13th annual Municipal Finance Conference


13th annual Municipal Finance Conference


The North Korean Nuclear Threat

Early this year North Korea declared itself a nuclear power; stated that it would not return to the six-party talks among both Koreas, the United States, China, Japan, and Russia; categorically refused to talk to the United States under any circumstances; and then changed its mind, saying perhaps it could talk after all if Washington dropped its “hostile” attitude.

Such volatility is more than a little unsettling when demonstrated by a country with enough plutonium for about eight nuclear weapons—at least four times what it had as recently as two or three years ago—and the capacity to make enough additional plutonium and uranium to add one or two bombs a year to that inventory. More unnerving still, the United States recently uncovered evidence that North Korean uranium ended up in Libya before Muammar el-Qaddafi’s decision to rejoin the international mainstream. That raised the specter of sales of even deadlier nuclear materials to even more unsavory customers. Meanwhile, North Korean efforts at market reform are sluggish, and the nation’s military is still horribly oversized. In other words, the economic pressures that help motivate North Korea’s arms sales, counterfeiting, and drug smuggling remain powerful.

Readers will have to follow newspapers and journals to track the rapid developments in North Korea. But many of the country’s basic economic and political realities were best described in books that came out at the beginning of the decade. Kongdan Oh and Ralph C. Hassig’s North Korea Through the Looking Glass (Brookings Institution Press, 2000) provides a good grounding in the country’s politics and society. Marcus Noland’s Avoiding the Apocalypse: The Future of the Two Koreas (Institute for International Economics, 2000) explores the region’s economics. And Nicholas Eberstadt’s The End of North Korea (American Enterprise Institute Press, 1999) and Victor D. Cha and David C. Kang’s Nuclear North Korea: A Debate on Engagement Strategies (Columbia University Press, 2003) examine the diplomatic and military puzzles.

The Democratic People’s Republic of Korea is the world’s last Stalinist regime and the most totalitarian and isolated country in the world. Oh and Hassig provide an accessible short history and an insightful dissection of the country’s inner political workings. They describe the economic system of juche, or self-reliance; North Korea’s almost complete isolation from the outside world; and its complete failure to provide for its people. They describe juche’s ideological origins in North Korea’s strange version of communism, really a meld of that system with a perverse form of Confucianism. Economic insularity also keeps the North Korean people unaware of the wider world and of the relative failure of their own society and rulers.

Oh and Hassig also investigate Kim Jong Il’s relationship with the North Korean armed forces. They demonstrate how Kim managed by the late 1990s to establish a rather loyal group of top officers to run the military, leaving him relatively unconstrained by domestic politics in his negotiating behavior and policy choices.

Eberstadt and Noland fill out the picture of juche. For the first couple of decades after World War II, the DPRK outperformed South Korea because of the North’s command economy and the industrial capacity it inherited from Japan’s half-century of occupation. Soviet subsidies, a strong work ethic, and an overseas market in the 1950s and 60s for steel and weaponry further bolstered the economy.

But by the 1970s South Korea’s economic miracle was under way, North Korea’s inefficient statist industries were showing their limitations, its sparse natural resources were dwindling, and the DPRK fell behind its southern cousin in economic production per capita. The fact that it also maintained a huge military—fully two-thirds the size of America’s, despite North Korea’s modest population of about 25 million—strained the economy further. In fact, North Korea is the most militarized country on earth, whether one considers the fraction of its population serving in the armed forces or the fraction of gross domestic product devoted to the military (25 to 35 percent).

Today, with the end of Soviet subsidies and the further deterioration of North Korea’s industries, the South is at least 15 times richer per person than the North. Over the course of the 1990s, North Korean economic production was cut in half. Adding insult to injury, even many of its arms markets dried up. One result was a terrible famine that killed at least hundreds of thousands. Kim Jong Il recognized that he needed to do something to avoid a complete collapse of his economy and his regime. In typical North Korean fashion, he undertook a combination of extortion, using the North’s new nuclear capabilities to try to extract promises of help and aid from the world; baby steps toward economic reform; and more criminal activity involving drug smuggling and counterfeiting.

At the turn of the decade, analysts of North Korea didn’t know that already in the late 1990s North Korea was cheating on the deal it struck with the United States in 1994 not to pursue nuclear weapons. America and its allies could perhaps be criticized for not engaging with North Korea more fully, living up to the broader spirit of the 1994 deal. But even when President Bill Clinton tried that approach in 2000 the North Koreans apparently pressed ahead with their illicit nuclear program. By 2002 the Bush administration realized that, though it played down the situation so as not to distract attention from Iraq. North Korea tried to justify its nuclear program as a reaction to Bush’s pre-emption doctrine and earlier “axis of evil” speech, as well as his decision to invade Iraq, but the nuclear program was well under way before Bush moved into the White House.

Cha and Kang wrestle with that policy context in their crisp, smart book. Cha, the more hawkish (and now a part of the Bush administration as director for Asian affairs at the National Security Council), would negotiate with North Korea but in the expectation that talks will fail, persuading our regional partners to get tough. His thinking heads less toward military pre-emption than toward the political and economic isolation of the DPRK. Kang presents a sophisticated and hardheaded argument for more-generous engagement. Recognizing that North Korea is genuinely starved for cash, extraordinarily isolated, and truly paranoid, he favors major American incentives, including aid and more formal diplomatic engagement, for North Korea to denuclearize and start opening up to the world.

Cha and Kang do a good job of explaining the spectrum of serious policy choices before us today, which are somewhat narrower than one might think. Those choices do not range from Iraq-style invasion on the one extreme to an unconditional showering of kindness and dollars on the other. Hawks envision that the six-party talks, if indeed North Korea is willing to return to them, will fail—and that the main reason to try them is to persuade other countries to clamp down once that happens. Japan might cut off hard-currency remittances from North Korean nationals to families back home. China, South Korea, and Russia might join the American-led Proliferation Security Initiative, which would allow searches of suspect air and sea cargo. They might further support U.N. Security Council sanctions.

The United States and its allies are far from such consensus, which relieves dovish analysts who argue that tough international sanctions would be undesirable, unpredictable, and dangerous. How would a nuclear-armed North Korea behave as the world essentially tried to strangle it? These analysts prefer a more flexible negotiating tack first. But to warrant significant help, North Korea would need to do more than give up its nukes; it would need, Vietnam-style, to reform much of its economy and society over time, and to agree to have a new kind of relationship with the outside world.

Which path will Washington and its allies take? And where will North Korea wind up? Oh, Hassig, Noland, Eberstadt, Cha, and Kang, of course, cannot say (though Cha may know more about the first question than most of his colleagues). But a grounding in these authors’ books will help readers understand future developments as they unfold.