Plan to Disarm North Korea

Plan to Disarm North Korea

Assumption #1: Reunification would end the humanitarian crisis and disarm North Korea
Assumption #2: Unification can be achieved by changing the allegiance of North Korean elites
Assumption #3: Personal security and financial prosperity motivates human behavior

Imagine you control a multi-billion dollar capital fund and North Korea is an underperforming corporation. You see it is undervalued and wish to take over, but it is controlled by a backward board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—the larger number of political and military elites, government managers and bureaucrats, and the general population—a higher price for their shares to convince them to overrule their board of directors.

This friendly corporate takeover can be accomplished for less than $30 billion—$4.2 billion per year for 7 years. This is pocket change for a small consortium of transnational corporations and business tycoons, while the private and public sector benefits would be enormous.

To achieve this result, we must create a privately endowed (no-risk) fund that promises an appealing payout to North Korean elites if they can bring about reunification. The top 1,000 North Korean families will be promised $5–30 million each (dispersed over 7 years), 11,000 upper elites—including all generals—would get over $1 million; 50,000 lower-level political elites and military officers are promised $100,000 to $500,000. In total, 81,000 military officers and 31,000 political/military elites will receive a large payout, plus the benefits of living in a reunited Korea in the free world. This will create powerful incentives for unification among the new generation of elites that has taken over since the succession of Kim Jong-un six years ago.

Promising safety and security to the House of Kim may prevent bloodshed. However, if Kim does not acquiesce there may be chaos and insurrection. With $20–30 million promised to each of the 210 most prominent families, they might take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political or military elites. In either case—violent overthrow or peaceful acquiescence—the transfer of power to South Korea would disarm a growing nuclear threat and end more than 65 years of abject tyranny and human rights abuse.

This plan is introduced in my book: Stop North Korea! A Radical New Approach to Solving the North Korea Standoff (2017).

Disarming North Korea

You may contact me at iver7777@mac.com or at 850-781-6090

this is my new updated version of:

Disarming North Korea

Abstract: Conventional political wisdom is there are no good options to prevent a nuclear North Korea. This fatalism is unwarranted because there is a cultural solution; Pyongyang elites—who keep the Kim regime in power—can be convinced they will benefit more in a united nuclear-free Korea. Evidence also suggests the Kim regime might fail without Chinese trade and aid and that the United States has leverage to compel China to pressure these elites to force Kim to acquiesce. With these objectives, I introduce a two-part cultural and economic incentive model designed as a platform to facilitate public-private and Korea-US-China cooperation to disarm North Korea.

KEYWORDS: Reunification Investment Fund, geoeconomic approaches, peaceful acquiescence, incentive model, strategic cooperation, ubiquitous benefits

Foreign Policy editor and Beltway insider David Rothkopf complains about “dumb-downed smart people” in Washington, and claims there is an “institutionalized aversion to creativity” (2014, 16). This frailty is compounded by the fact that when crises emerge everybody seems to become a North Korea expert creating a media-assisted echo chamber. Indeed, conventional US North Korea policy remains stuck in the muck and mire of Cold War causation, without nuance, imagination, or reasonably substantiated expectations of positive-sum outcomes. The often-repeated fatalistic diplomatic doctrine is: “There are no good options.” This can and must change.

The succession of nuclear tests and missile launches suggest that sometime during the Trump presidency North Korea will be able to deliver a nuclear-tipped ICBM to the continental United States (Schilling, Lewis, and Schmerler 2015). Past US presidents have tried to draw a red line—claiming they would not allow a nuclear North Korea—but none has succeeded in undermining this danger or in dissuading China from supporting the Kim regime. After eight years of strategic patience there is consensus something must be done in a hurry and that China must be compelled to cooperate (Goldstein 2016, 82-100). East Asia analyst Jonathan Pollack (2016) observes: “By sharpening the choices confronting Beijing, Washington shows it believes that equivocation or indecision by China is no longer acceptable.”

As aircraft carriers and US battle groups roam Korean waters, Chinese Communist Party (CCP) General Secretary Xi Jinping and North Korea’s Kim Jong-un must feel uneasy about an unconventional US president with a conservative populist mandate, as Donald Trump has made China’s trade surplus a political issue, and as Beijing quietly continues to prop up a belligerent regime in Pyongyang that is developing nuclear weapons it threatens to use against the United States. In addition to indirectly supporting this unholy alliance, Americans are reaching a logical conclusion that buying Chinese manufactured products is essentially paying for their own unemployment and the modernization of the Chinese military that threatens US security interests and may one day be used to kill their sons and daughters.

Some analysts contend China has little influence over North Korea and the US must do more to encourage negotiations with the Kim regime or learn to accept it as a nuclear power, which may include accepting nuclear proliferation in East Asia and the probable export of nuclear materials and technology to other parts of the world. For a variety of reasons discussed below, I am skeptical of trust-building engagement or other appeasing approaches in North Korea’s case, and oppose allowing a fragile authoritarian regime—in a country with the GDP of Togo—the capacity to kill millions of Americans from half-way around the world at the push of a button.

A growing number of analysts also claim a soft US policy toward China has failed (Harding 2015, 95-122). Princeton scholar and former US national security advisor Aaron Friedberg asserts: “China is not an ally, nor is it a trusted friend…[it] has interests and objectives that are at times in direct opposition to America’s” (2011, 265). With millions of manufacturing jobs lost to alleged unfair trade practices and North Korea in the final stages of developing a nuclear-tipped ICBM, Washington may soon seek a grand bargain with Beijing to rebalance US-China trade and denuclearize North Korea.

As the enduring and preponderant economic and military power in the world, the United States has considerable ability to achieve both objectives. Despite the Asian Infrastructure Investment Bank (AIIB), Regional Comprehensive Economic Partnership (RCEP), One Belt, One Road (OBOR) initiatives, and the China Dream of restoring the spender of its Golden Age, as a debt-ridden, export and energy dependent, low-middle income rising power—facing the middle-income trap—with an inferior blue-water Navy and without allies, Beijing has incentive to compromise and cooperate with Washington. And with one-fifth of the worlds population and a growing consumer market, as an emissary of US business interests, Washington has incentive to compromise and cooperate with Beijing. However, as China is a proud and self-confident rising power, avoiding unnecessary conflict may require sophisticated face-saving policies and unconventional means of deploying US power.

In a book Henry Kissinger hopes will convince policymakers to reassess geoeconomic tools, in War by Other Means Ambassador Robert Blackwell and Jennifer Harris (2016) critique conventional US foreign policy and present a prescient prescription for what must change. Blackwell and Harris contend the Vietnam War pushed geoeconomics off the policy stage, and then as now, the US too often reaches for the gun instead of the purse. Citing ideas introduced by the influential Johns Hopkins foreign policy professor Michael Mandelbaum (2015), Blackwell and Harris assert: “Understanding geoeconomics requires appreciating deeply embedded differences in the operating assumptions of geopolitics and economics. The logic of geopolitics is traditionally zero-sum, while the logic of economics is traditionally positive-sum” (2015, 24). They conclude US policy should de-emphasize zero-sum conventional power politics in favor of positive-sum geoeconomic statecraft.

To achieve this objective, I designed a two-part incentive plan to peacefully denuclearize North Korea while creating economic and security benefits for all concerned stakeholders. Fortunately, there are new leverage points today for solving disputes that were unavailable just a few years ago. Instead of another round of contingent engagement, followed by a new display of lethal weaponry and more restrictive sanctions, this reward-based model for conflict resolution does not depend on impersonal trust between leaders or states, but instead relies on the motive force of culture, as expressed in the incentive-directed personal preferences of individuals.

Therefore, in this essay I will introduce a plausible pragmatic platform for positive-sum private and multilateral cooperation that expands the set of options at a time when it is painfully obvious conventional strategies derived from institutional think tanks and policy professionals are not working, and sentiment is growing for more drastic action.

However, since it will be difficult to rein in North Korea’s nuclear missile program without Chinese cooperation or military force, before introducing this proactive geoeconomic approach, let us review evidence that supports the prevailing opinion that China could do more to stop North Korea, possible reasons for its reluctance, and consider incentives that might lead to its cooperation.

PART ONE: CHINESE COOPERATION

China’s Reluctance to Stop North Korea
To observe China’s current reluctance to pressure North Korea to curb its nuclear ambitions is not to contend it will always be unwilling. Like all great sovereign nations, China has a range of evolving geopolitical interests and perspectives and internal political factions competing to have their way. Despite Historic mistrust, current resource predation, and ethnic-nationalist prejudice, conventional wisdom is North Korea and China are involved in a “mutual hostage” (Cha 2012, 344) relationship and that China prefers a divided peninsula in order to preserve a fraternally allied communist authoritarian state as a buffer between itself and the US allied (and occupied) democratic South Korea.

While perhaps valid concerns for an insecure Chinese generation, and although frequently referenced by US policy professionals, there is little rationale for this today. In addition to the borderless diffusion of news and information via satellite/digital communications and the Internet, with over two million men in boots and 2,000 fighter aircraft, no modern army would dare push toward Beijing over land through Korea, and after unification, anti-ballistic missile systems (THADD) and a large US military presence will become unnecessary. Let me suggest a more sinister reason that has largely escaped critical analysis.

Since the chorus of public disapproval in China following North Korea’s February 2013 nuclear test (Dengli 2013; Tao 2013; Yuwen 2013), the prevailing consensus is that Beijing has distanced itself from Pyongyang. It is often cited that Chinese President Xi has yet to meet with Kim Jong-un and has warned him to stop provocations. However, while there is circumstantial evidence for estrangement, this does not discredit an alternative hypothesis that hardliners are feigning displeasure to disguise their real intent. Analysts who presume acrimony fail to identify the silent surrogate role North Korea plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the transfer of technical military knowledge and advanced weaponry.

This chain of strategic relationships destabilizes the Middle East, challenges US interests in the Persian Gulf, and defies the post-World War II liberal international order (Auslin 2017). China policy expert Denny Roy points out that an increasingly dangerous “anti-U.S. Iran diverts U.S. resources away from East Asia and attention away from China” (2013, 174). An incomplete flow chart of the chain of interlinking proxy relationships (including Russia’s role) and weapon transfers between anti-Western authoritarian states and non-state terrorist/resistance groups in the Greater Middle East is represented in the figure below:

Anti-Western International Weapons Supply Chain

supply chain
(Source: Iverson 2017, 147)

A history of Chinese weapon exports to the Greater Middle East and current North Korean weapon exports through Chinese ports to Syria and Iran (arming Hezbollah and Hamas) suggests collusion (Garver 2016, 2006). According to newly released records obtained under the Freedom of Information Act, China began exporting nuclear materials to the Middle East in the early 1980s. Declassified CIA reports reveal that Chinese entities have been key suppliers of nuclear and missile-related technology to Pakistan and missile-related technology to Iran (National Security Archive 2013; also see Kerr and Nikitin 2013; and Gill 1998, 55-70).

According to the head Pakistan nuclear scientist Abdul Qadeer Khan, in 1982 a Pakistani military C-130 left the western Chinese city of Urumqi with enough weapons-grade uranium for two atomic bombs. According to Khan, the uranium cargo came with a blueprint for a simple weapon that China had already tested, supplying a virtual do-it-yourself kit that speeded up Pakistan’s bomb effort (Smith and Warrick 2009). However, these overt Chinese operations soon subsided as Beijing began to prioritize economic growth over anti-imperialist adventures. China policy expert Bates Gill (1998) asserts that Beijing’s gradual acceptance of global arms control and nonproliferation norms—beginning in the 1980s and accelerating in the 1990s—was motivated by its desire to integrate with the international community. Since then, China has used alternative means and surrogates to achieve its anti-Western geopolitical objectives.

Evidence suggests that in return for economic support North Korea functions as a Chinese surrogate. In 2011 a UN Panel of Experts report was blocked by Beijing in the Security Council because it contained incriminating details that Iran and North Korea exchanged missile technology using Air Koryo and Iran Air, involving transshipment through China (Kan 2014). Before the Joint Comprehensive Plan of Action (JCPOA) agreement with Iran was finalized in 2015, Beijing had a long history of opposing UN sanctions against Tehran, vetoing sanctions against the Bashar al-Assad regime, and stymieing possible P5+1 action in Syria (Kemende 2010, 99-114). Beginning in 2009 the Obama Administration imposed sanctions 16 different times on Chinese entities for weapons proliferation, including after 445 North Korean-made graphite cylinders used in ballistic missiles were seized in 2012 from a Chinese cargo ship bound for Syria. In February 2014 the US Defense Intelligence Agency Director testified before the Senate Armed Services Committee that Syria’s liquid-propellant missile program depends on equipment and assistance primarily from North Korea (Flynn 2013, 24-25).

In addition to missile proliferation, the Kim regime has exported nuclear materials and knowledge to the Middle East. Thomas Plant and Ben Rhode—former researchers at Harvard’s Belfer Center for Science and International Affairs—submit that North Korea “sold technology used in nuclear-weapon development on at least two occasions: the slightly enriched uranium hexafluoride to Libya (along with un-enriched uranium hexafluoride feed-stock), and reactor technology and perhaps other material and infrastructure to Syria” (2013, 66). According to senior US intelligence officials and a high-level Iranian informant, North Korea helped Syria build a nuclear reactor in the Syro-Arabian Desert designed to produce nuclear weapons.

Information from satellite imagery released by the US government revealed the al-Kibār reactor was modeled on a North Korean gas-graphite reactor design—which uses a large core of natural uranium metal fuel—and was about the size and shape of the reactor at the Yongbyon nuclear facility in North Korea. After Mossad penetrated these plans, Israeli jets bombed it in September 2007 (Follath and Stark 2009). Harvard national security expert Graham Allison asks and answers: “Does Pyongyang believe that North Korea could get away with selling a nuclear weapon to Al Qaeda or Iran? The fact that North Korea sold Syria a reactor that is thousands of times larger than a bomb suggests that it does” (2014, ix).

These intelligence discoveries, plus Beijing’s lackluster response to Pyongyang’s nuclear and ballistic missile tests, its failure to eliminate munitions transshipments, and feeble enforcement of UN sanctions suggest that China’s support for North Korea may not be a benign legacy of the Cold War, but is part of a larger geopolitical strategy (Iverson 2013). After secretly establishing Pakistan as a nuclear power on one flank, China may prefer a surrogate ally with nuclear muscle on its other flank. While it may seem unthinkable today, China is a long term strategist, and if at any time in the future Beijing chose to challenge the US in the Pacific theater, it would certainly be of value to have a conventional and nuclear missile capable ally able to threaten US military bases in the region.

While hardliner elements in Beijing may currently lack resolve to stop North Korea, evidence China could suppress or even prevent its nuclear proliferation would create a strategic opening for geoeconomic diplomacy that US leaders have an obligation to pursue.

Can China Stop North Korea?
Taking the CCP at its word that it disapproves of North Korea’s nuclear missile program, most institutional analysts also presume Beijing cannot stop it. This is an unfounded and dangerous assumption since this lets China off the hook when evidence of substantial economic leverage suggests otherwise. According to a US Congressional research report, in addition to over one billion dollars in direct aid, Beijing purchases 90 percent of North Korea’s commercial exports, provides 80 percent of its consumer goods, 90 percent of its energy, over $100 million in UN banned luxury goods, and enough food to feed over a million people per year (Manyin and Nikitin 2012). However, the most profit is derived from the trade itself, which despite Beijing’s alleged discomfort with Pyongyang’s provocations, has quietly increased four fold since North Korea’s first nuclear test in 2006, as shown in the graph below.

China-North Korea Trade 2006-2015
Trade 2006-2015
Source: Korea Trade-Investment Promotion Agency (KOTRA)

Although there are recent indications—at least on paper—of a slowdown in trade—undoubtedly precipitated by greater US pressure to enforce UN sanctions—this dramatic increase in trade since 2006 is undeniable material evidence of China’s support for North Korea and suggests tacit approval of its Middle East policies and nuclear weapons program. As Beijing props up the Kim regime without bringing attention to itself—or anyone losing face—it may undervalue exports by at least one-third—a strategic discount—while the bulk of North Korea’s exports of mineral products and textiles—utilizing work camp labor—may return a 90 percent profit. The structural trade deficit (highlighted above) with China is effectively foreign aid since it is inconceivable it will ever be paid back, as with the $10 billion Russian debt that was forgiven in 2012 after decades in arrears. Given these assumptions, from available data Chinese trade and aid is responsible for direct and in kind fungible profits that paid for more than three-quarters of North Korea’s $6 billion 2015 military budget.

Thus, Beijing’s words do not comport with its actions, and the media and policy analysts should see this and respond accordingly. Despite benign policy pronouncements, there is no question that China is underwriting the stability of the Kim regime and paying for a large portion of its nuclear weapons program. Indeed, if China were to abide by UN sanctions and suspend support—even if food aid was maintained at humanitarian levels—without luxury goods for elites, oil for the military, and essential commodities for its people, it is improbable the Kim regime would last long. American Enterprise Institute economist Nicholas Eberstadt (2015, 7) describes North Korea as more dependent on aid than the poorest countries in Africa. According to the highest ranking émigré and a senior member of the Korean Workers Party: “Without Chinese capital goods, it would be impossible for the North Korean government to operate, and ordinary people would not be able to carry on with their daily lives” (Chosunilbo 2014).

Under such conditions, leaders of surrogate states need not like their overseers in order to do as expected when money—or its equivalent—is on the table, especially if they have no one else to turn to in times of trouble and when these activities are entirely consistent with their domestic political and geopolitical designs. The degree of animus or friendship between Beijing and the Kim regime is immaterial to this client-proxy relationship, which would dissolve if North Korea’s nuclear missile program, and missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

Breaking With the Past
Material analysis suggests Beijing has existential leverage over the Kim regime and that the effectiveness of UN sanctions is seriously compromised while China underwrites Kim’s survival. However, enlisting China’s cooperation may not be as prohibitive as observers might think. Dartmouth political scientist Jennifer Lind (2013) points out that when China and North Korea originally formed an alliance both countries were weak, resentful, isolated, and the target of Cold War containment by the US and its allies. China has since moved beyond this state of affairs, has joined multilateral institutions, and now depends on the international system as the world’s largest trader. Although its North Korea policy remains anchored to the past, influential factions in the PLA and the CCP regard the Kim regime as a threat to regional stability (Jun 2013).

In a September 2014 article, published in the China state journal, World Knowledge, Renmin university international relations expert Li Wei describes North Korea as inappropriate as a “strategic ally” because it does not conform to the general criteria of a “strategic hub country” that supports Chinese political, diplomatic and security goals (Dong-a Ilbo 2014). Party elites are uneasy about an unruly state on their border that may provoke a US military response or prompt regional nuclear proliferation (Samuels and Schoff 2013, 259). These security concerns, plus President Trump’s fair trade alarm, put Beijing in double jeopardy. Indeed, Richard Haass at the Council on Foreign Relations notes: “China needs years and more likely decades of relative stability in the region so that it can continue to address its many domestic challenges. North Korea is a threat to such stability” (2014).

Although hardliner traditionalists still prevail over a new generation of policy pragmatists, their authority is not unlimited, and Beijing is not immune to its own populist pressures. China may not renew this relationship indefinitely, as it is forced to accept more important concerns that loom on the horizon. Since the Mao era, Chinese leaders have exhibited an admirable faculty for reform in response to changing real-world circumstances. Cheng Li (2016, 356-357)—an expert on Chinese elites—argues President Xi’s deliberately ambiguous stances and strategies has struck a delicate balance between constituencies and socioeconomic forces that allows Xi the flexibility to adapt in the face of evolving geopolitical and geoeconomic challenges. As relations between the US and North Korea will likely deteriorate and the geopolitical calculus changes, the geoeconomic incentive model outlined below may be Beijing’s golden opportunity to resolve this eroding security dilemma before it loses control over the situation.

Sixty-five years ago when its frontline value was beyond reproach, North Korea was a protected pawn in the chess match of great power rivalry. However, now that it has invited danger into the region for China, it may be sacrificed for a larger strategic vision. There is danger that since the PLA is the dominant ground force in Asia, China’s notion of strategic reassurance may include territorial sequestration in Korea and in the littoral waters of the Asia-Pacific (see Bennett 2013, 89-90; and Iverson 2017, 121-134).

As Trump conducts a less institutionally constrained and more personal approach to foreign affairs he may abandon conventional Cold War geopolitics and stress a more accountable geoeconomic statecraft. And why not, for more than twenty years all else has failed. Strategic trade and security deals can be shaped and reshaped in this enlarged negotiating environment. In a world of massive capital flows, unequal abundance, structural stagnation, and global satellite communication, where expanding trade and creating jobs is as important to political survival as free access to well endowed consumer markets, it is likely that over the course of the twenty-first century a more pragmatic modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft to solve political disputes and promote and defend national interests.

As we gradually transition into a world of multiple polarities, in a bold new finance and technology-driven, democratically and demographically expanding interdependent globalized system, cooperative checkbook diplomacy must replace competitive gunboat diplomacy, and the proliferation of weapons of mass destruction must cease altogether. Nothing would reduce imperial rivalry and contribute more to world peace and international security than resolving the Korea nuclear dilemma with empathy, strategic cooperation, and financial reassurance.

The following plan to disarm North Korea was designed as a bridge to this future.

PART TWO: KOREAN COOPERATION

Creating Incentives
It is my hope with vastly more materialist variables on the table in the early twenty-first century that political leaders might transcend the more traditional and vindictive eye-for-an-eye approach and turn the other cheek. Policymakers would be wise to recognize that the application of pain through punishing sanctions and negative coercion is sometimes much less effective in gaining compliance than positive reinforcements. Like good parents, policymakers and heads-of-state must be able to discern when it is wise to punish and when it is better to use incentives. As David Baldwin (1971; 1979; 1985; 1998) advocated almost a half-century ago, there is need for a more balanced approach to the application of power.

What if North Korea could be disarmed without inciting fear or administering punishment, but instead, by promising personal rewards? Unconventional approaches—such as the one I am about to introduce—often seem strange and untenable until they are fully understood. Therefore, I ask readers to be open-minded—to be prepared to think outside the box—and to suspend judgment until they fully comprehend the interacting details of this cultural and economic approach.

This incentive model for disarming North Korea presumes that if the causes of conflict and war can sometimes be reduced to competition over money and control over the land, people, and the resources that produce it, then it might be possible to pay in advance to prevent it (Iverson 2013). My central assumption is that in social settings, where almost everything is for sale, there must be some level of security assurance and personal financial incentive that will convince top Pyongyang governing elites to impose insurmountable domestic pressure on the Kim regime to acquiesce to South Korean political control. Indeed, after more than a quarter century of failed conventional policies, an economic strategy that injects the persuasive power of personalized money into the diplomatic process may be necessary in order to overcome institutional inertia, ideological intransigence, and path dependencies that too often terminate in conflict.

Therefore, imagine you control a multi-billion dollar capital fund and North Korea is a poorly run and underperforming corporation controlled by an incompetent board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—political/military elites, government managers/bureaucrats, and the general population—a higher price for their shares to convince them to overrule their board of directors—A FRIENDLY CORPORATE BUYOUT.

For this model to succeed, Pyongyang elites must feel assured they would enjoy a safe and prosperous future. Therefore, I propose a privately endowed fund that promises an appealing post-unification payout to North Korean elites to incentivize them to take action to unify Korea. After much analysis, I have arrived at what I think would be a motivating amount: the top 1,000 North Korean families will be promised between $30-$5 million each (dispensed over 7 years), 11,000 upper elites—including all generals—would get over $1 million; 50,000 lower-level political elites and military officers are promised $100,000 to $500,000. In total, 112,030 elites will receive more than $50,000 each (see Iverson 2017, 38).

Individually, this is an enormous amount of money even for elites and should create strong incentives for reunification among over 100,000 new generation elites that have assumed power since the succession of Kim Jong-un almost six years ago. It is plausible this friendly corporate takeover can be accomplished for as little as $29.4 billion—an annual $4.2 billion investment over 7 years. A summary of this elite payout is provided below:

Fund Payments

Individual financial incentives are an affordable option in North Korea due to a small population (25 million), low per capita GDP (~$1,300), and a relatively impoverished power elite. Reports from high-ranking defectors suggest North Korean elites are ready for an alternative to their current condition. As internal insecurities mount, attractive material incentives and assurances their lives will improve after unification may tip the balance. Even Kim Jong-un may be offered personal and financial security, and be allowed to keep a portion of his fortune. Denial of complicity in palace purges and other alleged atrocities may preserve his public image; his father and the relic henchmen young Kim has already dispatched from positions of power will be scapegoats for decades of malfeasance and unconscionable human rights abuse. If preemptive back channel talks lead to an agreement, Kim might justifiably be hailed as the heroic leader who brought peace, prosperity, and unification to his people.

However, if he does not acquiesce, these financial incentives may lead to insurrection—the expectation of which will encourage this preemptive agreement. Indeed, with $20-30 million promised to each of the 210 most prominent families, it is not implausible that they might take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political or military elites. In either case—violent overthrow or peaceful acquiescence—the transfer of political power to South Korea would end more than 65 years of abject tyranny and human rights abuse, would prevent nuclear proliferation in East Asia, and eliminate one flashpoint for war between an established and a rising power—the US and China.

Although unification may be achieved through elite payments alone, this Reunification Investment Fund model includes the possibility of a publically funded component that would include payments to a larger segment of the population and perhaps lead to greater pressure on the regime. For an additional $15.4 billion 500,000 Korean Workers Party members and 300,000 impoverished families in Pyongyang may be incentivized to push for reunification. This will likely inspire mass grass-roots activism. The bold arrows in the figure below represent the more essential strategic elements of this Reunification Investment Fund:

Reunification Investment Fund Financial Flow Chart
Trade 2006-2015
(Source: Iverson 2017, 29)

As designated by the thin arrows, the masses outside Pyongyang may also be awarded financial benefits. This would help jump-start the new economy and ensure social stability. Non-taxpayer derived investment capital may come from South Korea’s half-trillion dollar sovereign wealth and foreign reserve assets, QE, helicopter money, or from the presumptive peace dividend. Post-unification investments in infrastructure from Korean government bonds ($300 billion was recommended by the Korea Financial Services Commission in November 2014), international banks, and the B-20 (the investment arm of the G-20) may amount to more than a trillion dollars over the next decade, creating millions of productive jobs and securing the democratic transition.

Little is known about the sentiments of the Pyongyang poor, who comprise about two million people living in close quarters, just a stone’s throw from the guarded compounds of the power elite. Few have refrigerators and even fewer own washing machines; electricity and water are intermittent. They live along dirt roads in brick-and-clay huts without toilets, heat their homes with charcoal, and bathe infrequently in public cold-water showers—even in the bitter cold of winter (Lankov 2007, 93-95). Promises of food security, modern health and dental care for their children, property ownership, a regularly functioning water and energy infrastructure, high-speed international communication links, and thousands of dollars deposited into their personal bank accounts each year for seven years may spread unification fever and many may take to the streets.

However, if safe from international retribution, the Kim regime may acquiesce long before the social situation devolves into a state of general chaos and insurrection. Although Kim Jong-un receives no money, that personal safety is more precious than power would give him little choice but to accept this offer. He may be granted immunity from criminal prosecution, allowed to keep a portion of his fortune, and promised freedom to live and travel anywhere in the world. Nothing is gained by his vilification or punishment, while promising safety and security to the House of Kim may prevent bloodshed.

On the surface, these payments may seem counterintuitive, unethical, and even immoral to pay an enemy that is infamous for decades of unconscionable human rights abuse. However, upon closer analysis, almost everyone in the North Korean hierarchical pyramid of power has been replaced in recent years, and therefore this new generation of Pyongyang elites may be viewed less as perpetrators and more as innocent victim inheritors of an ignoble history. Most who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate (position and power) and were not complicit in its original acquisition or in the malevolence that followed. We do not punish the descendants of slaveholders or the children of thieves and murderers. Indeed, this payment would amount to a bailout for the misdeeds of their ancestors—without moral hazard.

Although we often envision North Koreans through a media-distorted lens as goose-stepping saber-rattling soldiers and belligerent missile-launching miscreants, political scientist David Kang submits that these people “[inherited] circumstances they did not create … [and] live their lives, marry, worry about their children, go to their jobs, and try to get through the day as best they can” (2011/12, 162). They have families, grandchildren, and hopes and dreams for a peaceful and prosperous future, and over 30 percent are children endowed with the innocence of youth. Indeed, there is every indication North Korean elites are wise, rational, and pragmatic people who are amenable to compelling incentives, and will likely consent to this uniquely enriching opportunity for themselves and their families if their personal safety and wellbeing is assured.

After more than a generation of economic stagnation and fending for themselves following the dismantling of the free public food distribution system in the early 1990s, almost everyone in North Korea has abandoned Leninist ideology and is aware of and envious of South Korea’s remarkable prosperity. The steady diffusion of news and information across the semi-permeable Chinese border has changed the cognitive landscape in North Korea, as a market-motivated underground information highway has challenged the state’s meta-narrative and monopoly on information. As in the final days of the Soviet Union, the efficacy of this model is enhanced by word-of-mouth rumor currently spreading across North Korean social networks that the outside world is a better place to live (Kotz and Weir 2007; Iverson 2013). Rumors of the inordinately better life in the South have saturated cultural impressions and created a new social context for political change that has not existed before (Lankov 2013).

After decades of silent transformation the mere existence of this fund sitting in escrow ready to pay out vast sums may catalyze overwhelming support for reunification at all levels of North Korean society. The promise of $29.4 billion to elites can win a lot of hearts and minds. More than 3 million mobile phones will help spread news of this payout. North Korean elites and commoners are ready for change and this fund is a platform to unleash and manage it.

But who has the imagination, capability, and vested self-interest and incentive to fund this unconventional geoeconomic approach to peacemaking?

Private-Public Cooperation
For a variety of reasons it is unlikely any government—especially a democratically elected one—could authorize payment of public funds to North Korean elites, no matter how justifiable. Therefore, the success of this proposal depends not on the political but on the economic realm, where private entities may do whatever they wish. Global businesses have an economic interest in maintaining global production chains and the free-flow of trade, and therefore a significant incentive to protect world peace. And North Korea is naturally and geographically endowed with enormous profit-making resources that would become available to the private sector if it were unified with South Korea. Therefore, to secure a greater prosperity, these reciprocal benefits may lead to private-public cooperation.

As displayed in the figure above, in this scenario the South Korean government would offer resources awards and private sector contracts for infrastructural improvements and portions of future markets, industries, and business enterprises worth trillions of dollars in profitable assets, including a controlling interest in telecommunications, transportation, building materials, and automotive products, ownership or licensing agreements for control over mines, seaports, and tourist attractions, and exclusive construction contracts for a gas pipeline, railroads, tar roads, energy generation, and a multitude of necessary projects.

There is an abundance of lucrative business opportunities in the hermit kingdom. North Korea ranks 10th among all nations in mineral reserves: valued at $6-10 trillion. A multi-billion dollar pipeline must be built from Russia to supply the industrial and population centers of Korea with an estimated $3 billion in natural gas per year (Harkins 2011). New railroads lines must be built; goods shipped over a Eurasian Express train would reach European markets in one-third the time it takes by ship via the Suez Canal (Ikeda 2013). Japan would likely export to Europe by train through Busan. Unification would also stimulate exports through the northernmost ice-free Pacific port in Rason, just a few miles from landlocked China and bordering the resource rich Russian Far East.

These seaports will increase in value as trans-arctic shipping advances over the course of the twenty-first century. Roads must be tarred, cars imported; only 3 percent of the roads are paved and the North has only 50 thousand private cars compared to 18 million in South Korea. Less expensive labor will be available for at least a generation, as formal sector commodity markets spring up everywhere. Tourism is another unexploited multi-billion dollar industry, where control over specific attractions may also be turned over to private enterprise in return for contributions to the fund. These safe investment vehicles will result in enormously profitable ventures with long-term returns.

In exchange for these resource awards and government assurances, business investors would be required to endow this fund to pay an annual $4.2 billion golden parachute for seven-years to North Korea political and military elites, to compensate for their loss of power and position. As noted, since it is impractical to expect democratically elected officials to agree to transfer public money to North Korean elites, these payments must come from private sources, for whom the prospect of enormous business profits make this a wise investment. And there is no risk since money is not deposited into personal bank accounts until after unification and the formal transfer of political and military power.

And as good fortune would have it, after decades of globalization profits and unprecedented QE, the world is awash in money. Business tycoons, transnational corporations, and institutional investors have surplus capital and are looking for opportunities. East Asian private equity firms hold more than $100 billion in “unspent cash” but are experiencing difficulty finding profitable investment opportunities as the global economy has lost momentum (Carew and Watts 2015). The Bank of Korea or international banks (IMF, ADB, and AIIB) may provide infrastructural investments and financial guarantees—as the lender(s) of last resort—since there is little risk a unified Korean economy will not prosper, and the BOK will profit the most.

International business, banking, and multilateral underwriting, with G-20 leadership, will impart confidence by indemnifying this fund with broad assurances from the global community. In today’s multilayered global balance of power, private interests often serve as a unifying force in the competitive nation-state system of world governance. This unification plan is predicated on the simple assumption that geopolitics may sometimes be more effectively managed through positive-sum geoeconomic incentives acting on the personal and cultural level.

Convincing China
Analysts agree Beijing has been more assertive and confrontational since the Global Financial Crises, after which former US Treasury Secretary Hank Paulson observed a “newfound sense of confidence, verging on triumphalism, among many of the Chinese I saw and spoke with” (2015, 369). Princeton scholar and former deputy assistant secretary of State Thomas Christensen refers to China’s more aggressive geopolitical behavior as “offensive diplomacy” (2015).

However, it is unlikely this irrational exuberance can be sustained because China’s trade surplus with the West and its economic support for North Korea contain fatal contradictions it cannot yet resolve with raw power. Indeed, the CCP has made China vulnerable to financial crisis after years of inefficient domestic economic policies and by massively subsidizing its geostrategic objectives. After a decade of spending beyond its means, and now with a stagnating global economy and reduced exports, China is on the brink of a serious debt crisis and cannot afford diplomatic or trade complications with the US—that is responsible for 10-15 percent of its GDP and tens-of-millions of steady export related jobs.

The CCP must weigh the cost of zero-sum security competition and perhaps even conflict against and benefits of a new partnership and potential strategic condominium with the US. Graham Allison contends: “If leaders in Beijing and Washington keep doing what they have done for the past decade, the US and China will almost certainly wind up at war” (2017, xvii). Alternatively, this fund offers Beijing a face-saving opportunity to rethink its policies and form a collaborative alliance with the US based on the principles of the nuclear nonproliferation treaty.

If this fund were to gain critical momentum, China may have little choice but to cooperate, since its longer-term alternatives are foreboding. In one scenario, if security competition led to conflict and a western trade embargo, along with losing 40 percent of its foreign exports, already heavily leveraged Chinese corporations would fail, property markets—that hold its largest store of household wealth—would collapse, and $2.2 trillion in direct foreign investment would evaporate, as an unsuccessful stampede to withdraw a portion of the $15 trillion in household and consumer deposits from under-capitalized state banks would result in financial meltdown and panic across China. Even China’s considerable foreign reserves could not prevent this implosion, as its 35-year economic miracle would come to a screeching halt. Geopolitical specialist Peter Zeihan submits, “Should American trade access be revoked it would be as if China suffered from an equivalent of three American Great Recessions all at once” (2014, 314).

While there may be political instability in China, citizens in America would rally behind the President. The US would mobilize its military from around the globe, but after decades of China modernizing its near-shore military capabilities, it may be advisable to stand back behind of the First Island Chain and watch as events unfold on the mainland. The US would be less affected than one might expect after exaggerated reports of Chimerican interdependence. It may suffer a temporary stock market collapse, inflation at Walmart, and shortages of select electronic and machine products, but enjoy trade balance and employment gains as commodities once shipped from China are manufactured at home or near-shored.

Few realize the US economy is more self-contained and less integrated in the Bretton Woods global system than almost all other nations. The US is the world’s largest and most efficient manufacturer, producing 75 percent of what it consumes and all of its energy needs. Two-thirds of foreign trade is in the Western Hemisphere, and since the shale revolution gifted the United States with energy independence, its imports from the Eastern Hemisphere could potentially be less than 5 percent per year. Galina Hale and Bart Hobijn at the Federal Reserve Bank in San Francisco calculated that goods and services from China account for only 3 percent of US personal consumption expenditures (2011). David Dollar at Brookings notes: “Only 1 percent of the stock of US direct investment abroad is in China” (2015).

The economic contraction might be tantamount to the Global Financial Crisis, and damage to international investors and exposed corporations will be severe, but temporary. Americans and Europeans have healthy public support systems and can adjust to slow-downs, shortages, and price hikes, while most Chinese citizens cannot survive without a steady income, and would turn against a government that cannot provide then with one. After decades of rapid urbanization, massive unemployment compounded by a weak social safety net may redirect the exuberant energies of a surging lower- and middle-class nationalism against the CCP, that is already perceived as irreparably corrupt after decades of official graft and land grabbing. A reckless foreign policy that impacts livelihoods might be the last straw.

Although not a conventional democracy, the CCP is constrained from taking actions people recognize as damaging to the country; grave malfeasance would lead to inexorable demands for its ouster, and the end result is far from certain. If social unrest threatens the Party, ultimately it is the military that will decide its fate. Although the Central Military Commission has rescued the Party in the past, its leaders may second-guess the Party’s Mandate from Heaven if China’s economic foundations crumbled and mass social chaos ensued. Yale political scientist John Bryan Starr argues that the credibility of the PLA exceeds that of the CCP, and mindful of the backlash from the Tiananmen massacre in 1989, “it will be patriotism rather than loyalty to the party that brings the military into the political arena [again]” (2010, 362).

This is the great Confucian paradox of Chinese aggressiveness and precocious military modernization. Nevertheless, the CCP is no more suicidal than the Kim regime and will adapt to new geopolitical and geoeconomic realities with strategic cooperation if it has no better option. To countermand these regressive security impulses we need new institutional platforms that promote peace and conciliation, and that elicit opportunities for compromise and cooperation. This fund facilitates these collaborative stabilizing objectives.

Conclusion
The status of the world’s most consequential bilateral relationship will reflect how President Xi negotiates the China Dream and how President Trump applies his America First foreign policy. Trump has appointed a balanced staff of senior advisors, with the cautious pragmatism of Mattis, Tillerson, McMaster, Kelly, and Dunford on the military side, and with Mnuchin and Cohn moderating the hardliner trade approaches of Ross, Lighthizer, and Navarro. But despite sound advice, warm handshakes, and glittering smiles in Palm Beach, there may soon be a day of reckoning, when the office becomes larger than the men who inhabit it, and the art of the deal will be decided not over pleasantries and chocolate cake, but by hardball negotiation and the prerogatives of power.

The Trump administration has made it clear that America’s patience has run out and that it will not allow the Kim regime the ability to terrorize the United States with nuclear weapons. With the horror of 9/11 indelibly etched into American minds, many believe a surgical military strike now may have significantly lower risks than a nuclear-ICBM endangered future. Despite a pundit-orchestrated chorus of reservations, new polls suggest increased fear and support for US interdiction. New provocations seem to beg for preventive US kinetic action. As US military personnel increasingly populate the public airways, President Trump warns of “fire and fury” and that the US is “locked and loaded” and a major television network anchor casually uses the phrase “incinerate North Korea” as an option, it is clear that all options are on the table.

Although Trump promised to inform South Korea President Moon of an impending US attack, he may act unilaterally and unpredictably—as in the April 7 cruise missile strike on a Syrian airfield. Since conventional geopolitics has failed to stop North Korea from developing weapons of mass destruction, the geoeconomic approach outlined in this essay should be considered in lieu of another preventive missile strike. Indeed, the unorthodox plan proposed here might be the only realistically achievable path to denuclearize Korea at this late stage without resorting to a kinetic solution.

If as realist scholars submit, that vulnerability to threats is the main driver of Chinese foreign policy, then Beijing should seek to avoid the prospects of US military action on its doorstep, a nuclear-armed Japan (Nathan and Scobell 2012), or a geoeconomic challenge to its legitimacy. This plan gives the CCP room to back away and save face. As Henry Kissinger optimistically asserted in his August 2017 interview with Charlie Rose, mutual security concerns may compel reciprocal compromise and cooperation. China may facilitate Korean unification by suspending all support for Pyongyang while the US would agree to withdraw its military from mainland Korea pending unification and the removal of nuclear weapons. Both nations may diplomatically promote and financially support this fund because it advances their security.

If popularized in the media, business leaders and heads of state may see this is a workable plan with ubiquitous benefits to everyone with something at stake in the region. The US would get the dissolution of a grave nuclear threat, an end to the possible transfer of nuclear materials and technology to terrorists or rogue states, and a chance to reassess its geopolitical interests in a much less threatening Asia-Pacific; Japan gets safety from missile attack and weapons of mass destruction, along with large new labor, export, and investment markets; Russia gets secure rail and energy profits, and year-round passage to Pacific shipping; China gets a reprieve from the possibility of regional nuclear proliferation, free-market access to Korean minerals and ports, cooperation in developing its northeast provinces, the removal of US troops from mainland Korea and an easing of great power rivalry; and South Korea gets permanent peace, trillions of dollars in mineral resources, energy security and diversification, several valuable Pacific ports, rail connection to China and continental Europe, 50 percent more people, 120 percent more territory, and according to a Goldman Sachs study, development synergies that may propel its GNP past France, Germany, and Japan in just one generation (Kwon 2009, 12).

From the central tenets of this essay, it is clear we must move beyond the unimaginative conventional Cold War era policies of dumb-downed smart people in Washington, Beijing, and Seoul—and their institutionalized aversion to thinking creatively outside the box—to a place where good options do exist. We must see the bigger picture, in which over the course of the next generation another two billion people will plug into the Internet and join in the global conversation. If allied in efforts to procure a greater global unity, increase technological innovation, protect our fragile planet, capture the unlimited energy of the sun, and create jobs and open new markets and possibilities around the world for this expanding and modernizing population, the United States and China—with Russia and Japan—could forge new positive-sum relationships based on economic opportunity, and partner to unify Korea and extend the Long Peace deep into the twenty-first century.

Foreign policy must be reassessed and redesigned to account for the social and political leveling impact of the modernizing forces of new technology. The information revolution has created new aspirations for a better life in North Korea and the pre-conditions for political transformation that have not existed before. As the Kim regime denies its citizens a prosperous future, power elites, government officials, and average people are reaching a threshold of disaffection. However, due to the coercive security state, until a reason for hope comes along, people must wait for an angel to appear. This fund is that angel, since it provides a path to a better life, and creates an impetus for organizing hopes and dreams, and channeling thoughts and emotions into collective action.

Although nuclear proliferation and the trajectory of geopolitics seem unstoppable, we need not continue down this road leading into the abyss. Instead we may think outside the box and create novel solutions to unique contemporary geopolitical problems. Realizing the potential of this fund will require the inspired vision of business and political leaders who can bring out the best in all of us; those who perceive the big picture and understand that the ideas that move humanity forward are often initially considered crazy, disruptive, or impossible; leaders who can show us what we should want, while employing positive-sum geoeconomic incentives to get us there. If the smart power dynamics of this plan were popularized in the media and discussed on a world stage, the private sector and heads of state might be compelled to support this fund, and unification could occur within months, and leaders in China, Korea, and the United States could share the Nobel stage.

To get from here to there we must transcend zero-sum geopolitics with a strategic plan that at least has some chance of positive-sum success. This Reunification Investment Fund is such a plan. As Ambassador Blackwell and Jennifer Harris astutely assert: “U.S. foreign policy must be reshaped to address a world in which economic concerns often outweigh traditional military imperatives and where geoeconomic approaches are often the surest means of advancing American national interests” (2016, 226). Wise leaders of the twenty-first century must create new opportunities and consider cooperative platforms for showing people what they should want. Indeed, from time immemorial, reason and creativity has helped humans overcome nature; now in this nuclear age we must innovate in order to save us from ourselves.

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Disarming North Korea

you may contact me at iver7777@mac.com

Disarming North Korea
7,170 words

Foreign Policy editor and Beltway insider David Rothkopf complains about “dumb-downed smart people” in Washington, and claims there is an “institutionalized aversion to creativity.” Indeed, conventional US North Korea policy remains stuck in the muck and mire of Cold War causation, without nuance, imagination, or reasonably substantiated expectations of positive-sum outcomes. The fatalistic diplomatic doctrine is: “There are no good options.” This can and must change.

After North Korea’s quadruple missile launch in March, nonproliferation analyst Jeffrey Lewis has convincingly argued that Pyongyang is “preparing for a nuclear first strike” on US and allied military installations in the Asia-Pacific. Experts predict that sometime during the Trump presidency North Korea will be able to deliver a nuclear-tipped ICBM to the United States homeland. Past US presidents have drawn a red line, claiming they would not allow a nuclear North Korea; however none has been successful in undermining this danger or in dissuading China from supporting the Kim regime. After eight years of strategic patience there is a growing consensus that something must be done in a hurry and that China must be compelled to cooperate. East Asia analyst and scholar Jonathan Pollack observes: “By sharpening the choices confronting Beijing, Washington shows it believes that equivocation or indecision by China is no longer acceptable.”

As a US Aircraft carrier strike force moves toward Korean waters, Chinese President and communist Party general secretary Xi Jinping and North Korea’s Kim Jong-un must feel uneasy about an unconventional US president with a conservative populist mandate, as Donald Trump has already made China’s trade surplus a political issue, and as Beijing quietly continues to prop up a regime in North Korea that is developing nuclear weapons it threatens to use against the United States. Some analysts claim that a soft US policy toward China has failed. Princeton political scientist and former US national security official Aaron Friedberg asserts, “China is not an ally, nor is it a trusted friend…[it] has interests and objectives that are at times in direct opposition to America’s.” With several million manufacturing jobs lost to alleged unfair trade with China, and North Korea in the final stages of developing a nuclear-tipped ICBM, Washington may seek a grand bargain with Beijing to rebalance US-China trade and denuclearize North Korea.

As the preponderant economic and military power in the world today, the United States has considerable ability to achieve both objectives. As a debt-ridden, export and energy dependent, low-middle income rising power with a vastly inferior blue-water Navy, Beijing has incentive to compromise and cooperate with Washington. However, avoiding unnecessary conflict may require unconventional means of deploying US power over China and North Korea.

In a book Henry Kissinger hopes will convince policymakers to reassess geoeconomic tools, in War by Other Means Ambassador Robert Blackwell and Jennifer Harris critique conventional US foreign policy and present a prescient prescription for what must change. Blackwell and Harris contend the Vietnam War pushed geoeconomics off the policy stage, and then as now, the US too often reaches for the gun instead of the purse. Citing ideas introduced by the influential Johns Hopkins foreign policy professor Michael Mandelbaum, Blackwell and Harris assert, “Understanding geoeconomics requires appreciating deeply embedded differences in the operating assumptions of geopolitics and economics. The logic of geopolitics is traditionally zero-sum, while the logic of economics is traditionally positive-sum.” They conclude that US policy should de-emphasize zero-sum conventional power politics in favor of positive-sum geoeconomic statecraft.

To achieve this objective, I have designed a model to peacefully denuclearize North Korea while creating economic and security benefits for concerned stakeholders—including China. In this essay I will introduce a pragmatic platform for positive-sum private and multilateral cooperation that expands the set of options at a time when it is painfully obvious conventional strategies derived from institutional think tanks and policy professionals are not working, and sentiment is growing for more drastic actions.

However, before introducing this proactive geoeconomic approach, let us review evidence that supports the prevailing opinion that China could do more to stop North Korea, and possible reasons for its reluctance.

China’s Reluctance to Stop North Korea

Conventional wisdom is that China prefers a divided peninsula in order to preserve a fraternally allied communist authoritarian state as a buffer between itself and the US allied (and occupied) democratic South Korea. While perhaps a valid concern for a more insecure generation, there is little rationale for this today. In addition to the borderless diffusion of news and information via digital communications and the Internet, with over two million men in boots and 2,000 fighter aircraft, no modern army would dare push toward Beijing over land through Korea, and after unification, the presence of anti-ballistic missile systems (THADD) and the US military are unnecessary. Let me suggest another reason that has largely escaped critical analysis.

Since the chorus of disapproval in China following North Korea’s February 2013 nuclear test, prevailing consensus is that Beijing has distanced itself from Pyongyang. It is frequently cited that Chinese President Xi has yet to meet with Kim Jong-un and has warned the Kim regime to stop provocations. Although there is circumstantial evidence for estrangement this does not discredit an alternative hypothesis that China is feigning displeasure to disguise its real intent. Analysts who presume acrimony fail to identify the silent surrogate role North Korea plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the transfer of technical knowledge and advanced weaponry. An incomplete flow chart of the chain of interlinking proxy relationships (including Russia’s role) and weapon transfers between anti-Western authoritarian states and non-state terrorist/resistance groups is represented in the figure below:

Anti-Western International Weapons Supply Chain (ask and I can email it to you)

This chain of strategic relationships destabilize the Middle East, challenge US interests in the Persian Gulf, and defy the post-World War II liberal international order. China policy expert Denny Roy points out that an increasingly dangerous “anti-U.S. Iran diverts U.S. resources away from East Asia and attention away from China.” A history of Chinese weapon exports to the greater Middle East and current North Korean weapon exports through Chinese ports to Syria and Iran (arming Hezbollah and Hamas) suggests collusion. According to newly released records obtained under the Freedom of Information Act, China exported nuclear materials to the Middle East in the early 1980s. Declassified CIA reports reveal that Chinese entities have been key suppliers of nuclear and missile-related technology to Pakistan and missile-related technology to Iran.

In 2011 a U.N. Panel of Experts report was blocked by Beijing in the Security Council because it contained incriminating details that Iran and North Korea exchanged missile technology using Air Koryo and Iran Air, involving transshipment through China. Before the JCPOA agreement was finalized, Beijing repeatedly opposed UN sanctions against Tehran, vetoed sanctions against the Bashar al-Assad regime, and stymied possible P5+1 action in Syria. Beginning in 2009 the Obama Administration imposed sanctions 16 different times on Chinese entities for weapons proliferation, including after 445 North Korean-made graphite cylinders used in ballistic missiles were seized in 2012 from a Chinese cargo ship bound for Syria. In February 2014 the US Defense Intelligence Agency Director testified before the Senate Armed Services Committee that Syria’s liquid-propellant missile program depends on equipment and assistance primarily from North Korea.

These intelligence discoveries, plus Beijing’s lackluster response to Pyongyang’s nuclear and ballistic missile tests and its failure eliminate munitions transshipments and enforce UN sanctions, suggest that China’s support for North Korea may not be a benign legacy of the Cold War, but part of a larger geopolitical strategy. After establishing Pakistan as a nuclear power on one flank, China may prefer a surrogate ally with nuclear muscle on its other flank. If at any time in the future China challenged the US in the Asia-Pacific, it might be valuable to have an ally that is able to nuke America’s major military bases in the region.

While China may currently lack resolve to stop North Korea, evidence it could prevent its nuclear proliferation would create a strategic opening for geoeconomic diplomacy.

Can China Stop North Korea?

Taking the CCP at its word that it disapproves of North Korea’s nuclear missile program, most institutional analysts also presume Beijing cannot stop it. However, evidence of substantial economic leverage suggests otherwise. According to a US Congressional research report, in addition to over one billion dollars in direct aid, Beijing purchases 90 percent of North Korea’s commercial exports, provides 80 percent of its consumer goods, 90 percent of its energy, over $100 million in UN banned luxury goods, and enough food to feed over a million people per year. However, the most profit is derived from the trade itself, which despite Beijing’s alleged discomfort with Pyongyang’s provocations, has quietly increased four fold since North Korea’s first nuclear test in 2006, as shown in the graph below.

China-North Korea Trade 2006-2015 (ask and I can email it to you)

Source: Korea Trade-Investment Promotion Agency (KOTRA)

Although there are indications of a recent reversal, this dramatic increase in trade since 2006 is undeniable evidence of China’s support for North Korea and at least tacit approval of its nuclear weapons program. As Beijing props up the Kim regime without bringing attention to itself—or anyone losing face—it may undervalue exports by at least one-third—a strategic discount—while the bulk of North Korea’s exports of mineral products and textiles—utilizing work camp labor—may return a 90 percent profit. The structural trade deficit (highlighted above) with China is effectively foreign aid since it is inconceivable it will ever be paid back, as with the $10 billion Russian debt that was forgiven in 2012 after decades in arrears. Given these assumptions, from available data Chinese trade and aid is responsible for direct and in kind fungible profits that paid for more than three-quarters of North Korea’s $6 billion 2015 military budget.

Beijing’s words do not comport with its actions. Despite benign policy pronouncements, China is underwriting the stability of the Kim regime and paying for a large portion of its nuclear weapons program. Indeed, if China were to abide by UN sanctions and suspend support—even if food aid was maintained at humanitarian levels—without luxury goods for elites, oil for the military, and essential commodities for its people, it is improbable the Kim regime would last long. American Enterprise Institute economist Nicholas Eberstadt describes North Korea as more dependent on aid than the poorest countries in Africa. According to the highest ranking émigré and a senior member of the Korean Workers Party: “Without Chinese capital goods, it would be impossible for the North Korean government to operate, and ordinary people would not be able to carry on with their daily lives.”

Under such conditions, leaders of surrogate states need not like their overseers in order to do as expected when money—or its equivalent—is on the table, especially if they have no one else to turn to and when these activities are consistent with their geopolitical designs. The degree of animus or friendship between Beijing and the Kim regime is immaterial to this client-proxy relationship, which would dissolve if North Korea’s nuclear missile program, and missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

Breaking With the Past

As shown, China has considerably more leverage over North Korea than most analysts presume. The effectiveness of economic sanctions is seriously compromised while Beijing underwrites Kim’s survival. However, enlisting China’s cooperation may not be as prohibitive as observers might think. Dartmouth political scientist Jennifer Lind points out that when China and North Korea originally formed an alliance both countries were weak, resentful, isolated, and the target of Cold War containment by the US and its allies. China has since moved beyond this state of affairs, has joined multilateral institutions, and now depends on the international system as the world’s largest trader. Although its North Korea policy remains anchored to the past, influential factions in the PLA and the CCP regard the Kim regime as a threat to regional stability.

In a September 2014 article, published in the China state journal, World Knowledge, Renmin university international relations expert Li Wei describes North Korea as inappropriate as a “strategic ally” because it does not conform to the general criteria of a “strategic hub country” that supports Chinese political, diplomatic and security goals. Party elites are uneasy about an unruly state on their border that may provoke a US military response or prompt regional nuclear proliferation. These security concerns, plus President Trump’s fair trade alarm, put Beijing in double jeopardy. Indeed, Richard Haass at the Council on Foreign Relations notes: “China needs years and more likely decades of relative stability in the region so that it can continue to address its many domestic challenges. North Korea is a threat to such stability.”

Although hardliner traditionalists still prevail over a new generation of policy pragmatists, their authority is not unlimited, and Beijing is not immune to its own populist pressures. China may not renew this relationship indefinitely, as it is forced to accept more important concerns that loom on the horizon. Since the Mao era, Chinese leaders have exhibited an admirable faculty for reform in response to changing real-world circumstances. As relations between the US and North Korea deteriorate and the geopolitical calculus changes, the geoeconomic model outlined below may be China’s golden opportunity to resolve this eroding security dilemma before it loses control over the situation.

Sixty-five years ago when its frontline value was beyond reproach, North Korea was a protected pawn in the chess match of great power rivalry. However, now that it has invited danger into the region for China, it may be sacrificed for a larger strategic vision. However, there is always danger that since the PLA is the dominant ground force in Asia, China’s notion of mutual strategic reassurance may include its own territorial designs and sequestration in Korea, as is already evident in the littoral waters of the Asia-Pacific. In a nuclear age we must seek to avoid such kinetic solutions.

As the Trump administration conducts a less institutionally constrained and more personal approach to foreign affairs (as in Russia), it may abandon conventional Cold War geopolitics and stress a more accountable geoeconomic statecraft. Strategic trade and security deals can be shaped and reshaped in this enlarged negotiating environment. Indeed, in a world of massive capital flows, unequal abundance, structural stagnation, and global satellite communication, where expanding trade and creating jobs is as important to political survival as free access to well endowed consumer markets, it is likely that over the course of the twenty-first century a more pragmatic modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft to solve political disputes and promote and defend national interests. The following plan to disarm North Korea was designed as a bridge to this future.

Creating Geoeconomic Incentives

What if there was a way to reunify Korea and stop nuclear proliferation without inciting fear or administering punishment, but instead, by promising personal rewards? Novel approaches often seem untenable until they are fully understood. Therefore, I ask readers to be open-minded and suspend judgment until they comprehend the interacting details of this model.
To begin, imagine you control a multi-billion dollar capital fund and North Korea is a poorly run underperforming corporation that is controlled by an incompetent board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—political and military elites, government managers and bureaucrats, and the general population—a higher price for their shares to convince them to overrule their board of directors. This is the plan in a nutshell.

This incentive model for disarming North Korea presumes that if the causes of conflict and war can sometimes be reduced to competition over money and control over the land, people, and the resources that produce it, then it might be possible to pay in advance to prevent it. After more than a quarter century of failed conventional policies in North Korea, a geoeconomic strategy that injects the persuasive power of personalized money into the diplomatic process may be necessary in order to overcome institutional inertia, autocratic intransigence, and path dependencies that too often terminate in conflict. My central assumption is that in social settings, where almost everything is for sale, there must be some level of security assurance and personal financial incentive that will impose insurmountable domestic pressure on the Kim regime to acquiesce to South Korean political control.

To achieve this result I have designed a plan for the institution of a seven year $52.5 billion Reunification Investment Fund—with private underwriting—that would offer personal financial incentives for North Koreans to unify with their wealthy relatives to the South. As in the final days of the Soviet Union, the efficacy of this model is enhanced by the word-of-mouth rumor currently spreading across North Korean social networks that the outside world is a better place to live. People are ready for change; this fund is a platform to unleash and manage it. The bold arrows below represent the essential strategic elements of this Reunification Investment Fund:

Reunification Investment Fund Financial Flow Chart (ask and I can email it to you)

* The Bank of Korea may act as the lender of last resort

In this scenario, the South Korean government would offer resources awards and private sector contracts for infrastructural improvements and portions of future markets, industries, and business enterprises worth trillions of dollars in profitable assets, including open markets in telecommunications, transportation, building materials, and automotive products, ownership or licensing agreements for control over mines, seaports, and tourist attractions, and exclusive construction contracts for a gas pipeline, railroads, tar roads, energy generation, and a multitude of necessary projects.

In exchange for these resource awards and government assurances, business investors would be required to endow this fund to pay an annual $4.2 billion golden parachute for seven-years to North Korea political and military elites, to compensate for their loss of power and position. Since it is impractical to expect democratically elected officials to agree to pay large amounts of public money to North Korean elites, these payments must come from private sources, for whom the prospect of enormous business profits make this a wise investment. And there is no risk since money is not deposited into private bank accounts until after reunification and the formal transfer of political and military power.

Because of a desperate and isolated history, few realize that lucrative business opportunities abound in the hermit kingdom. North Korea ranks 10th among all nations in mineral reserves; valued at $6-10 trillion. A multi-billion dollar pipeline must be built from Russia to supply the industrial and population centers of Korea with an estimated $3 billion in natural gas per year. Railroads must be rebuilt. One estimate is that goods shipped over a Eurasian Express train system would reach European markets in one-third the time it takes for transportation by ship via the Suez Canal. Japan would likely ship commodity exports to Europe by train through the port at Busan. Unification would also stimulate exports through the northernmost ice-free Pacific port in Rason, just a few miles from landlocked China and bordering the resource rich Russian Far East. Roads must be tarred, cars imported; only 3 percent of the roads are paved and the North has only 50 thousand private cars compared to 18 million in the South. Inexpensive labor will be available for at least a generation, as commodity markets spring up. Tourism is another unexploited multi-billion dollar industry, where control over specific attractions may be turned over to private enterprise in return for contributions to the fund.

After decades of globalization profits and unprecedented QE, the world is awash in money. Business tycoons, transnational corporations, and institutional investors have surplus capital and are looking for opportunities. East Asian private equity firms currently hold more than $100 billion in “unspent cash” and are having difficulty finding profitable investment opportunities, as the global economy has lost momentum. This fund offers a safe investment vehicle that will result in large private profits. The Bank of Korea or international banks (IMF, ADB, and AIIB) may provide infrastructural investments and financial guarantees—as the lender of last resort—since there is little risk a unified Korean economy will not prosper, and the BOK will profit the most.

International business, banking, and multilateral underwriting, with G-20 leadership, will impart confidence by indemnifying this fund with broad assurances from the global community. In today’s multilayered global balance of power, private interests often serve as a unifying force in the competitive nation-state system of world governance. This plan is predicated on the simple assumption that geopolitics may sometimes be more effectively managed through positive-sum geoeconomic incentives acting on the personal and cultural level.

Culture Unifying Incentives

After more than a generation of economic stagnation and fending for themselves following the dismantling of the free public food distribution system in the early 1990s, almost everyone in North Korea has abandoned Leninist ideology and is aware of and envious of South Korea’s remarkable prosperity. The steady diffusion of news and information across the semi-permeable Chinese border has changed the cognitive landscape in North Korea, as a market-motivated underground word-of-mouth information highway challenges the state’s meta-narrative and monopoly on information. Rumors of the inordinately better life in the South have saturated cultural impressions and created a new social context for political change that has not existed before.

After decades of silent transformation the mere existence of this fund sitting in escrow ready to pay out vast sums may catalyze overwhelming support for reunification at all levels of North Korean society. The promise of $29.4 billion to elites—$4.2 billion times 7 years—can win a lot of hearts and minds. The top ten power elite families would receive $30 million each, while the top thousand would get more than $5 million; 11,000 upper elites—including all generals—will be offered at least $1 million; more than 50,000 mid-level political elites and military officers will receive $100,000 to $500,000, while the incomes of 300,000 families in Pyongyang will increase many fold if Korea were to unify.

This provision of money is compensation for loss of status and income. On the surface, these payments may seem unethical, possibly even immoral, but most of the elites who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate (position and power) and were not complicit in its original acquisition or in the malevolence that followed. We do not punish the descendants of slaveholders or the children of thieves and murderers. Their only guilt is the origin of their birth. Indeed, this payment would amount to a bailout for the misdeeds of their ancestors—without moral hazard.

As designated by the thin arrows in the financial flow chart shown above, the masses outside Pyongyang should also be awarded financial benefits. This will help jump-start the new economy and ensure social stability. Non-taxpayer derived investment capital may come from South Korea’s half-trillion dollar sovereign wealth and foreign reserve assets, QE, helicopter money, or from the presumptive peace dividend. Post-unification investments in infrastructure from Korean government bonds ($300 billion has been proposed), international banks, and the B-20 (the investment arm of the G-20) may amount to more than a trillion dollars over the next decade, creating millions of productive jobs and securing the democratic transition.

Little is known about the sentiments of the Pyongyang poor, who comprise about two million people living in close quarters, just a stone’s throw from the guarded compounds of the power elite. Few have refrigerators and even fewer own washing machines; electricity and water are intermittent. They live along dirt roads in brick-and-clay huts without toilets, heat their homes with charcoal, and bathe infrequently in public cold-water showers—even in the bitter cold of winter. Promises of food security, modern health and dental care for their children, property ownership, a regularly functioning water and energy infrastructure, high-speed international communication links, and thousands of dollars deposited into their personal bank accounts each year for seven years may spread unification fever and many may take to the streets.

However, if safe from international retribution, the Kim regime may acquiesce long before the social situation devolves into a state of general chaos and insurrection. Although Kim Jong-un receives no money, that personal safety is more precious than power would give him little choice but to accept this offer. He may be granted immunity from criminal prosecution, allowed to keep a portion of his fortune, and promised freedom to live and travel anywhere in the world. Nothing is gained by his vilification or punishment, while promising safety and security to Kim and his family may prevent bloodshed.

Or if Kim is unwilling to acquiesce, motivated by the $20-30 million promised to the 200 most prominent families, elites may take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political and military elites. In either event, violent overthrow or peaceful acquiescence—and with or without Chinese assistance—the transfer of power to South Korea would disarm a nuclear threat and end more than half a century of abject tyranny.

China’s Decision: Competition or Cooperation?

China must make a decision. Analysts agree Beijing has been more assertive and confrontational since the 2007-9 global financial crisis. Former US Treasury Secretary Hank Paulson observed a “newfound sense of confidence, verging on triumphalism, among many of the Chinese I saw and spoke with.” Princeton political scientist and former deputy assistant secretary of State Thomas
Christensen refers to China’s geopolitical behavior as “offensive diplomacy.” However, it is unlikely this irrational exuberance can be sustained because China’s trade surplus with the West, support for North Korea, and competition with the US each contain fatal contradictions Beijing cannot resolve with raw power. The CCP must weigh the cost of zero-sum security competition against and benefits of a new partnership and potential strategic condominium with the US. This fund offers Beijing a face-saving opportunity to rethink its policies and form a collaborative alliance with the US based on the principles of the nuclear nonproliferation treaty.

If not initially, once this fund gains critical momentum, China may have little choice but to cooperate, since its alternatives are foreboding. In one scenario, if security competition led to conflict and a western trade embargo, along with losing 40 percent of its foreign exports, already heavily leveraged Chinese corporations would fail, property markets—that hold its largest store of household wealth—would collapse, and $2.2 trillion in direct foreign investment would evaporate, as an unsuccessful stampede to withdraw a portion of the $15 trillion in household and consumer deposits from under-capitalized state banks would result in financial meltdown and panic across China. Even China’s considerable foreign reserves could not prevent this implosion, as its 35-year economic miracle would come to a screeching halt. Geopolitical specialist Peter Zeihan remarks, “Should American trade access be revoked it would be as if China suffered from an equivalent of three American Great Recessions all at once.”

While there may be political instability in China, citizens in America would rally behind the President and the US would mobilize its military from around the globe. The US would be less affected than one might expect after exaggerated reports of Chimerican interdependence. It may suffer a temporary stock market collapse, inflation at Walmart, and shortages of select electronic and machine products, but enjoy trade balance and employment gains as commodities once shipped from China are manufactured at home. Few realize that the US economy is more self-contained and less integrated in the Bretton Woods system than almost all other nations. The US is the world’s largest and most efficient manufacturer, producing 75 percent of what it consumes, and now all of its energy needs. Galina Hale and Bart Hobijn at the Federal Reserve Bank in San Francisco calculated that goods and services from China account for only 3 percent of US personal consumption expenditures. David Dollar at Brookings notes: “Only 1 percent of the stock of US direct investment abroad is in China.”

The economic contraction might be tantamount to the global financial crisis, and damage to international investors and exposed corporations will be severe, but temporary. Americans and Europeans have healthy public support systems and can adjust to slow-downs, shortages, and price hikes, while most Chinese citizens cannot survive without a steady income, and would turn against a government that cannot provide then with one. After decades of rapid urbanization, massive unemployment compounded by a weak social safety net may redirect the exuberant energies of a surging lower- and middle-class nationalism against the CCP, that is already perceived as irreparably corrupt after decades of official graft and land grabbing. A reckless foreign policy that impacts livelihoods might be the last straw.

This is the great Confucian paradox of Chinese aggressiveness and precocious military modernization. To countermand regressive security impulses we need new institutional platforms for peace and conciliation that elicit opportunities for compromise and cooperation. This fund facilitates these collaborative stabilizing objectives.

Conclusion

The status of the world’s most consequential bilateral relationship will reflect how Xi negotiates the China Dream and Trump how to Make America Great Again. Despite warm handshakes and glittering smiles in Palm Beach there may soon be a day of reckoning, when one nationalistic leader remarks to the other, “Sorry, nothing personal.” The office is larger than the men who inhabit it and the art of the deal will likely be decided by the science of fear, leverage, and power.

The Trump administration has made it clear that America’s patience has run out and that it will not allow the Kim regime time to develop the ability to nuke the United States. With the horror of 9/11 indelibly etched into American minds, many believe a surgical military strike now may have significantly lower risks than a nuclear-ICBM endangered future. All options are on the table; the US is prepared to act unilaterally and unpredictably—as in the April 7 cruise missile strike on a Syrian airfield. Since conventional geopolitics has failed to stop North Korea from developing weapons of mass destruction, this geoeconomic approach should be considered in lieu of another missile strike. Indeed, the extraordinary plan proposed here might be the only realistically achievable path to denuclearize Korea at this late stage without resorting to a kinetic solution.

If as realist scholars submit, that vulnerability to threats is the main driver of Chinese foreign policy, then it should seek to avoid the prospects of US military action on its doorstep and a nuclear-armed Japan. This plan gives China room to back away and save face. Mutual security concerns may compel reciprocal compromise and cooperation. China may facilitate reunification by suspending all support for Pyongyang while the US would agree to withdraw its military from mainland Korea pending unification and the removal of nuclear weapons. Both nations may diplomatically promote and financially support this fund.

If popularized in the media, business leaders and heads of state may see this is a workable plan with ubiquitous benefits to everyone with something at stake in the region. The US would get the dissolution of a grave nuclear threat, an end to the possible transfer of nuclear materials and technology to terrorists or rogue states, and a chance to reassess its geopolitical interests in a less threatening Asia-Pacific; Japan gets safety from missile attack and weapons of mass destruction, along with large new labor, export, and investment markets; Russia gets secure rail and energy profits, and year-round passage to Pacific shipping; China gets a reprieve from the possibility of regional nuclear proliferation, free-market access to Korean minerals and ports, cooperation in developing its northeast provinces, the removal of US troops from mainland Korea and an easing of great power rivalry; and South Korea gets permanent peace, trillions of dollars in mineral resources, energy security and diversification, several valuable Pacific ports, rail connection to China and continental Europe, 50 percent more people, 120 percent more territory, and according to a Goldman Sachs study, development synergies that may propel its GNP past France, Germany, and Japan in just one generation.

During the next decade another two billion people will plug into the Internet and join the global conversation. If allied in efforts to procure a greater global unity, increase technological innovation, protect our fragile planet, capture the unlimited energy of the sun, and create jobs and open new markets and possibilities around the world for this expanding and modernizing population, the United States and China—with Russia and Japan—could forge new positive-sum relationships based on economic opportunity, and partner to unify Korea and extend the Long Peace deep into the twenty-first century.

The information revolution has created modern aspirations for a better life in North Korea and the pre-conditions for political transformation that have not existed before. As the Kim regime denies its citizens a prosperous future, power elites, government officials, and average people are reaching a threshold of disaffection. However, due to the coercive security state, until a reason for hope comes along, people must wait for an angel to appear. This fund is that angel, since it provides a path to a better life, and creates an impetus for organizing hopes and dreams, and channeling thoughts and emotions into collective action.

Although nuclear proliferation and the trajectory of geopolitics seem unstoppable, we need not continue down this road leading into the abyss. Instead we may think outside the box and create novel solutions to unique contemporary geopolitical problems. Realizing the potential of this fund will require the inspired vision of business and political leaders who can bring out the best in all of us; those who perceive the big picture and understand that the ideas that move humanity forward are often initially considered crazy, disruptive, or impossible; leaders who can show us what we should want, while employing positive-sum geoeconomic incentives to get us there. If the smart power dynamics of this plan were popularized in the media and discussed on a world stage, the private sector and heads of state might be compelled to support this fund, and unification could occur within months.

To get from here to there we must transcend zero-sum geopolitics with a strategic plan that at least has some chance of positive-sum success. This Reunification Investment Fund is such a plan. As Ambassador Blackwell and Jennifer Harris astutely assert: “U.S. foreign policy must be reshaped to address a world in which economic concerns often outweigh traditional military imperatives and where geoeconomic approaches are often the surest means of advancing American national interests.” If President Trump sees this plan as a good option and takes this path, he may indeed help Make America Great Again.

Footnotes — sorry I don’t know how to make my blog properly reference them (haha–donations for paying a webmaster would be accepted)

David Rothkopf, National Insecurity: American Leadership in an Age of Fear (New York: PublicAffairs, 2014), p. 16.
Jeffrey Lewis, “North Korea Is Practicing for Nuclear War,” Foreign Policy, March 9, 2017.
John Schilling, Jeffrey Lewis, and David Schmerler, “A New ICBM for North Korea?,” 38 North, December 22, 2015.
Lyle Goldstein, “Time to Think Outside the Box: A Proposal to Achieve Denuclearization by Prioritizing the China-DPRK Relationship,” North Korean Review, Vol. 12, No. 1 (Spring 2016), pp. 82-100.
Jonathan D. Pollack, “Punishing Pyongyang: With new U.S. sanctions, how will China respond?,” Brookings Institution, February 2, 2016.
See Harry Harding, “Has U.S. China Policy Failed?,” The Washington Quarterly, Vol. 38, No. 3 (2015) pp. 95–122.
Aaron Friedberg, A Contest for Supremacy, China, America, and the Struggle for Mastery of Asia (New York: W.W. Norton, 2011), p. 265; and “The Future of U.S.-China Relations: Is Conflict Inevitable?,” International Security, Vol. 30, No. 2 (Fall 2005), pp. 7-45.
Robert D. Blackwill and Jennifer M. Harris, War by Other Means: Geoeconomics and Statecraft (Cambridge, MA: Harvard University Press, 2016).
Ibid., p. 24; also see Michael Mandelbaum, The Road to Global Prosperity (Princeton, N.J.: Princeton University Press, 2014); Ian Bremmer, “State Capitalism Comes of Age: The End of the Free Market?,” Foreign Affairs (May/June 2009); and Edward Luttwak, “From Geopolitics to Geo-Economics: Logic of Conflict, Grammar of Commerce,” The National Interest (1990), pp. 17-23.
For an earlier argument for this strategy, see Baldwin, David A., “The Power of Positive Sanctions,” World Politics, Vol. 24, No. 1 (October 1971): 19-38.
Shen Dengli, “Lips and Teeth: It’s time for China to get tough with North Korea,” Foreign Policy, February 13, 2013; Xie Tao, “What’s Wrong with China’s North Korean Policy,” Carnegie Endowment for International Peace, March 26, 2013; Deng Yuwen, “Should China Abandon North Korea Financial Times, February 27, 2013.
On the thesis that China has a deceptive grand strategy, see Michael Pillsbury, The Hundred-Year Marathon: China’s Strategy to Replace America as the Global Superpower (New York: Henry Holt, 2015).
Michael R. Auslin, The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region (New Haven, Conn.: Yale University Press, 2017).
See Denny Roy, Return of the Dragon: Rising China and Regional Security (New York: Columbia University Press, 2013), p. 174.
John W. Garver, China and Iran: Ancient Partners in a Post-Imperial World (Seattle, WA: University of Washington Press, 2006); and China’s Quest: The History of the Foreign Relations of the People’s Republic of China (New York: Oxford University Press, 2016).
“China May Have Helped Pakistan Nuclear Weapons Design, Newly Declassified Intelligence Indicates,” National Security Archive Electronic Briefing Book No. 423, April 23, 2013. Although significant portions of the document on Chinese technology sharing were excised, these reports represent the CIA’s first-ever declassifications of allegations that Beijing supported Islamabad’s nuclear ambitions. Also see, Paul K. Kerr and Mary Beth D. Nikitin, “Pakistan’s Nuclear Weapons: Proliferation and Security Issues,” Congressional Research Service (March 19, 2013); Thomas C. Reed and Danny B. Stillman, The Nuclear Express: A Political History of the Bomb and Its Proliferation (Minneapolis, Minnesota: Zenith Press, 2009); and Bates Gill, “Chinese Arms Exports to Iran,” Middle East Review of International Affairs, Vol. 2, No. 2 (May 1998), pp. 55-70.
Shirley A. Kan, “China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues,” Congressional Research Service, January 3, 2014.
Willem van Kemenade, “China vs. the Western Campaign for Iran Sanctions,” The Washington Quarterly, Vol. 33, No. 3 (2010), pp. 99-114.
Shirley A. Kan, “China and Proliferation of Weapons of Mass Destruction and Missiles.”
Michael Flynn, “Annual Threat Assessment,” Senate Armed Services Committee Hearing, April 18, 2013, pp. 24-25.
For a detailed essay on this subject, see Shepherd Iverson, “China’s Nuclear-Armed Proxy—North Korea: Hostile Surrogacies and Rational Security Adjustments,” North Korean Review, Vol. 12, No. 1 (Spring 2016), pp. 66-81.
Mark Manyin and Mary Beth Nikitin, “Foreign Assistance to North Korea.” Congressional Research Service, March 20, 2012.
This is in spite of a recent decline in trade volume that probably reflects the slowing of the Chinese economy more than compliance with UN trade sanctions. See Andrea Berger, “The New UNSC Sanctions Resolution on North Korea: A Deep Dive Assessment,” 38 North, March 2. 2016.
Nichoals Eberstadt, “North Korea’s ‘Epic Economic Fail’ in International Perspective,” Asan Report, November 2015, p. 7.
Quoted in, “Growing Chinese Influence Worries N.Korean Officials,” The Chosunilbo, March 13, 2014.
Jennifer Lind, “Will China finally ‘bite’ North Korea?” CNN International, March 14, 2013.
Jenny Jun, “Dealing with a Sore Lip: Parsing China’s ‘Recalculation’ of North Korea Policy,” 38 North, March 29, 2013.
“Chinese state journal: N.K. inappropriate as strategic ally,” The Dong-a Ilbo, September 2, 2014; also see Stephanie Kleine-Ahlbrandt, “The Diminishing Returns of China’s North Korea Policy,” 38 North, November 28, 2012.
Richard J. Samuels and James L. Schoff, “Japan’s Nuclear Hedge: Beyond ‘Allergy’ and Breakout,” in Ashely J. Tellis, Abraham M. Denmark and Travis Tanner, eds., Asia in the Second Nuclear Age: Strategic Asia 2013-2014 (Seattle, WA: The National Bureau of Asian Research, 2013), p. 259.
Richard N. Haass, “Time to End the North Korean Threat.” The Wall Street Journal, December 23, 2014.
Bruce W. Bennett, Preparing for the Possibility of a North Korean Collapse (Santa Monica, CA.: RAND Corporation, 2013), pp. 89-90; also see James Steinberg and Michael E. O’Hanlon, Strategic Reassurance and Resolve: U.S.-China Relations in the Twenty-First Century (Princeton, N.J.: Princeton University Press, 2014), pp. 124-130; Shepherd Iverson, Stop North Korea! A Radical New Approach to Solving the North Korean Standoff (North Clarendon, Vermont: Tuttle Publishing, 2017), Chapter 6.
This thesis was originally introduced in my first book, Shepherd Iverson, One Korea: A Proposal for Peace (Jefferson, North Carolina: McFarland, 2013).
Shepherd Iverson, “The Moscow Model for Korean Unification: A Lucrative Exit Plan,” Russia in Global Affairs, Vol. 11, No. 4 (December 2013), pp. 148-159; for a description of a similar economic decline, political praxis, and social transformation, see David. M. Kotz and Fred Weir, Russia’s Path from Gorbachev to Putin: The Demise of the Soviet System and the New Russia (New York: Routledge, 2007).
Shepherd Iverson, Stop North Korea!
Garrett J. Harkins, “A Trans-Korean Natural Gas Pipeline: Feasibility Study,” Unpublished Manuscript, American University, 25 April 2011.
Quoted in Motohiro Ikeda, “Russia’s dream for Trans-Siberian line farfetched,” Nikkei Asian Review, December 17, 2013.
Rick Carew and Jake Maxwell Watts, “Private-Equity firms in Asia Keep Their Powder Dry, The Wall Street Journal, February 24, 2015.
Andrei Lankov, The Real North Korea: Life and Politics in the Failed Stalinist Utopia (New York: Oxford University Press, 2013); also see Nat Kretchun and Jane Kim, “A Quiet Opening: North Koreans in a Changing Media Environment,” InterMedia, May 2012; and, Andrei Lankov, “Dangerous era of dissent may have begun,” NK News, April 8, 2014.
For a detailed presentation of these proposed payments, see Shepherd Iverson, Stop North Korea!, Chapter 2.
See Andrei Lankov, North of the DMZ: Essays on the Daily Life in North Korea (Jefferson, North Carolina: McFarland, 2007), pp. 93-95.
Henry M. Paulson, Dealing With China: An Insider Unmasks the New Economic Superpower (New York: Hachette Book Group, 2015) p. 369. Henry is referred to in the media as Hank.
Thomas J. Christensen, The China Challenge: Shaping the Choices of a Rising Power (New York: W.W. Norton, 2015), Chapter 8.
Peter Zeihan, The Accidental Superpower: The Next Generation of American Preeminence and the Coming Global Disorder (New York: Grand Central Publishing, 2014), p. 314.
Galina Hale and Bart Hobijn, “The U.S. Content of “Made in China,” Federal Reserve Bank of San Francisco, August 8, 2011. According to Galina Hale (personal communication) this proportion is virtually unchanged.
David Dollar, “United States-China Two-way Direct Investment: Opportunities and Challenges,” Brookings Institution, January 2015.
Andrew J. Nathan and Andrew Scobell, China’s Search for Security (New York: Columbia University Press, 2012).
Goohoon Kwon, “A United Korea? Reassessing North Korea Risks,” Paper 188, Goldman Sachs Global Economics (September, 2009), p. 12.
Robert D. Blackwill and Jennifer M. Harris, War by Other Means, p. 226.

BUYOUT NORTH KOREA

Commentary/Op-ed 1,050 words

BUYOUT NORTH KOREA

I recently moved back to the US after teaching 8 years in South Korea. For readers who do not live in the US, you should be aware that sentiment is growing here for a preemptive strike on North Korea’s nuclear missile facilities. Despite a pundit-orchestrated chorus of reservations, new polls suggest increased fear and approval for US interdiction. New provocations seem to beg for preemptive US kinetic action as military personnel now populate the public airways. Our president warns of “fire and fury” and that we are “locked and loaded” as a major network anchor uses the phrase “incinerate North Korea” as an option.

This threatening verbiage will abate, but the can cannot be kicked down the road indefinitely. Growing tensions increase the chance of miscalculation. Eventually, there will be a tipping point and a final resolution, one way or another.

This is the 7th iteration of limited UN sanctions against North Korea; few expect this round will have any effect. Brinkmanship is reaching an endpoint, and the death-knell of shooting missiles from the sky and/or an oil embargo may soon be imposed, as diplomacy plays its last card before the peninsula is hurled into cataclysm.

Misapprehension already exists.

More than a year ago I had dinner in Seoul with two North Korea experts (Drs. Lankov and Im) and to their alarm—referring to the haunting public memory of 9/11—I predicted the US would be more inclined to conduct a limited surgical strike on North Korea nuclear missile facilities than to allow the Kim regime weapons of mass destruction that could reach the American homeland. They were skeptical, but they are not Americans and did not experience the horror of watching the two towers crumble to the earth on live television as we did.

Less than a year ago I asserted at a meeting in Seoul—chaired by former minister and Sunshine policy advocate Chung-in Moon—that I would not be surprised if Trump was elected president. Everyone in the room considered this unlikely. But here we are, with an unpredictable US commander-in-chief who by personality and disposition is probably far less concerned about the potential loss of life in Korea than about promoting his vision of America-First.

We need an alternative to war and yet the status quo view in Seoul and Washington is that there are no good options. However, as I have argued in two books, there is one plausible good option that has not yet been explored: BUY THEM OUT—A FRIENDLY CORPORATE BUYOUT.

Crazy? Impossible? Think again. The world currently has an abundance of capital and a poverty of profitable investment opportunities. North Korea is literally a gold mine with up to $10 trillion in mineral wealth that can be bought as if it were a penny stock.

Imagine you control a multi-billion dollar capital fund and North Korea is an underperforming corporation. You see it is undervalued and wish to take over, but it is controlled by a backward board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—the larger number of political and military elites, government managers, and bureaucrats—a higher price for their shares to convince them to overrule their board of directors.

It is plausible this friendly corporate takeover can be accomplished for as little as $30 billion—an annual $4.2 billion investment over 7 years. To put this in perspective, Apple Computer has $250 billion in the bank, $4.2 billion equals about 2 days of US QE 2009-2014, and for a small consortium of tycoons this is pocket change.

My plan is to endow a fund and promise an appealing unification payout to North Korean elites in order to incentivize them to push for reunification. The top 1,000 North Korean families will be promised at least $5 million each (dispersed over 7 years), 11,000 upper elites—including all generals—would get over $1 million; 50,000 lower-level political elites and military officers are promised $100,000 to $500,000. In total, 110,000 elites will receive more than $50,000 each. This is an enormous amount of money—even for elites—and should create strong incentives for the new generation that has taken over since the succession of Kim Jong-un six years ago.

This generation of Pyongyang elites may be viewed less as perpetrators and more as innocent victim inheritors of an ignoble history. Most who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate (position) and were not complicit in its original acquisition or in the malevolence that followed. (For another $15.4 billion—$2.2 billion per year for 7 years—unification money may be promised to 500,000 members of the Korean Workers Party and 300,000 impoverished families in Pyongyang to incentivize mass grass-roots activism)

Kim Jong-un will be offered personal and financial security. However, there may be insurrection if he does not acquiesce. With $20-30 million promised to each of the 210 most prominent families, they might take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political or military elites. In either case—violent overthrow or peaceful acquiescence—the transfer of power to South Korea would disarm a growing nuclear threat and end more than 65 years of abject tyranny and human rights abuse.

Compelling evidence suggests relatively impoverished North Korean elites are ready for change. But they need attractive incentives and assurance their lives will improve after unification.

Considering the limited responses currently under consideration and the existential magnitude of this problem, shouldn’t we take a long look at this proposal—I spent 7 years drafting—before rushing into actions that may lead to dire consequences? Praised by numerous Korea experts, STOP NORTH KOREA! A RADICAL NEW APPROACH TO THE KOREAN STANDOFF offers a plausible non-kinetic solution that could denuclearize and unify Korea in a matter of months.

It is time the media pick up on this idea and help bring it to the consideration of policymakers.

INTERVIEW WITH SHEPHERD IVERSON

Let’s start with an introduction of yourself and your work on North Korea and Korean reunification. What is your approach to North Korea and why did you decide to write this book?

Iverson: I’ve lived in Korea for more than eight years. I’m a family man, a husband and father. My wife is also a PhD—a Polish theoretical physicist—and our adolescent son’s first language is Korean—of three languages he speaks fluently. We’ve gone native in Korea… in this safe and friendly culture. We have some dear friends.
Professionally… I’m a gadfly – I question authority, the status quo. After analyzing the reasons for a history of status quo policy failures it becomes possible to learn from mistakes and seek more productive alternatives. My approach to denuclearizing North Korea and ending this humanitarian tragedy is based on a strategy that has never been tried before—and that’s good.

My interest in the Korean problem came to me rather suddenly once I realized political control could be bought in North Korea and this whole damn problem could end without military conflict. I became convinced that Korea could be reunited and Kim’s nuclear threat could be over within a few short months if either statesmen or successful businessmen would lead the way. I have spent six years designing a pragmatic and plausible unification model. Now it is up to others to take it over and get this done.

I’m tired of hearing our status quo experts say there are no good options in Korea. They just haven’t explored all the options. If policymaking and diplomacy were run like a business the people who have been working on North Korea policy would have been fired long ago. Attempts at coercion, containment, isolation, accommodation, and partial engagement have all led to frustration. Yet every current strategic suggestion for dealing with the Kim regime proposes a reincarnation of one of these failed policies. This qualifies as the definition of institutional insanity: proposing the same policies over and over again expecting different results.

In the grand scheme of things there are only punishments and rewards, but as every parent or superior knows, it’s their particular form and application that bestows legitimate authority and credible power. A strong military response to eliminate a threat to US security might seem reasonable at this point, but there are alternatives that can be less dangerous and more effective. I think personalized incentives might be the answer.

What are the incentives you refer to?

Iverson: After president Obama’s Leap Year Deal failed in 2012 the US demanded North Korea make legitimate concessions to denuclearize before talks could begin, but the Kim regime made it clear it will never do that, and so we shrugged our shoulders, continued with our war games off its coast, and that was the end of it… stalemate. Strategic patience merely kicked the can down the road, allowing Pyongyang to reach the brink of possessing a nuclear-tipped ICBM capable of killing hundreds-of-thousands of American citizens. The recent ICBM test should surprise no one. What were we thinking?

This is where we are today, and why the USS Carl Vinson and the USS Ronald Reagan Carrier Strike Groups were dispatched to Korean waters and the South Korea navy has deployed ship-to-surface missiles. Eventually this strategic saber rattling and bellicose brinkmanship may lead to real consequences.

This increasingly negative and aggressive trajectory of relations can only turn positive and constructive through some form of engagement and the application of tangible incentives. Unfortunately for the Kim regime, the incentives I have in mind will force them from power, reunify Korea, denuclearize the region, and bring ubiquitous economic and security benefits to concerned nations. If the incentives I have prescribed were applied, the Kim regime would have no choice but to acquiesce… but with dignity and sufficient personal and financial security. For those who have not read my new book, Stop North Korea!, I have described in detail how an incentive-based culture and economic approach could be the answer to the North Korea problem. I hope people who can make a difference will read it, talk about it, and act on it.

In the book you ask readers to think of North Korea as a company with great potential, which has been under-performing, but its board of directors stubbornly refuse to leave and make room for someone who might run the company more successfully. To overcome this problem of leadership transition you propose that North Korea can be bought, that external investors should buy this “company” and give its “board of directors” (North Korean elites) a substantial severance so a new board can step in, bring new capital, and restart the engines. Could you expand on this notion? How can anyone bring this option to the table in 2017, under a Trump presidency and with mounting tensions in US foreign policy, and who could negotiate a deal of this magnitude?

Iverson: Now that’s a big compound question. I’ll answer the second part first. My mother made sure I had a liberal education. During the 2016 presidential campaign I mostly opposed Trump on domestic matters, but soon had to admit that he was taking a practical approach to international affairs, and connecting them to local sentiments. I predicted the electorate would respond to this and more than nine months before he was elected I told an audience of self-satisfied liberal political scientists in Seoul to prepare for the unexpected.
Not only was I convinced Trump would win, but I also concluded during the writing of this book that he would be more likely than Hillary to think outside the box and to implement the proposals I laid out. Irrespective of his scruples, Trump is a high-flying businessman who understands how to negotiate big deals with hard power using capital incentives and coercive strength. The art of the deal is really mostly the science of leverage.
But in the end it might not matter who was elected president in the US or South Korea. With the progressive nuclear threat, the moment of truth was going to come before 2020 anyway, and under extreme pressure my buyout idea would sound more plausible and appealing to any leader seeking an alternative to military action.

Say more about your notion of buying out North Korea.

Iverson: Well, the idea rests on a similar premise to the $50 billion Mofaz Fund proposed by a former Israeli general and statesman to buy out Palestine and empower moderate Arabs. Preposterous? I think not. Historically geopolitics plays out more zero-sum, while economics is usually more positive-sum. If anything it is absurd to think we can solve modern political disputes better with force than with capital investment. Ambassador Blackwill and Jennifer Harris argue this point in their brilliant new book, War By Other Means.

Over the course of the twenty-first century the modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft and smart power economic solutions. There will simply be no other reasonable choice than this natural evolution… as conventional and asymmetric weapons become more lethal and ubiquitous. Most policymakers still think sanctions and punishment first, and have yet to enter into this new positive paradigm.

It took a long time to convince parents to refrain from spanking their children except under exceptional conditions. But such parental restraint seems to have become standard family policy today in progressive households. However, the threat of North Korea’s nuclear-tipped ICBM’s may be one such exceptional condition.
But force usually results in temporary compliance and creates unresolved anger; this resentment may resurface in destructive ways. Some haunting cultural memories linger for generations, like the brutality of indiscriminate carpet-bombing of North Korean cities by the US in the 1950s. North Korean leaders play up the fact that the US dropped more bombs in Korea than during the entire War in the Pacific, and killed nearly to a quarter of the civilian population. These were not smart bombs.

And now with the US rehearsing an invasion just off its coast… it is no wonder the Kim regime is seeking a nuclear deterrent. The trajectory of this dispute is leading to military action. But I think there is a way out… a way to create peace, and this is why I wrote Stop North Korea! I have a new policy idea.

My insight is that in order to denuclearize North Korea we must create insurmountable culture-wide economic incentives for reunification. This would peacefully remove the Kim regime from power. And the only way to do this is through the institution of a Reunification Investment Fund. After an original story about my idea was published in NK News the global media picked up this proposal, but falsely reported that it would take a $175 billion investment to denuclearize Korea. CNBC even reported my plan would replace Kim with other North Korean elites.

If one were to read my plan carefully one would see that it would probably take $4 billion of private investment per year—promised over seven years—to payoff North Korean military and political elites… and another $15 billion—again, over seven years—to personally incentivize the government bureaucracy and the impoverished population in Pyongyang to take action. I think a $30 billion fund, sitting idle in escrow, but ready to payout, might be enough to unify and denuclearize North Korea in a matter of months. Word of mouth spreads quickly. It wouldn’t take long for everyone inside North Korea to hear about this offer. And soon everyone will be talking about how to depose the Kim regime and join with the South.

Could we summarize your plan for somebody who has little knowledge of the situation on the Korean Peninsula, somebody who is not familiar with its intricacies? What would the benefits be for each part of the North Korea population?

Iverson: Sure. This is a gigantic bribe: if elites force Kim to acquiesce, we give them money. The average annual income in North Korea is about $1,000; it is over $30,000 in the democratic South. Enough said… it is this relative poverty that gives my reunification plan a chance. Even elites are impoverished by international standards. There are 200,000 millionaires in South Korea, but only a few hundred in the North. My plan would create 11,000 instant millionaires, and begin a long process of peace and reconciliation.

This reunification fund promises North Korean elites enough incentive money to compel them to make Kim Jong-un an offer he cannot refuse. This may result in a Palace Revolution led by ultra-elites—who would receive $20-30 million each if Kim acquiesced—or a coup d’état sponsored by well-compensated military elites—all generals are promised at least a million dollars. Or it could lead to mass insurrection or peaceful acquiesce. Each of these scenarios is of course preferred over military confrontation.

We have an international humanitarian responsibility to end Kim’s reign. Besides the nuclear threat, the UN estimates two million children are chronically malnourished and the regime holds more than 80,000 political prisoners in a Stalin-like gulag system.

The reason this Reunification Investment Fund was quoted at $175 billion is because I direct $125 billion—more than 2/3’s of the money—go directly to the impoverished masses over seven years, more than doubling average household incomes per year. This capital would come from public sources and is money that must be spent on development anyway… and it is best it enter the economy through individuals—motivating both reunification and bankrolling economic demand at the grassroots.

And for the masses, promises of stable food prices, modern medical and dental care for their children, job freedom, reliable water and electricity, improved infrastructure, and thousands of dollars in a personal bank account, will create a new world of optimism. If Kim does not acquiesce willingly, we may anticipate mass disappointment will lead to collective action.

This economic model uses the power of incentivizing an entire culture to produce elite political transformation to reunite Korea. It is based on sound principles of social science and would succeed if funded.

So where will the money for Kim Jong-un and his family come from? If not individual governments, who has that kind of wealth?

Iverson: Kim Jong-un and his family will receive no money. But I recommend Kim be allowed to keep a portion of the money he is reported to have squirreled away. I think even now Kim Jong-un might reasonably be recast as a young figurehead leader, not directly responsible for the purges ordered by the old hierarchy of the entrenched Party bureaucracy. This gives Kim a plausible free pass and safe exit from power, without international retribution.

The $4 billion per year for seven years that is necessary to payoff North Korean elites must come from private sources. I would expect a consortium of Korean chaebols, international corporations, and private individuals can raise this kind of capital. This might be all the money needed to spark reunification. But you can read about the details of a larger payout in the book.

Now, considering that the numbers in your plan seem to make sense, who in your opinion would be the best negotiator to strike a deal on these terms with the North Korean government? Who do you see, today, as willing and able to take this plan to the North Koreans?

Iverson: Good question. If not Donald Trump, then Bill Clinton with Jimmy Carter, if he is still alive. Of course, with South Korean president Moon Jae-in, and perhaps a chaebol boss. In traditional societies women made the peace—perhaps Michelle Obama, or a combination of enlightened billionaires and the media. I don’t know who might surface to champion this cause, but once the money is on the table, this peace plan can be signed and sealed quickly.

Coming to South Korea’s role in all this, we have seen the recent victory of Moon Jae-in, who is a left-leaning politician who could possibly support more dialogue with the North. What do you think would be the implications for the participation of South Korea into this plan? Does it matter what South Korea thinks?

Iverson: A wise and cooperative South Korean president could be a big help. This is Moon Jae-in’s chance to win a Nobel Peace Prize. But he needs the courage to really lead his people out of the darkness.

This brings us to a section of the book that is particularly fascinating. You explore the relationship between China and North Korea and the concept of ‘hostile surrogates’. In your view, China is propping up countries like North Korea to keep the US busy with a different range of problems, and to divert the eyes of the US from what is really going on in Asia. This is in contrast with a depiction of North Korea in the media, as a crazy place, run by an infantile dictator, which constantly tests the patience of its Chinese Patron. What’s your take on that?

Iverson: Yes, there is this standard ‘infantilization’ of Kim Jong-un in the media. He’s depicted as a screaming toddler, rattling a nuclear missile to protest unfair treatment or just to get his way… and to me, this is a dangerous underestimation of Kim. But the real danger is in taking president Xi and China at its word. The media has completely missed the real story.

China’s economic support for North Korea has increased four-fold since 2006, after North Korea exploded its first nuke. Beijing now purchases 90 percent of North Korea’s commercial exports, provides over a billion dollars in aid, 80 percent of its consumer goods, 90 percent of its energy, $100 million in UN banned luxury items, and enough food to feed over a million people each year. Profits from trade and aid with China directly and indirectly fund more than three-quarters of North Korea’s $6 billion military budget. So essentially, despite what Xi says, Beijing is paying for Kim’s nuclear program. I don’t understand how the media has missed this.
China
supports North Korea for security reasons. After establishing Pakistan as a nuclear power on one flank, China prefers a surrogate ally with nuclear muscle on its other flank. This relationship would dissolve if the Kim regime’s nuclear threat to the United States were unacceptable to China’s larger geostrategic objectives. This logic has escaped analysts who fail to identify the silent surrogate role Pyongyang plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the indirect transfer of technical knowledge and advanced weaponry to the Greater Middle East—especially to Iran and Syria.

There is abundant evidence for all of this. That is why I somewhat cynically argue that Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama. However, if Washington awakens from its strategic slumber and challenges China, Beijing may soon see no alternative and reluctantly back away from North Korea. How Beijing can do this while saving face is explained in my book.

And this is why sanctions have not worked so far and are unlikely to work in the future?

Iverson: Exactly. Justin Hastings new book, A Most Enterprising Country, documents this very well.

What’s the UN’s role?

Iverson: The UN may help ameliorate some pain and suffering, but it does not keep the country alive; China does… and will continue to until it is forced to pay a price.

Now, if things change with China and its relationship to North Korea…. what would happen in case of a sudden regime collapse and in the absence of a reunification plan?

Iverson: There is a map in my book showing how Beijing could claim a large portion of what is now North Korean territory, say, drawing a line from Anju in the west to Hamhung in the east. They might initially claim this resource rich territory as a buffer zone, and then, in time, annex it. China can do this because it has the strongest army in Asia and the US will never again fight China on the ground. Indeed, China might even sequester this land after a US surgical strike if it thought it could control regime replacement in Pyongyang and sooth international public opinion.

Let’s get now to some of the points in your book that may raise more than a few eyebrows. The moral substantiation of your plan may seem weak to those who believe that North Korea is the ultimate incarnation of an evil polity, much akin to Nazi Germany. How would you morally justify making a deal with North Korea?

Iverson: This isn’t Let’s Make a Deal, it’s let’s peacefully remove the Kim regime using cultural and economic incentives. To some this payment plan may seem unethical or even immoral, but most of the elites who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate. They were not complicit in its original acquisition or in the malevolence that followed. We don’t punish the descendants of slaveholders or the children of thieves and murderers. This payment would largely amount to a bailout for the misdeeds of their ancestors—without moral hazard. The new North Korean elite is composed of good and bad people, like the elite in all nations.

Young South Koreans seem more detached from reunification issues than their parents. What is your take on this?

Iverson: I dealt with this question in my previous book. South Koreans are demotivated when it comes to unification because politicians, public intellectuals, and the media have not presented the entire picture. North Korea has enormously valuable natural resources—valued at $6-10 trillion US dollars—and according to a Goldman Sachs study there are intrinsic development synergies that would propel the GNP of a united Korea past France, Germany, and Japan in just one generation. Korean scholars and the media have not popularized all the facts. A unified Korea will be much richer.

Well, I hope this happens. I’d like to thank you for your time and for your efforts to resolve this Korean crisis. Thank You. Thank you very much.

Iverson: No, thank you for your intelligent questions and sincere concerns. I appreciate that you have read my book and can envision along with me the possibilities for a peaceful solution. Thank You.

North Korea and the World

Book Review

North Korea and the World: Human Rights, Arms Control, and Strategies for Negotiation by Walter C. Clemens, Jr. (Lexington, KT: University Press of Kentucky, 2016)

Reviewed by Shepherd Iverson

Walter Clemens is an exceptionally literate Columbia-Harvard educated octogenarian scholar, who offers an experienced purview of the past leading to the present, and sound advice for how to conduct North Korea policy in the future. As one might expect from its title, whether one prefers Virgil, Machiavelli, or Goethe, the cheerful adagio and leisurely allegro of a Bach concerto or the sharp point counterpoint and complex syncopation of Beethoven, this book has something for everyone.

Did you know Koreans printed books using metal type 200 years before Gutenberg; claims one-forth of all Catholic martyrs, and that no US President spoke the word “Korea” in public from 1911 to 1942? This book contains intriguing and meaningful anecdotes and details that embellish a refreshingly sophisticated analysis. Clemens thorough scholarship also provides updated empirical estimates of things such as how many children are malnourished, citizens imprisoned, number of people who died in the famine, and other figures. This historically grounded treatise will satisfy those who seek a deeper understanding of North Korea today and the perplexing dilemmas and geopolitical challenges associated with its nuclear proliferation.

Beginning with Kim Il Sung’s interest in nuclear weapons in the mid-1950s, Clemens chronicles the phases of North Korea’s nuclear program and the impetus given it when India tested its first nuclear bomb in 1974, proving that even a poor nation can obtain a nuclear threat. This would eventually lead to nuclear cooperation with Pakistan.

Although almost 450 pages—60 pages of notes—this book is so well researched and written that it reads like a Tom Clancy novel. Separated into four sections and twenty chapters, Clemens discusses the historical roots of the North Korea problem, policy dilemmas, recent opportunities aborted, and future policy options. Interspersed throughout are thought provoking questions that could only have been asked by a scholar of significant field experience and indisputable wisdom.

Clemens asks if America should be seen as a beneficent gendarme or a brazen bully, and provides evidence for both. In his chapter, Facing Up to Evil, he quotes Reinhold Niebuhr and posits a universal moral argument that “suffering anywhere diminishes everyone,” and cites the 2006 United Nations Security Council resolution 1674 affirming the “Responsibility to Protect,” which justifies the international community’s moral obligation to intervene economically and militarily if necessary when states violate the basic human rights of their citizens.

The third section of the book is devoted to opportunities aborted as Clemens discusses failed US policy beginning with the Agreed Framework—the least bad option to create security on the cheap—followed by “Bush’s blend of bombast and malign neglect,” frustration at the cessation of six-party talks, concluding with the abandonment of the Leap Year accord and strategic patience.

One criticism of this book might also contain its deliverance: throughout there is an almost ecumenical passion reminding readers that international relations is more than abstract concepts and impersonal theories. Clemens claims “determined individuals have sometimes overcome the thrust of material forces and neutered the vagaries of time and chance.” Indeed, after introducing Machiavelli’s mysterious concept of fortuna, Clemens discusses Australian black swans, cultural intangibles, determinism, free will, and provides ample exculpatory evidence for readers to agree with his exonerating thesis that humanity may indeed overcome the push and pull of structural constraints and political dilemmas to evolve toward the light—as Steven Pinker argues in The Better Angels of Our Nature.

Clemens asks if Korea will “become a crossroads for commerce or a cauldron for war,” and argues that we have a choice, that cooperation is vital to the fitness of our species, and to thrive in an interdependent world of growing complexity we must foster enlightened self-interest to accomplish mutual gain and accommodate peace.
In his final chapter Clemens discusses the limits of rational policymaking, the possibility of parallel truths, imponderables and uncertainty, before introducing ten alternative approaches to denuclearizing North Korea. He favors strategies of engagement and negotiation, and devising “outcomes beneficial to key stakeholders” through incentives, and proposes GRIT (graduated reciprocity in tension-reduction) to achieve these results.

North Korea and the World makes an important and timely contribution to resolving one of the greatest security dangers to the United States since the Cuban missile crisis. This book is a must read for policymakers and Americans concerned about a belligerent nation with a per capita GDP of Afghanistan and a cultural propensity for honorable suicide that is developing weapons of mass destruction capable of annihilating a major American city in less than an hour from across the ocean at the push of a button.

Disarming North Korea

Disarming North Korea

Abstract: This essay seeks to cast doubt on conventional assumptions about China’s coercive ability and intent concerning North Korea, and proposes an unconventional geoeconomic solution to the growing nuclear threat that upholds Chinese security and saves face for Beijing. With incentives for private underwriting, a Reunification Investment Fund is introduced as a platform to create US-China cooperation and elite North Korean support in reuniting Korea.

Foreign Policy editor and Beltway insider David Rothkopf complains about “dumb-downed smart people” in Washington, and claims there is an “institutionalized aversion to creativity.” Indeed, conventional US North Korea policy remains stuck in the muck and mire of Cold War causation, without nuance, imagination, or reasonably substantiated expectations of positive-sum outcomes. The fatalistic diplomatic doctrine is: “There are no good options.” This can and must change.

After North Korea’s quadruple missile launch in March, nonproliferation analyst Jeffrey Lewis has convincingly argued that Pyongyang is “preparing for a nuclear first strike” on US and allied military installations in the Asia-Pacific. Experts predict that sometime during the Trump presidency North Korea will be able to deliver a nuclear-tipped ICBM to the United States homeland. Past US presidents have drawn a red line, claiming they would not allow a nuclear North Korea; however none has been successful in undermining this danger or in dissuading China from supporting the Kim regime. After eight years of strategic patience there is a growing consensus that something must be done in a hurry and that China must be compelled to cooperate.

Chinese President and communist Party general secretary Xi Jinping must feel uneasy about an unconventional US president with a conservative populist mandate, as Donald Trump has already made China’s trade surplus a political issue, and as Beijing quietly continues to prop up a regime in North Korea that is developing nuclear weapons it threatens to use against the United States. With several million manufacturing jobs lost to alleged unfair trade with China, and North Korea in the final stages of developing a nuclear-tipped ICBM, Washington may seek a grand bargain with Beijing to rebalance US-China trade and denuclearize North Korea. As the preponderant economic and military power in the world today, the United States has considerable ability to achieve both objectives. However, avoiding conflict may require unconventional means of deploying US power over China and North Korea.

In a book Henry Kissinger hopes will convince policymakers to reassess geoeconomic tools, in War by Other Means Ambassador Robert Blackwell and Jennifer Harris critique conventional US foreign policy and present a prescient prescription for what must change. Blackwell and Harris contend the Vietnam War pushed geoeconomics off the policy stage, and then as now, the US too often reaches for the gun instead of the purse. Citing ideas introduced by the influential Johns Hopkins foreign policy professor Michael Mandelbaum, Blackwell and Harris assert, “Understanding geoeconomics requires appreciating deeply embedded differences in the operating assumptions of geopolitics and economics. The logic of geopolitics is traditionally zero-sum, while the logic of economics is traditionally positive-sum.” They conclude that US policy should de-emphasize zero-sum conventional power politics in favor of positive-sum geoeconomic statecraft.

To achieve this objective, I have designed a model to peacefully denuclearize North Korea while creating economic and security benefits for concerned stakeholders—including China. In this essay I will introduce a pragmatic platform for positive-sum private and multilateral cooperation that expands the set of options at a time when it is painfully obvious conventional strategies derived from institutional think tanks and policy professionals are not working, and sentiment is growing for more drastic actions.

However, before introducing this proactive geoeconomic approach, let us review evidence that supports the prevailing opinion that China could do more to stop North Korea, and possible reasons for its reluctance.

China’s Reluctance to Stop North Korea
Conventional wisdom is that China prefers a divided peninsula in order to preserve a fraternally allied communist authoritarian state as a buffer between itself and the US allied (and occupied) democratic South Korea. While perhaps a valid concern for a more insecure generation, there is little rationale for this today. In addition to the borderless diffusion of news and information via digital communications and the Internet, with over two million men in boots and 2,000 fighter aircraft, no modern army would dare push toward Beijing over land through Korea, and after unification, the presence of anti-ballistic missile systems (THADD) and the US military are unnecessary. Let me suggest another reason that has largely escaped critical analysis.

Since the chorus of disapproval in China following North Korea’s February 2013 nuclear test, the prevailing consensus is that Beijing has distanced itself from Pyongyang. It is cited that Chinese President Xi has yet to meet with Kim Jong-un and has warned the Kim regime to stop provocations. Although there is circumstantial evidence for estrangement this does not discredit an alternative hypothesis that China is feigning displeasure to disguise its real intent. Analysts who presume acrimony fail to identify the silent surrogate role North Korea plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the transfer of technical knowledge and advanced weaponry. An incomplete flow chart of the chain of interlinking proxy relationships (including Russia’s role) and weapon transfers between anti-Western authoritarian states and non-state terrorist/resistance groups is represented in the figure below:

Anti-Western International Weapons Supply Chain

This chain of strategic relationships destabilizes the Middle East and challenges US interests in the Persian Gulf. A history of Chinese weapon exports to the greater Middle East and current North Korean weapon exports through Chinese ports to Syria and Iran (arming Hezbollah and Hamas) suggests collusion. China policy expert Denny Roy points out that an increasingly dangerous “anti-U.S. Iran diverts U.S. resources away from East Asia and attention away from China.” According to newly released records obtained under the Freedom of Information Act, China exported nuclear materials to the Middle East in the early 1980s. Declassified CIA reports reveal that Chinese entities have been key suppliers of nuclear and missile-related technology to Pakistan and missile-related technology to Iran.

In 2011 a U.N. Panel of Experts report was blocked by Beijing in the Security Council because it contained incriminating details that Iran and North Korea exchanged missile technology using Air Koryo and Iran Air, involving transshipment through China. Before the JCPOA agreement was finalized, Beijing repeatedly opposed UN sanctions against Tehran, vetoed sanctions against the Bashar al-Assad regime, and stymied possible P5+1 action in Syria. Beginning in 2009 the Obama Administration imposed sanctions 16 different times on Chinese entities for weapons proliferation, including after 445 North Korean-made graphite cylinders used in ballistic missiles were seized in 2012 from a Chinese cargo ship bound for Syria.

In February 2014 the US Defense Intelligence Agency Director testified before the Senate Armed Services Committee that Syria’s liquid-propellant missile program depends on equipment and assistance primarily from North Korea.
These intelligence discoveries, plus Beijing’s lackluster response to Pyongyang’s nuclear and ballistic missile tests and its failure eliminate munitions transshipments and enforce UN sanctions, suggest that China’s support for North Korea may not be a benign legacy of the Cold War, but part of a larger geopolitical strategy. After establishing Pakistan as a nuclear power on one flank, China may prefer a surrogate ally with nuclear muscle on its other flank.
While China may currently lack resolve to stop North Korea, evidence it could prevent its nuclear proliferation would create a strategic opening for geoeconomic diplomacy.

Can China Stop North Korea?
Taking the CCP at its word that it disapproves of North Korea’s nuclear missile program, most institutional analysts also presume Beijing cannot stop it. However, evidence of substantial economic leverage suggests otherwise. According to a US Congressional research report, in addition to over one billion dollars in direct aid, Beijing purchases 90 percent of North Korea’s commercial exports, provides 80 percent of its consumer goods, 90 percent of its energy, over $100 million in UN banned luxury goods, and enough food to feed over a million people per year. However, the most profit is derived from the trade itself, which despite Beijing’s alleged discomfort with Pyongyang’s provocations, has quietly increased four fold since North Korea’s first nuclear test in 2006, as shown in the graph below.

China-North Korea Trade 2006-2015

Source: Korea Trade-Investment Promotion Agency (KOTRA)

Although there are indications of a recent reversal, this dramatic increase in trade since 2006 is undeniable evidence of China’s growing support for North Korea and at least tacit approval of its nuclear weapons program. As Beijing props up the Kim regime without bringing attention to itself—or anyone losing face—it may undervalue exports by at least one-third—a strategic discount—while the bulk of North Korea’s exports of mineral products and textiles—utilizing work camp labor—may return a 90 percent profit. The structural trade deficit (highlighted above) with China is effectively foreign aid since it is inconceivable it will ever be paid back, as with the $10 billion Russian debt that was forgiven in 2012 after decades in arrears. Given these assumptions, from available data Chinese trade and aid is responsible for direct and in kind fungible profits that paid for more than three-quarters of North Korea’s $6 billion 2015 military budget.

Despite benign policy pronouncements, this suggests China is underwriting the stability of the Kim regime and paying for a portion of its nuclear weapons program. Indeed, if China were to abide by UN sanctions and suspend support—even if food aid was maintained at humanitarian levels—without luxury goods for elites, oil for the military, and essential commodities for its people, it is improbable the Kim regime would last long. American Enterprise Institute economist Nicholas Eberstadt describes North Korea as more dependent on aid than the poorest countries in Africa. According to the highest ranking émigré and a senior member of the Korean Workers Party: “Without Chinese capital goods, it would be impossible for the North Korean government to operate, and ordinary people would not be able to carry on with their daily lives.”

Under such conditions, leaders of surrogate states need not like their overseers in order to do as expected when money—or its equivalent—is on the table, especially if they have no one else to turn to and when these activities are consistent with their geopolitical designs. The degree of animus or friendship between Beijing and the Kim regime is immaterial to this client-proxy relationship, which would dissolve if North Korea’s nuclear missile program, and missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

Breaking With the Past
As shown, China has more leverage over North Korea than most analysts presume. However, enlisting China’s cooperation may not be as prohibitive as observers might think. Dartmouth political scientist Jennifer Lind points out that when China and North Korea originally formed an alliance both countries were weak, resentful, isolated, and the target of Cold War containment by the US and its allies. China has since moved beyond this state of affairs, has joined multilateral institutions, and now depends on the international system as the world’s largest trader. Although its North Korea policy remains anchored to the past, influential factions in the PLA and the CCP regard the Kim regime as a threat to regional stability.

In a September 2014 article, published in the China state journal, World Knowledge, Renmin university international relations expert Li Wei describes North Korea as inappropriate as a “strategic ally” because it does not conform to the general criteria of a “strategic hub country” that supports Chinese political, diplomatic and security goals. Party elites are uneasy about an unruly state on their border that may provoke a US military response or prompt regional nuclear proliferation. Indeed, Richard Haass at the Council on Foreign Relations notes: “China needs years and more likely decades of relative stability in the region so that it can continue to address its many domestic challenges. North Korea is a threat to such stability.”

Although hardliner traditionalists still prevail over a new generation of policy pragmatists, their authority is not unlimited, and Beijing is not immune to its own populist pressures. China may not renew this relationship indefinitely, as it is forced to accept more important concerns that loom on the horizon. Since the Mao era, Chinese leaders have exhibited an admirable faculty for reform in response to changing real-world circumstances. As relations between the US and North Korea deteriorate and the geopolitical calculus changes, the geoeconomic model outlined below may be China’s golden opportunity to resolve this eroding security dilemma before it loses control over the situation. Sixty-five years ago when its frontline value was beyond reproach, North Korea was a protected pawn in the chess match of great power rivalry. However, now that it has invited danger into the region for China, it may be sacrificed for a larger strategic vision.

In a world of massive capital flows, unequal abundance, structural stagnation, and global satellite communication, where expanding trade and creating jobs is as important to political survival as free access to well endowed consumer markets, it is likely that over the course of the twenty-first century a more pragmatic modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft to solve political disputes and promote and defend national interests. The following plan to disarm North Korea was designed as a bridge to this future.

Creating Geoeconomic Incentives
What if there was a way to reunify Korea and stop nuclear proliferation without inciting fear or administering punishment, but instead, by promising personal rewards? Novel approaches often seem untenable until they are fully understood. Therefore, I ask readers to be open-minded and suspend judgment until they comprehend the interacting details of this model.

To begin, imagine you control a multi-billion dollar capital fund and North Korea is a poorly run underperforming corporation that is controlled by an incompetent board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—political and military elites, government managers and bureaucrats, and the general population—a higher price for their shares to convince them to overrule their board of directors. This is the plan in a nutshell.

After a quarter century of failed conventional policies, a geoeconomic strategy that injects the persuasive power of personalized money into the diplomatic process may be necessary in order to overcome institutional inertia and path dependencies that too often terminate in conflict. My assumption is that in social settings, where almost everything is for sale, there must be some level of security assurance and personal financial incentive that will impose insurmountable domestic pressure on the Kim regime to acquiesce to South Korean political control.

To achieve this result I have designed a plan for the institution of a seven year $52.5 billion Reunification Investment Fund—with private underwriting—that would offer personal financial incentives for North Koreans to unify with their wealthy relatives to the South. As in the final days of the Soviet Union, the efficacy of this model is enhanced by the word-of-mouth rumor currently spreading across North Korean social networks that the outside world is a better place to live. People are ready for change; this fund is a platform to unleash and manage it. The bold arrows below represent the essential elements of this Reunification Investment Fund:

Reunification Investment Fund Financial Flow Chart

* The Bank of Korea may act as the lender of last resort

In this scenario, the South Korean government would offer resources awards and private sector contracts for infrastructural improvements and portions of future markets, industries, and business enterprises worth trillions of dollars in profitable assets, including open markets in telecommunications, transportation, building materials, and automotive products, ownership or licensing agreements for control over mines, seaports, and tourist attractions, and exclusive construction contracts for a gas pipeline, railroads, tar roads, energy generation, and a multitude of necessary projects.

In exchange for these resource awards and government assurances, business investors would be required to endow this fund to pay an annual $4.2 billion golden parachute for seven-years to North Korea political and military elites, to compensate for their loss of power and position. Since it is impractical to expect democratically elected officials to agree to pay large amounts of public money to North Korean elites, these payments must come from private sources, for whom the prospect of enormous business profits make this a wise investment.

Lucrative business opportunities abound in the hermit kingdom. North Korea ranks 10th among all nations in mineral reserves; valued at $6-10 trillion. A multi-billion dollar pipeline must be built from Russia to supply the industrial and population centers of Korea with an estimated $3 billion in natural gas per year. Railroads must be rebuilt for rapid commodity transport to Europe and China. Unification would stimulate exports through the northernmost ice-free Pacific port in Rason, just a few miles from landlocked China and bordering the resource rich Russian Far East. Roads must be tarred, cars imported; only 3 percent of the roads are paved and the North has only 50 thousand private cars compared to 18 million in the South. Cheap labor will be available for at least a generation, as internal markets spring up. Tourism is another unexploited multi-billion dollar industry, where control over specific attractions may be turned over to private enterprise in return for contributions to the fund.

After decades of globalization profits and unprecedented QE, the world is awash in money. Business tycoons, transnational corporations, and institutional investors have surplus capital and are looking for opportunities. International business, banking, and multilateral underwriting, with G-20 leadership, will impart confidence by indemnifying this fund with broad assurances from the global community. In today’s multilayered global balance of power, private interests often serve as a unifying force in the competitive nation-state system of world governance. This plan is based on the assumption that geopolitics may sometimes be more effectively managed through positive-sum geoeconomic incentives acting on the personal and cultural level.

Culture Unifying Incentives
Almost everyone in North Korea has abandoned Leninist ideology and is aware of and envious of South Korea’s remarkable prosperity. The steady diffusion of news and information across the semi-permeable Chinese border has changed the cognitive landscape, as a market-motivated underground word-of-mouth information highway challenges the state’s meta-narrative and monopoly on information. Rumors of the inordinately better life in the South have saturated cultural impressions and created a new social context for political change that has not existed before.

After decades of silent transformation the mere existence of this fund sitting in escrow ready to pay out vast sums may catalyze overwhelming support for reunification at all levels of North Korean society. The promise of $29.4 billion to elites—$4.2 billion times 7 years—can win a lot of hearts and minds. The top ten power elite families would receive $30 million each, while the top thousand would get more than $5 million; 11,000 upper elites—including all generals—will be offered at least $1 million; more than 50,000 mid-level political elites and military officers will receive $100,000 to $500,000, while the incomes of 300,000 families in Pyongyang will increase many fold if Korea were to unify.

This provision of money is compensation for loss of status and income. On the surface, these payments may seem unethical, possibly even immoral, but most of the elites who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate (position and power) and were not complicit in its original acquisition or in the malevolence that followed. We do not punish the descendants of slaveholders or the children of thieves and murderers. Their only guilt is the origin of their birth. Indeed, this payment would amount to a bailout for the misdeeds of their ancestors—without moral hazard.

As designated by the thin arrows in the financial flow chart shown above, the masses outside Pyongyang should also be awarded financial benefits. This will help jump-start the new economy and ensure social stability. Non-taxpayer derived investment capital may come from South Korea’s half-trillion dollar sovereign wealth and foreign reserve assets, QE, helicopter money, or from the presumptive peace dividend. Post-unification investments in infrastructure from Korean government bonds ($300 billion has been proposed), international banks (IMF, ADB, and AIIB), and the B-20 (the investment arm of the G-20) may amount to more than a trillion dollars over the next decade, creating millions of productive jobs and securing the democratic transition.

Little is known about the sentiments of the Pyongyang poor, who comprise about two million people living in close quarters, just a stone’s throw from the guarded compounds of the power elite. Few have refrigerators and even fewer own washing machines; electricity and water are intermittent. They live along dirt roads in brick-and-clay huts without toilets, heat their homes with charcoal, and bathe infrequently in public cold-water showers—even in the bitter cold of winter. Promises of food security, modern health and dental care for their children, property ownership, a regularly functioning water and energy infrastructure, high-speed international communication links, and thousands of dollars deposited into their personal bank accounts each year for seven years may spread unification fever and many may take to the streets.

Safe from international retribution, the Kim regime may acquiesce long before the social situation devolves into a state of general chaos and insurrection. Although Kim Jong-un receives no money, that personal safety is more precious than power would give him little choice but to accept this offer. He may be granted immunity from criminal prosecution, allowed to keep a portion of his fortune, and promised freedom to live and travel anywhere in the world. Nothing is gained by his vilification or punishment, while promising safety and security to Kim and his family may prevent bloodshed.

Or if Kim is unwilling to acquiesce, motivated by the $20-30 million promised to the 200 most prominent families, elites may take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political and military elites. In either event, violent overthrow or peaceful acquiescence—and with or without Chinese assistance—the transfer of power to South Korea would disarm a nuclear threat and end more than half a century of abject tyranny.

Conclusion
The Trump administration has made it clear that America’s patience has run out and that it will not allow the Kim regime time to develop the ability to nuke the United States. With the horror of 9/11 indelibly etched into American minds, many believe a surgical military strike now may have significantly lower risks than a nuclear-ICBM endangered future. All options are on the table; the US is prepared to act unilaterally and unpredictably—as in the April 7 cruise missile strike on a Syrian airfield. Since conventional geopolitics has failed to stop North Korea from developing weapons of mass destruction, this geoeconomic approach should be considered in lieu of another missile strike. Indeed, the extraordinary plan proposed here might be the only realistically achievable path to denuclearize Korea at this late stage without resorting to a kinetic solution.

Mutual US-China security concerns may compel reciprocal compromise and cooperation. China may facilitate reunification by suspending all support for Pyongyang while the US would agree to withdraw its military from mainland Korea pending unification and the removal of nuclear weapons. Both nations may diplomatically promote and financially support this fund. Indeed, ubiquitous benefits from reunification should help promote this peace initiative.

If popularized in the media, business leaders and heads of state may see this is a workable plan that would benefit everyone with something at stake in the region. The US would get the dissolution of a grave nuclear threat, an end to the possible transfer of nuclear materials and technology to terrorists or rogue states, and a chance to reassess its geopolitical interests in a less threatening Asia-Pacific; Japan gets safety from missile attack and weapons of mass destruction, along with large new labor, export, and investment markets; Russia gets secure rail and energy profits, and year-round passage to Pacific shipping; China gets a reprieve from the possibility of regional nuclear proliferation, free-market access to Korean minerals and ports, cooperation in developing its northeast provinces, the removal of US troops from mainland Korea and an easing of great power rivalry; and South Korea gets permanent peace, trillions of dollars in mineral resources, energy security and diversification, several valuable Pacific ports, rail connection to China and continental Europe, 50 percent more people, 120 percent more territory, and according to a Goldman Sachs study, development synergies that may propel its GNP past France, Germany, and Japan in just one generation.

Although nuclear proliferation and the trajectory of geopolitics seem unstoppable, we need not continue down this road leading into the abyss. Instead we may think outside the box and create novel solutions to unique contemporary geopolitical problems. Realizing the potential of this fund will require the inspired vision of business and political leaders who can bring out the best in all of us; those who perceive the big picture and understand that the ideas that move humanity forward are often initially considered crazy, disruptive, or impossible; leaders who can show us what we should want, while employing positive-sum geoeconomic incentives to get us there.

To get from here to there we must transcend zero-sum geopolitics with a strategic plan that at least has some chance of positive-sum success. This Reunification Investment Fund is such a plan. As Ambassador Blackwell and Jennifer Harris astutely assert: “U.S. foreign policy must be reshaped to address a world in which economic concerns often outweigh traditional military imperatives and where geoeconomic approaches are often the surest means of advancing American national interests.”

correction

Correction

Somehow I messed up the 2015 North Korea-China trade amount. It did not increase but declined from 2014.

From Korea Trade-Investment Promotion Agency data, I now estimate Chinese trade and aid is responsible for direct and in kind fungible profits that fund more than 80 percent of North Korea’s $6 billion military budget. [not 90 percent]

The corrected ten year graph is below.

           North Korea Trade Volume (billions)

 

The US-Korea Alliance and the World According to Trump

The US-Korea Alliance and the World According to Trump                  

Living in South Korea with my family for the past eight years has afforded me a grassroots perspective on Korean politics and the future of the US-Korea alliance. As populism changes the political landscape in the West, many wonder if similar effects will be felt in the East. The public process of dethroning President Park suggests it may. With populist hysteria associated with the transgressions of President Park and her cronies, there has been a rise of left-wing political opposition that is less sympathetic to US interests. Washington is concerned about a possible postponement (or even cancellation) of the planned 2017 deployment of the Terminal High Altitude Area Defense (THAAD) system.

As a predominant economic and military power, the United States can make policy mistakes and recover relatively unaffected. But as a resource-poor middle-power, never far from the precipice, South Korea does not have the resilience to deny reality and make mistakes. Unfortunately, facts and logic do not seem highly valued in Korean policy circles. A collective state of denial of the North Korea proliferation problem has defied reason. Like status quo parties in Europe and the United States, traditional sources of political power in Korea are ill prepared to reverse patterns of perceived incompetence and trends of disaffection.

Months ago, shortly after Donald Trump made disparaging campaign remarks about the cost of the US-Korea alliance, I warned those present at a political science seminar in Seoul not to underestimate the possibility of a Trump presidency. My Korean colleagues thought I was out of touch; this could never happen. That inconvenient truths or the logical trajectory of geostrategic facts might intervene to dissuade future events seemed not to effect the normal wishful thinking of status quo political analysts in South Korea (and in the US), as they misapprehended modern vectors of change. However, mistakes in judgment have larger consequences for Korea.

Few South Korean analysts have been critical of America’s wait-and-see policy of strategic patience, as if assuming the North Korea nuclear missile threat will disappear without incident. Status quo thinkers have been unmoved by innovative ideas that might impact policy, allowing only small iterations of their own unimaginative conventional approaches. Myopic self-satisfied political leaders from both the right and left seem so wrapped in the rhetoric of there historical views and positions on North Korea that neither see the ground moving out from beneath their feet. At a time when Korea needed a strong and sophisticated leader it elected a president who consults with spirits through Shamans.

Exit Obama-Park; enter Trump. The Donald might not be well liked by half the American public, but as a spoiled self-centered billionaire who will do almost anything to win and get his way, he simply doesn’t give a damn about how things have been done in the past or what the established order thinks. In the spirit of Teddy Roosevelt, Ronald Reagan, and the gunslingers of the Wild West, many Americans like such rough and ready tell-it-like-it-is leaders. Opponents may refer to his personal style of deal making as abrasive, even dangerous, but everyone will agree he is a man of action who commands attention; while some fear and others rejoice that he might actually get things done. Trump may have a thin understanding of how geopolitics has been conducted in East Asia, but after years of making deals, he has a thick understanding of how to employ power to get his way.

While experts predict North Korea will be able to deliver a nuclear-tipped ICBM to the US mainland at some point during the Trump presidency, many now ask how the World According to Trump will affect Koreans and the US-Korea alliance. Unlike sidestepping politicians, I will be blunt and straight to the point about an issue that really matters. While President Obama asserted the US would not consider a unilateral strike on North Korean nuclear missile sites because of the danger of a knee-jerk retaliation against Seoul, all bets are off with Trump. To protect American lives, that tens of thousands of Koreans might perish is unavoidable collateral damage. Trump does not have a liberal conscience; he is an American exceptionalist on steroids. When he says America First he means it.

Even the suggestion of unilateral action makes my Korean colleagues cringe. They will not discuss this possibility openly; it is more comforting to put ones head in the sand and to deny danger. During Obama’s tenure, few took my forewarnings seriously, even as the logical progression of this possible outcome was becoming more apparent. Indeed, Trump may not let a belligerent Kim regime obtain political leverage concordant with an ability to vaporize millions of Americans at the push of a button. And with the horror of 9/11 indelibly etched into the American psyche, why should he when a surgical military strike now may have significantly lower risks to American lives than a nuclear-ICBM endangered future?

It should be remembered that 10 years ago two former US Secretary’s of Defense advocated just such a preemptive strike, and public opinion polls suggest that even a portion of those who did not vote for Trump might approve of this action. Former Secretary of Defense Colin Powell has also reiterated this scenario, and it is doubtful incoming Secretary of Defense James “Mad Dog” Mattis—whom GOP hawks tried to convince to run for president—will be less proactive.

Another pending concern that may affect the US-Korea alliance, about which the conventional South Korean political establishment is in a state of denial, has to do with China. The liberal East Asian Foundation and other progressive groups have applauded China’s One Belt One Road and Maritime Silk Road initiatives (with the dubious assumption Korea will accrue some benefit), but without a realistic assessment of its economic viability. It is ironic that while Korean economists expertly manage the Korean economy, economic realities seem of little consequence to Korean political experts while stroking the China Dream.

It is presumed China’s rise and the US fall are real and permanent and that South Korea must decide which ship to board. But political dreamers are merely intoxicated with a grand idea. Most sober geoeconomic analysts predict this will be the American Century and that communist China may soon crumble under the weight and fiscal mismanagement of its corrupt authoritarian leaders. Perhaps this sanguine credulity and irrational exuberance among Korean political experts exists because crony capitalism and kleptocracy with Chinese characteristics strikes close to home—among the last six South Korean Presidents, two were impeached, two went to jail, and one committed suicide. Even before the prospects of a Trump geoeconomic rebalance, the view among many macroeconomics is that China is a sinking ship, overleveraged in every aspect of its economy, and faces if not a hard landing, a very long one—the middle income trap.

In the World According to Trump, like European free riders, Korea is expected to pay more and do more to protect its freedom and prosperity, and China is considered the ultimate freeloader; but not for much longer. Trump will likely push for trade reform, as is evident in his “get tough on China” appointments of Robert Lighthizer for US Trade Representative, Wilber Ross as Commerce Secretary, and professor Peter Navarro—a reputable anti-China agitator who wrote “Death By China”—to run the new National Trade Council. Indeed, the impact of Obama’s geopolitical rebalance may be mild compared to Trump’s geoeconomic rebalance. Jobs are the issue.

Trump promised to give Americans their jobs back; rekindling the American Dream for a millennial generation. Indeed, Trump was elected in no small measure because people think conventional political leaders have failed them; that out-of-touch Cold War curmudgeons and corporatists have misappropriated their trust and beguiled the public good will. Citizens feel lied to about matters of great importance (with conventional media complicity) and express their anger through social networks and sometimes out on the streets.

These sentiments are going global and status quo candidates from the right and the left will increasingly be surprised and confounded by new populist political personalities who appeal more directly to plebeian concerns. As the masses unite, the US-Korea alliance may become as fraught with contradictions and as complicated as the US-Philippine alliance. These inertial populist forces are larger than any one political leader, and have roots in the democratic leveling effects of the Internet and the rise of a new global conversation.

Trump merely marshaled democratic forces already in motion that made the perceived negative effects of globalization and an unfair trade relationship with China a central populist issue. The US had lost 5 million manufacturing jobs since the year 2000. As Beijing refused to open its markets to US business without onerous requirements, the US trade deficit with China ballooned to over $350 billion. Americans are realizing that importing/buying Chinese products is paying for their unemployment while bankrolling the modernization of a Chinese military that may one day kill their sons and daughters.

Answering Taiwan President Tsai Ing-wen’s phone call reflects an incipient geostrategic willingness by the Trump Administration to apply leverage against China for a number of perceived abuses, including unfair currency and trade practices, its aggressive behavior in the South China Sea, and a reluctance to enforce sanctions against the Kim regime.

As the North Korean threat grows more menacing, Americans increasingly wonder how a country with a GDP equal to the poorest nations in Africa can afford a nuclear missile program? Who better to officially direct this question to Chinese leaders than Secretary of State Rex Tillerson, a pragmatic corporate dealmaker who sees national security through an economic lens.

Despite denial and deception, it is obvious China supports North Korea for geopolitical reasons, while having yet to suffer geoeconomic consequences for this preference. After establishing Pakistan as a nuclear power on one flank, China prefers a surrogate ally with nuclear muscle on its other flank. This relationship would dissolve if the Kim regime’s nuclear threat to the US and its well-documented missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

This analysis is based on actions, not words. Realism and Trump’s campaign promises put China’s trade and aid policies in double jeopardy. Many believe an unencumbered trade policy has not made Americans richer or safer, but harms workers while directly (China) and indirectly (North Korea) underwriting the financial and military capabilities of those who treat the United States as their enemy. It has become clear to even less educated citizens that the greatest paradox of our time is that Americans have been funding their own geopolitical and geoeconomic demise. Indeed, Trump was elected because he agrees with this populist diagnosis.

Although pending dangers remain unspoken, and no promises can be made, logical trajectories suggest Seoul must fully cooperate with Washington to pressure Beijing to stop Pyongyang, or else face the possible consequences of a US military strike against North Korean nuclear missile facilities. Unfortunately, because of inertial tendencies in international relations, it may already be too late. Perhaps the last and only possibility now to avoid military action is the fast-track solution—to bribe North Korean elites to reunify—outlined in my new book, Stop North Korea: A Radical New Approach to the North Korean Standoff.

With a populist Make America Great Again mandate, President Trump will be compelled to modernize US policy and force China to comply with fair trade policies and denuclearization in North Korea. The art of this deal is in the degree to which economic pressure must be applied to convince China to stop North Korea’s nuclear threat. For Seoul, liberal economic reengagement is no longer an option since Pyongyang is nearly ready to field a nuclear-tipped ICBM that will endanger American lives.

The US-Korea alliance is fragile at both ends. In a prolonged state of denial, South Korea has not done enough. Seoul must quickly adjust to an increasingly dangerous and complex situation, and do what it can to unify Korea now, because without forewarning, as the preponderant economic and military power in the world today, the United States has considerable leverage to achieve any security objective it deems necessary.

SHEPHERD IVERSON is a former foreign professor in the Institute for Korean Studies at Inha University. A portion of this essay was adapted from his new book, Stop North Korea! A Radical New Approach to Solving the North Korean Standoff (Tuttle 2017).

The Corporate Buyout of North Koreans

The Corporate Buyout of North Koreans

4

I am not a veteran political scientist, who after 25 years of diplomatic frustration and failure, is smothered in nostalgia for the Accords and still longing for renewed Six Party Talks. I am a cultural anthropologist who started work on denuclearizing North Korea only after I moved to South Korea to teach eight years ago. Although I am now quite familiar with the political theory and the ways and means of diplomatic gamesmanship, I am not overly impressed with either. Something more genuine and reasonable has been left out of their elitist equations…the common everyday people. Cultural concerns are naught. And while humanitarian concerns are voiced, there is much less attention paid to the economic survival of individuals in North Korea. Proposals for how to end the Korean civil war and reunify the country are therefore biased by both the bloodless and the bleeding hearts, with little common sense in between.

Considering the great danger of an unstable autocratic regime in control of nuclear-tipped ICBM’s it is amazing to me how few books have been published that might provide a solution. There have been five. I have written two.