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April 03, 2013

North Korea: Dangerous, but Not Crazy

Follow-up to From 1914 to 2014: The Shadow of Rational Pessimism from Mark Harrison's blog

Is the North Korean regime crazy or calculating? Here is a timeline of North Korea's actions since March 10, when I wrote last.

  • March 11: North Korea revokes the armistice ending the Korean War in 1953.
  • March 12: Kim Jong Un places the North Korean armed forces on maximum alert.
  • March 20: Attacks on South Korean news and banking websites, possibly from North Korea.
  • March 27: North Korea cuts a military hotline to the Kaesŏng special region (a joint economic project with South Korea).
  • March 29: Kim Jong Un places the North Korean armed forces on standby to strike U.S. territories.
  • March 30: North Korea warns of a state of war with South Korea.
  • April 2: North Korea will restart weapons-related nuclear facilities.
  • April 3: North Korea closes entry to the Kaesŏng special region.

In various ways, these are all costly actions. Some are financially costly to Pyongyang, such as restarting nuclear facilities and disrupting Kaesŏng-based production and trade. Other are reputationally costly, because they stake out positions that are hard to retreat from without loss of face. All of them have a common element of danger -- the risk of triggering a ruinous catastrophe.

Why is North Korea doing these things if they are so costly? In a common interpretation, the North Korean regime is crazy. They don't understand the world or know what is good for themselves. I think this is unlikely.

On the basis that the North Korean leaders are not insane, there are several possible ways to think about their actions and understand them, but in the end they all point to the same outcome.

Opportunity cost. While the measures listed above are costly, North Korea believes that it would not find a better alternative use of the resources consumed or put at risk as a result of their actions. There are few profitable opportunities for production in the world's worst economic system. Investing in confrontation may well be, for North Korea, the better alternative.

Diminishing returns.In the past, North Korea has extracted billions of dollars of aid from South Korea and the West by holding its own people hostage and showing a willingness to play with fire. The problem with this strategy is that Western countries and their Asian partners have learned how it works. As a result, the North Korean strategy has run into diminishing returns. Pyongyang can continue to extract an advantage only by going to greater and greater lengths. This means taking greater and greater risks with peace.

Rational pessimism (That's what I wrote about here). North Korea's leaders see two scenarios. In one, there is a peaceful future in which their regime will inevitably disintegrate and howling mobs will drag them into the street and tear them to pieces. In another, there is a high probability of war in which millions might perish but there is some faint chance of regime survival. You wouldn't jump at either, and you might not rush to make a choice. Still, ask yourself: If you were Kim Jong Un, and push came to shove, which would you prefer?

March 10, 2013

From 1914 to 2014: The Shadow of Rational Pessimism

Writing about web page

China’s territorial claims and bellicose actions in the Western Pacific have aroused concerns about where this process could lead. In The Shadow of 1914 falls over the Pacific (in the Financial Times on 4 February), Gideon Rachman asked whether we are watching a re-run of events that led to the outbreak of World War I in 1914.

Then, a rising power (Germany) was challenging the established power (Britain) for a say in world affairs and a share in the world's colonial territories. It was not Germany's plan to make war on Britain; German leaders wanted only a say and a share. The economic, military, and naval power that they built was not made to go to war, only to prevent Britain from blocking Germany’s demands. They wanted to ensure peace and to command respect. The war that then came about was not meant to happen. The war would not have happened at all if allies, agents, proxies, and third parties beyond their control had not helped to bring it about.

Replace Britain by the United States, Germany by China, and Austria-Hungary, Russia, and Serbia by Japan, Vietnam, and North and South Korea, and you have Rachman's story in a nutshell. Rachman's conclusion is hopeful, however: China's leaders have tried to learn from history. That, and the inhibitions added by nuclear weapons, will help to avert war.

What was the role of calculation in the outbreak of World War I? Rachman writes as though the war was not calculated at all:

Leaders on all sides felt helpless as they were swept towards a war that most of them did not want.

But something is missing here. While the war was in some sense unwanted, the leaders were not helpless: they chose war. It was a calculated decision, and it was not a miscalculation: those who favoured war correctly estimated that victory was far from certain. They had a war plan for a quick victory over France that relied on a high speed military manoeuvre on a colossal scale, a decision by Britain to abstain, and a Russian mobilization that would obligingly wait until the German Army was ready to switch its focus from West to East. They knew it was an outrageous gamble.

Critical to this story was something that I will call rational pessimism. By 1912, Germany no longer felt itself the confident, rising power once led by Bismarck. Germany’s leaders had come to fear the future. Their own attempts to secure Germany’s rightful place in the sun, they feared, were leaving Germany ever weaker.

These fears were well founded. Externally, the balance of power was tilting away from Germany. More countries were adhering to the anti-German alliance of Britain and France. Britain and Russia were rearming at a pace that nullified Germanys’ own efforts. Given time, Germany would only become weaker. Within Germany the balance was tilting away from monarchism and conservatism towards parliamentary socialism. The fiscal demands of rearmament were opening up new social divisions. Germany’s Prussian bureaucracy and aristocracy felt itself more and more besieged.

Increasingly the calculation became: If we fight, we may lose but at least there is a chance that we win. If we remain at peace, we certainly lose. From this point of view the war was a gamble, but it was not a miscalculation. It was simply the choice with the highest expected value. For this reason the leaders of the Central Powers went to war full of foreboding, but they went to war anyway.

In July 1914 the German chancellor Bethmann Holweg confided in his friend Kurt Riezler, who wrote in his diary:

Russia’s military power growing fast … Austria grows ever weaker … This time things are worse than 1912, because now Austria is on the defensive against the Serb-Russian agitation. … The future belongs to Russia, which grows and grows into an ever great weight pressing down on our chest.

The chancellor is very pessimistic about Germany’s intellectual condition. Frightful decline of our political niveau. Individuals are becoming ever smaller and more insignificant; nobody says anything great and honest. Failure of the intelligentsia and of the professors.

This pessimism was general. When Germany’s Wilhelm II was informed of the Austrian ultimatum to Serbia, he wrote:

Now or never.

In Vienna, Kaiser Franz-Josef wrote:

If we go under, we better go under decently.

(The latter quotes are from Holger Herwig’s The First World War: Germany and Austria-Hungary, 1914-1918, published in 1997 by Arnold).)

From this perspective it becomes crystal clear why North Korea’s predicament is so dangerous. Day by day, North Korea is provoking enemies and losing friends. The tensions within the country are largely unknown but surely increasing. What insider would predict a peaceful future for the Pyongyang regime that is better than today? What does Kim Jong-Un have left to lose from gambling on conflict, no matter how poor the odds? Rational pessimism is surely tilting North Korea’s choices towards war. Still, we are not there yet.

As for China itself, the threat of war should be thought of as one for the future. It seems unlikely that China’s leaders would ever choose to gamble everything on a major war as long as they expect to gain more from a continuation of peace. Their optimism is a bulwark against war.

The risk is that optimism is fragile. China faces many problems that could sap the confidence of its leadership. Edward Luttwak (in The Rise of China vs the Logic of Strategy, published in 2012 by the Belknap Press of Harvard University) has written that China is pursuing an impossible trinity of prosperity, diplomatic influence, and military power. China’s economic growth may falter. Even if economic growth is sustained in China, the chances are that at some stage the West will recover its prosperity and technological leadership. Meanwhile China’s rearmament and territorial claims are losing it friends in Japan, Vietnam, and India. At home, there are protests over a range of issues that widens continually: the rule of law, corruption, censorship, inequality, wages and working conditions, land grabs, and pollution. China’s rulers rely on xenophobia and stories of foreign encirclement and penetration to manage these threats to their legitimacy.

Putting all this together, it is not hard to envisage a future in which China’s leaders would become rational pessimists. Would they then be held back by knowledge of history and by the possibility of nuclear war? Maybe. Is Kim Jong-Un restrained by these things today? So far, yes. If Germany’s rulers in 1914 could have seen the future, would they have chosen differently? Perhaps. Unfortunately, we can’t be sure.

December 19, 2011

Help Me, Daddy

Writing about web page

The death of Kim Jong-il, who ruled North Korea from 1994, reminded me of something a Korean friend told me a few years ago. My friend is an expert on North Korea and told me this "for a fact." Now, I also remember many things I was told "for a fact" in Moscow in Soviet times. This is a fact I've never had the opportunity to verify (and wouldn't know where to look), so I'll put everything in quotes as my friend told it to me.

In order to facilitate his system of personal rule, Comrade Kim Il-sung devised a subcommittee of the party politburo to help him take the most important political and military decisions. The subcommittee had five members, so it became known as the Committee of Five.

Initially, the Committee of Five consisted of Kim Il-sung himself, his son Kim Jong-il, and three other senior party figures.

Note. Kim Il-sung was North Korea's first ruler, and the father of Kim Jong-il. The idea of a Committee of Five is very plausible. A key to the personal power of a totalitarian dictator is "divide and rule." One aspect of divide-and-rule is the compartmentalization of information and responsibilities, so as to minimize the number of people that have an overview of everything. Stalin was a master of this technique, and became notorious after the war for dividing the Politburo members into little subcommittees with limited oversight of particular aspects of policy. These subcommittees became known as the the Quintet, the Septet, and so on. Kim Il-sung's Committee of Five would have excluded other members of the Politburo from general oversight.

Time passed and took its toll. In 1994, Kim Il-sung "went to meet Marx." Following his death, he was promoted to the country's President for Eternity.

Note. This part is certainly true.

Since Kim Il-sung continued to be a state official, although dead, it was clearly out of the question to remove him from the Committee of Five, so he was not replaced. As the three other members of the Committee of Five aged and died, they too were not replaced, probably because there was no one that Kim Jong-il trusted sufficiently. Despite this, the Committee of Five lived on.

Eventually, only Kim Jong-il was left.

My friend concluded (this would be around ten years ago):

At the present time when important political and military decisions must be made, the Committee of Five continues to meet, but when it meets Kim Jong-il is alone in the room. After announcing each item on the agenda, he looks to the ceiling, clasps his hands, and says: "Help me, Daddy!"

This seems like a good precedent for Kim Jong-il's son and successor, Kim Jong-un, to follow. He'd better pray to Daddy; there's no one else he can trust.

I am a professor in the Department of Economics at the University of Warwick. I am also a research associate of Warwick’s Centre on Competitive Advantage in the Global Economy, and of the Centre for Russian, European, and Eurasian Studies at the University of Birmingham. My research is on Russian and international economic history; I am interested in economic aspects of bureaucracy, dictatorship, defence, and warfare. My most recent book is One Day We Will Live Without Fear: Everyday Lives Under the Soviet Police State (Hoover Institution Press, 2016).

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