One of main "reasons" attributed to the recent turbulence in the markets have been due to the brinkmanship stance shown by North Korea's leadership.
This from the Economist,
``ONE of the odd features of the dispute between North and South Korea since the torpedoing of the Cheonan by North Korea in March, is that the non-military responses available to the South and its allies are rather puny. Only a few hawkish South Koreans think a military response is desirable. Hillary Clinton, America's secretary of state, said that “the international community has a responsibility and a duty to respond” when she arrived in Seoul at the end of her Asian tour. For the international community, read China, which is reluctant to censure Kim Jong Il. The North's shortfall in everything from food to energy has been met by a mixture of trade with its southern neighbour and presents from China. The suspension of inter-Korean trade now leaves the poor North more dependent than ever on Beijing." (emphasis added)
This leaves us the following question can a North Korea wage a war against South Korea?
The answer is yes, but this would be suicidal for the following reasons:
Because this would unlikely benefit the heir of President Kim to which allegedly was the reason for the bellicosity. A losing war won't be in their interest simply because North Korea is so poor and isolated as to win a full scale war.
Next, considering that North Korea is in "shortfall in everything" waging war means it can only happen with China's consent.
Considering that it would not appear to be in the interest of China to escalate the region's troubles which could only ruffle her "successful" economic and geopolitical momentum, North Korea could only be trying to extract some marginal concessions.
Unless of course, China could be using the North to divert possibly international attention (e.g. from pressure to appreciate the Yuan).
Third, like most of the past troubles, North Korea as said earlier, may be just using the incident to extract more deals. Considering the diminishing returns from recent actions (missile test and etc.), this seem like a new approach, but again would be subject to China's approval or rebuke.
In short, unless North Korea's leadership has gone berserk the odds for a Korean Peninsula military conflict seems remote.
However, the longevity of the incumbent regime in North Korea is almost totally dependent on China. This only means that once China decides for a change in North Korea's leadership, there is little the Kims can do, and maybe could also serve as reason for this unfortunate event.
Finally, North Korea's predicament only reveals how socialism is a very inferior way of distributing resources to a society as exhibited by the "shortage in everything" and near utter dependence on China for most of her needs.
The lack of pricing signals and economic calculation in determining profit and loss factors has led to massive misallocation of resources (mostly to military spending).
Of course, there is also the issue of the paucity of motivation or incentives for her people to work which has been subject to collective distribution.
As Ludwig von Mises explained, ``What must be realized is that within a market society organized on the basis of free enterprise and private ownership of the means of production the prices of consumers’ goods are faithfully and closely reflected in the prices of the various factors required for their production. Thus it becomes feasible to discover by means of a precise calculation which of the indefinite multitude of thinkable processes of production are more advantageous and which less. “More advantageous” means in this connection: an employment of these factors of production in such a way that the production of the consumers’ goods more urgently asked for by the consumers gets a priority over the production of commodities less urgently asked for by the consumers. Economic calculation makes it possible for business to adjust production to the demands of the consumers. On the other hand, under any variety of socialism, the central board of production management would not be in a position to engage in economic calculation. Where there are no markets and consequently no market prices for the factors of production, they cannot become elements of a calculation."
This is a real time experiment failing right before our very eyes and should serve as a lesson, especially to the mainstream who frequently romanticize the role of government.
In my view, the current North Korean regime (Kim and his heir) isn't likely to last in the next 3-5 years. Either hyperinflation will undo North Korea or China forces a change in leadership. But the regional political volatility will remain until such transition occurs.
This from the Economist,
``ONE of the odd features of the dispute between North and South Korea since the torpedoing of the Cheonan by North Korea in March, is that the non-military responses available to the South and its allies are rather puny. Only a few hawkish South Koreans think a military response is desirable. Hillary Clinton, America's secretary of state, said that “the international community has a responsibility and a duty to respond” when she arrived in Seoul at the end of her Asian tour. For the international community, read China, which is reluctant to censure Kim Jong Il. The North's shortfall in everything from food to energy has been met by a mixture of trade with its southern neighbour and presents from China. The suspension of inter-Korean trade now leaves the poor North more dependent than ever on Beijing." (emphasis added)
This leaves us the following question can a North Korea wage a war against South Korea?
The answer is yes, but this would be suicidal for the following reasons:
Because this would unlikely benefit the heir of President Kim to which allegedly was the reason for the bellicosity. A losing war won't be in their interest simply because North Korea is so poor and isolated as to win a full scale war.
Next, considering that North Korea is in "shortfall in everything" waging war means it can only happen with China's consent.
Considering that it would not appear to be in the interest of China to escalate the region's troubles which could only ruffle her "successful" economic and geopolitical momentum, North Korea could only be trying to extract some marginal concessions.
Unless of course, China could be using the North to divert possibly international attention (e.g. from pressure to appreciate the Yuan).
Third, like most of the past troubles, North Korea as said earlier, may be just using the incident to extract more deals. Considering the diminishing returns from recent actions (missile test and etc.), this seem like a new approach, but again would be subject to China's approval or rebuke.
In short, unless North Korea's leadership has gone berserk the odds for a Korean Peninsula military conflict seems remote.
However, the longevity of the incumbent regime in North Korea is almost totally dependent on China. This only means that once China decides for a change in North Korea's leadership, there is little the Kims can do, and maybe could also serve as reason for this unfortunate event.
Finally, North Korea's predicament only reveals how socialism is a very inferior way of distributing resources to a society as exhibited by the "shortage in everything" and near utter dependence on China for most of her needs.
The lack of pricing signals and economic calculation in determining profit and loss factors has led to massive misallocation of resources (mostly to military spending).
Of course, there is also the issue of the paucity of motivation or incentives for her people to work which has been subject to collective distribution.
As Ludwig von Mises explained, ``What must be realized is that within a market society organized on the basis of free enterprise and private ownership of the means of production the prices of consumers’ goods are faithfully and closely reflected in the prices of the various factors required for their production. Thus it becomes feasible to discover by means of a precise calculation which of the indefinite multitude of thinkable processes of production are more advantageous and which less. “More advantageous” means in this connection: an employment of these factors of production in such a way that the production of the consumers’ goods more urgently asked for by the consumers gets a priority over the production of commodities less urgently asked for by the consumers. Economic calculation makes it possible for business to adjust production to the demands of the consumers. On the other hand, under any variety of socialism, the central board of production management would not be in a position to engage in economic calculation. Where there are no markets and consequently no market prices for the factors of production, they cannot become elements of a calculation."
This is a real time experiment failing right before our very eyes and should serve as a lesson, especially to the mainstream who frequently romanticize the role of government.
In my view, the current North Korean regime (Kim and his heir) isn't likely to last in the next 3-5 years. Either hyperinflation will undo North Korea or China forces a change in leadership. But the regional political volatility will remain until such transition occurs.
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