What is Propping up the North Korean Regime?

What to do about North Korea? This long blog entry is a summary of a much longer, detailed analysis of what hasn't worked so far - and why.

Given years of starvation, the brutal if canny dictatorship of Kim Il Jung and the occasional exploding train, why hasn't the North Korean state collapsed?

Nicholas Eberstadt predicted they would, several years ago. Today, however, North Koreans are no longer starving and they pose a serious threat to international stability. Eberstadt has a thought-provoking article out in Policy Review that examines The Persistance of North Korea. And his conclusions are strongly stated: US aid begun in 1998 not only allowed the NORK regime to survive, it also directly enabled them to proliferate deadly missiles and WMD technologies on the black market. North Korea, he argues, is following a deliberate policy of living off of foreign aid, while bulding a self-sustaining economy based on creating demand for its arms and WMD products by fostering instability around the world.

Before getting into the details (statistics, policy statements), Eberstadt looks for a parallel situation in history to North Korea's persistance and finds one from a century ago. In what is certainly going to be viewed by some as a provocative charge, he compares the situation with North Korea a few years ago to the Franco-British campaign at Gallipoli in WWI, in which 100,000 lives were lost in a futile attempt to bring down the tottering Ottoman empire -- and finds disturbing parallels.

The Gallipoli campaign of 1915-16 is remembered as a military debacle for the forces of France and, more particularly, the British Empire. In a bold and risky bid to capture Constantinople by naval attack and amphibious invasion, the allied troops were instead trapped on their own beachheads on the Gallipoli peninsula, unable to displace the Ottoman forces from their fortified positions on the high grounds above. For months the soldiers of the British Commonwealth — quite a few of them Australian and New Zealand regulars — were slaughtered in futile attempts to break the Ottoman line...

At the end of 1915, with more than 100,000 Commonwealth casualties having been sustained in the campaign, the British began a total evacuation of the survivors. In the course of the Gallipoli campaign, Ottoman General Mustapha Kemal secured his reputation as a brilliant and heroic military leader, while Winston Churchill, the then-young Lord Admiral of the British Navy, was obliged to resign his post in humiliation.

Gallipoli is considered a classic military blunder today — literally a textbook case. For decades the campaign has been studied in military academies around the world. What is not commonly appreciated, however, is that the Franco-British naval assault that was to become Gallipoli very nearly did succeed — and indeed came within an ace of toppling the Ottoman Empire.

What happened to allow the Ottomans to totter for almost a decade longer?

In early March 1915, a Franco-British flotilla that included 16 capital ships (battleships, cruisers and destroyers) commenced Churchill’s plan to “force” the Dardanelles Strait. Artillery fire from the Turkish gun emplacements proved ineffectual against these mighty warships. On March 18, 1915, the flotilla prepared to advance through the Dardanelles Strait and into the Sea of Marmora — from whence they would steam on to Constantinople. Over the course of a day-long battle between big guns, the allied fleet slowly moved forward against the Ottoman emplacements. Then, in the late afternoon, three British ships — one of them a battleship — unexpectedly struck mines and suddenly sank. The British commander of the operation, Rear Admiral John de Roebeck, was severely shaken by this setback (apparently he felt certain he would be sacked for the loss of those ships). At the end of the day, the allied fleet regrouped — but did not pursue its assault the next day, or indeed in the weeks that immediately followed. ... only a few hundred casualties had been suffered, but the Admiralty’s Dardanelles campaign was over.

De Roebeck could not have known at the time about the circumstances on the other side of the barricades. With the benefit of Ottoman and German records and memoirs, however, historians have described these for us now: The Ottoman administration and its German military advisers were grimly convinced the allied assault would spell doom for Constantinople — for they had no hope of putting up a successful resistance.

In the days before the attempt to “force” the Dardanelles, indeed, Constantinople had begun to take on the smell of a defeated capital ... Among the disadvantages weighing on the beleaguered Turks was the fact — unappreciated by de Roebeck — that the defenders were virtually out of artillery shells ...

The Ottoman government and its German advisers could not believe their good fortune when the allied naval assault inexplicably (from their perspective) halted. Looking back later, Enver is reported to have commented:

If the English had only had the courage to rush more ships through the Dardanelles, they could have got to Constantinople; but their delay enabled us thoroughly to fortify the Peninsula, and in six weeks’ time we had taken down there over 200 Austrian Skoda guns.

When the Allies went back to take Constantinople, they failed - after massive casualties among British, Australian and New Zealand troops. (France had bowed out at that point).

Like Constantinople and the Ottomans in 1915, by the end of the 1990s, the North Korean economy was also facing imminent collapse - and probably the collapse of the regime along with it. What does Eberstadt think propped it up? What recent decisions are the equivalent to de Roebeck's paralysis - paralysis that led directly to ability of the Germans to resupply the Ottomans and the resulting loss of over 100,000 Allied troops? Eberstadt conducts a detailed analysis:

North Korea in the mid- and late 1990s, I argued, was set on a trajectory for economic collapse — for its domestic economy was incapable of producing the requisite goods necessary for the maintenance of a division of labor, and the regime seemed utterly unable to finance their purchase from abroad. Although it was impossible to determine from outside the precise breaking point at which the division of labor would unravel, events were bringing the DPRK system progressively closer to that point.

The situation in 2004 looks somewhat different. The ordinary North Korean today, of course, does not exactly live in the lap of luxury. On the other hand, by most accounts, he no longer suffers from the desperate privation that characterized the mid-to-late 1990s. As best can be told, the North Korean famine — which almost certainly claimed hundreds of thousands of victims and may well have killed a million people between 1995 and 19984 — ceased raging about five years ago.

Officially, the North Korean leadership evinced a new confidence in the DPRK’s staying power back in September 1998 at the same Supreme People’s Assembly that formally elevated Kim Jong Il to “the highest position of state.” That convocation publicly declared “The Arduous March” of the previous several years over and announced that the DPRK was now on the road to becoming a “powerful and prosperous state” (Kangsong Taeguk).

Whether or not the North Korean economy has enjoyed actual growth since 1998 — a question that remains a matter of some contention — it is clear that the economic situation has in some meaningful sense stabilized and improved since the grim days of the “Arduous March.” But how was this accomplished? Mirror statistics provide some clues.

Mirror statistics are the statistics trading partners keep on their exchanges of goods, services and funds with other countries. If we can't see into the books of the NORK regime, we can gather useful data from its exchanges with other countries.

In 1990, the reported value of imports was nearly $3 billion (in current U.S. dollars). Eight years later, the reported level had dropped below $1.2 billion — a catastrophic fall of over 60 percent. After 1998, however, North Korea’s imports rebounded markedly. By 2001, the reported level exceeded $2 billion — and it appears to have risen through 2003. To go by these numbers, North Korea was obtaining just about twice as much in the way of goods from abroad in 2003 as in 1998. In the year 2003, in fact, the current dollar volume of North Korean merchandise imports was at the highest level registered since the collapse of the Soviet Union. And how did North Korea pay for this upsurge in imports? To judge by the mirror statistics, it did so not through any corresponding jump in reported export revenues ... In a purely arithmetic sense, North Korea succeeded in effecting a substantial increase in merchandise imports by managing to increase its reported balance of trade deficit appreciably

So how was this reported deficit actually sustained? Chinese aid helped, enhanced by a variety of illicit activities on the part of Pyongyang. But that doesn't account for all, or even the majority, of the effect.

Indeed, if we remove China from the picture, the line describing North Korea’s net imports of supplies from abroad rises steadily upward between 1997 and 2003. It is this graphic that captures the economic essence of North Korea's shift from its “Arduous March” period to its Kangsong Taeguk epoch.

And how was this jump in non-Chinese net imports financed? Unfortunately, we cannot be precise about this, since many of the sources of funds involve illicit transactions. North Korea’s international counterfeiting, drug trafficking, weapons, and weapon technology sales all figure here, although the sums raised from those activities are a matter of some dispute.

Nor do we yet know exactly how much of the South Korean taxpayers’ money was furtively channeled from Seoul to Pyongyang during this period. One set of prosecutorial investigations has convicted former President Kim Dae Jung’s national security adviser and several other aides of illegally transferring up to $500 million to Kim Jong Il’s “Bureau 39” (a unit of the ruling party specially charged with funding Kim’s royal court) on the eve of the historic June 2000 Pyongyang summit. The possibility of other unreported official Seoul-to-Pyongyang payoffs during the 1998-2003 period cannot be ruled out — nor, of course, can the potential volume of any such attendant funds be determined.

Eberstadt argues, however, that it was US policy in the late 1990s that played a decisive role in propping up the North Korean regime.

Broadly speaking, however, we can explain the timing and the magnitude of the 1998-2003 upswing in North Korea’s non-Chinese net imports by looking at policies that were embraced during those years by the United States and her Northeast Asian allies. The year 1998 heralded the inauguration of rok President Kim Dae Jung and the advent of South Korea’s “Sunshine Policy” for détente and reconciliation with the North. In 1999, the U.S. followed suit, unveiling the “Perry Process” (former U.S. Defense Secretary William J. Perry’s “grand bargain” approach to settling outstanding disputes with the DPRK). Japan and the eu both joined in the pursuit of “engagement” with North Korea during these years as well, although in differing degrees. In their strict performance specifications — their defining actions, as opposed to their official rationales or stated intentions — “Sunshine Policy” and “engagement policy” effectively meant organized activity by Western governments to mobilize transfers of public resources to the North Korean state.

How much was transferred?

If this formulation sounds provocative, reflection on the particulars of those multilateral polices — e.g., the Hyundai/rok National Tourism Office payments for vacations to Mt. Kumgang; the U.S. “inspection fee”6 of 500,000 tons of food aid granted in 1999 in exchange for permission to visit a suspect underground North Korean facility at Kumchang-ri; the continuing food and fertilizer shipment from Seoul and the occasional food transfers from Japan; the secret payment for the historic June 2000 Pyongyang summit between Kim Jong Il and Kim Dae Jung; and the new, albeit modest, flows of aid from eu countries in the wake of the flurry of diplomatic normalizations between Pyongyang and eu states in 2000-01 — will indicate it is also functionally accurate. Thus, it is perhaps not surprising that North Korea’s financial fortunes should have improved so markedly in 1998 and the years immediately following.

It may be perplexing and counterintuitive to see the United States — the DPRK’s longtime principal opponent and antagonist in the international arena — described as a major backer of the North Korean state. Yet this is now in fact the case. Figures compiled by Mark Manyin of the Congressional Research Service provide the details (see Table 1). In the 1996-2002 period, Washington awarded Pyongyang just over $1 billion in food aid, concessional fuel oil, and medical supplies.

By the second half of the 1990s, it may be noted, North Korea’s reliance on U.S. aid for financing its international purchases and supplies of goods was, in some quantifiable respect, more pronounced than for almost any other state for which Washington funded military, economic, and/or humanitarian assistance programs. This may be seen from Table 2, which compares the volume of American aid bestowed on various recipient governments with those countries’ own self-generated export revenues. Total American aid allocations to the key recipients Israel and Egypt for the five years 1996-2000, for example, amounted to 34 percent and 67 percent of those states’ respective export earnings for the year 2000. U.S. 1996-2000 assistance to North Korea, by contrast, actually exceeded the DPRK’s reported year 2000 commercial export revenues. Ironic though it may seem, by this metric, Washington’s foreign aid lifeline to the DPRK in recent years looks more significant than any Washington has arranged in recent years for allies or friends.

At the end of the day, we can never know what would have happened if the United States and her allies in Asia and Europe had refrained from underwriting the survival of the North Korean state in the late 1990s and the early years of the present decade. We do not know, furthermore, just how close North Korea came to the critical breaking point of an “economic collapse” during the “Arduous March” period between Kim Il Sung’s death and Kim Jong Il’s formal anointment. What we know — or think we know — is that the DPRK was failing economically in the mid-1990s. But in the late 1990s and early years of the current decade the prospect of “economic collapse” was diminished materially by an upsurge in provisions of goods from abroad — goods that were financed in considerable measure by new flows of Western foreign aid.

What thus seems beyond dispute is that the upsurge of Western aid for the DPRK under “Sunshine” and “engagement” policy played a role — possibly an instrumental role — in reducing the risk of economic collapse and increasing the odds of survival for the North Korean state.

Was this a good thing or a bad thing for the US and the world? Setting aside purely humanitarian concerns (and those were significant during the famine), was the net result of US aid helpful?

Those who find Barnett's Core/Gap analysis persuasive in its details (and by no means all analysts do) can point to the need for us to knit North Korea back into the society of nations. Eberstadt makes a strong case, however, that this is not in fact what happened as a result of the Perry Process at all -- and that the trajectory of events was not what Western countries hoped for, but the result of Pyongyang's intentional policy and long-standing ideology.

DPRK party lecture notes published in South Korea late in 2002 put the point more succinctly:

The capitalist’s ideological and cultural infiltration will never cease, and the struggle against it will continue, as long as the imperialists continue to exist in the world. . . .
The great leader, Kim Jong Il, pointed out the following: “Today, the imperialists and reactionaries are tenaciously scheming to blow the wind of bourgeois liberalism into us” . . . .
Under these circumstances, if we turn away from reality and we regard it as someone else’s problem, what will happen?
People will ideologically degenerate and weaken; cracks will develop in our socialist ideological position; and, in the end, our socialism will helplessly collapse. A case in point is the bitter lesson drawn from the miserable situations of the former Soviet Union and Eastern European countries.

“Economic exchange” with the “capitalist” world, in other words, is explicitly and officially regarded by Pyongyang as a process that unleashes powerful, unpredictable and subversive forces — forces that ultimately erode the authority of socialist states. Viewed from this perspective, North Korea’s trade performance vis-à-vis the advanced market economies though a record of failure — i.e., failure to integrate into the world economy — is at the same time a mark of success — i.e., effective containment of a potentially lethal security threat.

Moreover, it is worth recalling that the DPRK’s public misgivings about “ideological and cultural infiltration” are longstanding. Although Pyongyang’s pronouncements about “infiltration” have attracted some attention abroad since the downfall of Soviet bloc socialism, the slogan itself was not a response to that defining historical event. To the contrary, North Korean leadership had been highlighting the dangers of that tendency for at least a decade before the final collapse of the Soviet Union.

Nor does this "success" stand alone. It is, Eberstadt points out, tied strongly to a policy of military buildup -- and arms proliferation outside of normal official channels.

If staying out of the poisonous embrace of the world economy is viewed as an imperative for survival by DPRK leadership, a corollary question inevitably arises: how to generate sufficient international resources to forestall economic collapse? To date, Pyongyang’s answer has been: through nonmarket transactions. The DPRK has always pursued an “aid-seeking” international economic strategy — but in the post-Soviet bloc era, the particulars of that approach have perforce mutated. In the Kangsong Taeguk era, North Korea’s main tactics for generating international resources are viewed through the prism of the current state campaign for “Military-First Politics” (Songun Chongchi).

Like the concept of “ideological and cultural infiltration,” the theory of “Military-First Politics” has received a tremendous amount of air-time in the North Korean media over the past five years.

Today, the peoples’ struggle for their nations’ independent development and prosperity is waged in an environment different from that of the last century. . . .
In building a state in our era, it is essential to beef up the main force of the nation and fortify the revolutionary base, and, in this regard, it is most important to build up powerful military might. In today’s world, without powerful military might, no country can . . . achieve development and prosperity.

Today, by firmly adhering to the principle of putting prime effort into the defense industry and, based on this, by developing the overall economy ceaselessly, our party is brilliantly resolving the issue of consolidating the national strength of a powerful state.

And how exactly does military power conduce to prosperity? The answer was strongly hinted at in a statement the following month:
A country’s development and the placement of importance on the military are linked as one. . . .
Once we lay the foundations for a powerful self-sustaining national defense industry, we will be able to rejuvenate all economic fields, to include light industry and agriculture and enhance the quality of the people’s lives.

This is a fascinating and revealing formulation. In most of the world today, a country’s defense outlays are regarded as a weight that must be shouldered by the value-adding sectors of the national economy (hence the phrase “military burden”). North Korea’s leadership, however, evidently entertains the concept of a “self-sustaining” defense sector — implying that Pyongyang views its military activities as generating resources rather than absorbing them. In the enunciated view of Pyongyang’s leadership, the DPRK’s military sector is the key to financing the recovery of the national economy.

It does not require a great deal of imagination to spell out the operational details of this approach. While forswearing any appreciable export revenues from legitimate commerce with advanced market economies, North Korean policy today seems to be banking on the possibility of financing state survival by exporting strategic insecurity to the rest of the world

If Eberstadt's analysis is correct, what can we hope to achieve through negotiations - either multilateral, per the Bush administration, or the return to bilateral talks that Kerry wants?

Read the whole thing -- and then come back to Winds of Change to debate Eberstadt's claims and the implications for US and international policy.

UPDATE: A Monday follow-up post - North Korea: Making the Point