THE BEAR'S
LAIR Juche right when it
suits By Martin Hutchinson
The death of Kim Jong-il, dictator of
North Korea since 1994, has been met with near
universal condemnation of both his human rights
record and his approach to economics. Yet
juche, the philosophy of self-reliance
underpinning the North Korean economy since his
father Kim Il-sung devised it, is far from dead.
Instead, as hapless populist leaders
search in the current recession for alternatives
to the apparently failed 1990s "Washington
consensus" version of capitalism, they are in many
cases turning to versions of juche,
horrible as its record has been in North Korea.
Maybe Kim Il-sung, like Karl Marx before him, is
destined to inspire millions of deluded followers
a generation or more after his death.
The
North Korean philosophy of juche was first
propounded by
Kim Il-sung in a December
28, 1955, speech "On eliminating Dogmatism and
Formalism and establishing juche in
ideological work". Kim urged party functionaries
not to import ideas wholesale from the Soviet
Union, but to establish North Korea as a
revolutionary nation in its own right. The
ideology was developed over the next decade,
alongside the Kim family's extreme personality
cult, receiving an impetus from the Sino-Soviet
split of 1960, and was elaborated in an April 1965
speech, in which it was held to entail political
independence, economic self-sustenance and
self-reliance in defense. Kim Jong-il elaborated
the ideology further in his 1982 "On the
juche idea" and added an "army first"
policy to it in 1996.
Juche has
been held responsible for many of North Korea's
follies, including its universally hostile and
deceptive foreign policy and its wayward nuclear
program, although many of the Kim regime's most
unpleasant features are common to totalitarian
states throughout history. However, the economic
side of0 juche, the doctrine of extreme
self-reliance, minimizing international trade,
investment and contact at every level, is of most
interest here.
Self-reliance showed its
downside in North Korea in 1994-98, when the
country's gross domestic product halved and its
populace descended into famine. Its earlier record
was better. As of 1968, 15 years after the end of
the Korean War, North Korea was considerably
richer than South Korea. This was only
peripherally a result of juche; North Korea
had inherited the bulk of the pre-war Japanese
industrial plant (little of which had been
destroyed by the 1950-53 war) and received
considerable help including subsidized energy
imports as a member of the Sino-Soviet bloc. After
1970, the subsidies declined and the Japanese
equipment wore out, so North Korea entered a
period of stagnation.
The great blow to
the juche economy was the fall of the
Soviet bloc and the exposure of North Korea to the
full force of the international market. Whereas
juche had worked reasonably well within a
non-market-driven economic bloc containing a third
of the world's population and much of its natural
resources, as an eccentric ideology in a world of
blistering free trade it proved a disaster. Since
2000, the North Korean economy has subsisted on
handouts from its now much richer neighbor to the
south and by blackmailing the West through its
nuclear program.
There are thus lessons to
be drawn from the last 50 years of North Korean
economic history. First, any attempt to be
self-reliant requires an economic entity that is
large enough to produce most of the goods it
needs, even inefficiently. North Korea on its own,
without the Soviet bloc as friendly neighbors,
manifestly fails on this criterion.
Second, and less obviously, juche
works better in a world in which it is not
particularly outlandish, in which free flow of
goods and services is blocked by relatively high
tariffs, and in which many other countries are
practicing similar policies. In the 1950s and
1960s, Britain and much of Europe had exchange
controls and high tariffs both internal and
external, China was an inward-looking peasant
economy and India and most of Latin America were
practicing policies of crude import substitution
that were to hobble their economies for decades
thereafter.
The Soviet bloc, above all,
devoted much of its output to weaponry and
disabled the price mechanism through central
planning. Only the United States practiced
something close to free trade and unrestricted
international investment, while Japan initially
and the remainder of east Asia later built their
economies on their export prowess to US and
European markets, without any corresponding
domestic opening.
In the 1990s,
conversely, exchange controls were a thing of the
past, as was the Soviet bloc. International trade
was at record highs, and international investment
was finally returning to its apogee of 1914. Even
more disruptively, the advent of the Internet
during the decade made international supply chains
far easier to manage than they had ever been
before, leading to a massive boom in emerging
markets that is still with us.
In such a
world, North Korean economic methods that had
worked adequately in a more restricted world fell
apart completely. Juche was much more
outrageously sub-optimal in 1998 than it had been
in 1968; thus the collapse of the North Korean
economy in the middle 1990s.
Juche
is thus a completely discredited economic ideology
- except that today you can see elements of
juche creeping into economic policy all
over the world. Mercosur, the trade bloc including
Brazil, Argentina, Uruguay, Paraguay and soon
Venezuela, has just agreed to choose 100 imports
on which it will impose 35% tariffs. Brazil itself
has imposed a 30% tariff surcharge on imported
automobiles. All five Mercosur leaders are
leftists, elected in a reaction to the previous
policies of economic liberalization; their natural
instinct is to protect their economies from what
they see as destructive global competition.
Then you have the "anti-dumping duties"
imposed by the US on Chinese tires and the
countervailing duties imposed by China on imports
of US automobiles. In India, the impulse to free
markets under Atal Bihari Vajpayee (1998-2004) is
long gone; the present government has hurriedly
reversed a decision to open Indian retailing a
fraction further to foreign investment.
Then you have the European Union, not seen
by most of its keenest supporters as a free trade
zone - that's a myth cooked up for the gullible
British - but as a closed system strong enough at
last to repel the hated influence of the United
States and Asia. The attempt to battle against
market forces which correctly flag the Greek
economy as hopelessly uncompetitive at current
exchange rates is a classic of juche
thinking.
So too is the German energy
subsidy system, now copied by other EU countries,
which allows multiple state-favored energy inputs
at non-market prices, while a certification system
is used to exclude Chinese wind-turbine
manufacturers. Even in stock exchanges, now the
leading edge of globalization, the Deutsche
Boerse-NYSE deal is being stymied by regulatory
opposition at the European end, while having been
let through by the US authorities.
The
current global flowering of juche is not
surprising. In the Great Depression, not only did
the United States raise its tariff barriers to
inordinate levels by the Smoot Hawley absurdity,
but even the normally free-trading Britain tried
to produce a self-reliant imperial market through
the Ottawa Agreement of 1932. The result of the
latter was a nice rebound of the British economy
in the 1930s, but the gradual collapse of British
manufacturing in sector after sector when it was
exposed to the full rigors of international
competition after World War II.
It must
not be forgotten that no Soviet era industrial
behemoth fared so hopelessly in international
competition as did the 1970s British Leyland. My
father's long-standing ambition was to own a
Jaguar; he achieved this ambition in 1973, poor
man. British Leyland's torture of an innocent
customer by its abysmal quality control of that
era will not be soon forgiven!
Thus you
should not imagine for a second that Kim Il-sung's
juche ideology works in terms of providing
long-term prosperity. Wherever it has been tried
to any but the most minimal extent it has
impoverished its people, as surely as it has in
North Korea. In a world where the free market is
working properly, like the global economy before
1914, or that of 1990-2008, only a lunatic would
attempt it.
However, when the global
economy suffers a prolonged setback, as in the
1930s or recently, a juche approach becomes
increasingly attractive politically. What's more,
if the rest of the world is itself indulging in
anti-competitive activities, or blocking the free
movement of goods and capital, juche
becomes less sub-optimal and can even work
partially, for a time. Only when the system
liberalizes once more does the extent of its
failure become apparent.
Maybe we will
soon lift out of the current global economic
problems, and the world's attempts to reproduce
North Korean economic policies will be seen as a
minor blip in a free market system. But there is
an alternative possibility, in which the
market-distorting policies themselves do enough
economic damage that the global recession becomes
indefinitely extended, and growth worldwide
shudders to a halt or even reverses.
Indeed the globalization process,
producing as it does a shift in wealth from the
West to emerging markets, could in a prolonged
recession provide the seeds of its own downfall.
Japan, the United States and western Europe,
countries that still collectively retain much of
the world's economic clout but feel their economic
welfare declining, could conceivably indulge in an
orgy of juche-inspired policy
self-destruction.
In that case Kim
Il-sung, evil tyrant that he was, will have become
the leading economic inspiration of the unhappy
21st century.
Martin Hutchinson
is the author of Great Conservatives
(Academica Press, 2005) - details can be found on
the website www.greatconservatives.com - and
co-author with Professor Kevin Dowd of
Alchemists of Loss (Wiley, 2010). Both are
now available on Amazon.com, Great
Conservatives only in a Kindle edition,
Alchemists of Loss in both Kindle and print
editions.
(Republished with permission
from PrudentBear.com.
Copyright 2005-12 David W Tice &
Associates.)
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