Monday, September 19, 2005

Happy Pirate's Day from North Korea

If You Liked Albania in 1965, You will Love North Korea in 2005

As readers know, Desert of the Real Economic Analysis’ main foci are economics, finance and investment. International and domestic. But the confluence of two recent events have put the Peoples Democratic Republic (yeah, right) of Korea at the forefront of the Author’s current interest.

On September 15th, the Author saw an amazing documentary about North Korea at his favorite theatre, the Guild Cinema in Albuquerque. And yesterday it was announced that the six-nation talks had produced a tentative agreement for North Korea to drop its nuclear weapons program in exchange for nuclear assistance, other aid, and what sounds like a non-aggression pact to be executed between the US and North Korea.

The author is not naïve about the possibility of North Korea sabotaging this agreement, or the lesser possibility of the hard-line Neo-Conservatives in the US sinking the nascent entente. The North Koreans are consummate deceivers, vacillators and manipulators. But this might be the breakthrough that has eluded the parties since 1994. And if the agreement comes to fruition, it will be the most important diplomatic event to date in this early century. It would signal the end of The Cold War and would resolve the final issue that remains from World War II. Big Stuff. Important Stuff.

So what does this have to do with Economics? Much. North Korea is the last Communist State on earth. It is a living fossil, like the coelacanth or the gingko tree. It has outlived Stalin, Mao, the Berlin Wall, Marshal Tito, Leonid Brezhnev’s eyebrows and Fearless Leader, the scar-faced potentate of Pottsylvania.[1] Despite all that was and is wrong with communism, North Korea still trundles along in the Land of the Morning Calm.

Deprivation amid Technicolor Displays

The film the author saw was entitled “State of Mind”. The BBC produced it in 2003 and the documentarians had extraordinary access to this xenophobic country to produce a story about the Mass Games. The Mass Games are a periodic gymnastic showcase to celebrate North Korean events, such as the birthday of President Forever Kim Il Sung or the peasants exceeding their cabbage-growing quotas.[2]

The storyline follows the preparation of two 12-year old girls who will participate as gymnasts in the Mass Games. The Mass Games are indeed impressive. They make the Superbowl Halftime extravaganza look like a first-grade pageant. North Korean “guides” constantly escorted the filmmakers, but none of the documentary was censored. There were several reasons nothing was censored, but two stand out. The filmmakers did not need to ask probing political questions. The poverty, the totalitarian nature of the state, the comical propaganda recited all showcased the degraded conditions of the marginally operating state. Food is rationed. Power outages occurred daily. The buildings are old and decaying. The massive boulevards are crumbling and bereft of traffic. It looks worse than Albania circa 1965.

Secondly, the North Koreans are genuinely proud of these Mass Games. They wanted this story told. The games showcase, in the minds of North Koreans, the resilience and strengths of the country. The skills and discipline of the participants are amply evident. But the show backstage is far different. The director of the games has only rotary dial phones. And the images of the prior Mass Games were filmed in Technicolor, a film process that has been obsolete since the time of the Korean War. The Author, an assiduous student of film minutiae and obscurities found the use of Technicolor quaint and fun.[3]

Yet within all of this state domination, children worked several hours per day, in addition to their schoolwork and homework, to compete in the games. People go to work and about their lives. They walk in the park on Sunday. And underneath all of the pretense, poverty and some unintentional parody, there is a pride and work ethic that may explain how this pariah nation keeps going amid sacrifice, suffering, and occasional famine.

North Koreans Would Not Greet “Liberators” with Street Dancing and Flowers

Korea, like Vietnam, has a history of foreign invasion met with fierce resistance. North Koreans believe that they stood up to, and repelled, U.S. forces in the Korean War. They did, but with the help of a few million Chinese soldiers. The “victory” they won in 1953 when the Korean conflict ended still defines the country. And in fact, the Mass Games that were the subject of the movie were held to celebrate the 50th anniversary(in 2003) of the North Korean “victory”. This “victory” is manifested in “juche”, which roughly translates to “self-reliance”.

War on the Korean peninsula would be a very barbarous affair. It is estimated that there would be one million casualties within the first 24 hours of peninsular war. Seoul, the capital of South Korea, is within artillery range of the border with North Korea. Except in tactical Pentagon plans and in the vituperative and vacuous minds of a few American chickenhawks, a second peninsular Korean war is unthinkable. Millions of Koreans and tens of thousands of American GIs would die. Korean terrain makes most of the country a huge killing zone. Mortars are already dialed in and fields of fire plotted.

Back to economics. Just as market forces have unleashed reform and emergent prosperity in Russia, Eastern Europe and China, North Korea could one day become a prosperous and democratic nation. The work ethic of its people is strong and the success in South Korea would appear to be reproducible.

Can Bush go to “China”? With the Domestic Side not Looking So Good Right Now, Bush Could use the Frequent-Flier Miles.

When the Clinton Administration was negotiating with North Korea in 1994, it had two problems. One domestic, one intelligence-related. Pressure from the Republican Right prevented him from offering the Koreans what they really want. A non-aggression pact with the US that recognizes its independence and puts some ink on the end of the Korean conflict. Both political parties and most of the western intelligence world shared the other problem. It was generally believed that North Korea would go the way of every other communist nation and collapse. In that sense, whatever deal was made with North Korea was deemed at the time to be irrelevant. In a year or two there would be no communist Korean government to deal with.

The US and its Asian Allies must resign themselves to the fact that North Korea will not fall of its own weight and will become a nuclear power if nothing changes. If an enforceable and verifiable deal can be put in place, it would be a monumental move. Continued stalemate will allow the North Koreans to develop, or increase, their nuclear arsenal[4]. And miscalculation leading to a shooting war is always a possibility in the tense standoff that currently exists between North and South.

Change is on the wind. These winds can either steer our ships of state on a safer course or blow us further into uncharted and dangerous waters.

[1] Pottsylvania is the fictional US adversary in the Bullwinkle and Rocky cartoon show of the 1960s. The cartoon was a cold war satire and a darn good one. Fearless Leader commanded Boris and Natasha in their ever-failing efforts to bring down our heroes, Bullwinkle J. Moose and Rocket J. Squirrel. Pottsylvania appeared to be a place not unlike a seedy beer hall undergoing a perpetual –putsch.
[2] The Author is of course being smarmy. Westerners should be suspicious of the degree of Korean loyalty to their leaders. But we must not completely discount it. Kim Il Sung has been proclaimed “President Forever,” and his son, the puffy Kim Jong Il the “Great General”. The author has heard the level of cult worship of Kim I and II as something akin to the Christian Trinity. Kim Il Sung is “the father”, Kim Jong Il is “the son”, and juche, the doctrine of self-reliance, is “the holy spirit”.
[3] Some of the scenes from the prior Mass Games were of fireworks. Technicolor produces “hot” tones of red, and vibrant golds and silvers. They looked good on screen.
[4] There is some question whether North Korea has weaponized its nuclear capacities, or if it is still in the process of weaponizing their nuclear materials. Regardless, without massive incentives, it will be a nuclear state.


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