A Voice in the Wilderness In Defense of "Mere Conservatism"

Markets, Sanctions, and North Korea

Writing in The South China Morning Post last week, Dr. James Dorn (of the libertarian think-tank The Cato Institute) discussed the economic situation in North Korea.

After US Secretary of State Hillary Rodham Clinton's announcement that new economic sanctions would be placed on North Korea, one headline read: "US tightens the screws on North Korea's economy." Yet, Pyongyang has already tightened the screws on its own economy.  The chaos created by last year's currency "reform" and by the crackdown on market activities is evident in food shortages, spiraling prices and discontent.

Small traders had taken advantage of opportunities for profitable exchange following a relaxation of economic controls after the famine of the mid-1990s. Private markets developed and cross-border trade grew. The existence of private markets along with the "sunshine" policy of the South brought new opportunities, as workers moved into the non-state sector and consumers could purchase goods outside the state distribution system.

And yet with this small glimmer of success in an otherwise devastated country, the totalitarian government that rules North Korea with an iron fist did not care for the free trade that was taking place.

Not surprisingly, the communist elite feared the market. Moreover, the South, under domestic and US pressure, departed from a policy of engagement. By 2005, Pyongyang had begun to restrict small traders. The currency reform — and an end to the use of foreign currencies in the informal, dual economy — was a signal that further liberalization was anathema.

Instead of learning from the natural experiments that demonstrated the superiority of markets, Kim Jong-il and his cronies preferred to maintain their power. By making people dependent on the state for their livelihood, government officials regain power lost to the market.

But Dr. Dorn believes that brighter days lay ahead for the impoverished nation.  His solution seems to be to lessen economic sanctions on North Korea.

After more than 50 years of North-South tension, it's time to end the socialist fantasy and restore markets and freedom to the North. The US foreign policy of economic sanctions and war games has failed to change the North. A policy of economic engagement would be more productive, with support from both China and South Korea. China's "peaceful development" is the result of economic liberalization, not isolation.

The transition from central planning to a market economy in the North should be of utmost importance. Massive war games and economic sanctions will only play into the hands of the North's propaganda department, and the US will become the scapegoat for Kim's attack on market liberalism.

The North was once richer than the South. Restoring markets and instituting a rule of law would give North Koreans the possibility of improving their lives.

What do you think about this proposal?  Will helping to strengthen the economy of the Communist regime prolong their control of the country?  Have sanctions worked against dictatorial enemies like Cuba?