Wednesday, January 4, 2012

Juche right when it suits....China rallies behind supreme leader....

Juche right when it suits....China rallies behind supreme leader....
By Martin Hutchinson

The death of Kim Jong-il, dictator of North Korea since 1994, has been met with near universal condemnation of both his human rights record and his approach to economics. Yet juche, the philosophy of self-reliance underpinning the North Korean economy since his father Kim Il-sung devised it, is far from dead.

Instead, as hapless populist leaders search in the current recession for alternatives to the apparently failed 1990s "Washington consensus" version of capitalism, they are in many cases turning to versions of juche, horrible as its record has been in North Korea. Maybe Kim Il-sung, like Karl Marx before him, is destined to inspire millions of deluded followers a generation or more after his death.

The North Korean philosophy of juche was first propounded by kim Il-sung in a December 28, 1955, speech "On eliminating Dogmatism and Formalism and establishing juche in ideological work". Kim urged party functionaries not to import ideas wholesale from the Soviet Union, but to establish North Korea as a revolutionary nation in its own right. The ideology was developed over the next decade, alongside the Kim family's extreme personality cult, receiving an impetus from the Sino-Soviet split of 1960, and was elaborated in an April 1965 speech, in which it was held to entail political independence, economic self-sustenance and self-reliance in defense. Kim Jong-il elaborated the ideology further in his 1982 "On the juche idea" and added an "army first" policy to it in 1996.

Juche has been held responsible for many of North Korea's follies, including its universally hostile and deceptive foreign policy and its wayward nuclear program, although many of the Kim regime's most unpleasant features are common to totalitarian states throughout history. However, the economic side of0 juche, the doctrine of extreme self-reliance, minimizing international trade, investment and contact at every level, is of most interest here.

Self-reliance showed its downside in North Korea in 1994-98, when the country's gross domestic product halved and its populace descended into famine. Its earlier record was better. As of 1968, 15 years after the end of the Korean War, North Korea was considerably richer than South Korea. This was only peripherally a result of juche; North Korea had inherited the bulk of the pre-war Japanese industrial plant (little of which had been destroyed by the 1950-53 war) and received considerable help including subsidized energy imports as a member of the Sino-Soviet bloc. After 1970, the subsidies declined and the Japanese equipment wore out, so North Korea entered a period of stagnation.

The great blow to the juche economy was the fall of the Soviet bloc and the exposure of North Korea to the full force of the international market. Whereas juche had worked reasonably well within a non-market-driven economic bloc containing a third of the world's population and much of its natural resources, as an eccentric ideology in a world of blistering free trade it proved a disaster. Since 2000, the North Korean economy has subsisted on handouts from its now much richer neighbor to the south and by blackmailing the West through its nuclear program.

There are thus lessons to be drawn from the last 50 years of North Korean economic history. First, any attempt to be self-reliant requires an economic entity that is large enough to produce most of the goods it needs, even inefficiently. North Korea on its own, without the Soviet bloc as friendly neighbors, manifestly fails on this criterion.

Second, and less obviously, juche works better in a world in which it is not particularly outlandish, in which free flow of goods and services is blocked by relatively high tariffs, and in which many other countries are practicing similar policies. In the 1950s and 1960s, Britain and much of Europe had exchange controls and high tariffs both internal and external, China was an inward-looking peasant economy and India and most of Latin America were practicing policies of crude import substitution that were to hobble their economies for decades thereafter.

The Soviet bloc, above all, devoted much of its output to weaponry and disabled the price mechanism through central planning. Only the United States practiced something close to free trade and unrestricted international investment, while Japan initially and the remainder of east Asia later built their economies on their export prowess to US and European markets, without any corresponding domestic opening.

In the 1990s, conversely, exchange controls were a thing of the past, as was the Soviet bloc. International trade was at record highs, and international investment was finally returning to its apogee of 1914. Even more disruptively, the advent of the Internet during the decade made international supply chains far easier to manage than they had ever been before, leading to a massive boom in emerging markets that is still with us.

In such a world, North Korean economic methods that had worked adequately in a more restricted world fell apart completely. Juche was much more outrageously sub-optimal in 1998 than it had been in 1968; thus the collapse of the North Korean economy in the middle 1990s.

Juche is thus a completely discredited economic ideology - except that today you can see elements of juche creeping into economic policy all over the world. Mercosur, the trade bloc including Brazil, Argentina, Uruguay, Paraguay and soon Venezuela, has just agreed to choose 100 imports on which it will impose 35% tariffs. Brazil itself has imposed a 30% tariff surcharge on imported automobiles. All five Mercosur leaders are leftists, elected in a reaction to the previous policies of economic liberalization; their natural instinct is to protect their economies from what they see as destructive global competition.

Then you have the "anti-dumping duties" imposed by the US on Chinese tires and the countervailing duties imposed by China on imports of US automobiles. In India, the impulse to free markets under Atal Bihari Vajpayee (1998-2004) is long gone; the present government has hurriedly reversed a decision to open Indian retailing a fraction further to foreign investment.

Then you have the European Union, not seen by most of its keenest supporters as a free trade zone - that's a myth cooked up for the gullible British - but as a closed system strong enough at last to repel the hated influence of the United States and Asia. The attempt to battle against market forces which correctly flag the Greek economy as hopelessly uncompetitive at current exchange rates is a classic of juche thinking.

So too is the German energy subsidy system, now copied by other EU countries, which allows multiple state-favored energy inputs at non-market prices, while a certification system is used to exclude Chinese wind-turbine manufacturers. Even in stock exchanges, now the leading edge of globalization, the Deutsche Boerse-NYSE deal is being stymied by regulatory opposition at the European end, while having been let through by the US authorities.

The current global flowering of juche is not surprising. In the Great Depression, not only did the United States raise its tariff barriers to inordinate levels by the Smoot Hawley absurdity, but even the normally free-trading Britain tried to produce a self-reliant imperial market through the Ottawa Agreement of 1932. The result of the latter was a nice rebound of the British economy in the 1930s, but the gradual collapse of British manufacturing in sector after sector when it was exposed to the full rigors of international competition after World War II.

It must not be forgotten that no Soviet era industrial behemoth fared so hopelessly in international competition as did the 1970s British Leyland. My father's long-standing ambition was to own a Jaguar; he achieved this ambition in 1973, poor man. British Leyland's torture of an innocent customer by its abysmal quality control of that era will not be soon forgiven!

Thus you should not imagine for a second that Kim Il-sung's juche ideology works in terms of providing long-term prosperity. Wherever it has been tried to any but the most minimal extent it has impoverished its people, as surely as it has in North Korea. In a world where the free market is working properly, like the global economy before 1914, or that of 1990-2008, only a lunatic would attempt it.

However, when the global economy suffers a prolonged setback, as in the 1930s or recently, a juche approach becomes increasingly attractive politically. What's more, if the rest of the world is itself indulging in anti-competitive activities, or blocking the free movement of goods and capital, juche becomes less sub-optimal and can even work partially, for a time. Only when the system liberalizes once more does the extent of its failure become apparent.

Maybe we will soon lift out of the current global economic problems, and the world's attempts to reproduce North Korean economic policies will be seen as a minor blip in a free market system. But there is an alternative possibility, in which the market-distorting policies themselves do enough economic damage that the global recession becomes indefinitely extended, and growth worldwide shudders to a halt or even reverses.

Indeed the globalization process, producing as it does a shift in wealth from the West to emerging markets, could in a prolonged recession provide the seeds of its own downfall. Japan, the United States and western Europe, countries that still collectively retain much of the world's economic clout but feel their economic welfare declining, could conceivably indulge in an orgy of juche-inspired policy self-destruction.

In that case Kim Il-sung, evil tyrant that he was, will have become the leading economic inspiration of the unhappy 21st
China rallies behind supreme leader....
By Yvonne Su

BEIJING - China was probably the country most prepared for the death of former North Korean supreme leader Kim Jong-il. In his last visit to China in May 2011, Kim reportedly briefed Chinese leaders about his succession arrangements and asked Beijing to continue giving its support to his successor - his third son Kim Jong-eun.

Sharing 1,416 kilometers of border with North Korea, China is naturally most concerned with stability in the Hermit Kingdom. If chaos erupts, China would bear the brunt of an influx of refugees. Washington's aggressive propaganda and deployments to implement its "return-to Asia" has also increased also Beijing's suspicions about a United States containment strategy, and China needs a stable "buffer zone" to counter US moves in Northeast Asia.

Hence, it is no surprise that Beijing will lend any support it can to the new Kim Jong-eun regime after the Dear Leader's death. This also explains why Beijing is so eager to mediate between South Korea, the US and Japan in the hope of resuming the six-party talks on Pyongyang's nuclear weapons.

Exactly 24 hours after Pyongyang officially announced the death of Kim Jong-il, on December 17, Chinese President Hu Jintao together with his heir-apparent, Xi Jinping, paid a visit to the North Korean embassy in Beijing to offer their condolences. This was an unusual high-profile move in diplomatic protocol.

When North Korea officially announced that Kim Jong-eun had been virtually endorsed as its new supreme leader, China immediately extended an invitation for him to visit Beijing when "it is convenient", according to Chinese Foreign Ministry spokesman Liu Weimin.

Late last week, South Korea media reported that the Chinese Communist Party (CCP) would send a high-level delegation, headed by Wang Jairui, director of its Central International Department, to visit Pyongyang in late January. Wang may meet Kim Jong-eun and officially invite him to visit China - an important gesture to show Beijing's support.

"The conventional wisdom is that China only cares about one thing when it comes to North Korea - stability," John Delury, a researcher on China and the two Koreas at Seoul's Yonsei University, said in an interview with Asia Times Online.

On December 31, 2011, shortly after Kim Jong-eun assumed the position of supreme commander of the Korean People's Army, Hu immediately sent his congratulations to the 28-year-old leader. Editorials in state-run Chinese newspapers, meanwhile, have stressed the need for a stable leadership transition, with the Global Times saying China should be "a powerful and secure backer of a smooth transition of power".

Beijing, while sending supportive and friendly messages to Pyongyang, has also been urging South Korea, Japan and the US not to promote regime change in Pyongyang. Within a week of Kim Jong-il's death, China was busy holding meetings with senior Japanese and South Korean government officials.

"Beijing has passed messages urging Washington not to support any Arab Spring-like protests to pursue regime change in North Korea, while also discouraged South Korea from taking advantage of Kim Jong-il's death to pursue one-sided unification," said a Beijing-based diplomat on the condition of anonymity.

As to what outcome of instability worries Beijing the most, China's North Korea experts remain divided. Some say Beijing fears South Korea will take aggressive moves, while others maintain that Beijing's major concern would be an influx of North Korean refugees.

"China now is preventing the Lee Myung-bak government [of South Korea] from initiating any revenge attack for the Cheonan sinking incident," said Cui Yingjiu, a retired professor of Korean language at Peking University in Beijing and a former schoolmate of Kim Jong-il's in Pyongyang in the 1960s.

But Zhang Yushan, a researcher at the Jilin Provincial Academy of Social Sciences, said while Beijing is concerned with North Korea instability because of its long land borders, other neighboring countries would also suffer the refugee problem to various degrees. "If there was any instability in North Korea, China, South Korea and Japan should all share the concern," he said.

According to a 2008 report "Keeping an Eye on an Unruly Neighbor - Chinese Views of Economic Reform and Stability in North Korea" by the Center for Strategic and International Studies & US Institute of Peace, "In the event of instability of North Korea, China's priority will be to prevent refugees from flooding across the border. If deemed necessary, PLA [People's Liberation Army] troops would be dispatched into North Korea."

But most of China's North Korea experts see no sign of imminent instability.

"Some might have cited the youth of Kim Jong-eun as a concern, but China had an eight-year-old emperor in its history ... things will remain stable for a while," said Jin Linbo, senior fellow at China Institute for International Studies, dismissing any concerns over the new leadership in Pyongyang.

China and North Korea's long-standing friendship, which both sides claim was sealed in blood during the Korean War in 1950s, has become ever more complex in the last decade with the normalization of China-South Korean diplomatic ties, Pyongyang's two nuclear tests and the North's continued reluctance for economic reform.

In 2009, bilateral relations went through a particularly turbulent year: Pyongyang launched a satellite in April, conducted a second nuclear test in May, launched seven missiles into waters off its east coast in early July, withdrew from the six-party talks in mid-July, and claimed it had reached the final stage of enriching uranium in September.

Despite all these provocative moves, Beijing chose to stand by its ally, sending Premier Wen Jiabao to Pyongyang on October 4, a decision analysts said as setting the tone of China's policy towards the North.

"Keeping an Eye on an Unruly Neighbor" surmised that China's consistent aid policy toward North Korea was based on consideration of protecting China's military-strategic environment, maintaining stability and security along the border and sustaining economic growth and political stability in China's three northeastern provinces bordering North Korea.

Since Premier Wen's visit, China has also promoted bilateral trade with North Korea. China's state-run Global Times cited Chinese customs statistics reporting lately that the bilateral trade between the two sides hit $3.1 billion in the first seven months of 2011, an 87% increase from the same period last year due to a 169.2% increase of Chinese imports from North Korea.

After Kim Jong-il's death, the Chinese government is now pushing for the resumption of the six-party talks, hoping to put the North Korea issue back into the institutionalized mechanism. But most of China's North Korea experts see no substantial progress of the approach.

"For the US, Japan, and South Korea, the six-party talks are about denuclearization in the Korea Peninsula. Without North Korea showing any interest in denuclearizing its weapons, what's the point to rush to the talks," said Zhang Lianggui, a professor of International Strategy at the Central Party School in Beijing.