The curious case of North Korea

  1. Overview

North Korea, considered to be one of the last communist regimes on earth and one of the most secretive; was seen with a certain curiosity and fun how such a ‘self isolated’ country survives in a globalized world like the one we have today. North korea was originally united with her “sister” South Korea being a single Korea, however as a result of the cold war in 1948 they were split in two, with two separate governments.

However that division was never really accepted by both Koreas, each one of them believed they had the legitimacy to govern all Korea. This friction escalated, and on 25 June 1950 North korea, supported by the communist regimes of China and Soviet Union, moved south and started what would be called as the Korean war. On 27 June, 21 countries from UN constituted an UN force, with the vast majority being american troops, to help the south korea against what was considered to be the communist faction (north korea, soviet union and china). The war would last 3 years with more than 2 million fatalities, the most being South and Northern Korean soldiers.

After that the North and South became more distant than ever. The North allied with China and Soviet Union – the communist faction, while South Korea became an ally of US, Japan and other UN member states. This alliance with the communist factions was really important, not only in terms of geopolitics and defense against the south korean allies, but also as a source of financing since the Soviet Union was a major source of money for the North Korean communist regime. This alliance however would get weaker, as Deng Xiaoping became the 1st chinese leader to visit the US in an attempt to open it’s country to the outside and foreign investment what would be called China’s capitalist revolution. In 1991 came the collapse of the soviet union, which was a major source of financing to North Korean regime. The combination of these events led to the isolation of the North Korean regime and its continuing closure.

As many people state this country is not simply a communist state as it represents the mixture of communist ideology, nationalism, Juche and Songun philosophy. This combination was set up by what are considered to be “eternal leaders of north korea” Kim Il-Sung and his son Kim Jong-Il. The country fell in a repressive and authoritarian regime that used, and still continues to use nowadays with Kim Jong-Un, the cult of personality where everything that has been made or planned was an act of “divine intervention” by the supreme leaders.

It’s 25 millions inhabitants are believed to live under extreme poverty, that many human rights are violated – something it’s defectors tell to the outside world, and the fact that human rights organizations like International Amnesty do not get a permit to visit the country shows that these aren’t just rumors and western propaganda. Under the many accusations, it’s the fact that this is one of the few countries in the world who still conduct public executions, just for “committing the crime” of not agreeing with the regime and supreme leader.

 

  1. A rising threat

At first sight we are to believe we are in the presence of some crazy dictatorship that lives under the cult of personality, is a closed country that violates human rights but poses no threat to the world. However in 2006 that started to change as North Korea managed to carry out its first successful nuclear explosion, in 2009 it carried out its second and more powerful nuclear test. Subsequently, they continued with their research and tests but no one seemed to believe they were really making progress in terms of Nuclear power. Many said some of the nuclear warheads we see in North Korea military parades are made of paper, or that they had soviet technology that was completely outdated.

But since Kim Jong Un got in charge in 2011, their nuclear research and activity seemed to boost. Despite having a hard time in terms of economics, specially with the tougher economic sanctions, 16% of GDP is dedicated solely to military activity – having one of the largest paramilitary organizations (roughly 25% of the north korean population are military). By mid 2016 they started to show major developments which culminated with the launch of ICBM missiles this year during summer and the creation of what is supposed to be thermonuclear weapons, way more powerful than the nuclear bombs US launched on Nagasaki and Hiroshima in 1945.

NorthKorea_Missile_testing_update_08.17-01

(source: Center for Strategic International Studies )

This obsession with military and nuclear power is above all the result of the Songun philosophy North korea has, which is basically “Military first policy”, in other words the state priority should be to achieve a powerful and mighty military force so no nation even thinks of challenging its regime. Something that Kim Jong Il saw happening in Iraq with US intervention in 2003, and regime change that led to the execution of Saddam Hussein and the execution of Gaddafi after he was overthrown in 2011. This was probably one of the reasons north koreans reconducted their nuclear research in 2003 after a 5 year break and in 2006 had their first nuclear weapon test with success.

Geographically speaking, we can see it as a “child trying to show he is a grown up as well”, its neighbours are all world leading economies China is the 2nd largest economy in the world, Japan the 3rd largest and South Korea, the eternal rival, is the 11th largest economy in the world according to the IMF and Work Bank data from 2016.

Unsurprisingly, the nuclear pursuit is used by the North Koreans as a show of force to their neighbours – in order to display that despite their languishing fiscal condition, the North remains a strong nuclear force to be beckoned with.

The reason behind North Korea’s constant show of force is simple. It’s used as a deterrent to their neighbours and helps consolidate their position in the area as a force to be beckoned with – despite their fiscal degradation.

Due to their isolationist attitude towards globalisation over the years, the North has constantly been at risk of falling into obscurity and nothingness. However, their strategy over the years has been simple – to remain in the news through whatever outlandish story they can pump out to the world. Thus they have constantly made outlandish claims of having found miraculous drugs to cure terminal illness amongst other things.

What initially remained a harmless yet comic display of faux aggression from the reclusive nation over the years, has slowly developed into something more sinister. The North’s experimentation with high grade Nuclear weaponry has alerted the international community.

The North’s lack of regard for the international community makes it a dangerous wildcard in a strategic location for the West. Whilst the North has nothing to lose from any of this, their maverick attitude towards conflict can have devastating effects on the world both in regards to trade and environmental reasons.

Recently, Japan endured incredibly large unnatural tremors due to what can only be guessed as military experimentation from their North Korean neighbours. This has further ramped up the need for the international community to band together in dealing with the North Korean threat.

The danger remains simple – North Korean recklessness with Nuclear and thermonuclear weaponry that is potentially beyond their capacity to control, put the whole region at the risk of an apocalyptic scenario where a fall-out causes millions of lives to be lost within minutes and global levels of catastrophes ensuing from the conflict. The lives would not only be lost by the military weapons used – but also from the environmental disasters that would follow. In recent years – we have come very close to seeing a nuclear melt down at the Fukushima Power Plant. This would undoubtedly trigger that and a whole load of similar scenarios.

But North Korea has now boldly made claims they have missile capabilities of reaching the US – which can be loaded with their new thermonuclear Hydrogen Bomb stronger than the bombs dropped on Hiroshima and Nagasaki. It’s a scenario of the worst kind. Something that you only get to see glimpses of in apocalyptic action movies from Hollywood – but it’s now become a real possibility.

 

  1. Trump foreign policy

This brings into question what role America plays in dealing with this dangerous scenario. The North has remained a bone stuck in the throats of many previous Presidents – from the Bush father and son to Bill Clinton, Obama and now Trump.

Previously, despite the North being very vocal in their desires for Nuclear supremacy, there hasn’t been much of a display of aggression physically. Just a mere war of words – which previous Presidents have responded to with ridicule, humour, sanctions and other not too complicated means such as mediation through China and other regional partners.

However, with the election of Trump – a firebrand in the Oval Office. It seems Kim Jong Un has found his match. Both share similar characteristics of being outspoken, often outlandish and having little regard for diplomatic dialogue.

Despite Trump’s campaign focussing on establishing China as his enemy No. 1 for their trade malpractices and its impact on US economy. Ever since his election, Trump has had to change his direction. Softening his stance on China and trying to forge a friendly relation with President Xi Jinping. It is evident to the Trump administration that their best hopes of dealing with North Korean problem is by optimising China as a mediator – even if that means giving up some ground on the on-going fiscal war between China and the US to become the next fiscal Hegemony for the new age.

But the problem doesn’t end here for the Trump administration. The real issue here is that they lack a clear and coherent strategy or direction in regards to how they hope to deal with this crisis.

Despite Trump trying his best to cosy up to the Chinese – including his infamous anecdote about eating ‘Chocolate cake’ with President Xi while America launched missile strikes. Former Trump Election Chief Steve Bannon proudly went on record to ‘The Prospect’ stating that:

We’re at economic war with China,” he added. “It’s in all their literature. They’re not shy about saying what they’re doing. One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path. On Korea, they’re just tapping us along. It’s just a sideshow.

Furthermore, Trump pledged to respond to North Korea with “Fire and Fury”. only to once again be contradicted by Bannon – who in the same interview, went on to say:

There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.

Many would have argued that these views are Bannon’s own and thus he has subsequently been removed from office and relieved from his White House duties by President Trump.

However, it doesn’t end there. Trump’s Defence Tsar Nikki Haley at a UN Emergency Meeting regarding North Korea made the bold statement that; North Korea’s “Abusive use of missiles” displayed that Kim Jong II was “Begging for war”. Only to be followed by Trump’s Defence Secretary; General ‘Mad Dog’ Mattis briefing the Press at the White House through a self contradictory statement saying “We are not looking to the total annihilation of a country, namely North Korea, But as I have said, we have many options to do so.”

If this wasn’t enough, the President decided to take it one step further himself. In a display of having absolutely no clue at all in regards to dealing with international military conflict or the North Korean issue that is escalating, Trump decided to answer a reporter who shouted out a question to him as he was walking to his ride “Mr. President, will you attack North Korea”. Rather than remaining diplomatically coy about it like other statesmen and women would, Mr. Trump decided to break his stride, turn to the reporter and reply “We’ll see”. before smiling, waving and walking off again in true Trump fashion.

 

  1. Bottom Line

What remains certain is that whatever the real capability of Nuclear warfare that North Korea may possess, the threat is now more realistic than ever.

Despite the well known fact that North Korea has a habit of making exaggerated and outlandish claims, their recent test results display not only a real desire for the reclusive nation to develop, improve and create Nuclear warheads, but also display the fact they have finally refined their research and become capable of achieving their nuclear dreams.

This makes the scenario a very dangerous one for the international community as North Korea can no longer be dismissed as a Political Parody of a state with an eccentric but foolish leader, it is now a unhinged state with Nuclear capabilities – catapulting the world into a dangerous scenario.

Alongside this, what isn’t helping is President Trump’s approach of lacking a clear strategy and his constant displays of amateurish antics which can only be compared to Kim Jong Un.

The stark reality is that we live in a world where two egomaniacs are displaying their masculinity to each other through a war of crass rhetoric and insults. On one hand we have a cartoonish Dictator who revels in killing or jailing political opponents and anyone he sees as a threat to him – including students visiting his nation, and on the other hand we have a US President who takes to twitter 3am in the morning to insult those who oppose him with childish slurs. Yet these two men hold the codes to some of the most powerful Nuclear artillery in the world.

 

Luís Carvalho, Graduates of Democracy Editor in Chief

Mu-hamid Pathan, Graduates of Democracy President

 

Disclaimer: This article reflects the author’s opinion it might not reflect the whole group’s opinion

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Don’t throw the firecrakcers yet

If you’re one of those cheering for Steve Bannon’s getting fired and believe this will mean change inside the Trump administration, you’re probably not seeing the whole picture.

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Bannon’s presence inside the WH as Chief Strategist was always seen as the “source of evil” behind Trump’s policies. Others saw him as a troublemaker inside the WH, even going as far as accusing him of leaking insider info. However, truth be told, “evil” didn’t start with him.

Having been officially aiding Trump with his campaign only since August 2016 – after Trump got the Republican nomination, most of the controversial policies/statements had already been made before Bannon got in. The first of those ideas – which is now currently on hold, was the wall at the US-Mexico border to stop Mexican immigrants to come to the US – who according to Trump, were coming over “committing serious crimes like rape, killing and selling drugs”. By the end of 2015, the new flavour of the month was the Muslim ban, in which Trump proposed temporarily stopping all Muslims from entering the country “Until we know what’s going on“, something that is now being seen by the Supreme Court.

Bannon is no moderate, in fact he is a well know right-wing nationalist and the reason why Breitbart became what it is today; a website that spreads alt-right propaganda with immense exposure in doing so. His world views are no secret of his, he warns of an incoming apocalyptic war between Islam and Christianity and warns that if the US doesn’t act, China might outpace the US both in terms of economic and military capacity. Something that can be seen in his interview at ‘The American Prospect’.

This interview of his was quite scandalous because of the old “on-off the record” controversy, but also because of what he said in that interview, especially about North Korea:

“There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us”

Something that might have not gone well with his former “chief”, but Bannon’s mistakes didn’t start here. If we go back to April we could see that clashes between Bannon and Trump’s most sacred treasure, his family, started to come up especially with Jared Kushner, who was accused of being a “Democrat” – aka soft republican, and a “Globalist”. Trump tax cut plan; typical of Republican establishment, might have been a stab in the back for Bannon – who’s a fierce economic nationalist and clearly saw the impact that would have on the electoral base that got Trump elected – leading to Bannon remarking in his interview at The Weekly Standard:

“What Trump ran on—border wall, where is the funding for the border wall, one of his central tenets, where have they been? Have they rallied around the Perdue-Cotton immigration bill? On what element of Trump’s program, besides tax cuts—which is going to be the standard marginal tax cut—where have they rallied to Trump’s cause? They haven’t.”

For those who are trilled and happy with Bannon’s getting fired don’t throw the firecrackers yet. There is more than meets the eye in this administration. Bannon might have gone, but if we can learn something with this is that Republican establishment and Trump’s nepotism are alive and well.

 

Luís Carvalho, Bsc graduated in Economics and proud 2015 graduate of democracy

Disclaimer: This might not reflect the whole group’s opinion

 

Is Trump boosting the Economy?

US June Jobs report has come out, and unlike the previous mistrust from Trump  regarding the official numbers of unemployment rate he and his supporters seem to be astonishingly happy for a unemployment decrease that according to experts is just an extension of the trend that was observed in 2016 under the Obama administration in terms of Job Creation.

According to data, in June nonfarm payroll employment, which is any job with the exception of farm work, unincorporated self-employment, and employment by private households, the military and intelligence agencies, increased by 220,000 in June. The unemployment rate suffered little changes, considering the 2 previous months (4,4% in April and 4,3% in May) being now at 4.4 percent. Special highlight for the Health Care, Social Assistance, Financial activities and mining, in terms of jobs creation.

Many Trump supporters, and specially his vice president Mike Pence believe this Jobs report just show Trump’s commitment to create “tons of jobs” is being delivered. At the same time there is an urge by some people to believe investors and economic agents are confident on the economy and the way things will evolve.

Captura de ecrã 2017-07-09, às 12.08.07.png

Employment by Selected Industry, source: US Labor Statistics

Taking into consideration the chart above we can clearly see that the Education and Health Services was the industry that had added more jobs to the economy in June, around 59,100, not the type of industry that depends on business owners feelings but more on the needs of the population. Retail Trade which only added around 8,100 jobs in June and Utilities, which added 1,800 jobs, this past month are betters examples of industries driven by economic feelings and weren’t that much expressive as it was Education and Health Services, even if take into consideration their added jobs together.

This happens for a reason, optimism towards the economy is seeing a decline, referring to pre-election levels, as we can see in the chart below.

Captura de ecrã 2017-07-09, às 12.28.36

Source: New York Times, Neil Irwin’s article

This decline in optimism between consumers can be expressed in their practically stagnant wage. As the June Jobs reports states, in this month average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.25 in comparison to May. However if we look from June 2016 to June 2017 average hourly earnings rose only 63 cents, around 2.5 percent. This is an important factor to take into consideration because if consumers don’t have a reasonable disposable income or aren’t pretty confident on their future economic conditions they won’t consume which won’t create a Demand for business owners to invest and hire more people to meet the demand for more products/services.

In the end a question still has to be answered, “Is Trump boosting the economy?”

Not even 6 months have passed since his inauguration and even though there is a urge to say this economic evolution is due to the “Trump factor” to justify the argument that “He isn’t so bad after all” I do believe it’s really early to make such assumptions. Yes he already signed legislation to roll back some regulations to promote jobs creation and expressed his intention to cut taxes, even though trickle down economics has proven to be mislead, but some things take time to start affecting the economy this is just one of them, we’ll probably have to wait the first year or two to see if he is really boosting the economy or just continuing the trend that started under the Obama administration.

 

 

Luís Carvalho, economics bachelor student and proud 2015 Graduate of Democracy

The Budget of Fear and Individualism

An overview

Trump’s first budget proposal is out, one of the most expected budgets ever in american history that symbolizes Trump’s campaign motto: “Make America Great Again”. In case people doubt about it he made sure people would really see that on this budget by labeling it as “America First: A budget blueprint to make America great again”. As promised during his whole campaign he will do everything in his capabilities to shift priorities in Washington to make the American society safer, stronger and prosper while making other nations fear his administration. Does this budget represents this?

Yes, the most absorbing fact of this budget proposal is the fact that there will be a $54Bn. increase in the defense department with the goal to buy more jets, warships, and boost the military activity against ISIS. That will also be of the like of the Defense Industry that has ties to the Republican party. To balance the budget this massive increase in defense and military will be offset by a huge decrease across all others departments

Captura de ecrã 2017-03-18, às 15.20.22

(US Gov Departments expenditure, source: Washington post)

As we can clearly, Trump’s administration represents an inversion in what has been American policies in the last 8 years during Obama presidency. Cuts for almost every department except the Defense, the Homeland Security and Veteran Affairs departments. This ultra conservative and anti government intervention is clearly emphasized in this budget, specially when looking at the EPA department that will be the most affected one (in %) according to this administration hardline stance on global warming. Another way to look at this is seeing the decrease of nearly $10.1 Billion at the State Department which goes along the isolationist mindset that is reshaping american politics.

Proposals and a new paradigm in American policy

As we can see in the table above, Trump administration will do several large cuts in some key departments like the State, Labour and Education departments.

Among the major program cuts implemented by Donald Trump we have:

-The elimination of the USDA Water and Wastewater loan and grant program, a reduction of $498 million.

-The reduction or elimination of 20 programs within the Department of Education including Striving Readers, Teacher Quality Partnership and Impact Aid support payment for federal property and international education programs.

-Cuts FEMA state and local grant funding by $667 million, including the Pre-disaster Mitigation Grant Program and Homeland Security Grant Program.

-Eliminates funds for Section 4 Capacity Building for Community Development and Affordable Housing.

-Ceases payments to the United Nations’ climate change programs for the Green Climate Fund and other funds.

-Scales back funding for the World Bank and other international development banks by $650 million over three years.

-Shrinks the Treasury Workforce by an unspecified amount

-Stops funding for the Clean Power Plan.

These measures like the elimination of funds for affordable houses and education show that Trump will do major cuts in several traditional welfare sectors contradicting his electoral promises of giving better living conditions to the American people being not so different of many traditional Republican proposals that refuse the government intervention in these key sectors. Another sector in which this can be seen is in health with the removal of the Patient Protection and Affordable Care Act, known as Obamacare, which will mean that many Americans will become unable to pay health insurance meaning they cannot be assisted if they have an emergency health problem and will also become unable to pay treatment for oncological and chronic illnesses. Despite Trump’s promises that Obamacare will be replaced by something better until now, no concrete proposal was made.

Less surprising is the decrease in funds for Climate, Development and Migration issues. On these subjects Trump presents a populist evolution of the Republican stances by ignoring or in some cases, even denying the existence of some of World’s major problems, in a contrast with a more internationalist and interventionist position taken by the Obama administration.

As it is typical in a nationalist budget proposal this also marks a shift is the balance of the United States policy that will give now less importance to Global Affairs and more importance to Internal Affairs following the concern of many Americans that worry about their living conditions and jobs but not about a war in some Middle East country or a big natural disaster in Asia.

In the limit this could mark the return of an isolationist America. This can appear surprising if we consider the United States policy after the Second World War but in fact if the US was quite isolationist and protectionist during the XIX century and most of the first half of the XX century. However unlike in the XIX century this position is now much more irresponsible because some problems like the Climate Change, Islamic terrorism and the Migration crisis are global and require agreements between the World’s most powerful nations, among which is included the United States, in order to overcome them. There is also a moral imperative because the United States has responsibilities in some of this problems specially in Climate Change and in the instability in the Middle East.

Economic prospect

Above we’ve seen how the budget might be for the next year, but numbers alone don’t mean anything, however if we take into consideration its implications for the american economy now that’s something even more interesting to think and look at.

One of the most famous economists ever, that is still a reference in our days, John Maynard Keynes said that Aggregate demand, in other words, a country GDP is represented by the below equation:

Y= C+G+I+Nx, where Y is the country output (we refer it as GDP most of the times), C is private consumption, G government spending, I is Investment and Nx is Net Exports ( Exports – Imports).

Taking into consideration the proposed budget G will decrease in 2018 due to government slashing some expenditure on social programs, as a consequence many poor families will lose their subsidies which will make them poorer, and since Investment is divided between private and public, we see that it might have a negative variation (seeing for example the Transport Department projected expenditure variation). With this in mind we could already see that, all things remaining constant, American 2018 GDP might degrow a bit, however there is still one thing to take into consideration, which is Net Exports, for that we need to take into consideration the effect of the Interest Rate and Exchange Rate.

Last week, we saw an announcement by FED’s president Janet Yellen stating that FED interest rate will rise from 0,75% to 1%, which has its economic consequences.

fig32

(Exchange Rate, Rate of Return, source:University of Colorado Boulder)

Represented in the image above, we have the vertical line which is the domestic interest rate, the horizontal line the foreign interest rate, the vertical Axis the Exchange Rate level and the horizontal Axis the expected rate of return. We see that an increase in the american interest rate (From left to right) will mean an higher expected rate of return of american investments. This means that the dollar will be more desirable and demanded which will trigger it’s value, that is to say, it’s exchange rate goes up, a dollar now is worth more Euros, Kwanzas, etc.

This interest rate hike and consequently Dollar appreciation might deteriorate American Net Exports, since the dollar is now more expensive and so are the american products.

This combination of raising interest rate while cutting government expenditure can lead to a deceleration of the american economy in 2018.

In the end, we should bear in mind that this is just a budget proposal and needs congress approval to become a reality. Even though it is creating some divisions among republicans this proposal seems a plausible budget and it seems likely to be approved by a congress in which Republicans have the majority of the seats. This is a budget proposal that represents fear, individualism and isolationism focusing on military activity, instead of supporting social, education and healthcare programs that can be a social uplift for many poor families and improve the living conditions of many americans. Sectors like the environment are also ignored by this budget proposal. These measures will not only be negative for the economy because it lacks enough of a stimulus, but will have the likely result of dividing and polarising even more the American society which can create more social unrest special among the poor and minorities.

 

Luís Carvalho, economics student and proud 2015 graduate of democracy

Pedro Diogo, economics graduate

Disclaimer: This Post reflects solely the author’s opinion it does not represent the whole platform

2017: A practical guide for the worried voter

The year 2016 has ended, for some a terrible year where we have lost dozens of famous people. From football legend Johan Cruyff to legendary singer Leonard Cohen. People who were not only great in their profession but who also influenced the world around them. Take Olympic champion and anti-war figure Muhammad Ali. A hero and inspiration for many who showed us we should never give up on our dreams despite our social background, religion, or race. Continue reading “2017: A practical guide for the worried voter”

Trump: From Parody Candidate to a Threat to International Security

Images of how Trump made his bodyguards expel a TrumpUnivision journalist -the Hispanic TV station with the highest diffusion in the US- from one of his events, his use of the Orlando massacre to promote Islamophobia; and a rhetoric of segregation and the closure of frontiers to Mexicans, Muslims and immigrants, all under an ethnocentric appellation evokes a dangerous parallelism with Nazi Germany in its origins. Continue reading “Trump: From Parody Candidate to a Threat to International Security”