TheMarketForIdeas

The “hermit kingdom” of North Korea is back in the news, at the center of a new round of exchanges of bellicose declarations, underpinned by failed tests for intercontinental ballistic missiles (ICBMs) that, nevertheless, show the impressive progress of the country’s indigenous program. The missile capabilities are meant to provide a delivery device for the country’s nuclear weapons, the other great program beset by a string of failures and shoestring successes. Western observers are now attempting to “read the tea leaves” in order to predict when the country will have achieved the ability to threaten the continental United States, while the threat to its immediate neighbors, South Korea and Japan, remains real but uncertain. The weapon systems involved are complex and, as has been suggested of the recent failed test, prone to cyber-attacks and sabotage through the component supply chain. Rather, the immediate threat to a country like South Korea is all of the conventional artillery pointed at its capital, which would make flattening Seoul in a matter of hours a foregone proposition. With Donald Trump at the helm of the US and sending carrier groups in the vicinity, a man given to grand gestures as negotiating bids, the latest tensions with North Korea seem momentous, as if some form of denouement to the regime in Pyongyang is looming. The form it would take is critical to its neighbors, who fear both the ways in which the country can lash out violently, as well as the consequences of a collapse of power, such as millions of refugees trying to cross land borders or internecine warfare. 

The weapon systems involved are complex and, as has been suggested of the recent failed test, prone to cyber-attacks and sabotage through the component supply chain.

A country apart 

The failed elections in 1948 divided the Korean Peninsula, a region which had persisted for centuries as a unitary state under the influence of powers like China and, later Japan. Similar to the China-Taiwan conundrum, both countries laid claim to the whole. One of the first proxy wars of the Cold War came about from this conflict, as the US and various Allies engaged in what was, officially, a “police action” against North Korea and its substantial Chinese help. The acerbic resistance of the North made total victory impossible for the Americans, beginning a string of ambiguous military setbacks in differing civilizational contexts that continues to this day. A little-known fact is that newly Communist Romania was also a marginal participant in the War, having sent a medical unit to its Communist ally in the North. Overt hostilities ended in 1953, but the war never did and South Korea has one of the most important and long-running garrisons of US military forces in the world, backed up by the forces in Japan. The euphemistically named “demilitarized zone” is, in fact, one of the most heavily guarded and mined borders in the world though, as always, there are limited ways around such a barrier for smuggling, infiltration and so on.

The acerbic resistance of the North made total victory impossible for the Americans, beginning a string of ambiguous military setbacks in differing civilizational contexts that continues to this day.

North Korea was the stronger state, in spite of the horrendous losses incurred during the war. Its territory and population were larger and its natural resources base better, which made a rematch seem likely to Cold War strategists. After 30 years of authoritarian leadership, however, South Korea struck upon its specific development model of export-led industrialization and took off, becoming an industrial powerhouse with worldwide brands and eventually becoming a democracy. Its population had boomed, eventually becoming double that of the North, and differences are seen even in the average heights of the two populations who are, otherwise, identical in ancestry, cultural background and every other definition of a people. South Korea is now a military power in its own right, with a globally competitive defense industry that has benefited from US technology transfers, as well as transfers of military expertise.

While having been reinterpreted over the years to meet the needs of the regime, the basic ideas of Juche are “self-reliance” and the primacy of the collective over the individual. It is "the ability to act independently without regard to outside interference”.

After 1955, the Supreme Leader of North Korea, Kim Il-Sung, developed a concept encompassing political and economic ideas called Juche, an autarkic philosophy that led to the country closing off from most of the world. Its allies, the USSR (both Kim Il-Sung and his successor, Kim Jong-Il, having been educated in Moscow, the latter even growing up there) and China, gave it significant support as part of the proxy confrontation of the Cold War. While having been reinterpreted over the years to meet the needs of the regime, the basic ideas of Juche are “self-reliance” and the primacy of the collective over the individual. It is "the ability to act independently without regard to outside interference”, which North Korea has certainly pursued doggedly. However, the end of support from its Communist allies made the economic shortcomings of the system apparent, and 800 thousand to two million people are estimated to have died in the famines that followed the fall of the Soviet Union. It might have been hoped by South Korea, in the days of governmental conversions to democracy in the former Communist Bloc, with the reunification of Germany and the peaceful separation of Czechoslovakia, that the reunification of the Korean Peninsula would be at hand. Unfortunately, the Cold War saw the development of an impressive state apparatus for repression and an extraordinary personality cult that had inspired the Romanian President, Nicolae Ceaușescu, to implement his own. As far as any outside observer can tell, the transfer of power to Kim Jong-Il was successful and complete, being the only dynastic transfer inside a dictatorship in the 20^th century, at least until the July 2000 ascent of Bashar Al-Assad in Syria. However, hope did not die, and the disappearance of the “Eternal President”, Kim Il-Sung, set the stage for decades of “carrot and stick” diplomacy, wherein his successor, Kim Jong-Il, extracted various concessions and aid from surrounding countries and the US in exchange for temporary reprieves in inflammatory gestures. This repetitive pattern is one of the most striking objects for analysis by “game theory” in international relations, especially the “theory of moves”, that had previously been employed for the Cuban Missile Crisis. 

The business model 

The disappearance of the “Eternal President”, Kim Il-Sung, set the stage for decades of “carrot and stick” diplomacy.

Basically, the North Korean population’s misery would be the “honeypot”. Kim Jong-Il and his successor would give indications of a willingness to talk and to compromise. The Republic of Korea, especially, is interested in this, but so is the United States, for whom the end of the regime and the reunification of the Peninsula are key points of its Asian hegemony strategy. After a few talks and some gestures like allowing a few busloads of separated family members to meet, North Korea would receive food aid, fuel, technology and other, more substantial, inducements. North Korea would then change tack and go to the other extreme, blustering about turning Seoul into a literal sea of fire, organizing military exercises, cancelling the cooperation measures instituted so far and threatening to nationalize the Kaesong Industrial Zone. This would bring even more aid and other concessions, which would sate the regime for the time being, until it is time to do so again. The pattern has held out with remarkable dependability over the years, though it seems to have frayed recently. Instead of undermining the regime and moving it to some sort of liberalization, the concessions resulting from the “six party talks” have made the regime stronger, forestalling economic collapse and hunger induced rebellion. This pattern has been helped by the West’s portrayal of the North Korean state as an “irrational or infantile” force, encouraged by the youth and appearance of the current leader. One imagines Donald Trump smiling to himself as he recognizes the basic principles of some of his own business negotiations. This helps with concessions, but also prevents an actual solution to the problem, one that would take into account in its approach the fact that the North Korean leadership has a rational worldview based on ensuring its survival and avoiding entanglements that constrict their freedom of movement, including those with China, whose supporters within the regime have recently been purged.

Instead of undermining the regime and moving it to some sort of liberalization, the concessions resulting from the “six party talks” have made the regime stronger, forestalling economic collapse and hunger induced rebellion.

The success of this business model for an entire country is down to a few factors:

• North Korea’s single minded pursuit of this as a cornerstone of foreign policy;
• North Korea’s unity of purpose, no matter what mix between coercion and willingness we theorize;
• The appeasement mentality of Japan and South Korea, who have a lot to lose in case of war and are, understandably, reticent about the powder keg nearby;
• The democratic succession of leaders in the US, Japan, South Korea, bringing new Administrations that do not take the long view of relations with North Korea and are eager to jump on any sign of a breakthrough in relations;
• The role of China as a critical partner for North Korea, based on historical factors, such as enmity towards Japan, as well as enlightened self-interest. In every new cycle, China serves the roles of privileged intermediary, bringing the West to the table as a country with a recognized influence over North Korea and helping in “settling the bill” afterwards. Despite being, itself, on the hook for aid, the relationship has been immensely profitable to China, as it has helped it gain political capital and wring concessions from other powers in its own foreign policy agenda.

Relations among states often exhibit the same patterns as in relations between people, which have been noted to favor the bold, the unreasonable, the boisterous and the aggressive.

Relations among states often exhibit the same patterns as in relations between people, which have been noted to favor the bold, the unreasonable, the boisterous and the aggressive. There is no better example of this with regards to relations between North and South Korea as the Kaesong Industrial Zone opened in 2004. South Korean companies (123 at its height) go there to employ low wage labor and try to establish a win-win relationship with the North Korean Government. The industrial area was supposed to employ 700 thousand workers, but it ended up with a maximum of 53,000 and reached break even just a decade later. The area is hampered by Western restrictions on technology transfers and the overbearing nature of the North Korean government, which has forced its sudden closure numerous times, leaving the South Korean managers and engineers stranded a few times. Ultimately, according to Edward Luttwak, it is just another form of masked financial aid to the North Korean Government, as South Korea attempts to influence its behavior through dependencies. There can be no other explanation for why South Korea condones virtual slavery, as all wages are collected by the government (90 million dollars each year), nor why South Korea persists in using the area despite threats to its businesses and its citizens, as well as various insults received over the years. North Korea might close the area on a whim, but South Korea has, until February 2016, never closed it, not even after the March 2010 sinking of the Cheonan, a South Korean warship, killing 46 sailors, not after building an illegal nuclear enrichment plant, and not for killing South Korean soldiers and civilians with the November 2010 artillery barrage on Yeonpyeong island. And the pattern has held, with the exception of the 2016 closure, which is already being walked back by the new President of ROK, Moon Jae-in, who is discussing reopening and even expanding Kaesong. 

State ideology 

Maybe there is still hope for rapprochement, although North Korea is unlikely to get the sort of state autonomy it considers its due, despite nuclearizing states like Pakistan and Israel not having become global pariahs.

This pattern was aided by Kim Jong-Il’s evolution of Juche in 1995, instituting the Songun Chongch'i (“Army First” ideology), which became a cornerstone of the extractive subsistence model of North Korea. Songun is a "politics which solves all problems arising in the revolution and construction on the principle of giving priority to the military affair and advances the overall cause of socialism relying on the army as the pillar of the revolution". Songun diverts almost all resources to the army and institutes near universal conscription, as a means for socialization and control of the population. It is basically the instituting in times of peace of an institutional, political and economic paradigm appropriate to countries fighting a “total war”. This serves quite a few purposes:

• A deterrent against American and South Korean military aggression;
• An instrument for threatening aggression;
• The best military use of one of the few resources the country has in abundance, which is usefully socialized people;
• A means of population control, both directly and indirectly;
• It creates the constituency (the starving population) for Western helpfulness and posturing, though it has been reported that the government refers to American aid as tribute paid in exchange for not destroying them.

The North Korean nuclear issue has had ramifications outside of military policy.

North Korea has one of the largest standing armies in the world, with a million people under arms (half as much as China, which is 55 times larger in population size), but also with the largest paramilitary organization in the world, at 25% of the population or 6 million people. It is heavily armed and armored, though the exact extent of its armament and supplies for all-out war is unknown. According to the US State Department, its mix of Soviet, Chinese and imported weaponry masses around 4,200 tanks, 2,200 armored vehicles, 8,600 artillery guns, and over 4,800 multiple rocket launchers. It is noted to also possess chemical weapons, in addition to Hiroshima type nuclear weapons, as well as weapons which have been forbidden by the UN, such as blinding weapons.

According to the North Koreans themselves, Songun is:

“based on the Juche idea in the new situation in which the sovereignty of many countries is tragically violated and the cause of human independence as a whole has met with serious challenges under the policy of extreme arbitrariness and domination pursued by the US that has become the "only superpower" of the world after the Cold War”.

“... a source of unprecedently enhancing the absolute worship of the army men and people toward the leader, a decisive factor to enable the transformation of the ranks of the reform movement to a mighty whole of the devoted defense of the leader, a factor that makes it possible to realize the total oneness of the army and people in the ideo-spiritual and moral features, and a political mode that enables the strengthening of the driving force for the accomplishment of the socialist cause by all means”.

“the do-or-die spirit of anti-imperialism to counter with super toughness the consistent aggressive moves of imperialism to obliterate the Juche revolution. The do-or-die spirit means the spirit of sacrificing oneself without fearing death. ... Kim Jong Il was born during the period of the bloody anti-Japanese war and had grown up in the forest of bayonets, hearing sound of guns as a lullaby. During these periods, he had experienced the spirit of gun that the only way for an empty-handed man is death before the armed enemy and one should hold the gun to fight against enemy in order to carry out the revolution". 

Finally, Kim Jong-Il’s successor, Kim Jong-Un, who maintained Songun after his ascent in 2013, said the following about the ideology:,

“Songun was the General’s revolutionary idea, his practice in the revolution, his political ideal and his political mode…. Regarding the strengthening of the KPA as the most important of affairs in the Songun revolution, he raised the KPA as the buttress, the main force, of our revolution and achieved the historic victory in the grim anti-imperialist, anti-US showdown in defence of the country’s security and socialism by training the KPA to be the army of the leader boundlessly faithful to the cause of the Workers’ Party of Korea, to be an invincible revolutionary army. He defined the spirit of defending the leader unto death, the spirit of implementing his instructions at any cost and the self-sacrificing spirit displayed by the service personnel as a revolutionary spirit symbolic and representative of the Songun era, as the revolutionary soldier spirit, and led all the service personnel and people to live and struggle in that spirit, thus ensuring that a great turn and changes were brought about in all sectors of the revolution and construction. In order to consolidate the successes of his Songun-based leadership and administer Songun politics in a comprehensive way, he saw to it that the First Session of the Tenth Supreme People’s Assembly of the Democratic People’s Republic of Korea adopted the Socialist Constitution that embodies the idea and principles of the Songun revolution and established a new state administration structure, whose backbone is the National Defence Commission, and led all state affairs to be conducted on the principle of giving precedence to military affairs.” 

Current events 

“The President seems to have explicitly reversed his previously stated view that economic considerations should not be subordinate to geopolitical or strategic considerations in foreign policy.”

A number of elements seem to be precipitating a change in the status-quo of the Korean Peninsula and the established way of doing business. Firstly, the North Koreans seem to be achieving new milestones with regards to nuclear development, delivery method development (ICBMs) and nuclear miniaturization for payloads. It is still a long way from imminent threats, but the mood in the West right now seems to be along the lines of the saying “a stitch in time saves nine”. At the same time, one should consider that having ICBM capability is useful from the perspective of deterrence and even extracting further resources, but, if one wants to hurt one’s enemies, having nuclear weapons is sufficient, since it is possible, in the globalized world, to smuggle them right under the nose of the enemy. Regardless of whether the weapons are low yield or high yield, advanced or primitive or simply “dirty bombs”, the disaster would be guaranteed. Maybe there is still hope for rapprochement, although North Korea is unlikely to get the sort of state autonomy it considers its due, despite nuclearizing states like Pakistan and Israel not having become global pariahs.

North Korea might also be failing in its prime directive for survival – the acquisition of foreign currency.

Secondly, US President Donald Trump, faced with incredible resistance for his domestic reform agenda, has pivoted, for the time being, towards foreign policy as a source for success and also to achieve his goal of reestablishing American deterrence and prestige. While overt intervention in Syria risks backlashes in the US and Europe, as well as an accidental shooting war with Russia, North Korea fits the bill for trying to position himself as the Anti-Obama, who was derided by the Republican opposition as the Appeaser-in-Chief. The Tomahawk launches on a prewarned government airfield in Syria for the alleged use of chemical weapons by the Assad regime were made during dinner with Chinese President Xi Jinping and were likely meant as an announcement of US intent to intervene against North Korea should China not be willing to do so. Trump then moved a carrier group to the region, with more apparently on the way. It is a surprising display of force, but a dangerous one, since several exercises have noted the vulnerability of aircraft carriers to saturation strikes. In a shooting war, losing an aircraft carrier would be a devastating blow to morale and prestige, which has not happened yet because aircraft carriers have only been used against enemies who could not fight back.

Thirdly, China itself seems to be losing its grip on the “hermit kingdom”. Three quarters of North Korean imports and exports go through China, which is strategic as a consumer of North Korean coal and as a provider of industrial machinery. The publicized executions and suspected disappearances of individuals within the notoriously opaque North Korean Administration seem to be focused on destroying China’s network of influence, leaving the Chinese as perplexed as others. There is more than rational self-interest and paternalist care of the “little brother” involved in its relations with North Korea. China fears millions of refugees streaming past the Yalu River, as well as other effects of a turbulent downfall, such as a vacuum that might be filled by the US and its allies. Leveraging its special relationship to improve its influence and extract advantages has benefitted China, but the North Koreans, supposedly, are themselves becoming wary of the relationship’s impact on their autonomy. Of course, it has not been just China that has benefited from North Korean misbehavior. Even the (potential) victims of North Korean aggression have parlayed their troubles into concessions from the US.

A “moderate” stance that solves nothing, but moves the problem into the future by a few years, is a perfectly acceptable outcome, since it preserves the reputation of all parties, and has low marginal costs in the present.

The Chinese President was right to savor the chocolate cake desert, as Donald Trump made an important real concession in exchange for an ambiguous commitment on North Korea – that Chinese investments in the US would be treated the same as those of any other country, which is not the case for potential rivals and even enemies. Eamonn Fingleton, noted expert on Asia with Forbes, noted that there is a pattern of North Korean threats favoring Japan, South Korea and China in trade relations with the US. Exaggerating the threat would thus be a rational movement, since the US is so invested in the Korean Peninsula’s security, that it would run to China, Japan and South Korea for advice and coordination on handling the latest outrage from Pyongyang. The North Korean nuclear issue has had ramifications outside of military policy and, which the Pentagon and State Department have seen as useful sacrifices to avert impending disasters. He notes that:

“Moreover, at times of tension, Pentagon officials inevitably take charge. As the East Asians have gleefully realized for generations, the Pentagon is a remarkably soft touch on trade, and in return for the merest hortatory support for its military objectives will pull the rug from under the most carefully conceived plans drawn up elsewhere in Washington to get East Asia to open up.”

As my colleague, Andrei Vlășceanu, noted in his article on Trump’s first 100 days, a Goldman Sachs report had this to say about the compromises Donald Trump was making:

[…] the President seems to have explicitly reversed his previously stated view that economic considerations should not be subordinate to geopolitical or strategic considerations in foreign policy. For example, in its recent report to Congress on the Administration’s key principles on trade policy, the Office of the US Trade Representative, part of the White House, said that it “reject[s] the notion that the United States should, for putative geopolitical advantage, turn a blind eye to unfair trade practices.” However, President Trump appears to be making an exception for China for the moment, stating “we have tremendous trade deficits with everybody, but the big one is with China...and I told them, ‘You want to make a great deal?’ Solve the problem in North Korea. That’s worth having deficits. And that’s worth having not as good a trade deal as I would normally be able to make.”

This has obvious implications for Trump’s trade agenda, which sees reciprocity for access to markets as crucial and a lack of insistence on it as one of the big mistakes of American economic policy. Even during Reagan’s time, his coercion of the Japanese auto industry led to the establishment of production in the US, but not to the opening of Japan to American cars (or any other cars). China, South Korea and Japan run mercantilist trade policies, which have led to substantial secular trade surpluses with a country that, increasingly, cannot afford this pattern. 

Is North Korea stable? 

There is an argument to be made that North Korea itself or at least its leadership, is undergoing some sort of upheaval that makes Kim Jong-Un desire a retrenchment into old patterns that might not be serviceable anymore. For instance, some of the most highly placed individuals whose execution has been confirmed were in the military. Kim Il-Sung ran the country like a standard Communist state, with the help of the Party. As the Communist veneer wore off after the end of the Cold War, Kim Jong-Il found his base of power in the army and marginalized the civilian Party cadres. Now, Kim Jong-Un pays lip service to his father’s Songun ideology, but has moved the Army back under civilian control through the Party. Just like China, there is little content left to the Communism of the country, just a few outwards forms. While China is trending towards state-run social market hyper-capitalism, North Korea has become a traditionalist Korean supremacist state run by an absolutist “monarch”, predicated on the maintenance of the purity of the Korean people, their values and language. It is unfortunate that the North Korean example superimposes grinding poverty and oppression onto exaggerated forms of otherwise healthy policies for a nation, thereby discrediting them in the ideological warfare that grips the world.

One could posit that the slow penetration of information into North Korea, through unauthorized telephone, Internet or data access, is undermining the regime by contrasting it with the prosperity in South Korea.

At a macro level, North Korea might also be failing in its prime directive for survival – the acquisition of foreign currency, which is surely something that Romanians and all Eastern European can relate to. Foreign currency is the only means of obtaining valuable imports. What is left from military imports can go into luxuries such as the whiskey habit Kim Jong-Il was known for, coffee and other consumer goods for Party elites, machinery for civilian industry and, finally, staple foods for the wider population. As mentioned before, the majority of North Korean exports went to China, but other sources of foreign currency were the Kaesong Industrial Zone, black market activities with, for instance, nuclear technology and materials (said to have helped Pakistan with its program), but also transborder organized crime. It has been noted that the North Korean Government is involved in everything from drug trafficking to cyber-theft and to selling “virtual currency” in massive multiplayer online games like World of Warcraft. With Kaesong closed, China closed, no aid on the horizon and international efforts presumably putting a dent in criminal activities, it stands to reason that the country is reeling from a lack of foreign currency, which would undermine the regime.

The current inflammatory gestures may be seen in the light of Kim Jong-Un trying to embark on his own resource gathering expedition from the “six party talks”, and misjudging the furor that his gestures would unleash or the patience that the other countries would exhibit towards him, since he is seen as weaker and less stable politically than his father was. 

A Game Theory conclusion 

It is unlikely that we are at the point of actual change in the Korean Peninsula, though the South Korean Ministry of Unification has been planning for such a moment since 1969. When it comes, there is enough likelihood for the change to be catastrophically chaotic that North Korea’s counterparts in the “six party talks” have preferred to maintain it as an open-air prison for its people in the hope of eventually orchestrating a peaceful and controlled transition. The pattern of cooperation, negotiations, concessions then inflammation and further concessions has held up surprisingly well. One can consider this to be an example of the “theory of moves”, an area of game theory established by Steven Brams which aims to bring models closer to reality by enabling players to speculate on the movements of other players and by admitting asymmetries. The “game” in the Korean Peninsula has been very interesting, with the:

• Asymmetric advantage of North Korea in deciding where to start and where to end its shakedowns, based on frictions from resource exhaustions and the end of frictions when resources are delivered;
• The diminishing benefits pursued by the United States, which started off in the 1990s aiming for regime change and unification and ended up playing for the temporary maintenance of regional peace. Several rounds took place, in the hopes that it would lead to a permanent conclusion;
• The gradual hardening of US attitudes under Donald Trump, but beginning long before within the Pentagon, that might force an end to the game;
• The US dual stance of influencing negotiations, yet having to take Allies into consideration;
• The difference in utility types between players, with North Korea gaining resources, and the US gaining concessions for political support back home and abroad;
• The likelihood that the repetitive negotiations in the backdrop of escalating threatening gestures was wearing down North Korea’s dialogue partners.

There would be no reasons why this pattern could not last forever, had the North Koreans not stumbled upon the threat of a nuclear program actually coming to fruition. The nature of the managerial leadership in the West means that Western leaders abhor decisive action and view them as risks to their continued power, because of political uncertainties. A “moderate” stance that solves nothing, but moves the problem into the future by a few years, is a perfectly acceptable outcome, since it preserves the reputation of all parties, and has low marginal costs in the present, as opposed to the costs of a war or the costs of retreat. Whether this narrow rationalism can be preserved is anyone’s guess. Having seen what happened to the Ukraine and to Gaddafi after relinquishing their nuclear weapons program, it is likely that the North Koreans themselves view the nuclear arsenal as an existential issue and would seek to normalize their possession of it, which might eventually lead to conflict. If this is so, then the main actors involved would prefer for a war to take place now, while ICBM capacity is doubtful, than in the future, which would leave a first strike option (or the psychological value of one) to the North Koreans. A war with North Korea would involve incredible losses for both sides and a stabilization problem that would make Afghanistan seem like a dress rehearsal. Resistance will likely be fierce, as the North Koreans, lacking the daily distractions of open societies, have been free to constantly refresh the memory of the extraordinary bombardments and loss of life and property they suffered during the Korean War.