Korea: No One Knows, And Everyone Is Scared


January 17, 2010: As expected, North Korea now demands that sanctions be lifted and a peace treaty with the United States be negotiated and signed, before there can be any resumption of talks about North Korea's nuclear weapons program. The U.S. quickly turned this down, and told North Korea to start negotiating, or else they can starve in the dark. Another  demand, that South Korea dump "North Korea Collapse Contingency Plans" before negotiations resume between the two Koreas was dismissed by South Korean officials. North Korea has been making that demand for years. The demands are always ignored, and North Korea always moves on to something else.

One of the more popular "something else" items are  the balloons, released by democracy and religious activists, that carry leaflets, radios and other contraband north. This has been going on for over two years now. Two years ago, North Korea ordered pro-North Korean political groups in the south to use physical force. This stopped about ten percent of a one batch of leaflets being released to drift north, and got some of the pro-democracy leaflet people sent to the hospital. But it got a lot of the pro-North Korean thugs arrested, and was not the kind of PR the north wanted. This resulted in a crackdown on the pro-North Korea groups in South Korea. There were no laws in South Korea to stop the balloons, and no enthusiasm in the legislature to pass any.

The contingency plan was back in the news recently, along with reports about updated estimates on how much it would cost South Korea to rebuild North Korea. It was long believed it would cost between one and two trillion dollars (it cost two trillion to rebuild East Germany, after the Germanys were reunited in 1990). But updated estimates put the cost of fixing North Korea (which is in much worse shape than East Germany ever was) at $5 trillion. That, plus the fact that Germany has a GDP four times that of South Korea, means that the average South Korean will have to pay ten times what the average West German paid to rebuild their lesser half. Many South Koreans fear that rebuilding North Korea could wreck the South Korean economy. No one knows, and everyone is scared.

In an unprecedented move, North Korea media published an apology, for not feeding the country, from leader Kim Jong Il. For the last sixty years, the leadership has always talked about how, real-soon-now, food would be available in abundance. It isn't, and people are starving to death again. However, Kim also was quoted as saying things were going to get better, real soon.

Perhaps as part of that plan, South Korea is sponsoring economics training courses in China, for senior North Korean officials. The training brings the North Koreans up to speed on how a market economy, and capitalism, really work. South Korea is used as an example, and most North Koreans now know, or suspect, that the situation is much different (and much better) in the south. It's believed that North Korea wants to get a guarantee, of non-interference, from the United States and South Korea, before it embarks on a program of economic reform. North Korea believes these reforms could cause unrest in the north, and doesn't want the U.S. or South Korea taking advantage of that. Actually, the minor economic reforms (farmers markets and such) over the last seven years has caused growing unrest. China is urging North Korea to get on with the economic reforms, like China did in the 1970s and 80s, and become self-sufficient. China does not want the two Koreas united (since the new Korea would likely be a democracy), but does not want to keep propping up a Stalinist dictatorship in the north.

The recent monetary reforms in North Korea (suddenly introducing a new currency) continue their disastrous trajectory. After introducing the new currency, and wiping out the savings of those who had participated in the economic reforms (legally or otherwise), state employees (including farmers) were all given a raise. Since most of the free markets were also shut down late last year, this caused a run on the stores, and rampant inflation.

The European Union (EU) has imposed sanctions on twelve top officials in North Korea, for their role in nuclear weapons development. These sanctions will have no practical effect, but make it seem like the EU is doing something.

South Korea is not happy with an 18 month delay in receiving eight upgraded American  P-3C maritime patrol aircraft. The cause of the delay is the reluctance of the United States to allow the export of a key electronic warfare component (that detects and classifies radar signals). The U.S. believes that is this item is sold to South Korea, it will be stolen (by China, and a number of other usual suspects), and thus degrade the effectiveness of the technology. The South Koreans have been trying to change minds in the United States, and believes it still has a chance to do so. If this goes on much longer, the technology in question will become obsolete (superseded by something more effective.)

January 15, 2010:  Three months after the offer was made, North Korea has agreed to accept 10,000 tons of free food from South Korea. The north had refused to allow southern officials to supervise the distribution of the food, and  South Korea responded by halting the shipment of sending free food (several hundred thousand tons a year) north two years ago. All this was mainly because increasing amounts of that food was being diverted to the North Korean military, or exported to China, to obtain foreign goods. But now North Korea faces another famine, on a scale with the one in the 1990s, that killed some two million people.

January 13, 2010: Suddenly, North Korea announced that it would allow more American tourists into North Korea. Since 1987, when Western tourists were first allowed again, only about 2,000 Americans have visited. But now, North Korea wants to allow as many as a thousand a year. North Korea makes a lot of money off each of these visitors, as top rates are charged for everything, and payment must be in dollars.

January 2, 2010: North Korean media made much of editorials calling for peace with the United States, and prosperity for North Korea. Neither is likely to happen until the north agrees to scrap its nuclear weapons program.

December 31, 2009: South Korea has been unsuccessful in getting North Korea to return $40 million worth of construction equipment and building materials, abandoned when North Korea was caught violating the 1994 nuclear disarmament treaty (in which North Korea promised to halt nuclear weapons development, in return for economic aid). This included the construction of two South Korea nuclear power plants, which was why all that South Korean gear and material was up north. North Korea frequently steals stuff on a large scale. A few years back, they tried to steal Chinese freight trains, that had brought goods into South Korea, but were not allowed to leave North Korea. China threatened war, and the trains were released.

December 30, 2009: North Korea has banned the use of any foreign currency after January 1st. This is part of currency reforms, to get cash out of the hands of people who might oppose the government. But all this does is cause more damage to the economy, which is already on its deathbed. This decree will just cause more people to break the law, and more security personnel to become corrupt. Thus the government will, a year from now, have less control over the population. Last years attempt to eliminate the private markets (which appeared in 2003, at the urging of the Chinese), have simply gone underground again.

December 29, 2009: In a desperate attempt to alleviate the growing starvation, North Korea has allowed the purchase and importation of Chinese rice. People are spending their last bits of cash to buy this food. It has created shortages of rice on the Chinese side of the border, along with a sharp increase in the price of rice.




Help Keep Us From Drying Up

We need your help! Our subscription base has slowly been dwindling.

Each month we count on your contributions. You can support us in the following ways:

  1. Make sure you spread the word about us. Two ways to do that are to like us on Facebook and follow us on Twitter.
  2. Subscribe to our daily newsletter. We’ll send the news to your email box, and you don’t have to come to the site unless you want to read columns or see photos.
  3. You can contribute to the health of StrategyPage.
Subscribe   Contribute   Close