Poverty, Sanctions, and North Korea's Nuclear Ambitions

flickr / fresh88

This week North Korea released an inflammatory new propaganda video showing President Obama and United States troops in flames. The video then credits America’s “gangster-like policy of hostility” for the country’s decision to become a “strong military power” and conduct its latest nuclear test. Like many other North Korean propaganda videos, this one also blames the nation’s overwhelming poverty—including chronic food shortages—to the imperialist bullying of America.

Although the video and its sentiment is far from new—North Korea has been releasing such propaganda for years—the implications of this one are a little more pressing this time around. That’s because North Korea detonated a third nuclear test explosion on February 12^th, about two months after firing a missile into orbit. As John Bolton, former U.S. ambassador to the United Nations and a senior fellow at the American Enterprise Institute, puts it, North Korea is “perilously close to becoming a nuclear weapons state in fact, not just in the regime’s extravagant rhetoric.”

Most of the time, North Korea’s propaganda and rhetoric is so convoluted that calling it “extravagant” is probably being too kind. In what is more a force of coincidence than reason, however, the logic of its most recent video is not too far off the mark. Namely, the video argues that America’s sanctions are to blame for the nation’s poverty and that America’s hostility (read: sanctions) are likewise to blame for the country’s decision to obtain a nuclear weapon. Of course, none of us can make much of an assessment about North Korea’s decision to do anything, but there is one thing we do know. And that is: the sanctions aren’t working. In fact they’re making matters worse. Let me explain.

This week, in response to North Korea’s latest nuclear test, the European Union passed still more, still tougher sanctions against the Asian nation. The new sanctions ban imports and exports aluminum for ballistic missile systems; transactions involving North Korean government bonds; forbid North Korean banks from opening new branches within the EU; and prohibit EU banks from taking part in banking activities in North Korea.

In a world of anonymous shell corporations and offshore accounts, these new sanctions won’t exactly be impossible to evade. We already have good reason to believe that North Korea channels funds through a variety of international banks that help Pyongyang evade the ban on developing long-range missiles and a nuclear reactor. For example, North Korea used a Jordan-based bank receive money from Syria and Iran in exchange for illegal weapons. And U.S. officials believe North Korea is “aggressively establishing a network of front companies through which to secretly sell its weapons and evade sanctions.”

Not only are they ineffective, these sanctions may have the opposite effect as desired. Wealthy North Koreans and their government, who have endured sanctions from the United States since the 1950s, have been moving money for decades using illicit drugs, counterfeit money, and financial scams. Sanctions have entrenched the regime—forcing the economy to look further inward, pushing more money to illicit avenues, and debilitating the middle class. If there were to be an opposition in North Korea, it’s the middle class that would ignite it, not the starving population. In fact, North Korea’s leadership realized long ago that its weakness—economic decay—could in fact be converted into a strength—a silent population, steeled for constant war.

The evidence points to a hard truth—economic sanctions make dictatorships stronger; they push money into the underground economy; and they cut off the life-blood of the very people inside the dictatorship who we would hope to rise up.

I wish I could end on a light note, but the truth is that even with more transparency in international banking, sanctions in North Korea won’t work. Transparency might force some shadowy finances into the light, but the wealthy members of society will still have the option of literally carrying cash across the boarder (a more common approach than you might expect) and we’d still have the problem of enforcement, especially in China. Yet, simultaneously, by pursuing sanctions with such zeal, we’re ignoring other possible solutions. In effect, we’re allowing North Korea to pursue its nuclear ambitions.