State Department denies deal for Park’s release; also, Larry Craig still isn’t gay. If by some miracle the truth actually leaked out, State would probably say that President Obama’s announcement — the day before North Korea announced Park’s release — that he would not to re-add North Korea to the list of state sponsors of terrorism was a mere “goodwill gesture,” or an “understanding,” but not really a quid-pro-quo. When the transcript of the State Department news conference for February 5th becomes available, you’ll see that the reporters had to do everything but waterboard Spokesman P.J. Crowley to get him to deny that there was a deal. Sorry, I wasn’t born yesterday, I smell a rat, and I don’t believe it.
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Our human rights envoy Robert King speaks, but does this really mean anything? “‘Respect for human rights by the DPRK (North Korea) will have significant impact on the prospect of closer ties with the US and will be necessary for North Korea to fully participate in the international community,’ King said in the message read at the seminar.”
On the other hand, this statement from U.S. Ambassador Kathleen Stephens speaks of something our government is doing that’s actually effective: “‘We will continue to fund radio broadcasts into North Korea to try to provide information about the outside world,’ she said, adding that her government will also work to support North Korean refugees.” Well, not so much on that last part, so far.
An escaped artist talks about the perils of painting portraits of you-know-who: “While concentrating on painting, it is not unusual to smear paints on the photos, put the photos on the floor or even step on them. But when that happened, we were then officially accused by others.”
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WTF? Developers are building three artificial islands at in the Han River estuary.
Pirates seized a North Korean-flagged cargo ship owned by Libya’s White Sea Shipping in the Gulf of Aden off Somalia and Yemen, an anti-piracy task force said. The 4,800-ton MV Rim changed course and was headed for the Somali Basin Wednesday, the European Union Naval Force said, CNN reported.
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Good Grief: The Human Rights Industry’s obsessions with Gitmo and Gaza has already damaged it by distracting its attention from far greater abuses in other places. But Amnesty International’s unholy alliance former Gitmo prisoner and prominent Taliban supporter Moazzam Beg must be a new low.
North Korea calls for regime change, and the “elimination” of “anti-reunification” forces. I wonder why most of the press either ignores or laughs off North Korea’s threats against its neighbors, yet recoils in shock at calls for the overthrow of the world’s most repressive regime? After all, there’s nothing worse that instability, right?
As it turns out, inviting a North Korean gulag survivor to speak to South Korean troops is a lot like inviting Elie Wiesel to speak at a Pat Buchanan rally:
After speaking recently to a group of young South Korean soldiers about North Korea’s harsh labor camps, former prisoner Jung Gyoung Il — himself once a soldier in North Korea’s massive army — was stunned by the questions from the audience. One soldier asked how many days of leave North Korean soldiers were given. Another asked if North Korean soldiers were allowed to visit their girlfriends. No one showed any curiosity about the notorious network of gulags, a signature marker of the North’s brutality toward its own people.
In a rare acknowledgment, the South Korean government recently noted in a report that hundreds of thousands of North Koreans are languishing in the prison camps. But Seoul has made no public effort to exert pressure on Kim Jong Il’s regime over the issue. And many South Koreans, who hold deeply conflicted feelings toward their communist neighbor, are reluctant to even concede that the camps exist. [Stars & Stripes]
Actually, I don’t think this guy’s views are conflicted at all:
Jung Wook-sik of the Peace Network, a group of civic activists, said the existence of the gulags is “not relevant” in South Korea because many citizens feel their own human rights are being abused. Lee has been heavily criticized for, among other things, subduing peaceful protests and firing members of a teacher’s union that questioned his administration.
And it’s exactly the same thing, of course! You do remember Jung, don’t you, from when he was writing at OhMyNews as “Cheong Woon Sik?”
David Hawk, author of the study “The Hidden Gulag: Exposing North Korea’s Prison Camps,” said little was known about the gulags until about five years ago, when large numbers of North Koreans managed to defect from the famine-stricken country.
Nothing in there surprises me much after four years in the USFK.
Reuters has a long round-up on the failure of the Great Confiscation, with this being the bottom line: “The collapse of the market system brought about by the currency revaluation produced rare civil uprisings. But the violence appears to have been sporadic and should fade as long as the North allows market activity to return.”
Marcus Noland, catching up on the latest reports for the BBC, wonders if the failure of the Great Confiscation has damaged Kim Jong-Eun’s succession prospects. Noland says North Korea “is beginning to look increasingly like a nuclear-capable failing state.”
Both views seem partially right to me. Violence against the state is a big risk anywhere, and especially there. If the regime’s climbdown makes the people less desperate, they won’t resort to violence until the next time they’re this desperate, but because it’s North Korea, that time will come. And when it does, the Great Confiscation has taught the people that (a) they aren’t alone in their anger, and (b) if enough of them challenge the state at once, they can win. More fundamentally, a restoration of the markets will mean that people may regain their economic independence, escape from their state-assigned jobs and the propaganda harangues they endure there, and build the physical and mental strength to get into a rebellious mood. Starving people don’t rebel. People who struggle against the state for their daily bread, and who live in envy of those atop the state’s caste system, might.
But if we’ve learned anything from the lessons of the Rangoon Autumn or Robert Park, it’s that nonviolence is useless against brutal tyrannies. No rebellion will succeed unless the security forces splinter or mutiny, or unless the people organize and arm themselves. Look at how long the Burmese regime survived since the massacres of 1988.
Following Part 1, here’s Part 2 of Enzo Reale’s interview with Cao. This week, Cao informs us that North Korea’s public distribution system is in perfect working order, that there are no concentration camps in North Korea, that Kim Jong Il eats the simple peasant fare as everyone else and does not in fact live in a palace, and that every single North Korean agrees with every decision the government makes. Surely I exaggerate, you say. No, Cao actually says, “[E]veryone without exception supports the system and would give his life for its survival.”
I’m struck by the quality and perceptiveness of Enzo’s questions. His knowledge of the subject matter greatly exceeds that of many journalists I see covering North Korea. It makes for a jarring contrast between Cao’s reality and ours. My favorite example is when Cao says, “I am well-known and respected person.” Cao also claims that he and Kim Jong Il have exchanged e-mails, which could actually be true.
It’s still premature to say that the North Korean regime has retreated in its attack on the system of markets, known as jangmadang, on which the majority of the people had come to depend since the collapse of the state distribution system in the 1990’s. The best available information — and the qualifiers to the aforementioned phrase should be obvious — suggests that the regime has decided against pressing the attack in certain specific places for now. For the time being, food prices and exchange rates have begun to stabilize, at least in the border provinces of Ryanggang, North Hamgyeong, and North Pyongan. Time will tell if the regime allows markets to reopen in the “core” area of Pyongsong, a city near Pyongyang that had become a trading center. The reopening of markets near the capital would likely signal an abandonment of the anti-market campaign.
Adding to the confusion, the state has finally announced the long-delayed “official” prices for foodstuffs, threatening to confiscate goods sold for higher prices, despite the fact that the goods’ market value is substantially higher. The Daily NK thinks the new prices will be difficult to enforce.
The regime’s retreat appears, remarkably, to be the result of civil unrest like the reported riot in Hamhung, what I call the Ajumma Rebellion, and alarming reports of violent attacks against members of the security forces. Via Good Friends, there is a new report of civil unrest, this time in the South Hamgyeong town of Dancheon:
Danchun City, South Hamgyong Province is named to have the highest death due to starvation by the result of the field survey, and war veteran residents from the city held a mass protest in front of their city hall. Mainly war veterans over the ages of 70-80 gathered and they were followed by other elders and residents, so the momentum was great. War veterans sat across from city office and violently complained, “We worked hard for our survival during the Arduous March, but the current movement of opening doors to the Strong and Prosperous Nation would make everyone starved to death with currency exchange. Are you going to starve us to death?” The atmosphere turned ugly for a while when residents charged up with emotions screamed after hearing war veteran’s speech. An elder cried, “What is the use of the City Party or people’s government organization when they cannot feed their people? When we followed the Great Leader during the revolution, we wanted to make sure our descendents were well-off. It doesn’t matter if old people die, but our descendents are all about to die. We don’t need such government.” The City Party of Danchun City reported this incident directly to the Central Party. On January 26, the Central Party ordered, “Distribute 1,000 tons of rice that is being saved as Number 2 reserve in Danchun City farms.” The City Party rushed distribution at the end of January to residents with the most difficult living situation. An official at Danchun City commented, “Residents of other cities and counties are having difficulties, but our residents seem to suffer the most. More people are dying and many households with 4-5 members are living off of 500g of corn noodle boiled in water.” [Good Friends]
Even among those without the extraordinary courage needed to openly resist the state, there is more open discontent than in previous years:
Chang, Keum-Ok (alias), a resident in Danchun city, south Hamgyong province complained about the government’s inaction: “they know of people dying of hunger, but they do nothing to resolve people’s suffering.” People cannot find grain even if they want to buy, and the food prices skyrocket everyday. People can do nothing but despair at this moment. Ko, Byong-Gook (alias) complained that “if the government took away all of people’s money, they should provide services and goods to ensure people’s basic living conditions. They just say nicely, but nothing is actually coming out to support people’s basic living conditions.” There are some rumors from some part of the City Party that PDS (Public Distribution System) may be reactivated around February 16 holiday, but people are not terribly excited by that. People complain that “even if that is true, people will die of hunger while waiting for that to happen. Will the government let starving people die?” People complain that they are experiencing the worst ordeal right now: “our government does not show any mercy; instead they seem to test how long their people could survive without sufficient food.”
Good Friends also reports dire conditions in Chongjin, and reports that the damage to the market system is persistent. Traders who lost everything in the Great Confiscation were hit hardest. The markets were their survival strategy. Now, some of them are literally starving. Most ominously for the state, there are worries about the sufficiency of the army’s food supply. And according to multiple reports, people are speaking much more openly of their discontent than in the past:
The residents in Sunchun, South Pyongan province do not hide their opposition. They complain that “the government’s new economic measures make people die of hunger. Instead of making a Strong and Prosperous Nation for people, the new economic measures open the door of poverty and hunger for people.” Heyoung Kim (alias) said “women who feed a family have many opinions on the new economic measures. Compared to the days of old monetary system, our living condition is much worse. Many households cannot even eat corn porridges. Since people’s living condition is at the bottom, they talk badly to the government.” Police officials agree with such sentiments. “In these days, people are increasingly angry and harshly blame the government. Their firm belief and commitment about the Strong and Prosperous Nation are already gone. Political speeches and lectures these days are not effective to reorient and realign the people to the nation’s ideology. They seem to think only about the means and ways to make their living.” [Good Friends]
For obvious reasons, it’s hard to know how much of this is true, though it’s consistent with other things we’ve heard recently. North Korea never emerged from the Great Famine entirely. The most vulnerable and obedient are already dead, but in a place like North Korea, the arbitrariness of the state produces an unsteady but constant supply of vulnerable people whose deaths pass unnoticed.
I predicted before that eventually, “the diktats that demand tomorrow’s sacrifices will be mostly forgotten because no one will have the luxury of obedience.” Most likely, what we’re seeing is a return to the old pattern of the people ignoring, evading, and bribing their way about the state’s economic regulations, as the security apparatus ceases to enforce those regulations as anything more than good reasons to shake down targets of opportunity.
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Ordinarily, the palace economy and the peoples’ economy live their separate lives, but there are exceptions. If the state is willing to risk civil unrest because the state wants the money, I’ll speculate that this means that the palace economy needs the money. The sharp drop in revenue from weapons sales certainly also suggests as much. The most telling evidence, however, is the indication that the regime is purging the people who finance the palace economy: first, Pak Nam Gi, the Finance Director of the Workers’ Party, and now, Kim Dong-Un, the head of the notorious Bureau 39:
South Korea’s Yonhap news agency said Kim Dong-un was dismissed because he had been blacklisted by so many foreign governments, including the EU in December, leaving him unable to travel on behalf of Room 39’s legal companies. He has been replaced by his deputy, Jon Il-chun, Yonhap said, citing an unidentified source.
Housed in an unremarkable government compound in Pyongyang, Room 39 oversees 120 companies and mines, accounting for a quarter of all North Korean trade and employing 50,000 people, according to Lim Soo-ho, a research fellow at the Samsung Economic Research Institute. He said Kim’s dismissal may be part of attempts to get around international sanctions. [….]
Some of the money generated by Room 39 is used to buy the loyalty of senior party officials, a role that may take on greater prominence as Kim Jong-il, who suffered a stroke in 2008, prepares to hand over power to his third son, Kim Jong-un. Analysts have estimated that illegal activities account for up to 40% of all North Korean trade and an even higher share of total cash earnings. [The Guardian; hat tip, Curtis]
It’s possible that Kim Dong-Un was replaced simply because he was a marked man outside North Korea, but his dismissal now seems unlikely to be completely unrelated to the regime’s current instability. There are other indications of infighting within the inner party:
“Right now, North Korean officials are busy blaming each other for the failed currency reform and Pak, who spearheaded the revaluation, is believed to have been sacked,” said a diplomatic source in Beijing. “Markets have come to a grinding halt following the currency revaluation and prices have soared,” the source said. It seems North Korea hoped to stabilize prices through the currency reform and then credit the achievement to Kim Jong-il’s third son and heir apparent Jong-un to consolidate his grip on power, but this flopped, the source added.
Some North Korea watchers in China predict that the regime may perform a U-turn back to timid market reforms now that Pak, who led the crusade against capitalism, has been fired. One North Korea expert in Beijing said, “There is a strong possibility that high-ranking North Korean officials who led the drive to crush market forces since 2004 will be removed from office, while policies will shift toward market reforms starting in the second half of this year.” [Chosun Ilbo]
Although it would be reasonable to infer from this that the sanctions are working, as is often the case in North Korea, not all signs point in the same direction. One would not expect a regime in financial distress to proceed with something as useless as cladding the useless Ryugyong Hotel in glass (see, e.g., this excellent photograph, and yes, Pyongyang looks even colder than D.C.)
[Update 4, 6 Feb 10, bumped again:Park has arrived at L.A.X. There’s also video of him perp walking through the Beijing Airport while being mobbed by the press, much of it South Korean.
In contrast to his animated pose with his North Korean captors — these obviously being the “good cops” — look at this video and tell me the man doesn’t look like one whose spirit has been completely broken. He looks thinner, with no obvious signs of physical torture, and every sign of being devastated, emotionally. I don’t know if it’s the statement he made or the decision to cross, but Park certainly regrets something. I feel terrible for him, though not as terrible as I do for the others he put in danger. He meant well. But he obviously knows by now that didn’t do well.
Cute of Xinhua, by the way, to refer to Park as a “trespasser,” making no reference to the reason Park walked up to the borders guards in broad daylight, petition in hand, while reporting his “confession” to the North Koreans as fact. But we’d expect no less from fascist China, would we?]
[Update 3:Via Yonhap, here’s photo of him arriving in Beijing.]
[Update 2, and bumped: The Chosun Ilbo publishes this photograph of Park. I don’t see any scars or bruises.]
North Korea said on Friday it will release U.S. religious activist Robert Park, arrested in December for illegally entering the country in a journey to raise awareness about Pyongyang’s human rights abuses. “The relevant organ of the DPRK (North Korea) decided to leniently forgive and release him, taking his admission and sincere repentance of his wrong doings into consideration,” the state KCNA news agency said.
KCNA said Park had confessed to illegally entering the state and that he had changed his mind about North Korea after receiving kind treatment there.
“What I have seen and heard in the DPRK convinced me that I misunderstood it. So I seriously repented of the wrong I committed, taken in by the West’s false propaganda,” KCNA quoted Park as saying. Defectors from the North say the state often uses torture to extract confessions. [Reuters]
It would be premature for me to assume that Robert Park (a) said those things, or (b) said them of his own free will, but if he did, I think it will vindicate my initialobservations about Park. On the other hand, it seems unlikely that this would be happening now if those reports that he was beaten were accurate.
Now, who else finds it oddly coincidental that this should happen just one day after President Obama says he won’t put North Korea back on the terror-sponsor list? Am I out of line to suspect that a deal of some kind was struck? [Update: In its daily press brief on February 5th, State denied that there was any deal. Believe that if you wish. I certainly don’t. The transcript will be here when it’s available.]
So aside from getting one North Korean defector arrested and possibly exposing others to the risk of capture, what exactly did Park’s foolish act accomplish for the people of North Korea? If my speculation above turns out to be right, Park was traded for a very significant ransom payment indeed. Which means that, as I predicted from the beginning, Park’s actions did Kim Jong Il far more good than harm.
Hat tip to a valued reader and friend.
Update:Here’s KCNA’s report. Below the fold, you can read KCNA’s complete “interview” of Park in which he denounces the “false propaganda” about “non-existent human rights abuses” and heaps praise on the benevolence of the Sun of the Nation, who guarantees religious freedom for all! It’s definitely not to be read by those who’ve eaten in the last hour or who have expensive carpeting. I suppose we should keep our minds open until he can explain himself (sigh), but if he really said this, we should only pity him more.
On a side note, I’m deeply disappointed not to have been singled out by name as a source of “false propaganda.” Read the rest of this entry »
Like about 200,000 of our neighbors, we’re all freezing in the dark here. The roads probably won’t be clear by Monday, and more snow is forecast for Tuesday. Our governor says it’s breaking all previous records.
We’re shivering in good spirits and have plenty to eat — my son has now beaten me in three straight games of Monopoly — but this may be the last post for a while until power is restored, meaning the unfortunate delay of Part II of the Cao de Benos interview and other regularly scheduled programming.
In conclusion, I blame Al Gore for global cooling, caused by his dangerous manipulation of our supply of greenhouse gases.
I’ve mostly ignored the speculation that the Koreas will hold a summit because I think the chances of it actually happening are still pretty vaporous. One thing I will observe is that South Korea is saying that it won’t reward North Korea just for showing up, but I don’t see any chance that Kim Jong Il would attend without a payoff. Really, I think Kim Jong Il’s dispositive motivation is that payoff, while Lee’s is to look like he’s open to dialogue, which means that he wins just by keeping this story alive. I wouldn’t put it past Lee to actually go through with it if his poll numbers drop, which is reason enough for the Americans to worry that a summit would ease the economic pressure on the North just when that pressure is starting to destabilize it.
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Iraq has largely disappeared from policy debates in Washington. There are special envoys for every critical country in the region except Iraq, the country whose evolution will help determine how American relevance to the currents of the region will be judged. The Obama administration needs to find its voice to convey that Iraq continues to play a significant role in American strategy. Brief visits by high officials are useful as symbols. But of what? Operational continuity is needed in a strategic concept for a region over which the specter of Iran increasingly looms. [Henry Kissinger, Washington Post]
If only we had a some sort of senior government official in Baghdad whose job it was to make sure that Iraq’s interests and views were heard at the highest levels of our government, and who performed that function competently and effectively.
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A Chinese dissident is nominated for a Nobel Peace Prize, and the ChiComs try to bully the Nobel Committee out of it. I’m feeling charitable enough to give the ChiComs a little free advice: instead of validating the universal perception that you’re thugs, why not validate that other universal perception — that the Nobel hasn’t meant anything for at least a decade? Then again, the fact that no one would in Europe would dare to nominate a critic of radical Islam for a Nobel suggests that the ChiComs may be on to something.
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South Korea wants to “renegotiate” the transfer of wartime operational command. Has anyone else noticed that all agreements with South Korea are endlessly renegotiable?
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Danish Neocons? I agree with what the makers of The Red Chapel were trying to do politically speaking, it’s just that based on the sample I saw, it didn’t seem very funny, or effective at conveying its message. This reviewer had a more positive view.
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Interesting: Japan and South Korea may team up for a military exercise. More interesting: the exercise will focus on “humanitarian disaster response.” Hmmm.
Posted by Joshua Stanton on February 5, 2010 at 10:15 am · Filed under WTF?
A high-ranking Pakistani diplomat reportedly cannot be appointed ambassador to Saudi Arabia because in Arabic his name translates into a phrase more appropriate for a porn star, referring to the size of male genitals, Foreign Policy reported.
The Arabic translation of Akbar Zeb to “biggest d**k” has overwhelmed Saudi officials who have refused to allow his post there.
Zeb has run into this problem before when Pakistan tried to appoint him as ambassador to the United Arab Emirates and Bahrain, where he was rejected for the same reason, according to Foreign Policy. [Fox News, via Foreign Policy]
On the one hand, you can’t say that the man’s name would necessarily be harmful to Pakistan’s image. Just think of the tourist trade! On the other hand, just try to imagine the challenge of introducing this guy at a formal reception, or a state dinner:
Speaking on the failure of North Korea’s attempt to reconsolidate state control over the economy, Noland concludes with this:
The underlying political stability of that regime, I think, is starting to be called into question.
Noland emphasizes how difficult it is to confirm reports of civil unrest in North Korea, but I think there’s sufficient evidence for us to conclude that North Koreans are questioning and challenging their government more openly than ever.
I’m not sure what pains me more — the thought of all the tawdry traffic this post will bring in, or knowing that a part of me actually wants the traffic.
According to the account by Mi Hyang, a former member of one of Mr Kim’s “pleasure squads” – groups of attractive young women enlisted to provide entertainment and sexual services – the leader could be sentimental when drunk, and even shed tears.
His favourite delicacy contains the reproductive organ of sharks.
Sharks … with frikkin’ laser beams attached to their heads!
He has a number of private residences around the capital city, some equipped with a 50-metre-long underground swimming pool. Mr Kim is known to be irascible towards his aides, but is surprisingly caring towards his private female attendants….
Caring right up to the point he signs the warrant to ship your entire family to Camp 22.
Mi Hyang, who goes only by her first name, served in one of Mr Kim’s pleasure squads for two years before fleeing to the South and defecting after her family was accused of treason, for reasons not yet revealed. She now resides in Seoul. The fate of her family has not been publicly disclosed.
Also, we learn that a lifetime of indoctrination and deification is still no substitute for good dental hygiene:
“When I first met Kim Jong Il, he looked so normal … like a next-door neighbour. He has many brown spots on his face. His teeth were yellowish. My previous fancy about the great leader was shattered at that very moment,” Mi Hyang says in the interview. “But he was very considerate towards me.”
… said “Mi Hyang,” who used only her first name to prevent Kim Jong Il sending hit squads to track her and her family down and kill them. Hey, he sounds like a gentle soul … a great catch! Hat tip: Mike Madden.
[Update:Kushibo notes that North Korea has started lifting market restrictions. Rice prices and exchange rates have begun to stabilize. The confiscation is done, but does this mean the regime is backing down? That would mean that change is irreversible, and that the regime has just surrendered much of its control over the economy. And just to thank Kushibo for re-posting his comment after I stupidly deleted it, I’ll recommend you read his post on the sacking of Pak Nam-Ki. Give credit where it’s due: Kushibo saw the significance of the currency revaluation immediately.]
North Korea is acknowledging the obvious: the Great Confiscation has been an economic and political fiasco:
Pak Nam-Ki, the Communist Party’s director for planning and finance, has reportedly been absent from public activities since early January. South Korea’s Intelligence Service said it could not confirm his sacking. But an intelligence official told the Associated Press news agency it had been closely monitoring Mr Pak’s whereabouts and he had recently disappeared from view. [BBC]
There has also been infighting within the Inner Party:
“Mutual recriminations are rampant within the North’s power circles over the failure of the redenomination, [and] Director Pak who led the reform has been sacrificed,” a diplomatic source in Beijing told Chosun Ilbo. Yonhap news agency, quoting traders in the Chinese city of Dandong near the North Korean border, said Mr Pak had been sacked and was awaiting trial.
Related Korean article here. Wondering about the meaning of this, I asked Kim Kwang Jin, a friend and former senior regime official involved in North Korea’s insurance fraud scam, what this means. He gave me permission to print his response.
We are now seeing the sad reality that North Korea has as leadership for economy somebody like the current “scapegoat” Pak Nam-kee who does not know how credit card works and has no idea how bad the hyper-inflation is. It is even sadder that in North Korea they have no right and access to know this, not to say any right to act what they think is right. So, this time again, another “stupid” currency reform by the government, increased sufferings for the people and another scapegoat to calm down anger, on its painful way of final collapse, which is coming closer.
All the signs point to Mr. Kim being right about that. Even Kim Jong Il himself must again acknowledge that the people are unhappy:
The official Rodong Shinmun newspaper on Monday said Kim expressed “compassion” for the reliance of his people on broken rice, a cheaper, inferior product, in their staple diet. “What I should do now is feed the world’s greatest people with rice and let them eat their fill of bread and noodles. Let us all honor the oath we made before the leader [Kim Il-sung] and help our people feed themselves without having to know broken rice.”
The newspaper on Jan. 9 quoted Kim as recalling nation founder Kim Il-sung’s promise of rice and meat soup for all, but adding, “We have not yet fulfilled his wishes.” [Chosun Ilbo]
So who will be the one to postpone the inevitable and bail Kim Jong Il out now?
So goes the meme: America can’t press human rights in its diplomacy with China, or insist that China stop enabling and start pressuring Kim Jong Il, because China now owns a controlling interest in America. It’s not difficult to find examples of this view, though it turns out to a more prevalent theory among editorialists than economists. Our old friends at Al Gore’s Current TV sum up the argument this way:
President Barack Obama will work hard to build trust with China during his trip there, but how far will he be able to go in seeking changes on the key issues — currency, the trade surplus, North Korea, Iran, human rights and others — when he’s sitting down with his nation’s largest creditor? China holds $800 billion in U.S. debt and gets $50 billion a year in interest.
Next, we hear from Glenn Kessler, a fawningadmirer of the Chris Hill approach to North Korea and probably the worst correspondent covering the North Korea story for a major newspaper in the last decade. Here, he co-writes with Ariana Eunjung Cha about the Clinton Obama Administration’s soft line on human rights with China:
China is the biggest foreign holder of U.S. debt, which helped finance the spending binge the United States went on before the economic crisis. Some experts have expressed concern that China’s substantial holdings of U.S. debt give it increased leverage in dealings with Washington because any halt in Chinese purchases of U.S. bonds would make it more difficult to finance the government bailout and stimulus packages.
Not even Kessler can be faulted too much for failing to mention other perfectly sensible reasons why Clinton tends to go soft on China until forced to do otherwise. If you’re of a conspiratorial mind, you can always consider the case of naturalized U.S. citizen Norman Hsu and others whose bundled campaign donations to Mrs. Clinton’s past campaigns greatly exceeded their accountable earnings. The same suspicions of undue Chinese influence stalked President Clinton and Al Gore before her. A simpler explanation may be that Clinton is bound up with the foreign policy establishment, an establishment that’s increasingly subject to Chinese influence, and which includes people like Chris Hill and Chas Freeman, people who are trusted by this administration, and who are also predisposed to defer to Chinese interests.
None of this, of course, should deny that our borrowing is excessive and dangerous. So far, there’s little evidence that it has created many jobs, either. But between the lines, something else has to have these non-economists (not to mention every Chi-Bot on Sina.com) so suddenly interested in economics. I sense a certain welcoming of America’s loss of influence to do things the editorialists didn’t want us to do anyway — such as putting human rights on our diplomatic agenda, or putting serious economic pressure on North Korea. Others can scarcely contain their glee that the American hyperpower is dethroned, even if a newly ascendant fascism is the consequence, with all computers henceforth arriving with Green Dam pre-installed. Something about the tone of this seemed awfully familiar to me somehow:
Not being ready to welcome our new insect overlords, but not being an economist myself, I’ve hesitated to enter this debate until now. Yet all along, I still wondered: where else was China supposed to invest all its earnings from its exports to America? Why would China attack the value of the dollar when that would make Chinese products more expensive for American consumers? And what of China’s demographic bomb — the legacy of the one-child policy — which requires China to sustain high annual growth rates to pay for all those pensions? Could China do it without a strong American export market? (Here’s video, by the way, of Nicholas Eberstadt talking about this topic.)
In that light, how much sense would it make for China to make war against its most important market? Would it make sense for China to start selling its U.S. debt, thereby depressing the worth of its remaining investment? After all, if the U.S. economy underperforms, the voters punish the ruling party, but no one goes to the firing squad. Who can say the same if a recession strikes China? China needs its dollar reserves because the lives of its ruling class may depend on it one day.
[T]he conventional wisdom–that America needs Chinese financing to continue its wild spending–turns out to be wrong. Partly because of the damaging jump in the size of the deficit, Chinese bond purchases have become irrelevant.
Official Chinese purchases of U.S. Treasury bonds are on pace to fall well below $100 billion for 2009 (the full-year total is published in February), while the federal government deficit soared to $1.4 trillion. Yet U.S. commercial interest rates are lower than at the end of 2008, when official Chinese purchases were equivalent in size to nearly half the federal deficit.[7] Official Chinese holdings of treasuries equal less than 7 percent of U.S. government debt.[8] Chinese bond purchases no longer seem to matter, if they ever did.
In addition, when Chinese purchases were large, it was because Beijing had no choice but to buy American bonds. The PRC can take in a great deal of money from the world through its trade surplus and other activities. The same rules that keep the Chinese currency undervalued keep Beijing from spending the world’s money at home. Most foreign money disbursed in China ends up right back with the central government, by law.[9]
That can leave the PRC sitting on a huge pile of dollars and the U.S. economy as the only place big and solid enough to absorb it back. China has not been lending; they have been investing the only way they can.
Finally, the bulk of China’s pile of foreign money can be traced back to the Sino-American trade gap. On exactly the same lines, the PRC ties its currency to the dollar. Linking itself closely to the American economy that way is also the PRC’s best choice. In contrast, any American financial dependence on China has almost vanished.
Scissors’s piece is worth reading in its entirety. Not that this is exclusively the view of conservative economists. Indeed, economist Sebastian Mallaby of the Council on Foreign Relations, who writes for the Washington Post and The Economist, sees China as the vulnerable party in this relationship:
By running colossal trade surpluses, they have accumulated vast holdings of bonds and shares denominated in dollars, the currency at the core of global finance. If the greenback declines, China’s government stands to lose a fortune.
The political backlash from such a loss could be brutal. Already, Chinese bloggers have ripped into the officials who invested $3 billion in the U.S. private equity group Blackstone, only to see the stock plummet. “They are worse than wartime traitors,” one online chatter fumed, according to the Financial Times. A large fall in the dollar would make the Blackstone loss look like a picnic.
So Chinese authorities are searching for a way to reduce their exposure to the greenback. The surest method would be to stop buying so many U.S. Treasury bonds, but that would mean allowing the Chinese currency to rise against the dollar, which would hurt Chinese exporters when they are already suffering. So the government is scrabbling around for something — anything — that can spring it from the dollar trap without driving up its currency.
It’s a wee bit early to hail our new insect overlords. We may proceed with the assumption that we are still an international power. Yes, China influence will continue to rise, but only until it hits the political and demographic barriers it has placed in its own way. Its arrogance is still a function of its insecurity and driven by its interest in appealing to domestic nationalism.
In the end, I’m left with the sense that the “Hail Ants” view is driven by emotion. I’m old enough to remember the warmed-over yellow peril of the 1980’s, when it was Japan’s overregulated state capitalism that kept Americans awake. Overregulated economies like China’s tend to have fewer recessions, but when they fall, they fall hard. When that happens, it’s plausible that China will sell U.S. debt in a hurry and depress the value of the dollar. That will be dangerous in some ways, and good for our exports, but it still won’t mean that China owns America.