Economic sanctions are a major form of leverage to promote diplomatic rather than military solutions to international problems, according to the liberal theory of international relations. The idea is to provide incremental pressure to change the cost-benefit calculus of the offending nation. If “bad” actions lead to punitive sanctions, presumably at some point the cost will exceed the benefit and diplomacy will prevail.
The rival realist theory of international relations rejects the liberal faith in incremental economic pressure using sanctions. Realists contend the central issues of national security are so vital to states that they are willing to pay an economic price rather than surrender core security concerns. Furthermore, sanctions are a two-edged sword because they penalize not only the targeted country, but also those in the sanctioning country whose business with the target is interrupted.
My corporatist theory shares the realist skepticism about the efficacy of sanctions, but from a different perspective. Recognizing that any sanctions regime (indeed virtually any economic policy) creates both winners and losers, my polarized political economy considers not the net balance of costs or benefits for a nation as a whole, but exactly which interests in each country are afflicted and which interests benefit. Sanctions may advance the cause of some economic or political interests over others. The beneficiaries of sanctions do not care about the net national cost; they just know they win. Sanctions will further their agenda, not curb it. In other words, sanctions could end up playing into the hands of your adversaries.
The case I have examined in most detail involves the U.S. economic sanctions on Japan in 1940-41, leading up to the outbreak of World War II in the Pacific. Japan was then deeply divided between business nationalists and internationalists. Nationalist business allied with elements of the Japanese military to expand their operations incrementally in China until they provoked such a reaction from the Chinese government that a full-scale war erupted between the two countries in 1937. The war in China gradually undermined the prosperous cooperation that the dominant internationalist elements of Japan’s business elite had enjoyed with Western countries, including the U.S. and the British Empire. As sanctions tightened on Japan, led in part by major oil companies in the U.S. and U.K., they necessarily affected the trade and business of America’s internationalist allies within Japan, but could not inflict pain on the Japanese business nationalists, who did not depend on foreign trade and in any case viewed the business internationalists as their most dangerous adversaries. Foreign sanctions actually advanced the cause of the Japanese nationalists, undermined their domestic rivals, and validated the nationalist political program. The sanctions provoked war rather than avoiding it.
There are some parallels with the North Korean case today. Understanding why requires trying to see the world from the standpoint of North Korea’s ruling Workers Party and its leader, Kim Jong Un. The point is not to sympathize with their perspective, but to understand how they might react. The North Korean regime follows a hard-core economic nationalist agenda. Business internationalism dominates in so much of the world today, including China, that it is hard to understand a regime that considers international trade more as a threat, a necessary evil to be minimized, than as a benefit.
The North Korean Workers Party is not a party of workers at all. It is overwhelmingly a party of current and retired military leaders with a dynasty at its head. Unlike the Chinese Communist Party, led by engineers and other professionals involved in the economy and production, North Korea’s leaders share a military viewpoint formed by the Korean War of 1950-53, when their effort to reunify Korea by force failed after a United Nations intervention led primarily by U.S. forces. Economic management is not their strong suit. Under the rule of the Workers Party, North Korea has slipped from approximate equality in standard of living with South Korea to being vastly poorer today. North Korea’s trade and economic output have diminished, too. Much of the decline in both relative and absolute terms took place after the collapse of the Soviet Union, which had sustained North Korea in many ways, but it started even during the 1980s.
The view from Washington suggests that China, as North Korea’s major remaining trading partner, facilitates Pyongyang’s intransigence. Yet China has its own checkered history of sanctions on North Korea. China has been trying to push North Korea toward the kind of massive economic reorientation that China itself experienced since the start of Deng Xiaoping’s “Four Modernizations” during the 1980s. North Korea’s militarized ruling party has largely rebuffed Chinese pressure because reforming the economy to participate more in world trade would radically shift the country’s internal balance of political power from the current warlords to a more economically-savvy engineering and managerial elite. China also does not want North Korea to develop nuclear weapons and long-range missiles (which China already has) because that complicates its own efforts to manage its relations with the West. Thus in response to North Korean intransigence, China had been gradually tightening its own sanctions on North Korea even before it signed on to the recent United Nations sanctions. For example, the government-controlled Bank of China and several other major Chinese banks cut ties with North Korea in 2013. Yet China has realized that its sanctions do not move the Pyongyang leadership since it does not share China’s globalist, pro-trade orientation.
Russia, which had extensive trade with North Korea during the Cold War decades, has already cut its economic ties to near zero. Russian President Vladimir Putin recently stated that North Koreans “would eat grass” rather than bow to pressure from sanctions. Western analysts tend to discount this statement, but it rings true from Russia’s and China’s own experience.
During the Cold War period when the Soviet Union and China subsidized the military modernization of the North Korean forces, Pyongyang developed a massive army that was fully mechanized with thousands of tanks, armored personnel carriers, and other vehicles supplied by its Communist partners. North Korea also deployed a large navy, especially its submarine force, and air force. But after the demise of the Soviet Union and the precipitous decline of North Korea’s economy, the regime could no longer support such an impressive mechanized military force. Much of the equipment acquired then still exists, but it is poorly maintained and troops are inexperienced because the lack of imported oil severely restricts training with this vast panoply of fuel-guzzling war machines.
Therefore, the nuclear weapons program is the last best hope for the North Korean regime to survive in a world it considers to be dominated by ruthless militaristic imperialism. If it cannot afford to maintain the massive conventional military forces bequeathed to it by the Cold War, it must have an irresistible trump card. Nuclear weapons are its only real hope for national security. It will hardly abandon such a vital program, now so close to fruition, because of minor inconveniences in trade, which it does not value anyhow. In some sense, the attention and even hysteria that Western countries are belatedly paying to North Korea are vindication of the wisdom of its nuclear weapons program. Finally North Korea is getting the “respect” of the world as a major power. Further sanctions enacted this week will not change North Korea’s behavior, but merely encourage Kim Jong Un that he is on the right course. He believes that course will end with North Korea as a nuclear power, but it might end in war.