Friday, February 23, 2007

Bradley Babson talk

Since I couldn't, on Wednesday night, remember the substantive portions of Babson's talk, I figured I'd write up the key points here. The title was "Engaging North Korea in a Post-Test World: Economic Perspectives". He started with context, including North Korea's key external vulnerabilities (energy, food, currency) and internal vulnerabilities (segmented economy, changing relationship of the people to the state, corruption). He made four assertions as well that were the keystone of his argument.

Assertion one was that the basic economic chanllenge was to manage three changes simultaneously: changes in the exteernal environment, economic reform, and internal policital changes (can they control them or will the changes control them?).

Assertion two was that the decision to test has altered the economic equation and increased the risks of their vulnerabilities. It is likely to have negative economic consequences.

Assertion three is that the implementation of sanctions will have both positive and negative consequences. On one hand, regulating inputs into the military economy could encourage redeployment of resources into more productive areas, such as mining and infrastructure. On the negative side, much of what North Korea needs is likely classified under dual use technology, so it will be excluded, and will be prevented from entering some industries in which they could have potentially been competitive. The segmented economy will continue to be a problem in implementing sanctions and delivering aid. It could also influence their need to be involved in illegal activity.

Assertion four is that a two pronged strategy of sanctions paired with economic assistance which would be tied to the nuclear agreement is the best chance for actually changing anything within North Korea.
He emphasized using the economic working group in the 6PT to help implement it, the need for a new domestic operational platform for NGOs and distribution, and planning both who will deliver and who will pay. Also, Babson pointed out that failure could undermine the nuclear agreement.

In the questions, he answered the main things they need to do, including having an outward oriented growth strategy, finding ways to make people want to trade with them, and finding areas where they are competitve.

Overall, my personal impressions of his ideas and recommendations were that they were balanced, and aimed practically at things that really needed to happen. He did not give odds on these things actually happening, but he did emphasize the need for outside powers to encourage it, implying that he is unsure as to whether the North Korean elite are aware or interested in these changes. But, I don't know enough about this kind of economics to state whether these are practical solutions or not.

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