Category: China centric

A Policy of Musihada (무시하다) and Muyong (무용)

Alex Gratzek
September 24

My early contributions to The Korea Times largely revolved around inter-Korean relations and the futility of ‘negotiations’ with North Korea.  Every North Korean dictator since Kim Il-Sung have proven themselves to be faithless negotiators.  Every ‘roadmap’ to better relations that is laid out inevitably proves to be a dead end.  North Korea has proven itself willing to take constantly but not actually deliver.

When Kim Jong-un was a new leader, he was given the benefit of the doubt but he proved himself to be in the same duplicitous mold as his forebears.  If North Korea is ever serious about improving relations then it should be the one to take the appropriate  steps to create the conditions for fruitful negotiations.  

Recently, North Korea launched cruise missiles in one of its sad but predictable attempts to remain relevant on the world stage.  Instead of giving in to what the North Koreans want, participation in conferences, concessions and legitimacy, it’s time for a new approach.  That should be the policy of Musihada (ignoring) and 무용(futility).  Let me explain.

One of the major reasons for the sudden collapse of The Soviet Union was economic.  Oil prices hit highs in the late 70’s before declining throughout the 80’s.  The Soviet Union’s economy was not efficient and its shortcomings had been covered by oil prices.  

However, that was not the only economic issue.  The Soviet Union was also bogged down in Afghanistan (79-89) while at the same time, President Ronald Reagan started to expand the Cold War into space.  It was a confluence of economic pressures that caused The Soviet System to buckle and collapse.

In this most recent North Korean provocation, North Korea flexed its ‘military might’ to intimidate South Korea and Japan by launching missiles into the East Sea.  The traditional response would be to see diplomats shuttling around the region, making plans for conferences and laying out  ‘steps to ease tensions.’

Instead of dignifying the endless North Korean provocations with inane diplomatic dribble or asking North Korea to stop, the provocation should be treated with the disdain it deserves.  South Korea is playing into North Korean hands by always letting it determine whether to ratchet tensions up or down.  It’s time to flip the script.

When questioned by reporters about North Korea, President Moon should make it clear he has more pressing issues on his plate like the economy, jobs and corona than dealing with the gadfly North Koreans.  He should refer questions regarding North Korea to a more junior member of his administration, preferably someone who is perceived as a bit off kilt, or even mad.    

Ignoring the North Korean and treating them with disdain is only one prong of the new approach.  The other prong is driving home the futility of North Korea’s efforts and the high costs.  If North Korea fires two cruise missiles,  then South Korea should fire double that number in North Korea’s direction.  

Even better would be to get Japan to fire off its own missiles in coordination with South Korea.  A united diplomatic front would prevent the traditional North Korean policy of playing its neighbors off against each other.     

The percentage of North Korean GDP eaten up by these tests is significantly larger than either Japan or South Korea’s hypothetical response would be.  It’s time to ratchet up the economic pressures, currently limited to sanctions, to include tit for tat responses to North Korean missiles to try and provoke them into an arms race.

It should be made clear to North Korea that South Korea is willing to go into an arms race but there is one key difference, South Korean has the economic capacity to support a race.  It took decades for North Korea to develop its cruise missiles, rockets and nuclear capabilities.  Imagine how disheartening it would be for North Korean’s if South Korea were to announce its own quest for nuclear weapons.  

There would be hemming and hawing by the international community but South Korea would be accepted as a nuclear power while North Korea would still be treated as a pariah.  South Korea’s respect in the world community, scientific prowess and level of economic development means it efforts would bear fruit mucher quicker than North Korea.  

The North Korean people underwent untold privations to get nuclear weapons.  They were held up to the North Korean as the prize for all those lean years.  The quick speed which South Korea could go nuclear would certainly undercut the North Korean regime’s propaganda and domestic standing.  Were the years of privation worth it if South Korea could achieve the same thing in a year or two with no suffering?

Of course, a nuclear arms race in Northeast Asia is not something China wants to see.  They may have tolerated or even tacitly supported North Korea’s nuclear ambitions as a means of getting the Americans tied down in solving an intractable diplomatic dispute.  

However, if the choice becomes either a nuclear free North East Asia or an Northeast Asia consumed by an arms race, the obvious answer for China is a Northeast Asia where it holds the nuclear monopoly.  A quest for South Korea’s own nuclear arsenal would light a fire under President Xi’s ass to bring all of China’s weight to bear on North Korea.

North Korea has always tried to sell its threats as being somewhat credible because they are ‘crazy.’  However, they are perfectly rational and that’s one of the reasons they play the crazy card.  But once you play your trump card repeatedly, it loses its effect.  It’s time for South Korea to start playing its trump cards to break the status quo.  South Korea has tried the direct approach to denuclearizing the Korean Peninsula but it’s time for an indirect approach.

Political Progression

By Alex Gratzek- Originally published in The Korea Times.

Over the centuries, a positive development among international relations and domestic politics has been the increased respect of the sanctity of diplomats and political opponents from harm.

In ancient times, diplomats were sometimes harmed or molested, but not always. During the Persian-Greek Wars, the Spartans threw two Persian diplomats down a well as depicted in the movie “300.”

Later, having ascribed their bad luck to these misdeeds, the Spartans sent two of their elder statesmen to the Persian shah as a kind of sacrificial lamb in order to wipe away their “bad juju.” The shah sent them back to Sparta as he did not want the bad juju associated with killing diplomats.

In medieval times, the great khan of the Mongols, Ghenghis Khan, sent diplomatic and trade envoys to the Khwarezm Empire. They were killed by a local governor. The great khan sent another envoy demanding the ruler of the empire punish the responsible governor and make amends.

The emperor chopped off two of their heads and sent the third envoy to report the tale. The Khwarezm Empire and the emperor were both soon ended by the scourge of god for the violation of diplomatic sanctity.

In the times of the Roman Empire, political struggles usually ended in the slaughter of the opponent and his supporters. Think of the first triumvirate of Caesar, Pompey and Crassus. It ended in bloodshed.

The second triumvirate of Augustus Caesar, Marc Antony and Leipidus also ended in bloodshed with Antony and Cleopatra dead. The junior partner in the trimuarative, Lepidus, eventually died of old age.

When his death was announced, it took Romans by surprise that he had not been killed in civil strife decades before. Leipidus’s survival till old age was an exception to the rule of slaughtering your enemies and crucifying your opponents.

Even in more modern times, the sparing of political opponents hasn’t always been the norm. In czarist Russian times, one claimant to the throne during the Time of Troubles was lucky to escape with his life to political exile in the desolate frigid wastes of Archangel. Other losers of political struggles were broken on the wheel, tortured, strangled or met other horrible fates.

During the time of Stalin, millions of citizens were sent to the gulags but Stalin also destroyed every possible opponent in the Soviet hierarchy multiple times over. He moved on the leftists under Trotsky and then the rightists under Bukharin, eliminating them by using the precursor to the KGB, the NKVD. At the time of his death in 1953, Stalin was preparing yet another purge against his supposed enemies.

However, his death interrupted the planned purge and his successor was Kruschev. Following the debacle and loss of face during the Cuban Missile Crisis, Kruschev’s opponents in the Politburo organized a coup and forced him from power into a comfortable exile into a country dacha rather than the wholesale indiscriminate purges as in Stalin’s times.

That new reality, that “Now everything is different. The fear is gone, and we can talk as equals” was perhaps one of his greatest contributions to the Soviet system.

However, since then Russia has regressed. During the Cold War, spying was a natural part of the game. Spies would be captured and later traded away for spies captured from the other side. Now, President Vladimir Putin is steadily sending FSB agents, the successor to the KGB abroad in order to kill opponents in violation of the unwritten rules.

In North Korea, political opponents are still killed as was seen with the assassination of Kim Jong-nam, the half-brother to Supreme Leader Kim Jong-un. While in China, political opponents of President Xi Jinping have been driven from the party and imprisoned.

On the flipside, you have seen a great political progression in South Korea. In previous decades, it seemed as if street fighting was the only form of political protest which would be heeded. However, South Korea has shown itself to be a well-developed, mature and established democracy following the peaceful protests that led to Park Geun-hye’s removal from office and her eventual imprisonment for corruption.

In America, it seems that politics are regressing. President Donald Trump has threatened to imprison his enemies, made a statement which could be interpretated as asking for the second amendment people to take care of Hillary Clinton and has used the power of his office to harass his political opponents.

Hopefully this proves to be a temporary aberration, just a Trumpian phenomenon which will not take root in the American political system. I would hate to see America on the same level as North Korea, China and Russia when it comes to the treatment of diplomatic and political opponents. God willing, America can keep it together a few more months and the trajectory to a shit hole nation can be arrested.

“IMF crises” 2.0

By Alex Gratzek

*Please note, in Korea it is referred to as the IMF Crises while in most of the rest of the world calls it the 1997 Asian Financial Crises.*

Twenty years ago, South Korea experienced the “IMF Crisis.” The contagion, spreading from Thailand, affected much of the rest of Southeast Asia and moved on to South Korea. The impact was brief but deep.

More recently, Korea was largely able to escape the worst of the 2007/2008 crisis. As a nation largely dependent upon trade, Korea needs to prepare for the next crisis.

In 1978, under the leadership of Deng Xiaoping, China embarked on a mission to grow its economy, allowing it to operate along increasingly capitalistic lines. However, it has never fully embraced capitalism and the state retains a large presence in the economic sector.

The decision to adopt “pseudo” capitalism has led to an unprecedented 40 years of uninterrupted economic growth, allowing China to become the second-largest economy in the world. Oftentimes, this growth rate has exceeded 10 percent while in recent years it had slowed to 6 percent.

This is a remarkable achievement but one that comes with costs that have yet to been paid. The Chinese government has come to stake its legitimacy on delivering economic growth. To this end, it has consistently intervened in its economy to ensure this. The time for a recession is long overdue. The longer one is artificially avoided through government machinations, the more drastic any eventual recession will be.

In recent years, the government has only been able to ensure economic growth by utilizing debt to promote it. This is becoming an increasingly expensive and perilous way of ensuring growth. The amount of debt that is needed to ensure growth is increasing in proportion, while the extra growth that is generated is shrinking. The input (debt) costs needed to create a fixed amount of growth (output) are increasing.

State companies have seen their debt load rising in recent times. With access to government officials, they have been consuming government loans in order to stay afloat, and have avoided laying off workers for the sake of stability. Their proximity to power means they can access loans and pay a lower interest rate than the market dictates. Increasingly, new loans are being used to pay off old loans while banks are reluctant to report loans as nonperforming. This is not a sustainable practice.

Another related issue of concern is the housing market which has been encouraged as a means of maintaining economic growth via construction. This market witnessed prices double between 2010 and 2017. Housing prices posted a double digit increase in 2016. Chinese capital controls prevent money from being invested abroad and many Chinese are weary of the domestic stock market. Money left in bank accounts receives a pittance of interest. Therefore, many Chinese with money to spare have parked their money into housing.

This accounts for the dramatic rise in the price of apartments, and many speculators and individuals own multiple units. Outside of major cities, there are so-called ghost cities in the interior ― fully constructed cities but with populations well below maximum capacity.

The one child policy and the cultural preference for males resulted in a skewed gender ratio in which males outnumber females. Bachelors know owning a house is a minimum requirement in order to be considered marriageable material to any potential partner.

Any resulting coupling will be two young adults with no children. Thanks to China’s former one child policy, which started to result in a shrinking population, married couples will stand to inherit two or more houses from their respective parents while already owning their own. This will ultimately crash the housing bubble if it hasn’t crashed before then. A couple owning three or more apartments will inevitably sell them; especially if a debated property tax is put into effect.

The Thai crises originated from the economy needing more and more money as asset bubbles grew within the country. Those who were able to acquire bank loans were those with access to the center of power. A key component of this bubble was real estate speculation. This is being mirrored in China at this time.

A key characteristic of capitalism is inevitable recessions. Forty years of uninterrupted economic growth is not a natural outgrowth of capitalism but a reflection of government intervention during bad times. Eventually, this will no longer succeed and Korea needs to be prepared for when it does.

The “IMF crisis” originated from a small economy in Southeast Asia before spreading throughout the region and to Korea. The 2007-08 crisis occurring across the Pacific, allowed Korea to escape the worst of the fallout. Korea was also spared because China, its largest trading partner, went ahead with government intervention to ensure economic growth.

It is not inevitable that China will suffer a recession. Its efforts at pursuing reforms to clean up its banking system along with an attempt to rein in the housing market could work. However, Korea needs to be prepared in case China fails in these endeavors or some other unforeseen event causes a recession.

China is the largest trading partner of South Korea, accounting for around 25 percent of South Korea’s exports and is the second-largest economy in the world. Any Chinese economic issue will dwarf the 1997-98 crisis in its impact, while South Korea will not be able to escape unscathed as it did in the 2007-2008 crisis. As the bible says, in times of plenty save for the bad times. I hope Korea has done so.