'Think Again' About U.S. Impact On N. Korean Economy

For years, U.S. policy toward North Korea has been going on the premise that economic sanctions could deter North Korea from developing nuclear weapons. Host Scott Simon talks with David Kang, professor of international relations and business at the University of Southern California, about the state of the North Korean economy.

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SCOTT SIMON, HOST:

For years now, U.S. policy toward North Korea has preceded on the premise that economic sanctions could deter North Korea from developing nuclear weapons. After all, North Korea is a poor country. It was hoped that sanctions would pressure the country's leadership toward change. We're joined now by David Kang. He is the professor of international relations and business at the University of Southern California and co-author of a new article called "North Korea: Think Again," which appears in Foreign Policy. Professor Kang, thanks for being with us.

DAVID KANG: My pleasure.

SIMON: You've got one of the sections in this article headed "North Korea is Poor Because Sanctions are Working." Is that true?

KANG: No, North Korea is poor because they cling to an outmoded economic model based on a centrally planned economic and self-imposed isolation from the rest of the world. And this economic model has failed and it's been basically failed for decades. And they haven't shown yet any appetite to engage in major economic reforms that would raise the standard of living.

SIMON: Wasn't there a time when the North Korean economy - it's been some time ago now - was considered to be doing pretty well?

KANG: Yeah. In 1945, when Kim Il Sung first took power in North Korea as a communist, for the first couple decades, the North Korean economy actually performed better than the South Korean economy. There was collectivized farms, there was centralized planning for factories, huge subsidies from China and Russia, or the Soviet Union. And so during the '50s and '60s, compared to South Korea, the North Korean economy was doing quite well. This led actually to, in part, a military coup in South Korea because the South Koreans were worried they were falling behind the North. By the '70s or so, the North Korean economy began to run into the inevitable limits of central planning, which is vast inefficiencies, bureaucracies, telling farmers at times to grow tobacco even as they were starving to death because they couldn't grow their own food. And the North, since the '70s or '80s, has been falling farther and farther behind.

SIMON: Do the Chinese keep them afloat?

KANG: Basically, China does keep them afloat. China provides the majority of North Korea's energy needs. China provides a lot of food assistance and other aid. And perhaps most importantly, what China does is it allows, turns a blind eye, to formal and illegal trade that goes on over the North Korea-China border.

SIMON: We've heard over the years that sanctions could apply pressure to the North Korean leadership because they are used to living high, at least by North Korean standards, and that sanctions could shut that down. Has that happened?

KANG: On the one hand it's worked and on the other hand it hasn't. North Korea's basically shut out of the international financial system, the banking system. So, when they want to go out around the world and buy illegal goods to make nuclear weapons or missiles, now North Korean diplomats or other, you know, business entrepreneurs are essentially reduced to carrying dollars in suitcases because they can't get into the banking system. So, on the one hand, the sanctions have made it much harder for North Korea to proliferate. On the other hand, in part because China doesn't actually enforce the sanctions, they haven't really affected the quality of life in North Korea. Many of the farmers or the people are poor. But I had a friend who was in Pyongyang last summer who reported he had saw Heineken beer and flat-screen TVs. And in fact noted that there's probably more late-model cars on the road today than there were 10 years ago.

SIMON: So, if the leadership can be indifferent to the sanctions 'cause it doesn't affect them much and it doesn't seem to instill a political opposition 'cause they can blame it on the West, what might have some effect of changing North Korea behavior and policy?

KANG: That's the big question, and if we knew it we would have solved the problem by now. I mean, one of the depressing things about studying North Korea for a while is you see the same issues coming up over and over again, right? Coercion doesn't seem to work. Nobody's willing to actually start a war. So, there's an upper limit to how much pressure we're willing to put on North Korea because the cost of a war would be horrific. At the same time, it doesn't appear that there's any appetite to try and draw North Korea out, and the North Koreans seem perfectly happy to play this game of chest thumping, finger pointing and name calling. And so we are literally have the same arguments that we had 10, 20 or 30 years ago about North Korea.

SIMON: Professor David Kang of the University of Southern California. Thanks so much for being with us.

KANG: My pleasure. Thank you.

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