As the follow-up negotiations to finalize the nutritional assistance to North Korea is taking place, several analysts have weighed in their opinions on the "Leap-day deal." Most people have taken a negative position, citing the agreement's narrow focus on the Yongbyon facility and the questionable act of using humanitarian assistance for leverage.
However, it is important to point out that the recent negotiations have produced opportunities for long-term engagement and a chance to reduce tensions in the region.
At the least, the infamous Yongbyon facility will be closed. Many point out that North Korea probably has many other underground facilities that support the nuclear weapons program, but Yongbyon is probably Pyongyang's largest and most productive enrichment site. With enough output to produce a nuclear weapon on an annual basis, closing down the facility will be a huge step forward.
Furthermore, now that the food crisis and the nuclear issue are linked, Pyongyang will be pressed hard to make further concessions in their nuclear program in order to gain more food. Although some experts, like Marcus Noland, do not believe that Pyongyang accepted the US deal out of concern for its people, considering the socio-economic conditions, it is likely that North Korea's sudden change in position is tied to its desperation for assistance. 240,000 tons of nutritional assistance will only last so long. When the North Koreans come back for more food, more concessions may be negotiated.
These are issues that both North Koreans and Americans can potentially work together to resolve - Washington wants Pyongyang to give up its nuclear weapons and Pyongyang wants Washington to help it recover from the food crisis. Andrei Lankov is adamant that North Korea will never give up nuclear weapons, but as long as talks move in a direction that would reduce tensions and establish a firmer line of communication between Pyongyang and Washington, the current negotiations are well worth the moral and strategic risks.
Of course Washington is on a limited time frame. As North Korea's ties with Russia and China deepen, the US economic leverage over the isolated and hungry state will decrease. More importantly, the US should not delay the delivery of humanitarian assistance as to prevent further trauma on the North Korean people. Much is at stake.
Saturday, March 10, 2012
Thursday, March 1, 2012
US-DPRK leap?
On February 29, 2012, the DPRK and the United States simultaneously announced the results of their third exploratory talks. Both sides chose to focus on different aspects of the negotiations in their announcement, but in general, Pyongyang and Washington appear to have landed on the same page.
The agreements were surprisingly extensive, covering a moratorium on long-range missile launches, cessation of nuclear weapons tests and nuclear activities at Yongbyon and permission for IAEA inspectors to return to North Korea.
In return, the United States promised to finalize negotiations on 240,000 metric tons of nutritional aid. The addition of "nutritional assistance" in the meeting is somewhat surprising because Washington has always maintained rhetorical distance between the nuclear issue and humanitarian assistance - as many analysts suspected, the deal appears to have been reached mainly via US using humanitarian assistance as leverage.
The agreement to provide 240,000 metric tons of nutritional aid is significant because it means that the North Korean leadership was willing to concede on the issue of being given the remaining 330,000 tons of grain from the 2005 agreement. According to Marcus Noland, this concession suggests that there is an individual or group making decisive political decisions in Pyongyang, which in of itself was not a certainty after the death of Kim Jong-il.
While US negotiators were wary of making assertive comments on recommencing the Six-party Talks, the North Korean statement chose to underscore the possibility of restarting the talks, lifting sanctions and acquiring a light water reactor - clearly looking for a deal similar to the 1994 Agreed Framework.
The key area of concern here is the linkage between food aid and the nuclear issue. If this becomes the established precedence, then humanitarian assistance will be shamelessly flaunted as a political tool - and the North Koreans will have a positive incentive to engage in provocative behavior to induce food aid.
Moreover, the linkage between food and the nuclear program will create an incentive for Washington to continue the supply of aid even if the North Koreans are abusing the distribution, as long as the negotiations on the nuclear program makes progress - humanitarian assistance will be taken hostage by North Korea's willingness to talk.
The agreement specified that North Korea will halt nuclear activities at the Yongbyon nuclear facility, which leaves nuclear facilities that the US and the IAEA do not know about (if they exist) free to continue uranium enrichment. In 2010 Siegfried Hecker was shown the uranium enrichment program at Yongbyon and he was shocked to find that the facility was capable of producing a weapon's worth of highly enriched uranium every year. While this infamous facility will halt operations, just as Hecker was not expecting a massive enrichment program in 2010, we may stumble upon an underground nuclear facility in the near future. Furthermore, Pyongyang probably retains enough plutonium right now for four to twelve atomic bombs.
While the recent agreement could definitely open way for a considerable breakthrough, bringing the regional players back to Six-party Talks and forestall mass starvation in North Korea, as with all agreements with Pyongyang, this one stands on thin ice. As the moratorium does not include a specific timetable, Pyongyang may well be stalling for time and aid.
The agreements were surprisingly extensive, covering a moratorium on long-range missile launches, cessation of nuclear weapons tests and nuclear activities at Yongbyon and permission for IAEA inspectors to return to North Korea.
In return, the United States promised to finalize negotiations on 240,000 metric tons of nutritional aid. The addition of "nutritional assistance" in the meeting is somewhat surprising because Washington has always maintained rhetorical distance between the nuclear issue and humanitarian assistance - as many analysts suspected, the deal appears to have been reached mainly via US using humanitarian assistance as leverage.
The agreement to provide 240,000 metric tons of nutritional aid is significant because it means that the North Korean leadership was willing to concede on the issue of being given the remaining 330,000 tons of grain from the 2005 agreement. According to Marcus Noland, this concession suggests that there is an individual or group making decisive political decisions in Pyongyang, which in of itself was not a certainty after the death of Kim Jong-il.
While US negotiators were wary of making assertive comments on recommencing the Six-party Talks, the North Korean statement chose to underscore the possibility of restarting the talks, lifting sanctions and acquiring a light water reactor - clearly looking for a deal similar to the 1994 Agreed Framework.
The key area of concern here is the linkage between food aid and the nuclear issue. If this becomes the established precedence, then humanitarian assistance will be shamelessly flaunted as a political tool - and the North Koreans will have a positive incentive to engage in provocative behavior to induce food aid.
Moreover, the linkage between food and the nuclear program will create an incentive for Washington to continue the supply of aid even if the North Koreans are abusing the distribution, as long as the negotiations on the nuclear program makes progress - humanitarian assistance will be taken hostage by North Korea's willingness to talk.
The agreement specified that North Korea will halt nuclear activities at the Yongbyon nuclear facility, which leaves nuclear facilities that the US and the IAEA do not know about (if they exist) free to continue uranium enrichment. In 2010 Siegfried Hecker was shown the uranium enrichment program at Yongbyon and he was shocked to find that the facility was capable of producing a weapon's worth of highly enriched uranium every year. While this infamous facility will halt operations, just as Hecker was not expecting a massive enrichment program in 2010, we may stumble upon an underground nuclear facility in the near future. Furthermore, Pyongyang probably retains enough plutonium right now for four to twelve atomic bombs.
While the recent agreement could definitely open way for a considerable breakthrough, bringing the regional players back to Six-party Talks and forestall mass starvation in North Korea, as with all agreements with Pyongyang, this one stands on thin ice. As the moratorium does not include a specific timetable, Pyongyang may well be stalling for time and aid.
Friday, February 24, 2012
The dependency illusion
Through trial and extreme error, communism has been thoroughly discredited in the last century; however, the theory of dialectical materialism survives into the new millennium. Marx suggested that the construction of new means of production inevitably leads to internal contradictions and new epochs are created through the process of synthesizing all the existing material realities. Today, we simply replaced the idea of an inevitable communist takeover with the presumption that every country will one day adopt the liberal democratic system.
This was Francis Fukuyama's famous thesis in "The End of History?" However, the revolt against this new world order began soon after the end of the Second World War, right alongside the Cold War. This was the struggle fought via economic nationalism and competing theories of modernization, taking shape in various ideologies and political systems. Latin American economists first led the charge in the 1940s and 50s with their "Dependency Theory." The core idea forwarded the view that poor and less powerful states will be subject to the political, economic, social and cultural domination of wealthier states. Adherents of this theory chose to disengage from the dominant economic systems of their world in favor of sovereignty.
There were varying degrees (everything from import substitution to self-sufficiency), but the most radical and extensive pursuit of this stance can be seen in North Korea. North Korea rejected the idea of being subject to either American or Soviet political and economic influences. Manifestations of this appeared in Pyongyang's refusal to join COMECON and its constant pursuit of heavy industry.
However, many analysts have pushed aside indigenous North Korean desire to be independent and instead analyzed Pyongyang's policies as an attempt to maximize political capital by playing the Soviet Union against the PRC during the Sino-Soviet Split. Naturally, in the post-Soviet era, the US foreign policy makers look to China as North Korea's patron and sole hegemon. As negotiations in Beijing carry on to denuclearize North Korea, this mistaken perception of Sino-DPRK relations will prove most ineffective for the US side.
North Korea appears to be increasingly dependent on Chinese economic aid and slowly making reforms to harbor cross-border trade. Some have argued that such reforms indicate North Korea's irreversible ties to China and a physical representation of Beijing's influence over Pyongyang, almost like the economic and political relationship that the US had with Latin America. However, to characterize the Sino-DPRK relationship as a traditional core-periphery model is short sighted.
The basic assumption that North Korea's economic dependence translates to political subjugation lacks substantial warrants. Yafeng Xia, a historian specializing in the history Sino-DPRK relations, portrayed China as less of a lever and more of a hammer, meaning that Beijing can strangle/starve Pyongyang to death but lacks the tools to apply less extreme changes or bring it to submission.
On top of not wishing to upset the balance of powers,North Korea serves as an important source of raw materials for development in China's northeastern provinces.
Furthermore, with everyone expecting millions of refugees to flood across the Yalu when the state collapses, it is hard to distinguish who has leverage over whom in the current state of affairs.
There is a predominant mood of inevitability when people discuss issues related to North Korea - that it will one day collapse or that it will inevitable bow to the economic realities and give themselves to the Chinese model. However, such thoughts are presumptuous and oversimplifies how different people view themselves and the world.
Imposition of dogmatism and a self-assuredness in one's own vision of history are not new things, but we ought to have learned our lesson and become more flexible.
Read my article in the context of the US-DPRK negotiations on Asia Times
This was Francis Fukuyama's famous thesis in "The End of History?" However, the revolt against this new world order began soon after the end of the Second World War, right alongside the Cold War. This was the struggle fought via economic nationalism and competing theories of modernization, taking shape in various ideologies and political systems. Latin American economists first led the charge in the 1940s and 50s with their "Dependency Theory." The core idea forwarded the view that poor and less powerful states will be subject to the political, economic, social and cultural domination of wealthier states. Adherents of this theory chose to disengage from the dominant economic systems of their world in favor of sovereignty.
There were varying degrees (everything from import substitution to self-sufficiency), but the most radical and extensive pursuit of this stance can be seen in North Korea. North Korea rejected the idea of being subject to either American or Soviet political and economic influences. Manifestations of this appeared in Pyongyang's refusal to join COMECON and its constant pursuit of heavy industry.
However, many analysts have pushed aside indigenous North Korean desire to be independent and instead analyzed Pyongyang's policies as an attempt to maximize political capital by playing the Soviet Union against the PRC during the Sino-Soviet Split. Naturally, in the post-Soviet era, the US foreign policy makers look to China as North Korea's patron and sole hegemon. As negotiations in Beijing carry on to denuclearize North Korea, this mistaken perception of Sino-DPRK relations will prove most ineffective for the US side.
North Korea appears to be increasingly dependent on Chinese economic aid and slowly making reforms to harbor cross-border trade. Some have argued that such reforms indicate North Korea's irreversible ties to China and a physical representation of Beijing's influence over Pyongyang, almost like the economic and political relationship that the US had with Latin America. However, to characterize the Sino-DPRK relationship as a traditional core-periphery model is short sighted.
The basic assumption that North Korea's economic dependence translates to political subjugation lacks substantial warrants. Yafeng Xia, a historian specializing in the history Sino-DPRK relations, portrayed China as less of a lever and more of a hammer, meaning that Beijing can strangle/starve Pyongyang to death but lacks the tools to apply less extreme changes or bring it to submission.
On top of not wishing to upset the balance of powers,North Korea serves as an important source of raw materials for development in China's northeastern provinces.
Furthermore, with everyone expecting millions of refugees to flood across the Yalu when the state collapses, it is hard to distinguish who has leverage over whom in the current state of affairs.
There is a predominant mood of inevitability when people discuss issues related to North Korea - that it will one day collapse or that it will inevitable bow to the economic realities and give themselves to the Chinese model. However, such thoughts are presumptuous and oversimplifies how different people view themselves and the world.
Imposition of dogmatism and a self-assuredness in one's own vision of history are not new things, but we ought to have learned our lesson and become more flexible.
Read my article in the context of the US-DPRK negotiations on Asia Times
Tuesday, February 21, 2012
A short chronology of DPRK-US nuclear weapons negotiations 2010-12
February 2010
March 2010
May 2010
June 2010
August 2010
November 2010
January 2011
February 2011
March 2011
May 2011
July 2011
August 2011
September 2011
October 2011
December 2011
February 2012
- U.N. political chief B. Lynn Pascoe meets with North Korea's president and foreign minister and "argue[s] strongly that the six-party talks should be resumed without preconditions or further delay."
- On February 13, North Korea's chief nuclear negotiator Kim Kye Gwan arrives in Beijing and strongly pushes for a trip to the United States in March, but the U.S. does not authorized a visa for him.
- February 15 North Korea’s nominal head of state, Kim Yong Nam, states that North Korea will end hostile relation with U.S. through dialogue and negotiations.
March 2010
- 26 March 2010, ROK Corvette Cheonan is scuttled
May 2010
- Kim Jong-Il publicly supports cooperation “towards moving for a resumption of the Six-Party process.” Meanwhile, Clinton tours Asia.
June 2010
- United States extends economic sanctions against North Korea under the UN Security Council Resolution 1874
August 2010
- Kim Jong-il expresses hopes for early resumption of six-party nuclear talks during his trip to China
November 2010
- Special Representative Stephen Bosworth travels to Beijing to discuss the DPRK’s clandestine uranium enrichment program.
- Yeonpyeong Island is shelled.
January 2011
- North Korea invites South Korea to begin negotiations on inter-Korean trade; however, Seoul makes a counteroffer to discuss the sinking of the Cheonan and the shelling of Yeonpyeongdo. Pyongyang agrees to meet in February.
February 2011
- US NGOs observe signs of a severe food crisis in parts of North Korea
- The first Inter-Korean military negotiation sine the 2010 sinking of the Cheonan starts and promptly collapses as the North Korean delegation storms out
March 2011
- The US demands a show of seriousness by the North Koreans as a prerequisite for the resumption of negotiations.
May 2011
- Special Envoy for North Korea Human Rights Ambassador Robert King and the USAID Deputy Assistant Administrator for the Office of Foreign Disaster Assistance Jon Brause travel to the Democratic People’s Republic of Korea from May 24th to 28th to explore the possibility of extending food aid.
July 2011
- Kim Kye-gwan arrives in New York on July 27, 2011 for negotiations “designed to explore the willingness of North Korea to take concrete and irreversible steps toward denuclearization.” Talks conclude without any substantive changes, but characterized as exploratory and constructive. Bosworth states that “before deciding our next steps to resume the process, the United States will consult closely with the Republic of Korea and our other partners in the six-party talks”
- South and North Korean representatives meet in Indonesia to discuss prospects for restarting the 6 party talks
August 2011
- US and the DPRK agree to discuss the search and repatriation of remains of US troops killed in North Korean territory during the Korean War
- During his meeting with President Medvedev in Ulan Ude on August 24, Kim Jong Il promised to work on introducing a moratorium on testing and spent nuclear fuel processing. Senior Washington official states that the offer was “welcome but ... insufficient” to return to the negotiating tables.
September 2011
- Top nuclear negotiators from North and South Korea meet in Beijing to discuss terms of restarting the 6 Party talks
- On September 23, North Korea expresses interest in continuing negotiations with the US in October
October 2011
- October 24, Bosworth meets with DPRK vice foreign minister Kim Kye-gwan in Geneva “to determine if North Korea is prepared to implement its obligations under UN Security Council Resolutions 1718 and 1874 and its commitments under the 2005 Joint Statement of the Six-Party Talks
- No significant breakthroughs in denuclearization negotiations. Bosworth states he is “neither optimistic nor pessimistic”
- October 26, the US government is reportedly preparing to resume food aid to North Korea, but will stagger the aid in a series of deliveries. A source close to the North tells Yonhap News that Washington plans to restart the humanitarian assistance that stalled in 2008.
- Mounting criticism that the US is coupling food aid with successful negotiations with the DPRK.
December 2011
- Kim Jong-Il dies, but Pyongyang approves the continuation of negotiations. New York channel used to continue negotiations.
February 2012
- North Korea makes a list of demands that South Korea must fulfill before resuming negotiations including the cancellation of joint American-South Korean military exercises. South Korea does not budge and the exercises are conducted on schedule
- Vice-Minister of Foreign Affairs Kim Kye Gwan leaves Pyongyang on February 21 for the 3rd round of talks with U.S. officials in Beijing.
Thursday, February 9, 2012
The Russian Winter Offensive
It has been a while since I wrote an article about Russia, but with Foreign Minister Sergei Lavrov’s recent visit to Damascus and Russia’s veto at the UN Security Council to block a resolution on Syria, the Eurasian giant deserves our attention.
Many analysts question why Moscow is acting so strongly against the United States when the Obama Administration appears to have done so much to achieve a "Reset" with the Kremlin. Most prominently, Daniel Drezner compares Russia and China in his Foreign Policy article and points out how Beijing's rhetoric towards Washington is more reserved than Moscow's despite China facing more direct challenges from the United States.
But objectively speaking, the baseline presumption that there actually had been a "Reset" between the United States and the Russian Federation may be a fallacy. With Putin at the helm, the Kremlin has seen the foreign policies of the Clinton, Bush and Obama administrations, which invariably produces a long term perspective on US behavior towards Russia and actions in Russia's key areas of interest. Taking this view into account helps better explain why Moscow may not feel that Obama is all that different from Bush.
What the Russian leadership expected the “Reset” was for the United States to break from the policy of unilateralism and show “commitment to the notion that Russia can be a viable and trustworthy partner to the United States regardless of the state of Russia’s domestic affairs.” The Libya issue provides a good example of where the "Reset" failed to manifest - Russia abstained from the UN Security Council Resolution 1973 without totally rejecting it in deference to US leadership. Despite the silent understanding that the resolution should not be viewed as a green light for military intervention, NATO began air strikes on Libya. Therefore, in debating the crisis in Syria, it is only natural for Lavrov to give a firm warning to the "West" and use Russia's veto power to reject the resolution against the Assad regime. Furthermore, the criticism against Russian elections by the US State Department was not well received by the Kremlin, especially during a sensitive time for semi-democratic/semi-authoritarian regimes around the world.
What is more, Washington has nothing to bargain for. It has opted out of being an assertive negotiator or a stabilizer on the Korean Peninsula where Russia seeks stability in order to begin constructing new gas pipelines that will open way for the development of the Russian Far East. The US has not and cannot fulfill Japan's security needs, which is forcing Tokyo to reorient its military position from north against Russia to south against China (exchanging land based forces in Hokkaido for air and naval forces in the South China Sea) and leaving Russia in good position to conclude a favorable resolution on its island dispute with Japan.
Before, Russia saw the United States as a vital partner in engaging Asian countries - but with Washington forcing South Korea and Japan to reconsider their dependency on oil imports from the Middle East, Russians can expect the East Asian economic powers to come to the Kremlin. In fact, South Korean entities have been in negotiation since 2003 to develop means to deliver gas to South Korea through North Korea - now Pyongyang has given a nod of approval and things will move along, with or without Washington.
The US-Russian friction is a reflection of Washington's massive loss of leverage over a country that had at one point desperately desired closer relations. Internal weaknesses of the Russian Federation may play a peripheral role, but obsessing over Putin's authority over the country misses the wider implications of current events.
Russia is a big country. It spans over vast territories and borders several regions where major world players have staked out their interests - Kremlin is challenged to produce a cohesive and coherent foreign policy to maximize Russia's gains. Naturally, the resulting policies are both reactive and pragmatic.
Looking at Eurasia from the perspective of those who rule over a significant portion of it seems like a good place to start for Washington if it seeks to better assert its leadership role there.
Read my full article on Asia Times.
Many analysts question why Moscow is acting so strongly against the United States when the Obama Administration appears to have done so much to achieve a "Reset" with the Kremlin. Most prominently, Daniel Drezner compares Russia and China in his Foreign Policy article and points out how Beijing's rhetoric towards Washington is more reserved than Moscow's despite China facing more direct challenges from the United States.
But objectively speaking, the baseline presumption that there actually had been a "Reset" between the United States and the Russian Federation may be a fallacy. With Putin at the helm, the Kremlin has seen the foreign policies of the Clinton, Bush and Obama administrations, which invariably produces a long term perspective on US behavior towards Russia and actions in Russia's key areas of interest. Taking this view into account helps better explain why Moscow may not feel that Obama is all that different from Bush.
What the Russian leadership expected the “Reset” was for the United States to break from the policy of unilateralism and show “commitment to the notion that Russia can be a viable and trustworthy partner to the United States regardless of the state of Russia’s domestic affairs.” The Libya issue provides a good example of where the "Reset" failed to manifest - Russia abstained from the UN Security Council Resolution 1973 without totally rejecting it in deference to US leadership. Despite the silent understanding that the resolution should not be viewed as a green light for military intervention, NATO began air strikes on Libya. Therefore, in debating the crisis in Syria, it is only natural for Lavrov to give a firm warning to the "West" and use Russia's veto power to reject the resolution against the Assad regime. Furthermore, the criticism against Russian elections by the US State Department was not well received by the Kremlin, especially during a sensitive time for semi-democratic/semi-authoritarian regimes around the world.
What is more, Washington has nothing to bargain for. It has opted out of being an assertive negotiator or a stabilizer on the Korean Peninsula where Russia seeks stability in order to begin constructing new gas pipelines that will open way for the development of the Russian Far East. The US has not and cannot fulfill Japan's security needs, which is forcing Tokyo to reorient its military position from north against Russia to south against China (exchanging land based forces in Hokkaido for air and naval forces in the South China Sea) and leaving Russia in good position to conclude a favorable resolution on its island dispute with Japan.
Before, Russia saw the United States as a vital partner in engaging Asian countries - but with Washington forcing South Korea and Japan to reconsider their dependency on oil imports from the Middle East, Russians can expect the East Asian economic powers to come to the Kremlin. In fact, South Korean entities have been in negotiation since 2003 to develop means to deliver gas to South Korea through North Korea - now Pyongyang has given a nod of approval and things will move along, with or without Washington.
The US-Russian friction is a reflection of Washington's massive loss of leverage over a country that had at one point desperately desired closer relations. Internal weaknesses of the Russian Federation may play a peripheral role, but obsessing over Putin's authority over the country misses the wider implications of current events.
Russia is a big country. It spans over vast territories and borders several regions where major world players have staked out their interests - Kremlin is challenged to produce a cohesive and coherent foreign policy to maximize Russia's gains. Naturally, the resulting policies are both reactive and pragmatic.
Looking at Eurasia from the perspective of those who rule over a significant portion of it seems like a good place to start for Washington if it seeks to better assert its leadership role there.
Read my full article on Asia Times.
Friday, February 3, 2012
"The concept of a dog does not bark"
We cannot recreate the past. After all, it would be impossible to maintain authenticity while being fully aware of the consequences of certain decisions. Nonetheless, toying with counter-factual scenarios and obsessively rereading the recent past are crucially important habits for attending to current social needs. By applying our current world view to our critical reading of history, we may gain valuable insight on presumptions and fallacies that may have been lost on us before.
In light of the mass public demonstrations in the United States and Europe, we must ask ourselves why so many of us have become so disenchanted with the dominant socio-economic paradigm that was so welcomed at the fall of Berlin Wall: the merger of liberal democracy and free market capitalism.
Since the phenomenon needs a starting point, one can start with the triumph of the "West" against its adversaries - and it may be useful to assess what and who the victory was against.
In the 2000s, when resurgent Moscow's foreign policy became increasingly confrontational towards the "West," many forwarded the notion that the Cold War did not end in 1989/91, it had simply gone into remission during the reconstitution of the Russian Federation. This view suggests that the Cold War was a conflict between the Soviet Union and the United States. Add China into the narrative and one creates an interpretation of the Cold War that is largely great powers-oriented.
However, this perspective fails to account for civil conflicts around the world where domestic forces co-opted major powers to achieve political objectives. The Korean War is a great example of this: the North Koreans dragged the unwilling Soviet Union and China into a bloody conflict that very quickly involved the United States, but was initially only against South Korea.
Without accounting for other nuances of Cold War history, the nature of the post-WWII period is already very complex; nonetheless, a simplified model that continues to find itself into political rhetoric is the idea that the United States and Western Europe had championed the cause of democracy/capitalism against Soviet totalitarianism/communism.
German-American social psychologist Erich Fromm took offense to this notion and stated in his afterward to Orwell's 1984 that the use of "doublespeak" and the distortion of reality were prevalent in the West as they were in the dystopic novel and behind the Iron Curtain (obviously in varying degrees, but present nonetheless).
At the same time there is an important truism in narrowing the conflict to one between democracy and communism. It is not possible to maintain a pluralistic society and impose an economic system based on the denial of private property because such an economic model implies involuntary expropriation. Though some will argue that the forced march to industrialization helped the Russian people defeat the Nazis (again it's hard to create a counter-factual here), there is (or rather ought to be) little opposition to the notion that the Soviet Union was a supremely flawed experiment that produced neither prosperity nor equality. On the other hand, despite all its shortcomings, the handful of non-communist countries with its imperfect democratic institutions have undoubtedly nurtured the most tolerant and progressive societies in history. While there is a long road ahead, the progress made by the "West" must also be appreciated.
Reorienting our analysis to the era of globalization, the question now becomes the extent upon which democracy and capitalism are compatible, the limits and thresholds of their cohesion in the modern community of nations.
The friction between pluralism and capitalism is more nuanced within established liberal democracies because the system more or less provides avenues for redress and maintains a system of due process. However, as politics cannot be divorced from the appropriation of public funds and ensuring the general (economic) welfare of the constituents, there is ample room for principles to be trampled for (perceived) practical solutions.
The recent financial crisis in Europe revealed many contentious areas where the democratic system was in open confrontation with economic rationality.
Take George Papandreou's socialist government in Greece. When he came into office, he pursued a more transparent and honest economic policy than his predecessors and revealed that the Greek public debt was nearly two-folds higher than previously announced. This announcement panicked creditors and loans to Greece ceased, launching a major financial crisis. Papandreou was forced to devise austerity measures to qualify for a bail-out from the European Union, an absolute necessity for the economic survival of the Greek state; yet when these essential measures were introduced to the public, discontent boiled over and bloody riots reigned over the streets of Athens.
Naturally the markets reacted badly when the Greek government initially announced that it will place the conditions imposed by the European community on a national referendum. Under pressure to accept the conditions and curtail the market devastation, the government retracted the plans for a referendum and pushed forward without public consent. Ultimately, Papandreou resigned and a new coalition government is slugging along with the massively unpopular measures.
The question is: should the Greek government NOT have sought a popular mandate for the bail-out preconditions? The European Union clearly didn't think it was necessary, but is it so outrageous to seek the approval of the very people who will be most severely affected by the new policies? In fact, to act without a popular mandate on such a major issue seems abusive.
Many Greeks legitimately have redress against slashing public welfare funds - despite portrayals of Greeks lavishing in a Mediterranean paradise with generous pensions and retirement benefits that far exceed those received by Germans, this only applies to a portion of the population. Poverty rate in Greece is very high and in particular, poverty rate among the elderly rank highest in the European Union. Indeed, the cold front blowing across Eastern Europe and the Balkans appears to be a cruel twist by nature to further degrade the well-being of those Greeks whose safety nets have only recently been slashed open.
As evident in the Greek case, loss of faith in today's economic environment could spell disaster for a whole country. Most countries are drowning in debt and require a continuous line of credit to stay afloat - that's why the slow downgrading of the credit ratings constitute a serious threat to economic stability.
So the country's first line of order is to keep risk low and ensure the creditors that its macroeconomic policies are stable - but what happens when the wishes of the people are contrary to economic rationale? Or if the people's shortsightedness and the natural inclination of politicians to hold on to power turn into a vicious cycle?
In the case of Hungary, the economic performance of the entire country pivots around the electoral cycle - politicians promising economic/market reforms, incumbent government raising public expenditure, wild policies being proposed with even wilder expectations, etc. These are all legacies of Hungary's Goulash populism, instituted in the 1960s to appease the population that was still upset about the military occupation and repression following the 1956 Revolution. Under the communist regime, this populist policy manifested itself as small openings to the West. After the collapse of the Iron Curtain, it has turned into Clientelism by various political parties. Now, Hungary under the Fidesz government has finally maxed out the patience of its creditors.
What is happening in Hungary is not the people's fault. It's a moral hazard that political players waded into and then subsequently became stuck in. Nonetheless, it's hard to break from the vicious cycle when the general public reacts so wonderfully to increased government expenditure on welfare and wages.
The public often acts irrationally - fully knowing the consequences of their collective actions, societies still jump overboard, a la the Rapa Nui of Easter Island.
If this is the case, should the governments suppress public demands and forward plans that it sees will be for the welfare of the entire country? One is reminded of Bertolt Brecht's famous quote:
These are definitely issues that require greater public attention and detail. After all, the concept of a dog does not bark; we cannot simply call our society a democratic one without exploring what that means and then applying our ideals into practice.
In light of the mass public demonstrations in the United States and Europe, we must ask ourselves why so many of us have become so disenchanted with the dominant socio-economic paradigm that was so welcomed at the fall of Berlin Wall: the merger of liberal democracy and free market capitalism.
Since the phenomenon needs a starting point, one can start with the triumph of the "West" against its adversaries - and it may be useful to assess what and who the victory was against.
In the 2000s, when resurgent Moscow's foreign policy became increasingly confrontational towards the "West," many forwarded the notion that the Cold War did not end in 1989/91, it had simply gone into remission during the reconstitution of the Russian Federation. This view suggests that the Cold War was a conflict between the Soviet Union and the United States. Add China into the narrative and one creates an interpretation of the Cold War that is largely great powers-oriented.
However, this perspective fails to account for civil conflicts around the world where domestic forces co-opted major powers to achieve political objectives. The Korean War is a great example of this: the North Koreans dragged the unwilling Soviet Union and China into a bloody conflict that very quickly involved the United States, but was initially only against South Korea.
Without accounting for other nuances of Cold War history, the nature of the post-WWII period is already very complex; nonetheless, a simplified model that continues to find itself into political rhetoric is the idea that the United States and Western Europe had championed the cause of democracy/capitalism against Soviet totalitarianism/communism.
German-American social psychologist Erich Fromm took offense to this notion and stated in his afterward to Orwell's 1984 that the use of "doublespeak" and the distortion of reality were prevalent in the West as they were in the dystopic novel and behind the Iron Curtain (obviously in varying degrees, but present nonetheless).
Just as the Inquisitors who tortured their prisoners believed that they acted in the name of Christian love, the Party "rejects and vilifies every principle for which the socialist movement originally stood, and it chooses to do this in the name of socialism." Its content is reversed into its opposite, and yet people believe that the ideology means what it says. In this respect Orwell. quite obviously refers to the falsification of socialism by Russian communism, but it must be added that the West is also guilty of a similar falsification. We present our society as being one of free initiative, individualism and idealism, when in reality these are mostly words.One needs not go far back in history to find prominent examples to support Fromm's position; the overthrow of Iran’s democratically-elected Mossadeq government through CIA support, the praise for Pinochet's Chile as a key member of the "free world" and President Reagan's assertion that Grenada posed a threat to the security of the United States are only few of the examples among many disturbing contortions of reality during the Cold War that few in the general public questioned.
At the same time there is an important truism in narrowing the conflict to one between democracy and communism. It is not possible to maintain a pluralistic society and impose an economic system based on the denial of private property because such an economic model implies involuntary expropriation. Though some will argue that the forced march to industrialization helped the Russian people defeat the Nazis (again it's hard to create a counter-factual here), there is (or rather ought to be) little opposition to the notion that the Soviet Union was a supremely flawed experiment that produced neither prosperity nor equality. On the other hand, despite all its shortcomings, the handful of non-communist countries with its imperfect democratic institutions have undoubtedly nurtured the most tolerant and progressive societies in history. While there is a long road ahead, the progress made by the "West" must also be appreciated.
Reorienting our analysis to the era of globalization, the question now becomes the extent upon which democracy and capitalism are compatible, the limits and thresholds of their cohesion in the modern community of nations.
The friction between pluralism and capitalism is more nuanced within established liberal democracies because the system more or less provides avenues for redress and maintains a system of due process. However, as politics cannot be divorced from the appropriation of public funds and ensuring the general (economic) welfare of the constituents, there is ample room for principles to be trampled for (perceived) practical solutions.
The recent financial crisis in Europe revealed many contentious areas where the democratic system was in open confrontation with economic rationality.
Take George Papandreou's socialist government in Greece. When he came into office, he pursued a more transparent and honest economic policy than his predecessors and revealed that the Greek public debt was nearly two-folds higher than previously announced. This announcement panicked creditors and loans to Greece ceased, launching a major financial crisis. Papandreou was forced to devise austerity measures to qualify for a bail-out from the European Union, an absolute necessity for the economic survival of the Greek state; yet when these essential measures were introduced to the public, discontent boiled over and bloody riots reigned over the streets of Athens.
Naturally the markets reacted badly when the Greek government initially announced that it will place the conditions imposed by the European community on a national referendum. Under pressure to accept the conditions and curtail the market devastation, the government retracted the plans for a referendum and pushed forward without public consent. Ultimately, Papandreou resigned and a new coalition government is slugging along with the massively unpopular measures.
The question is: should the Greek government NOT have sought a popular mandate for the bail-out preconditions? The European Union clearly didn't think it was necessary, but is it so outrageous to seek the approval of the very people who will be most severely affected by the new policies? In fact, to act without a popular mandate on such a major issue seems abusive.
Many Greeks legitimately have redress against slashing public welfare funds - despite portrayals of Greeks lavishing in a Mediterranean paradise with generous pensions and retirement benefits that far exceed those received by Germans, this only applies to a portion of the population. Poverty rate in Greece is very high and in particular, poverty rate among the elderly rank highest in the European Union. Indeed, the cold front blowing across Eastern Europe and the Balkans appears to be a cruel twist by nature to further degrade the well-being of those Greeks whose safety nets have only recently been slashed open.
As evident in the Greek case, loss of faith in today's economic environment could spell disaster for a whole country. Most countries are drowning in debt and require a continuous line of credit to stay afloat - that's why the slow downgrading of the credit ratings constitute a serious threat to economic stability.
So the country's first line of order is to keep risk low and ensure the creditors that its macroeconomic policies are stable - but what happens when the wishes of the people are contrary to economic rationale? Or if the people's shortsightedness and the natural inclination of politicians to hold on to power turn into a vicious cycle?
In the case of Hungary, the economic performance of the entire country pivots around the electoral cycle - politicians promising economic/market reforms, incumbent government raising public expenditure, wild policies being proposed with even wilder expectations, etc. These are all legacies of Hungary's Goulash populism, instituted in the 1960s to appease the population that was still upset about the military occupation and repression following the 1956 Revolution. Under the communist regime, this populist policy manifested itself as small openings to the West. After the collapse of the Iron Curtain, it has turned into Clientelism by various political parties. Now, Hungary under the Fidesz government has finally maxed out the patience of its creditors.
What is happening in Hungary is not the people's fault. It's a moral hazard that political players waded into and then subsequently became stuck in. Nonetheless, it's hard to break from the vicious cycle when the general public reacts so wonderfully to increased government expenditure on welfare and wages.
The public often acts irrationally - fully knowing the consequences of their collective actions, societies still jump overboard, a la the Rapa Nui of Easter Island.
If this is the case, should the governments suppress public demands and forward plans that it sees will be for the welfare of the entire country? One is reminded of Bertolt Brecht's famous quote:
...would it not be be simpler,Indeed the reduction of the government's power to influence the market has been a key element of the intra-state agreements on free trade. The European Union demands that the central banks of all member states be independent and the United States forwards standardized labor regulations that many think will eventually render minimum wage laws obsolete. But are these regulations inhibiting the people's right to collectively decide how to live their lives? More importantly, what is the impact of these new socio-economic model on the essence of democracy.
If the government simply dissolved the people
And elected another?
These are definitely issues that require greater public attention and detail. After all, the concept of a dog does not bark; we cannot simply call our society a democratic one without exploring what that means and then applying our ideals into practice.
Friday, January 27, 2012
Hungarian Rhapsody... in blue
An atrocious article appeared on Real Clear World the other day that took me by complete surprise. I was shocked and appalled that a site which almost always maintains a compendium of insightful pieces on global issues had the audacity to carry what can only be called a testimony to shortsightedness. This particular piece by Alex Berezow sought to find the roots of Budapest's current troubles in the unfriendly disposition of the Hungarian people towards the outside world.
Never mind the fact that Europe as a whole has tilted increasingly right-wing since the financial crises, ignore the fact that Hungary's economic woes have been particularly hard on its people, forget historical lessons on how the public reacts to economic difficulties and place yourself in a vacuum - this is where Berezow begins his search for the origins of the Hungarian crisis.
Of course, I must admit that I have a soft spot for Hungary and its people - I visited the country as a child and went back to study abroad in Budapest and enjoyed my experiences there. I am certainly carrying a bias; however, Berezow's commentary blatantly ignores visible roots of the problem and dismisses the current conflict between Brussels and Budapest as a particularly Hungarian problem.
But why should people outside of Hungary and Europe care about this issue? For starters, it's an important case study of state driven economic nationalism that parallels increasing nationalist sentiments of the public - to categorize the current issue in Hungary as a unique case ignores how societies in general are susceptible to irrational behavior in times of economic hardship. It's not enough to point out these trends without delving deeper into the causes. If we gloss over these important issues when pertaining to others, how can we ever be critical of ourselves when similar problems arise in our society?
And if Hungary ends up seceding from (or thrown out of) the union, it will be a precedence for the future of the European project and a possible precursor to its dissolution, which will most definitely impact the international economy.
First the crisis itself:
The ongoing controversy surrounds Prime Minister Viktor Orban and his center-right Fidesz Party, which won two-thirds majority in the 2010 elections and thereby gained the mandate to amend the constitution without consent from the opposition. Fidesz received this overwhelming popular mandate because it promised to fix the economy, blaming much of the economic woes on the previous government under the Hungarian Socialist Party (MSZP). But promises are always easier made than carried through.
Claiming to be paving the path for economic recovery, Viktor Orban asserted the need to increase government control over Hungary's fiscal and monetary policies. Despite the fact that maintaining an independent central bank was a rule established by the European Union to ensure macroeconomic stability, Viktor Orban amended the structure of the Hungarian Central Bank to accommodate an additional vice governor who would be directly appointed by the government (recommended by the PM to the president, but a Fidesz president will never challenge a Fidesz PMs' recommendations).
In addition to the central bank, Fidesz has used its position in the parliament to increase government control over other previously autonomous institutions such as the media and the judiciary. Deterioration of the checks and balances, be it economic, political or judicial, establishes the ground works for extreme abuses of power. This is particularly disturbing because the far-right wing party Jobbik is lurking in the shadows and I shudder to think what would happen if its members were ever to join the ruling government as part of a coalition.
As the legislation on the central bank was brought before the Fidesz-controlled parliament to be rubber-stamped, the European Union Commission fiercely criticized the legislation as irresponsible and contrary to Hungary's treaty commitments with the European Union. As a serious breach of trust, it became a real possibility that Hungary may be chucked out the union. Budapest remained obstinate... meanwhile, the concerned IMF pulled the plug on the preliminary negotiations for financial assistance and forced Prime Minister Orban's hand.
Hungary chose a bad time to revolt. Orban's Thatcher moment was not to be. The Economist observed on November 26, 2011 that
With its credit rating meandering in junk status, Hungary returned to the negotiating table where the IMF recommended not only reestablishing an independent central bank, but also repealing the draconian measure that forced judges into early retirement. The Hungarian side has agreed to reconsider the central bank issue, but rejected the suggestion of changing its judicial rules to satisfy the IMF and the European Union.
The political entity in power seems split on what it envisions for Hungary's future - a European Hungary or a sovereign nation that does not answer to an extra-national body.
So what is the cause of this crisis?
Only a lazy observer will trivialize the problem by merely citing attitude as the key problem.
And yet for our commentator, Alex Berezow, the heart of the problem is the Hungarian people themselves, their supposed unfriendliness and pervasive xenophobia. Berezow cites three personal examples to support this assertion - a girl's refusal to take a picture of him and his wife in front of the Hungarian parliament, a story he heard from an Irish woman about a Hungarian telling her wrong directions on purpose and a child singing what he thought to be an anti-American song. After providing these wildly random examples, he points to the rise of the ultra-nationalist party Jobbik with its racist policy proposals as a wider symptom of the same problem his fragile self experienced while visiting Budapest. He is apparently bent on trying to justify his experience in a wider context beyond a mere misunderstanding and a series of bad experiences.
He does bring attention to important issues such as the attack on the freedom of the press and abuses on the Hungarian Roma population. He even goes as far to note that the problems became more acute when Fidesz took power in 2010, but does not delve into the socio-economic conditions behind Viktor Orban's landslide victory. How did a party gain such an overwhelming level of support in a democratic society? Why was there a sudden show of support for Jobbik by a sizeable portion of the public? Have Magyars suddenly become less friendly since the 2006 elections?
Economic difficulties tend to produce mass social dissatisfaction - Note that support for the ultra-nationalist Jobbik party during the 2010 elections came largely from eastern Hungary, a historically poorer part of the country where the recent economic crises have impacted people the hardest. Hungary is not alone here, the worsening economic conditions have given ultra-nationalists throughout Europe an opportunity to promote themselves by blaming the country's problems on outsiders. "If only foreigners left, there would be more jobs and less crime..." it's a rhetoric heard often enough around the world.
We have seen the public turn towards radical choices throughout history - the most extreme example being the meteoric rise of the Nazis in Germany during the Great Depression. In fact, it is the experience of hyperinflation during the Weimar Republic (1918-1933) that has led the Federal Republic of Germany to be extremely cautious about letting other members of the European Union ride the dragon of inflationary policies because Berlin sees it as a precursor to populist demagoguery and fascism (This American Life had a really good podcast episode on the rise and fall of the Euro and the role Germany plays in the currency).
But the neo-fascists are not in power (yet) - in 2010, the Jobbik party did not manage to control a single constituency. It entered parliament for the first time based on Hungary's political system which allows proportional representation. And it's hard to imagine the people of Budapest turn to Jobbik for guidance on economic issues - but if the issue comes to asserting Hungary's political status, who knows where the votes will go.
For now, Viktor Orban's targets are internal as much as they are external - placing Fidesz loyalists or those with personal connections to the ruling party in key positions ensure long term influence in state policymaking, even if Orban leads the party to defeat in 2014.
It's too soon to really believe that Hungary has gone down the path of extremism and will be soon ruled by Jobbik. However, I forward the notion that as long as systemic economic problems plague the European Union (and therefore Hungary), Hungarians will be increasingly tempted by radical establishments. To assert that it's only Hungarians who needs to learn to "play nicely" ignores the inherent pressures facing Budapest - Europe, and in particular Germany, needs to appreciate the needs of smaller and weaker member states.
Berlin has forgotten that it was not hyperinflation that pushed people towards Nazism during the Weimar period, but rather it was the resulting economic instability and shame of defeat that made Hitler so attractive to the disgruntled and dissatisfied German public.
Yes, there is the flip side of the coin - Greeks appear unwilling to make real reforms, Italy is hopelessly in debt and Hungarians are blatantly disregarding its political obligations; however, if Europe cannot resolve these matters together without coercion and through multilateralism, then the grand vision of a united Europe was not to be.
Of course, I am not on the ground in Hungary and cannot comment with certainty on how the Hungarian people perceive themselves. So why did I write so much on this? Probably because it pissed me off that some dude got paid to run a shitty article where he complains about a bad travel experience and turns it into a wider political commentary. What a jerk.
I should have left Bugs Bunny to explain the interrelations between the member state of the European Union...
Never mind the fact that Europe as a whole has tilted increasingly right-wing since the financial crises, ignore the fact that Hungary's economic woes have been particularly hard on its people, forget historical lessons on how the public reacts to economic difficulties and place yourself in a vacuum - this is where Berezow begins his search for the origins of the Hungarian crisis.
Of course, I must admit that I have a soft spot for Hungary and its people - I visited the country as a child and went back to study abroad in Budapest and enjoyed my experiences there. I am certainly carrying a bias; however, Berezow's commentary blatantly ignores visible roots of the problem and dismisses the current conflict between Brussels and Budapest as a particularly Hungarian problem.
But why should people outside of Hungary and Europe care about this issue? For starters, it's an important case study of state driven economic nationalism that parallels increasing nationalist sentiments of the public - to categorize the current issue in Hungary as a unique case ignores how societies in general are susceptible to irrational behavior in times of economic hardship. It's not enough to point out these trends without delving deeper into the causes. If we gloss over these important issues when pertaining to others, how can we ever be critical of ourselves when similar problems arise in our society?
And if Hungary ends up seceding from (or thrown out of) the union, it will be a precedence for the future of the European project and a possible precursor to its dissolution, which will most definitely impact the international economy.
First the crisis itself:
The ongoing controversy surrounds Prime Minister Viktor Orban and his center-right Fidesz Party, which won two-thirds majority in the 2010 elections and thereby gained the mandate to amend the constitution without consent from the opposition. Fidesz received this overwhelming popular mandate because it promised to fix the economy, blaming much of the economic woes on the previous government under the Hungarian Socialist Party (MSZP). But promises are always easier made than carried through.
Claiming to be paving the path for economic recovery, Viktor Orban asserted the need to increase government control over Hungary's fiscal and monetary policies. Despite the fact that maintaining an independent central bank was a rule established by the European Union to ensure macroeconomic stability, Viktor Orban amended the structure of the Hungarian Central Bank to accommodate an additional vice governor who would be directly appointed by the government (recommended by the PM to the president, but a Fidesz president will never challenge a Fidesz PMs' recommendations).
In addition to the central bank, Fidesz has used its position in the parliament to increase government control over other previously autonomous institutions such as the media and the judiciary. Deterioration of the checks and balances, be it economic, political or judicial, establishes the ground works for extreme abuses of power. This is particularly disturbing because the far-right wing party Jobbik is lurking in the shadows and I shudder to think what would happen if its members were ever to join the ruling government as part of a coalition.
As the legislation on the central bank was brought before the Fidesz-controlled parliament to be rubber-stamped, the European Union Commission fiercely criticized the legislation as irresponsible and contrary to Hungary's treaty commitments with the European Union. As a serious breach of trust, it became a real possibility that Hungary may be chucked out the union. Budapest remained obstinate... meanwhile, the concerned IMF pulled the plug on the preliminary negotiations for financial assistance and forced Prime Minister Orban's hand.
Hungary chose a bad time to revolt. Orban's Thatcher moment was not to be. The Economist observed on November 26, 2011 that
When Hungary hit the rocks in 2008, the outside world was quick to help with a $20 billion package, fearing contagion to other wobbly ex-communist countries. Now the picture is different. With most ex-communist members of the European Union in better shape than old members in the south, the east European label is looking meaningless. Two of Hungary’s neighbours—Slovenia and Slovakia—are in the euro. Poland is the unquestioned diplomatic and economic heavyweight. Mr Orban looks like an oddball, and his country is now a lower priority, at a time when lenders have more urgent calls on their time and money.Without assistance from abroad, the Hungarian economy faces downfall - and the world will hold out on assistance until Budapest repeals its recent laws. The Hungarian leadership has finally come to grips with the consequences of joining the European community: in return for increased economic contact with the continent, its political and financial decisions will be subject to review and scrutiny by other members of the community.
With its credit rating meandering in junk status, Hungary returned to the negotiating table where the IMF recommended not only reestablishing an independent central bank, but also repealing the draconian measure that forced judges into early retirement. The Hungarian side has agreed to reconsider the central bank issue, but rejected the suggestion of changing its judicial rules to satisfy the IMF and the European Union.
The political entity in power seems split on what it envisions for Hungary's future - a European Hungary or a sovereign nation that does not answer to an extra-national body.
So what is the cause of this crisis?
Only a lazy observer will trivialize the problem by merely citing attitude as the key problem.
And yet for our commentator, Alex Berezow, the heart of the problem is the Hungarian people themselves, their supposed unfriendliness and pervasive xenophobia. Berezow cites three personal examples to support this assertion - a girl's refusal to take a picture of him and his wife in front of the Hungarian parliament, a story he heard from an Irish woman about a Hungarian telling her wrong directions on purpose and a child singing what he thought to be an anti-American song. After providing these wildly random examples, he points to the rise of the ultra-nationalist party Jobbik with its racist policy proposals as a wider symptom of the same problem his fragile self experienced while visiting Budapest. He is apparently bent on trying to justify his experience in a wider context beyond a mere misunderstanding and a series of bad experiences.
He does bring attention to important issues such as the attack on the freedom of the press and abuses on the Hungarian Roma population. He even goes as far to note that the problems became more acute when Fidesz took power in 2010, but does not delve into the socio-economic conditions behind Viktor Orban's landslide victory. How did a party gain such an overwhelming level of support in a democratic society? Why was there a sudden show of support for Jobbik by a sizeable portion of the public? Have Magyars suddenly become less friendly since the 2006 elections?
Economic difficulties tend to produce mass social dissatisfaction - Note that support for the ultra-nationalist Jobbik party during the 2010 elections came largely from eastern Hungary, a historically poorer part of the country where the recent economic crises have impacted people the hardest. Hungary is not alone here, the worsening economic conditions have given ultra-nationalists throughout Europe an opportunity to promote themselves by blaming the country's problems on outsiders. "If only foreigners left, there would be more jobs and less crime..." it's a rhetoric heard often enough around the world.
We have seen the public turn towards radical choices throughout history - the most extreme example being the meteoric rise of the Nazis in Germany during the Great Depression. In fact, it is the experience of hyperinflation during the Weimar Republic (1918-1933) that has led the Federal Republic of Germany to be extremely cautious about letting other members of the European Union ride the dragon of inflationary policies because Berlin sees it as a precursor to populist demagoguery and fascism (This American Life had a really good podcast episode on the rise and fall of the Euro and the role Germany plays in the currency).
But the neo-fascists are not in power (yet) - in 2010, the Jobbik party did not manage to control a single constituency. It entered parliament for the first time based on Hungary's political system which allows proportional representation. And it's hard to imagine the people of Budapest turn to Jobbik for guidance on economic issues - but if the issue comes to asserting Hungary's political status, who knows where the votes will go.
For now, Viktor Orban's targets are internal as much as they are external - placing Fidesz loyalists or those with personal connections to the ruling party in key positions ensure long term influence in state policymaking, even if Orban leads the party to defeat in 2014.
It's too soon to really believe that Hungary has gone down the path of extremism and will be soon ruled by Jobbik. However, I forward the notion that as long as systemic economic problems plague the European Union (and therefore Hungary), Hungarians will be increasingly tempted by radical establishments. To assert that it's only Hungarians who needs to learn to "play nicely" ignores the inherent pressures facing Budapest - Europe, and in particular Germany, needs to appreciate the needs of smaller and weaker member states.
Berlin has forgotten that it was not hyperinflation that pushed people towards Nazism during the Weimar period, but rather it was the resulting economic instability and shame of defeat that made Hitler so attractive to the disgruntled and dissatisfied German public.
Yes, there is the flip side of the coin - Greeks appear unwilling to make real reforms, Italy is hopelessly in debt and Hungarians are blatantly disregarding its political obligations; however, if Europe cannot resolve these matters together without coercion and through multilateralism, then the grand vision of a united Europe was not to be.
Of course, I am not on the ground in Hungary and cannot comment with certainty on how the Hungarian people perceive themselves. So why did I write so much on this? Probably because it pissed me off that some dude got paid to run a shitty article where he complains about a bad travel experience and turns it into a wider political commentary. What a jerk.
I should have left Bugs Bunny to explain the interrelations between the member state of the European Union...
Monday, January 23, 2012
The Intractable Issue of Energy
As South Korea and Japan haggle over the most appropriate method of castigating Tehran for its nuclear program while also ensuring continued supply of petroleum from Iran, I think it's useful to recollect the insights of the late Japanese economist Wakimura Yoshitaro (1900-96). A member of the leftist economic circle, the Ouchi group, Wakimura warned that the transport of Middle Eastern oil was a potential flashpoint for global conflict. Having lost faith in the West's ability to negotiate without coercing oil producing countries, members of the Ouchi group concluded that continued dependence on oil and Japan's alliance with the United States would invariably pull them into an unwanted conflict surrounding the black gold. Their solution was for Japan to go nuclear.
Today both Seoul and Tokyo are struggling to balance their economic needs and their political allegiance to the United States. I argued in my most recent article on Asia Times Online that Washington's aggressive policies in the Middle East threatens East Asia's economic security and thus damages America's ties with its allies in the region.
Middle Eastern oil is indispensable to the global economy, but in particular to countries that rely heavily on shipping and heavy industry. South Korea and Japan both fall into this category - even though Japan developed nuclear energy after the post-war reconstruction, there are certain sectors where petroleum is irreplaceable. Part of South Korea's remarkable economic growth was based on its development of petrochemical industries, obviously an enterprise where oil is a prerequisite. Mind you, both nations are practically island nations that depend heavily on shipping for import-export. Nuclear powered container ships are still in their experimental stage.
Therefore, Washington's request to significantly reduce or ban import of oil from Iran comes as a serious blow to both Seoul and Tokyo.
Some experts in Israel have waived off concerns over loss of industrial output by suggesting that South Korea simply increase imports from other Gulf emirates. Besides, they said, diffusing Iran will help the denuclearization process in North Korea.
What's absurd about all this is how little regard these "professionals" have for the intricacies of trade and commerce. Yes, some Gulf states that have historically been terrified of Iran have offered to increase exports to South Korea. But oil from Saudi Arabia does not magically appear in your local gas station the next day - this requires more ships, rerouting of ships and funds, negotiating new deals (nearly three quarters of South Korea's imports from Iran are negotiated on a long term basis and only a quarter is bought on spot price) and dozens of other infrastructural and financial consideration have to be made.
In addition, South Korea's fiscal regime keeps the Won from being overvalued - this safety mechanism, while keeping exports relatively affordable, raises the cost of imports. Escalation of tensions in the Straits of Hormuz and the expansion of sanctions against Iran will invariably affect the market. At the end of the day, South Korean industries will be still be heavily burdened even if they are supplied from different sources.
It's contemptuous to color this as a simple process, especially when one country is bending over backwards to satisfy another's irrational fears.
Furthermore, what happens in Iran will not affect North Korea. Commercial links between the two states have already ebbed long time ago due to increased policing and oversight by the international community. North Korean missiles are no longer entering Iran, but nuclear proliferation expert Joshua Pollack noted that technology transfers have continued unabated. And why point to North Korea? It's the single greatest example of how punitive sanctions don't always work.
Meanwhile, Washington has long recognized its diminishing power in the Asia-Pacific. Obama's "pivot" seeks to reassert the importance of the United States in the region - And let's be fair, no one has forgotten about the US. After all, US security guarantees to South Korea and the Seventh Fleet stationed in Japan are considered essential facets of the two countries' defenses. At the same time, US cannot revert the confluence of time. China's industrial prowess is going to inevitably make it economically influential in the region.
The Free Trade Agreement with South Korea and the Trans Pacific Partnership with Japan are two great ways for the United States to build on existing (and still massive) trade links with its allies in East Asia. Indeed, nothing solidifies a relationship between two countries more than the transfer of goods and peoples. Add ideals and sense of familiarity - the United States is still indispensable in every way imaginable.
How do you mess this up? Force your allies to swallow bitter medicine for a sickness they don't have.
Chinese premier Wen Jiaobao stepped in with good timing and suggested taking the Iranian issue to the UN. He opposed Iran's nuclear program, but he also noted the incredible hardship that will be wrought on the world if the sanctions expanded. It's a bad day when Beijing appears like the more rational actor. Make no mistake, Seoul and Tokyo are in part holding out for China to forestall the current crisis.
If the United States truly feels as though there is a need for a strategic refocusing in the Asia-Pacific, then Washington must take into greater consideration the interests and concerns of South Korea and Japan.
In fact, an American president must learn to better empathize with countries around the world in general. Wakimura Yoshitaro believed that powerful Western nations will never negotiate with, but merely dictate to Middle Eastern countries, creating conditions for simmering anger to one day boil over and scald the rest of the world. Time for the United States to step up and prove itself to be a better country than those from another era.
Read my less rambunctious article here
Today both Seoul and Tokyo are struggling to balance their economic needs and their political allegiance to the United States. I argued in my most recent article on Asia Times Online that Washington's aggressive policies in the Middle East threatens East Asia's economic security and thus damages America's ties with its allies in the region.
Middle Eastern oil is indispensable to the global economy, but in particular to countries that rely heavily on shipping and heavy industry. South Korea and Japan both fall into this category - even though Japan developed nuclear energy after the post-war reconstruction, there are certain sectors where petroleum is irreplaceable. Part of South Korea's remarkable economic growth was based on its development of petrochemical industries, obviously an enterprise where oil is a prerequisite. Mind you, both nations are practically island nations that depend heavily on shipping for import-export. Nuclear powered container ships are still in their experimental stage.
Therefore, Washington's request to significantly reduce or ban import of oil from Iran comes as a serious blow to both Seoul and Tokyo.
Some experts in Israel have waived off concerns over loss of industrial output by suggesting that South Korea simply increase imports from other Gulf emirates. Besides, they said, diffusing Iran will help the denuclearization process in North Korea.
What's absurd about all this is how little regard these "professionals" have for the intricacies of trade and commerce. Yes, some Gulf states that have historically been terrified of Iran have offered to increase exports to South Korea. But oil from Saudi Arabia does not magically appear in your local gas station the next day - this requires more ships, rerouting of ships and funds, negotiating new deals (nearly three quarters of South Korea's imports from Iran are negotiated on a long term basis and only a quarter is bought on spot price) and dozens of other infrastructural and financial consideration have to be made.
In addition, South Korea's fiscal regime keeps the Won from being overvalued - this safety mechanism, while keeping exports relatively affordable, raises the cost of imports. Escalation of tensions in the Straits of Hormuz and the expansion of sanctions against Iran will invariably affect the market. At the end of the day, South Korean industries will be still be heavily burdened even if they are supplied from different sources.
It's contemptuous to color this as a simple process, especially when one country is bending over backwards to satisfy another's irrational fears.
Furthermore, what happens in Iran will not affect North Korea. Commercial links between the two states have already ebbed long time ago due to increased policing and oversight by the international community. North Korean missiles are no longer entering Iran, but nuclear proliferation expert Joshua Pollack noted that technology transfers have continued unabated. And why point to North Korea? It's the single greatest example of how punitive sanctions don't always work.
Meanwhile, Washington has long recognized its diminishing power in the Asia-Pacific. Obama's "pivot" seeks to reassert the importance of the United States in the region - And let's be fair, no one has forgotten about the US. After all, US security guarantees to South Korea and the Seventh Fleet stationed in Japan are considered essential facets of the two countries' defenses. At the same time, US cannot revert the confluence of time. China's industrial prowess is going to inevitably make it economically influential in the region.
The Free Trade Agreement with South Korea and the Trans Pacific Partnership with Japan are two great ways for the United States to build on existing (and still massive) trade links with its allies in East Asia. Indeed, nothing solidifies a relationship between two countries more than the transfer of goods and peoples. Add ideals and sense of familiarity - the United States is still indispensable in every way imaginable.
How do you mess this up? Force your allies to swallow bitter medicine for a sickness they don't have.
Chinese premier Wen Jiaobao stepped in with good timing and suggested taking the Iranian issue to the UN. He opposed Iran's nuclear program, but he also noted the incredible hardship that will be wrought on the world if the sanctions expanded. It's a bad day when Beijing appears like the more rational actor. Make no mistake, Seoul and Tokyo are in part holding out for China to forestall the current crisis.
If the United States truly feels as though there is a need for a strategic refocusing in the Asia-Pacific, then Washington must take into greater consideration the interests and concerns of South Korea and Japan.
In fact, an American president must learn to better empathize with countries around the world in general. Wakimura Yoshitaro believed that powerful Western nations will never negotiate with, but merely dictate to Middle Eastern countries, creating conditions for simmering anger to one day boil over and scald the rest of the world. Time for the United States to step up and prove itself to be a better country than those from another era.
Read my less rambunctious article here
Monday, January 16, 2012
Is the US being played?
Assessing US foreign policy in the past year, I cannot help but get the sense that the Obama administration is too easily swayed by external and internal forces.
Two situations lead me to this position.
First, in the decision to attack Libya last year, the US appears to be forced into its final position by its European allies. Forget the "leading from behind" rhetoric that followed the initiation of the massive air strike campaign, both diplomatically and militarily, Washington routinely fell in line with the decisions made in London and Paris.
In particular, while Sarkozy and Cameron pushed regime change (via bang bang) from the very beginning, Obama only came around to really asserting this objective later. The initial US position was far more cautious and seemed incongruent with the European approach, but then President Obama continuously adopted the European approach and decided to do best under new conditions until Sarkozy + Cameron issued an even stronger position. Every step of the way, the US only committed its support after UK or France posited a resolution. Even the military action was inaugurated by the French.
It is very likely that the White House had no intentions of being involved in another military conflict, but saw the unity of the "West" and the appearance of American leadership as higher priorities (For all those still trusting in Obama's human rights oriented doctrine, turn your attention to all the humanitarian crises that have quietly slipped to the back burner). Once these central objectives were established, the whole approach to Libya was open to a hijacking by Sarkozy and Cameron.
Washington is under pressure to reassert its leadership over its traditional sphere of influence which is slipping from its fingers (Thanks Bush II!). To appear uninvolved in such a major undertaking would symbolize loss of control/to prevent Europe from intervening would invite a firestorm of criticism over not preventing a grievous human rights violation. So maybe "easily swayed" is not the right word - but my point is that there are diplomatic means to control European prima donnas from going rogue. Key word here is diplomacy.
Alternatively, one can offer the explanation that the sensitivities surrounding the US spearheading another military operation in the Middle East lead to Washington's haphazard approach to the intervention. Indeed, the US was very insistent on involving the Arab countries in the process as much as possible.
Nonetheless, if the case of Libya was unclear or appears to be in the outfield of Obama administration's foreign policy behavior, then consider the current diplomatic actions against Iran.
The imposition of increased sanctions against Iran appears politically motivated and counter intuitive to Obama's stated policy aims for the United States. I am willing to hypothesize that the motivating factors are the rhetoric emanating from the Republican primaries and Israel's increasingly aggressive moves on Iran.
Democratic presidents have always been afflicted with the "weak on dealing with foreign countries" label by the Republicans. Invariably, throughout the Cold War, Democratic administrations preemptively acted more aggressively than they wanted to undercut such accusations from detractors and presidential hopefuls (the most egregious use of this being the infamous 1964 LBJ campaign ad where he turned the table on Goldwater and insinuated that the US will be nuked if the election did not go his way).
Likewise, in the current Republican primaries, the GOP presidential candidates have been increasingly pointing to Iran as Obama's weak spot. It will invariably rise as a key issue in the final rounds of the presidential debate (unless Ron Paul stands against the incumbent president). Therefore, the administration's drive to widen the sanctions and bring East Asia into the anti-Tehran coalition could very well be political. It's not unheard of.
In addition, the US has the added trouble of keeping enough pressure on Iran to ensure that Israel does not repeat its air strikes on Iraq in 1981 and on Syria in 2007 - the potential consequences of an Israeli strike on Iran are difficult to assess, but Washington will have a hard time keeping Iran from responding in one way or another. Obama may very well be doing damage control to convince Israel that the US will resolve the matter without needing to resort to direct Israeli intervention. Last time the US refused to undertake military action against a nuclear facility on behalf of Israel, Israel did the deed themselves (Syria, 2007). The White House probably feels pressured, especially now that Israel is clearly increasing operations in Iran.
This is a complete misallocation of US power and inconsistent with stated policy aims. In outlining the "Pivot," Obama clearly saw the need to bolster its alliance with the Asia-Pacific, but by pressuring Tokyo and Seoul to fall in line with the new sanctions regime, reminded the two allies why wholehearted alignment with US foreign policy sometimes has negative consequences. Japan buys 17% and South Korea 9% of the crude oil exported from Iran - asking these highly industrialized countries to reduce its reliance on Iranian supply by any margin is expending a lot of political capital.
This is why even politicians like Japanese diet member Taro Kono (Liberal Democratic Party), who is undoubtedly keen on maintaining close ties with the US, suggests that Tokyo should have a separate foreign policy from Washington in regards to Iran. South Korea which is even less reliant on Iranian oil than Japan has not even responded to the US on its decision yet (and Seoul will not respond until it is sure South Korea has an alternative channel).
It's important to recognize that this is more than mere deficit of political courage - the 8 years of the Bush administration have done a lot to reduce US influence abroad and the range of options have narrowed ever since. Nonetheless, the Obama administration has been incredibly obtuse in building the right ties to prevent the escalation of predictable problems around the world. This has made the besieged president even more vulnerable to forces that inevitably influence the making of decisions that are often contrary to state interests.
How about them changes now, Mr. Obama?
Two situations lead me to this position.
First, in the decision to attack Libya last year, the US appears to be forced into its final position by its European allies. Forget the "leading from behind" rhetoric that followed the initiation of the massive air strike campaign, both diplomatically and militarily, Washington routinely fell in line with the decisions made in London and Paris.
In particular, while Sarkozy and Cameron pushed regime change (via bang bang) from the very beginning, Obama only came around to really asserting this objective later. The initial US position was far more cautious and seemed incongruent with the European approach, but then President Obama continuously adopted the European approach and decided to do best under new conditions until Sarkozy + Cameron issued an even stronger position. Every step of the way, the US only committed its support after UK or France posited a resolution. Even the military action was inaugurated by the French.
It is very likely that the White House had no intentions of being involved in another military conflict, but saw the unity of the "West" and the appearance of American leadership as higher priorities (For all those still trusting in Obama's human rights oriented doctrine, turn your attention to all the humanitarian crises that have quietly slipped to the back burner). Once these central objectives were established, the whole approach to Libya was open to a hijacking by Sarkozy and Cameron.
Washington is under pressure to reassert its leadership over its traditional sphere of influence which is slipping from its fingers (Thanks Bush II!). To appear uninvolved in such a major undertaking would symbolize loss of control/to prevent Europe from intervening would invite a firestorm of criticism over not preventing a grievous human rights violation. So maybe "easily swayed" is not the right word - but my point is that there are diplomatic means to control European prima donnas from going rogue. Key word here is diplomacy.
Alternatively, one can offer the explanation that the sensitivities surrounding the US spearheading another military operation in the Middle East lead to Washington's haphazard approach to the intervention. Indeed, the US was very insistent on involving the Arab countries in the process as much as possible.
Nonetheless, if the case of Libya was unclear or appears to be in the outfield of Obama administration's foreign policy behavior, then consider the current diplomatic actions against Iran.
The imposition of increased sanctions against Iran appears politically motivated and counter intuitive to Obama's stated policy aims for the United States. I am willing to hypothesize that the motivating factors are the rhetoric emanating from the Republican primaries and Israel's increasingly aggressive moves on Iran.
Democratic presidents have always been afflicted with the "weak on dealing with foreign countries" label by the Republicans. Invariably, throughout the Cold War, Democratic administrations preemptively acted more aggressively than they wanted to undercut such accusations from detractors and presidential hopefuls (the most egregious use of this being the infamous 1964 LBJ campaign ad where he turned the table on Goldwater and insinuated that the US will be nuked if the election did not go his way).
Likewise, in the current Republican primaries, the GOP presidential candidates have been increasingly pointing to Iran as Obama's weak spot. It will invariably rise as a key issue in the final rounds of the presidential debate (unless Ron Paul stands against the incumbent president). Therefore, the administration's drive to widen the sanctions and bring East Asia into the anti-Tehran coalition could very well be political. It's not unheard of.
In addition, the US has the added trouble of keeping enough pressure on Iran to ensure that Israel does not repeat its air strikes on Iraq in 1981 and on Syria in 2007 - the potential consequences of an Israeli strike on Iran are difficult to assess, but Washington will have a hard time keeping Iran from responding in one way or another. Obama may very well be doing damage control to convince Israel that the US will resolve the matter without needing to resort to direct Israeli intervention. Last time the US refused to undertake military action against a nuclear facility on behalf of Israel, Israel did the deed themselves (Syria, 2007). The White House probably feels pressured, especially now that Israel is clearly increasing operations in Iran.
This is a complete misallocation of US power and inconsistent with stated policy aims. In outlining the "Pivot," Obama clearly saw the need to bolster its alliance with the Asia-Pacific, but by pressuring Tokyo and Seoul to fall in line with the new sanctions regime, reminded the two allies why wholehearted alignment with US foreign policy sometimes has negative consequences. Japan buys 17% and South Korea 9% of the crude oil exported from Iran - asking these highly industrialized countries to reduce its reliance on Iranian supply by any margin is expending a lot of political capital.
This is why even politicians like Japanese diet member Taro Kono (Liberal Democratic Party), who is undoubtedly keen on maintaining close ties with the US, suggests that Tokyo should have a separate foreign policy from Washington in regards to Iran. South Korea which is even less reliant on Iranian oil than Japan has not even responded to the US on its decision yet (and Seoul will not respond until it is sure South Korea has an alternative channel).
It's important to recognize that this is more than mere deficit of political courage - the 8 years of the Bush administration have done a lot to reduce US influence abroad and the range of options have narrowed ever since. Nonetheless, the Obama administration has been incredibly obtuse in building the right ties to prevent the escalation of predictable problems around the world. This has made the besieged president even more vulnerable to forces that inevitably influence the making of decisions that are often contrary to state interests.
How about them changes now, Mr. Obama?
Friday, January 13, 2012
Why not rice?
With the food-for-nukes talks underway between the North Koreans and the US, the negotiations appear to be bogged down on the details of the food aid package. The North Korean delegation has agreed to discuss ending the uranium enrichment program if the US shows "willingness to establish confidence."
So far, Washington remains quite unwilling to build the kind of "confidence" the North Koreans are talking about - mainly providing the remaining 300,000 tons of food aid that was promised to Pyongyang in 2008. The US is offering nutritional assistance (specifically protein-high supplements targeting younger children suffering malnutrition) instead because it fears that a substantial food aid package will be diverted to the military instead of going to the people in need.
This is a reasonable concern to have considering the number of times that Pyongyang had retracted its promises to Washington and the international community. However, if the US is willing to go as far as provide nutritional assistance, then it should consider and study the effects of providing North Korea with actual food aid, including rice and other grains.
Injecting the food deficient market with valuable rice could potentially play a crucial role in redistributing the food stuffs in the country. If the food aid actually reaches those in need, then the people can either consume it or sell the valuable grains for more quantities of less valuable grains, increasing their food reserve. And so far, based on reports from South Korean, US and UN aid groups, the North Korean government has shown capable of honestly distributing food aid to its people in the past year.
However, even if the grains are siphoned off by the party and military elites, the decrease in the demand for grains by the elites may help control the food prices that are growing out of control. Specifically, the sudden availability of rice will decrease the demand and price of cheaper grains such as corn and increase their accessibility to more impoverished North Koreans who have long relied on cheaper non-rice alternatives in times of hardship. Therefore, providing real food aid should be seriously considered as a means of significantly influencing the DPRK domestic food market.
All of this is purely guesswork and could very well make no sense whatsoever in the trained eyes of an economist or those with more up-to-date information about the economic conditions in North Korea. But I hope someone somewhere in the state department (or the White House) went through at least brain storming this before quietly excluding it from US foreign policy.
There are obvious political consideration involved, but again, the cost of a broken society will only be a future burden for the international community when North Korea finally collapses (whenever that may be...)
So far, Washington remains quite unwilling to build the kind of "confidence" the North Koreans are talking about - mainly providing the remaining 300,000 tons of food aid that was promised to Pyongyang in 2008. The US is offering nutritional assistance (specifically protein-high supplements targeting younger children suffering malnutrition) instead because it fears that a substantial food aid package will be diverted to the military instead of going to the people in need.
This is a reasonable concern to have considering the number of times that Pyongyang had retracted its promises to Washington and the international community. However, if the US is willing to go as far as provide nutritional assistance, then it should consider and study the effects of providing North Korea with actual food aid, including rice and other grains.
Injecting the food deficient market with valuable rice could potentially play a crucial role in redistributing the food stuffs in the country. If the food aid actually reaches those in need, then the people can either consume it or sell the valuable grains for more quantities of less valuable grains, increasing their food reserve. And so far, based on reports from South Korean, US and UN aid groups, the North Korean government has shown capable of honestly distributing food aid to its people in the past year.
However, even if the grains are siphoned off by the party and military elites, the decrease in the demand for grains by the elites may help control the food prices that are growing out of control. Specifically, the sudden availability of rice will decrease the demand and price of cheaper grains such as corn and increase their accessibility to more impoverished North Koreans who have long relied on cheaper non-rice alternatives in times of hardship. Therefore, providing real food aid should be seriously considered as a means of significantly influencing the DPRK domestic food market.
All of this is purely guesswork and could very well make no sense whatsoever in the trained eyes of an economist or those with more up-to-date information about the economic conditions in North Korea. But I hope someone somewhere in the state department (or the White House) went through at least brain storming this before quietly excluding it from US foreign policy.
There are obvious political consideration involved, but again, the cost of a broken society will only be a future burden for the international community when North Korea finally collapses (whenever that may be...)
Sunday, January 8, 2012
More dangerous than drugs
According to sources from within the DPRK, Pyongyang has issued an order to block the use of foreign currencies and to severely punish violators. This order specifically targets the demands for US dollar and Chinese renminbi, two most popular foreign currencies used for purchases in North Korea. Sure to be catastrophic and impossible to fully implement, the government rationale has been that it was the will of its late leader Kim Jong-il.
I noted in my last article that Pyongyang's primary objective for its year of "power and prosperity" will be geared towards curbing rampant food prices and bringing inflation under control. The most recent measure to insulate the nascent domestic consumer market from foreign currencies appears consistent with the desire to fulfill the above mentioned goals.
Pyongyang is still reeling from the devastating currency reform in 2009 which nearly wiped out the savings of everyday North Koreans. In order to revitalize the people's trust in the central bank, interest rates were raised and access to savings was eased. However, the sudden influx of cash into the capital-starved system seems to have led to inflation and people are once again abandoning the North Korean won for more reliable currencies such as the USD or RMB. At the rate that the North Korean won is devaluing, the most reasonable thing an individual can do is to convert cash holdings to stable foreign currencies.
The state is clearly worried about its increasing inability to manage the domestic market. After all, the issuing of money constitutes an enormously powerful mechanism of control. Accordingly, the recent order apparently noted that the punishment for illegal use of foreign currency should be more severe than the repercussions for drug smuggling.
More importantly, how the government resolves this crisis will dictate whether North Koreans will have something on the dinner table tomorrow. The price of rice and corn has increased dramatically in the last few months and many North Koreans are unable to afford their already meager meals. Stopping the use of foreign currencies may be intended to increase the value of the North Korean won and make goods more affordable - it could also turn out to be another major blow to consumers and merchants alike.
More on this to come...
I noted in my last article that Pyongyang's primary objective for its year of "power and prosperity" will be geared towards curbing rampant food prices and bringing inflation under control. The most recent measure to insulate the nascent domestic consumer market from foreign currencies appears consistent with the desire to fulfill the above mentioned goals.
Pyongyang is still reeling from the devastating currency reform in 2009 which nearly wiped out the savings of everyday North Koreans. In order to revitalize the people's trust in the central bank, interest rates were raised and access to savings was eased. However, the sudden influx of cash into the capital-starved system seems to have led to inflation and people are once again abandoning the North Korean won for more reliable currencies such as the USD or RMB. At the rate that the North Korean won is devaluing, the most reasonable thing an individual can do is to convert cash holdings to stable foreign currencies.
The state is clearly worried about its increasing inability to manage the domestic market. After all, the issuing of money constitutes an enormously powerful mechanism of control. Accordingly, the recent order apparently noted that the punishment for illegal use of foreign currency should be more severe than the repercussions for drug smuggling.
More importantly, how the government resolves this crisis will dictate whether North Koreans will have something on the dinner table tomorrow. The price of rice and corn has increased dramatically in the last few months and many North Koreans are unable to afford their already meager meals. Stopping the use of foreign currencies may be intended to increase the value of the North Korean won and make goods more affordable - it could also turn out to be another major blow to consumers and merchants alike.
More on this to come...
Wednesday, January 4, 2012
A legacy of death and inflation
Rather than the prosperous state Pyongyang promised for Kim Il-sung's centennial celebrations in 2012, Kim Jong-il's shortsighted economic policies leave his son in a position in which Jong-il found himself in 1994 - inheriting a nation facing famine. The capital's relative luxury has indirectly caused soaring food prices and the young Kim Jung-eun is faced with the insurmountable challenge of controlling inflation.
In addition, with winter setting in, North Koreans may also have to make the difficult choice between fuel and food. If the inflationary pressures remain, vast portions of the population will starve or freeze to death by the end of the winter.
The danger lurking around the corner is the possibility of North Korea falling back on anti-Americanism to channel the public's distress away from the falling living standards. It will not be a particularly difficult task as the state propaganda apparatus has already pointed to US-led sanctions as the key source of the country's hardships.
According to some sources, Kim Il-sung engaged in provocative actions in 1968 precisely because of this: to convince the people that sacrifice was necessary for national security.
You can read my full article here
In addition, with winter setting in, North Koreans may also have to make the difficult choice between fuel and food. If the inflationary pressures remain, vast portions of the population will starve or freeze to death by the end of the winter.
The danger lurking around the corner is the possibility of North Korea falling back on anti-Americanism to channel the public's distress away from the falling living standards. It will not be a particularly difficult task as the state propaganda apparatus has already pointed to US-led sanctions as the key source of the country's hardships.
According to some sources, Kim Il-sung engaged in provocative actions in 1968 precisely because of this: to convince the people that sacrifice was necessary for national security.
You can read my full article here
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