Engaging North Korea: The Moral Hazard Factor

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The hidden pitfalls of Eric Schmidt's trip to North Korea 

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Google Executive Chairman Eric Schmidt (second from the right) visit Kim Il-Sung University in Pyongyang on January 8, 2013. (Reuters)

Some, including The Atlantic's own Brian Fung, have wondered at exactly what Google executive Eric Schmidt hopes to accomplish during his visit to North Korea this week. The aims of the two people traveling with him, meanwhile, are far less mysterious.

On Tuesday, it was reported that former U.S. Ambassador to the U.N. Bill Richardson -- the former New Mexico governor and one-time Democratic presidential candidate -- along with longtime Richardson advisor Tony Namkung, were going to North Korea on something of a rescue mission (a "humanitarian mission," as a statement I received from Richardson's office put it). Kenneth Bae, an American citizen and tour guide, has been held by the North Korean government since November 2012. Richardson and Namkung have served as self-appointed hostage negotiators during a host of similar incidents. Their goal is to extract Bae. Since the North Koreans have already won a visit from Richardson, a powerful ex-politician, and Schmidt, a high-profile captain of American industry, Richardson and Namkung are likely to be successful. North Korea's leaders can use a fawning visit from a couple of name-brand American personages to project an image of control, stability and legitimacy both inside and outside of its borders. Meanwhile, the American visitors will achieve a tangible objective: the release of an American citizen, and the creation, in Schmidt's case, of high-level contacts in one of the most closed and opaque governments on earth.

But who else do these efforts, which are broadly aimed at fostering engagement with North Korea, actually benefit? Even in the case of something as straightforwardly helpful as humanitarian aid, the answer isn't exactly clear. Schmidt's visit raises a longstanding set of issues about the outside world's relationship with the Hermit Kingdom. Schmidt, Richardson and Namkung might believe that their efforts are hastening North Korea's eventual liberalization. But their trip calls to mind William J. Dobson's concept of "the dictator's learning curve" -- the idea that successful autocracies (and North Korea certainly qualifies) can adapt to prevailing realities and challenges in order to further entrench the existing system. As Adrian Hong, a strategic consultant and Pegasus Strategies managing director puts it, "the North Koreans are very good at working outsiders in a way that leaves them holding all the cards."

This trip could be a case in point.

* * *

From one perspective, even the best-intended cooperation with the North Korean government has had the effect of deepening the country's misery. The U.N.'s World Food Program has nothing but altruistic aims in North Korea -- namely, the alleviation of hunger in a country still reeling from a 1990s famine that killed as many as two million people. Yet the WFP's apparent independence from any of the potentially explosive politics of the Korean peninsula is exactly what makes its presence in the country so problematic. The North Korean government has eagerly exploited the U.N.'s understanding of food aid as a primarily humanitarian matter -- as Marcus Noland and Stephan Haggard of the Peterson Institute for International Economics have explained in their work on WFP aid in the country, North Korea has had some success in dictating the terms by which the international community can monitor the aid's end uses.

"Elementary school children in Chongjin who have absolutely no control over their government shouldn't be penalized because they have such an odious regime."

"Any aid we provide North Korea or any other government for that matter, acts as implicit balance of payment support," said Noland in an interview. "[North Korea] offsets a lot of the aid flow by reducing commercial imports...the problem is that given the expenditure preferences of the regime, the thought is that some noticeable share of this diversion ends up going to activities that the donors don't appreciate, like the military." Monitoring the use of aid is extremely important, and, thanks to the regime's recalcitrance, existing arrangements are far from ideal.

The WFP operates in a way that arguably strengthens the world's most oppressive government. WFP aid can even be thought of as a kind of unearned subsidy -- or as a subsidy that the North Korean government was able to extract through its continued bad behavior. After all, the estimated $3 billion to $4 billion North Korea has spent on its missile program over the past two years could easily have resolved the country's food security problems. Pyongyang's arrangement with the WFP gives the North Korean government leverage over an international community eager to alleviate large-scale human suffering, while freeing its resources for projects that arguably prop up the regime and destabilize the southeast Asian security environment. The less North Korea cares about solving a chronic and man-made food security crisis, the more the international community feels compelled to disconnect political and humanitarian concerns in dealing with the Hermit Kingdom.

Yet for an international community that would like to help the North Korean people while isolating and restraining their government, the existence of moral hazard is where the dilemmas begin -- and not where they end.

"Elementary school children in Chongjin who have absolutely no control over their government shouldn't be penalized because they have such an odious regime," says Noland. "But people who take that position have to be intellectually honest. Implicitly you are going to be supporting the North Korean military machine to a certain extent."

More importantly, simply freezing assistance to North Korea also elides the possibility of smarter, more targeted humanitarian aid. Adrian Hong says the most effective assistance comes from NGOs that "tailor aid to things that aren't dual use" -- wet noodles, for instance, have to be consumed quickly before spoiling. The money to be made appropriating or re-directing aid for pregnant women or infants is similarly limited. Noland says that rice is "most likely to be diverted to elite or military consumption" compared to other nutritious grains, like barley or millet -- "poor people's food" according to North Korean dietary tradition (One NGO that Hong says is particularly adept at operating in North Korea is Global Resource Services, which Jeff Baron profiled for The Atlantic last month).

Economic and humanitarian contact doesn't have to play into the narrow interests of the 3,000-4,000 elites who run North Korea, and benefit from its part-monarchic, part-Stalinist system of government. The question is whether it is possible to minimize the consequences of engagement while creating the kind of inroads into the North Korean economy, and into North Korean society, that hasten the system's ultimate decline.

There is abundant reason to be skeptical that Richardson, Namkung and Schmidt's trip will accomplish this.

* * *

Richardson is traveling to North Korea with Tony Namkung, a Korean-American academic and one of the earliest and most influential American proponents of engagement with Pyongyang. Namkung has built a career out of being less skeptical of North Korea than prevailing elite opinion, and his participation reflects some of the more troubling aspects of the trip. Even if Namkung honestly believes that warm relations with Pyongyang can lessen the dual crisis of North Korean bellicosity and internal oppression, his dealings with Pyongyang suggests an usual level of faith in the Kim regime. It is a trust that Richardson seems to share, by virtue of his long relationship with Namkung. And if Schmidt didn't share it, it's doubtful he would be in North Korea right now.

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Armin Rosen is a former writer and producer for The Atlantic's Global channel.

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