Saturday, November 27, 2010

How do you solve a problem like Korea?

If ever a ruling elite seemed to justify the Bush-era doctrine of “pre-emption”, it is the Kim dynasty in North Korea. No government anywhere subjects its own people to such a barbarous regime of fear, repression and hunger. And the Kims are complicit in international outrages ranging from murderous terrorism and nuclear proliferation to drug-smuggling and currency-counterfeiting. The present dictator, Kim Jong Il, is apparently not long for this world, and seems to be boosting his 27-year-old son and anointed successor as a victorious warrior. When the elder Kim was himself dauphin, in the 1980s, he earned his spurs through international terrorism.

This week the North waged war for the second time this year with South Korea when it shelled a South Korean island near the disputed maritime boundary, killing two soldiers and two civilians, injuring others and burning a score of houses. In March, when one of its torpedoes sank the Cheonan, a naval vessel, killing 46, North Korea could, albeit implausibly, deny culpability. This time, though the North describes its aggression as retaliation (for a harmless South Korean military exercise), there is no gainsaying its responsibility for one of the most serious incidents since the end of the Korean war in 1953. To add to this dismal catalogue, the latest onslaught came just three days after the revelation that, in defiance of international efforts to curb its nuclear programme, North Korea has developed a sophisticated facility for enriching uranium. That gives it a further potential source of material for bombmaking.

The starting-point for answering the North’s aggression has to be that, in the most basic sense, the Kims will almost certainly get away with only a symbolic return of fire. It is entirely wrong for North Korea to act as it does. But punitive military reprisals against the North risk a spiral of escalation and catastrophic war. Deterrence works badly against a dictator who blithely imposes famine and gulags on his people during peacetime. Even if there are doubts about the efficacy of its tiny nuclear arsenal, North Korea has enough men under arms, and enough conventional ammunition within range of Seoul—just 35 miles (60km) from the frontier—to make war seem very much a last resort.

If war and the threat of war are hardly even options, what can the world do? The best card in a bad hand is to heal the divisions among other countries about how to handle North Korea. That means, in particular, making China see that a tinderbox it has long regarded as a strategic asset has become an appalling liability. China also struggles to control North Korea. But a united front would change the environment that encourages the rogue state’s bad behaviour.

China cannot be blind to the Kims’ bungling and bellicosity, nor welcome their nuclear ambitions. But it has had two worse fears. One is of a rekindled war on the peninsula, which would damage China. The other is of North Korean collapse, with millions of desperate refugees pouring into China and South Korea or even American troops on China’s border. It is as a bulwark against this “instability” that China cossets the Kims. It refused to condemn them even for the sinking of the Cheonan, and this week issued blandly even-handed calls for restraint. It apparently believes that if their only ally abandons them, the Kims might do something really rash.

But they already have. Whatever it says publicly, China must surely see that this regime flirts with war as an instrument of diplomacy and that its desire to shock the world into negotiating with it requires ever greater outrages. Ultimately, this pattern of behaviour threatens the very stability China craves. China’s alliance with North Korea thus undermines not just its image as a global power but also its own interests.

So how to nudge China in the right direction? One possibility is the revival of the six-party forum, chaired by China and involving Japan and Russia. Talks stalled after North Korea forged ahead with its nuclear programme. The Kims would regard a revival as a victory. But talks will eventually have to resume if North Korea’s nuclear ambitions are to be negotiated down. If they also help persuade China to rein in North Korea, that would be a double benefit. ◦

Saturday, November 20, 2010

North Korea's succession

When North Korea’s leader, Kim Jong Il, and his son and newly anointed heir, Kim Jong Un, stepped onto a balcony to watch a display of dancing and fireworks on October 10th, the audience in the square below applauded politely. But as loudspeakers blared recorded cries of “long life, long life”, many did not join in. The Kim dynasty has fixed its succession but its propaganda grip is weakening.

The authorities, normally reluctant to let foreign journalists explore the grimness of what they call “beautiful and modern” Pyongyang, were so excited by Kim Jong Un’s coming out as leader-in-waiting that they let down their guard. More than 70 journalists were suddenly given visas to attend a series of events on October 9th and 10th that afforded the outside world a first glimpse of the man now to be known as the “young general”. They also had rare access to an austere city many of whose citizens suffered hunger earlier this year after a shock currency revaluation in November. The leadership’s attempts to convince them that theirs is a “people’s paradise” are likely to fall on many deaf ears.

Kim Jong Un’s appearances, after more than a year of speculation abroad about his being groomed to take over from his ailing father, were choreographed for maximum political effect. North Koreans saw his face for the first time in a photograph published by the state media on September 30th. This followed his elevation earlier in the week to the rank of general and vice-chairman of the ruling party’s military commission (though not yet to the National Defence Commission, which wields supreme power). Mr Kim, who is in his late 20s, has little, if any, military experience.

A few outings in early October with his father—to an artillery drill, a concert and on an inspection tour of a theatre—were enough to prepare Mr Kim for much bigger audiences and for the world’s media. Foreign journalists saw him for the first time on October 9th at a mass gymnastic performance in a Pyongyang stadium. The next day, he and his father took centre stage at a huge military parade through the city that was broadcast live to the nation. The symbolism was striking: father standing next to son, separated by a couple of paces, on a balcony. Below them a huge gold-framed portrait of a grinning Kim Il Sung, Kim Jong Il’s late father and founder of the dynasty, completed the trinity. The portly, podgy-faced Kim Jong Un, wearing a dark Mao suit, looked the spitting image of his grandfather at a similar age.

After the troops, tanks and missiles had thundered past, the audience waved and cheered with seeming enthusiasm when Kim Jong Il waved at them from the balcony. But at the fireworks and dancing display that evening at the same venue—Kim Il Sung Square—the response was less rousing. A few of the thousands of performers wept (as had a couple of female paratroopers as they passed the balcony during the earlier parade). But little fervour was otherwise in evidence.

The grooming of Kim the younger is only just beginning. His voice has yet to be heard in public (Kim Jong Il’s only got an airing 12 years after he emerged as his father’s successor). But he is likely to get an accelerated initiation. The appearances in Pyongyang seemed partly designed to show that Kim Jong Il, who is 69, remains very much in charge. But the North Korean media did not show what Western hacks clearly saw: the leader holding onto the balcony for support as he walked, left leg clearly limping. After a stroke in 2008, he is believed not to be well.

Another message the authorities apparently hoped to send was that Kim Jong Un will have others to guide him. Military expertise will be provided by Ri Yong Ho, North Korea’s chief of staff, who for much of the parade stood between the two Kims. Kim Jong Il’s brother-in-law, Chang Sung Taek, and sister Kim Kyong Hui will also be crucial figures. The state media said they had joined Kim Jong Un on his recent excursions. The conspicuous presence of a senior member of China’s ruling Politburo, Zhou Yongkang, at the October 10th events was designed to show Chinese support for these arrangements. Kim Jong Il encouraged him to wave from the balcony.

The public will be harder to convince. The parade and dancing were extravagances (staged to coincide with the ruling Korean Workers’ Party’s 65th birthday) that contrasted sharply with daily life in the city. There are a few more cars on the streets these days, many of them Chinese-made. But these are for the elite (perhaps as gifts bestowed by influence-seeking Chinese). There are also a few bicycles (for men only: Kim Jong Il apparently disapproves of women on bikes). But most take rickety public transport or walk.

There is no sign of the “radical improvement” in North Korean living standards that officials once talked of achieving this year. Neon lights blazed in a few places during the journalists’ visit, but foreign residents say that the city is normally dark at night. Power is so intermittent that policewomen (invariably young and pretty) still direct traffic at intersections with traffic lights, which are a very recent innovation in Pyongyang.

An unsupervised visit to a department store (a rare treat for normally chaperoned foreign journalists) revealed Pyongyang’s dearth of consumer culture. In half an hour, your correspondent saw only a trickle of customers and just four items being sold: a pencil, a wind-up plastic frog, a quilt and a golden statuette of a soldier. On the fourth floor a member of staff adjusted a red curtain at a marble shrine to Kim Il Sung. Others watched television, amid swathes of unused floor space.

At a nearby shop, several people milled around a counter selling DVDs—a hint that DVD players are becoming household items. Foreign residents say DVDs from South Korea are helping to spread knowledge of the South’s far greater affluence. Several people also sported mobile telephones. Pyongyang is said to have gained some 200,000 subscribers since the mobile service was introduced a couple of years ago. Most are permitted only to call other North Koreans, not people abroad or even foreign residents.

The city seems to have largely recovered from last November’s revaluation of the won, which permitted only limited amounts of old bills to be exchanged for new ones. From January until mid-February, when the authorities relented and re-allowed transactions in hard currency, commerce almost ground to a halt. It became nearly impossible to buy food except at great expense on the black market. Inflation soared. “When in Rome, do as the Romanians do,” one official assigned to mind foreign journalists kept telling them, oddly. The Kims, mindful of the grisly end of Romania’s Nicolae Ceausescu in 1989, will try to ensure that disgruntled North Koreans do no such thing. ◦

Thursday, November 04, 2010

Gender arbitrage in South Korea

If South Korean firms won’t make use of female talent, foreigners will

Another joyful day at the office.“DO YOU know you have to give everything to become a TV announcer?” These words cost Kang Yong-seok, a member of South Korea’s parliament, his membership of the ruling Grand National Party in July. His insinuation that a woman must sleep her way to the top to work in television embarrassed his colleagues and set off a national debate about sexism.

Working women in South Korea earn 63% of what men do. Not all of this is the result of discrimination, but some must be. South Korean women face social pressure to quit when they have children, making it hard to stay on the career fast track. Many large companies have no women at all in senior jobs.

This creates an obvious opportunity. If female talent is undervalued, it should be plentiful and relatively cheap. Firms that hire more women should reap a competitive advantage. And indeed, there is evidence that one type of employer is doing just that.

Jordan Siegel of Harvard Business School reports that foreign multinationals are recruiting large numbers of educated Korean women. In South Korea, lifting the proportion of a firm’s managers who are female by ten percentage points raises its return on assets by one percentage point, Mr Siegel estimates.

South Korea is the ideal environment for gender arbitrage. The workplace may be sexist, but the education system is extremely meritocratic. Lots of brainy female graduates enter the job market each year. In time their careers are eclipsed by those of men of no greater ability. This makes them poachable. Goldman Sachs, an American investment bank, has more women than men in its office in Seoul.

Only 60% of female South Korean graduates aged between 25 and 64 are in work—making educated South Korean women the most underemployed in OECD countries. That may change, however. Marriage and fertility rates have plunged. There were 10.6 marriages per 1,000 people in 1980, but only 6.2 last year. South Korean women have an average of only 1.15 children, one of the lowest rates anywhere. That has troubling implications for the country, but should help women in the workplace. Firms will have to use all the talent they can find. If they don’t, their rivals will. ◦