s Lesson: Prosperity Is Not Distributed — It Is Created

After the Second World War, West Germany faced the challenge of large-scale reconstruction. One of the main architects of its economic rise, Ludwig Erhard, proposed an approach that became known as the social market economy.

This model was not simply a compromise between the market and social policy. Its essence was that the state must create clear rules, protect competition, avoid suppressing private initiative, and at the same time ensure the social responsibility of the economic system. Konrad-Adenauer-Stiftung describes the social market economy as a model associated with Ludwig Erhard and the post-war success story of the Federal Republic of Germany; its principles include private property, responsibility, freedom of contract and trade, a stable currency, open market access and reliable long-term economic policy. (kas.de)

Erhard was not a supporter of manual control over the economy. He was a supporter of framework conditions: strong rules, competition, stability, responsibility and space for entrepreneurship. In his logic, “prosperity for all” does not emerge through the distribution of scarcity. It emerges when people and businesses have the opportunity to work, invest, compete, create added value and feel protected by fair rules.

For Ukraine, it is important not to mechanically copy the German experience of the 1950s. The time is different, the war is different, the structure of the economy is different, and global competition is different. But Erhard’s main lesson remains relevant: after great destruction, a country must not only restore buildings, but also create conditions for mass economic life.

Why This Matters for Ukraine

Today, Ukraine’s economy largely operates under conditions of wartime mobilisation, external support, budget deficits, high risks and constant uncertainty. This is the objective reality of war. But the post-war stage will require a transition from an economy of survival to an economy of development.

The European Union has created the Ukraine Facility, which provides up to EUR 50 billion in stable and predictable support in 2024–2027 for recovery, reconstruction and modernisation. (Enlargement and Eastern Neighbourhood)

However, even the largest international programmes cannot replace the country’s internal economic capacity. Donor funds can restore infrastructure, launch projects and support the budget. But long-term prosperity is created by entrepreneurs, workers, local budgets, investment, competition, education, production, exports and trust in rules.

That is why it is important for Ukraine to rethink its post-war economic model in the direction of greater competition, entrepreneurship, state responsibility, social justice and community capacity.

Why It Is Possible to Start with Territorial Communities

A full transformation of Ukraine’s economic model is a task for the national level. It concerns tax policy, the judiciary, antimonopoly regulation, the financial sector, the labour market, education, industrial policy, European integration and many other areas.

But the foundations of these ideas can already be implemented at the level of amalgamated territorial communities.

A community is the place where people see every day whether the state works. Decisions on land, municipal property, local infrastructure, education, social services, public amenities, local economic development and interaction with business are made here.

This is where trust or distrust is formed. This is where an entrepreneur encounters not an abstract “economic policy”, but a specific procedure, a land plot, a permit, a connection, a road, a school for employees’ children and the quality of local governance.

Therefore, a social market economy at the level of territorial communities is not theory. It is a practical question: does the community create rules and an environment in which business can operate, people can earn a living, and the budget can finance quality services?

In its report on Ukraine’s recovery, the OECD emphasised that multi-level governance, regional development and decentralisation can support reconstruction, the recovery of local economies and the strengthening of community resilience. (OECD)

The Experience of German Communities: A Practical Reference Point for Ukrainian Territorial Communities

The ideas of Ludwig Erhard should not remain only a historical analogy. Their practical value for Ukraine can be revealed through the experience of modern German communities.

It is at the local level that the social market economy appears not as theory, but as everyday governance practice: transparent rules for business, development of small and medium-sized enterprises, vocational education, quality municipal services, energy resilience and partnership between government, business and citizens.

German municipalities have the right to manage local affairs within the law and are much more than mere implementers of state policy at the local level. Municipal services of general interest include water and energy supply, maintenance of roads, schools, kindergartens and hospitals. (SKEW [DE])

For Ukrainian communities, this is an important reference point: a territorial community should be not only a recipient of subsidies or a balance-holder of assets, but a manager of local development. This means inventorying assets, working with business, planning infrastructure, training personnel, strengthening energy resilience and ensuring transparent rules for access to resources.

The German experience also demonstrates the importance of the Mittelstand — small and medium-sized businesses that are often family-owned, regionally rooted, technologically advanced, export-oriented and linked to vocational education. Such businesses form the economic foundation of many communities: not one large investor, but a network of enterprises that create jobs, pay taxes, keep people in the area and shape a local economic culture.

For Ukrainian territorial communities, this may mean establishing local economic development offices, business councils, registers of investment sites, SME support programmes, partnerships with vocational schools and colleges, municipal energy plans and systems of regular reporting to the community on the results of the economic strategy.

The area of German-Ukrainian municipal partnerships is also important. In 2025, the seventh German-Ukrainian Municipal Partnership Conference in Münster focused on the transition “from solidarity to transformation” and brought together representatives of municipalities and participants of the partnership network. (SKEW [DE]) According to BMZ, the German-Ukraine Municipal Partnership Network grew from 70 to 250 partnerships after the start of Russia’s full-scale aggression in 2022. (bmz.de)

For UST, this can become a practical channel: not only humanitarian aid, but also the exchange of governance models, energy solutions, SME support tools, vocational education and approaches to local economic development.

What Community Strategies Often Lack

Many community strategies already include demographics, SWOT analysis, lists of investment ideas, recovery plans, tourism potential or an environmental vision. This is an important foundation. But it is not enough for a social market approach.

A social market strategy must answer not only the questions “what should be built?”, “which investor should be attracted?” or “which projects should be submitted for funding?” It must provide answers to deeper questions:

• what development rules the community guarantees;
• how fair competition is ensured;
• how small and medium-sized businesses are supported;
• how new budget revenues are transformed into quality services;
• how the community trains personnel for the new economy;
• how residents are involved in decision-making;
• how it measures not only investment, but the real well-being of people.

This is where the boundary lies between an ordinary development strategy and a social market model of the community. The former often describes desired projects. The latter creates rules, institutions and mechanisms that allow the community to generate prosperity systematically.

The UST Model of Social Market Development of Communities

UST proposes to view a community not merely as an administrative unit or a recipient of assistance, but as a local social market system.

This means that assessing a community’s development should include not only demographics, budget, land or infrastructure. It must answer a deeper question: is the community capable of creating prosperity and fairly transforming it into quality of life for its residents?

Within this logic, the UST model of social market development of communities can consist of several key blocks.