Circles and Squares

Korea Times

“NK sanctions: Green light for profit seekers and red light for concerned citizens”

December 1, 2018

Emanuel Pastreich

Although the newspapers give us wall-to-wall reports about the tight economic sanctions that North Korea is subject to, sanctions meant to bring it to its knees and make it give up its nuclear weapons program forever, we also observe a steady flow of articles about meetings between government officials, Korean corporations and North Korean officials to discuss investment, infrastructure and other business opportunities. The Japanese and Chinese media have also offered occasional references to such confidential business negotiations.

Then the North Koreans came to South Korea to check out Pangyo’s Techno Valley on November 14 for a special tour of its facilities. That program was obviously only part of a larger program of negotiations and discussions for North Korea’s development.

So what is the point of those “crippling” economic sanctions that limit all interactions with North Korea? Well, it appears as if the sanctions are intended to block the participation of little people in the dialogue with North Korea that is obviously advancing quickly. We have lots of discussions with major corporations and North Korean officials. But we do not have Korean environmental groups, or other NGOs concerned with the environmental impact of the projects being discussed, travelling to North Korea. In fact, we do not even have a discussion in the Korean press about the criteria by which it is determined who is subject to the sanctions, and who is not.

Let us focus in on one important shift in South Korean policy toward North Korea that may have tremendous significance.

When President Moon Jae-in recently shook up his economic team, supposedly to make it more “market friendly,” he appointed, on November 7, Goldman Sachs economic analyst Kwon Goo-hoon as chairman of the Presidential Committee on Northern Economic Cooperation, a position with the rank of minister. Kwon had previously been based in Hong Kong.

The official story is that President Moon was moved by Kwon’s talk on KBS about the Fourth Industrial Revolution entitled “Brilliant Insights reaching out 10,000 miles” and then personally decided to appoint him.

The most serious problem, buried by much of the press, is the fact that Kwon will keep his position as an analyst at Goldman Sachs while serving as chairman for this committee. The conflict of interest is blatant, as Goldman Sachs could potentially stand to make billions of dollars from speculation in North Korean development, and other economic interactions of South Korea with Russia and China related to the work of the committee. That would be truer if it has access to juicy information that is not shared with others because of the so-called “economic sanctions.”

The previous chairman of this critical committee for coordinating North Korean policy for government and industry, together with China, Russia and other nations, was the National Assemblyman Song Young-gil, who stepped down in July. Song has had a long and deep interest in North Korea dating back to his undergraduate days, and he was fully qualified, with no conflict of interest, to serve as chairman.

When it came to finding a replacement, there were plenty of government officials, politicians and academics who could easily have replaced Song.

The official statement from the Blue House regarding the reasons for Kwon’s appointment reads:

“In response to the movement of relations with the North into a period of action, Mr. Kwon was most appropriate because of his work with international organizations and investment institutions.”

In a sense, his blatant conflict of interest is presented as his strongest point. Perhaps if you are working with the allegedly corrupt Trump administration there is some truth to that statement.

We can infer something about what Kwon’s role may be from an article that appeared in the Financial Times on November 4.

The opening sentence of the Financial Times article says it all:

“South Korea has named a senior Goldman Sachs economist to help bolster economic ties with North Korea amid growing signs of discord between Seoul and Washington over how to deal with Pyongyang.”

The poorly formed sentence speaks volumes. The author is trying to explain how the decision was made without giving away the story ― he fails of course, and spills the beans.

What does Goldman Sachs have to offer that will “bolster economic ties” with North Korea? Certainly someone who spent the past few years in Hong Kong handling portfolios for a global firm that will try to squeeze money out of anything, from the destruction of rainforests and mining of low-grade coal, to investments in factories around the world that employ people under miserable conditions ― a firm that devotes itself to casino speculation in currencies and in commodities and has no expertise on North Korea as it is lived by North Koreans. More importantly, he has been trained not to care about people or about the long-term of a country.

Goldman Sachs has no interest in educating North Koreans about climate change, in advocating for the right of North Koreans to organize labor unions, or to drink safe water, or ensuring that they will have pensions and excellent medical care.

Kwon will be deeply involved in plans for North Korea’s development but has the wrong motivations and the wrong training to do what needs to be done.

The Goldman Sachs connection is helpful to the Blue House in that it can be used as a conduit in making a deal with the vultures surrounding Donald Trump. Perhaps the relationship will give some financial benefits to some in Seoul when Wall Street carves up North Korea Iraq-style. Certainly Kwon has an acute sense of what those around Trump actually want.

The Financial Times goes on the explain that “Seoul is pushing for greater economic engagement, while Washington has maintained a hard line on enforcing sanctions in an effort to spur the denuclearization of North Korea.” Maybe. But we have not seen a ghost of a trace of efforts to promote denuclearization by Trump and associates.

If Trump was interested in reducing the threat of war in Northeast Asia, he would push the United States to adopt a no “first strike” policy for nuclear weapons and he would honor and expand existing treaties.

The article cites a Blue House official, spokesman Yoon Young-chan stating why Kwon is so qualified,

“(Kwon) is going to provide us with new insight and imagination to create the new growth engine of our economy by pushing ahead with northern economic co-operation, such as energy links and the development of a northern sea route.”

Let us parse this cryptic statement. How might it be that the Goldman Sachs analyst imagines Seoul will create a “new growth engine” through “northern economic co-operation,” “energy links” and “northern sea route?”

The vague term “new growth engine” refers to the false assumption that the speculative activities of investment banks will create real jobs for ordinary people. The incentive for such banks is to drive down wages, not raise them, and they are attracted to North Korea in that its wages are lower, not because of any potential it has to develop its potential or increase its standard of living. The only way to improve the situation in North Korea is to severely limit the actions of foreign banks (much as Park Chung-hee did in the 1960s and 1970s) and build up domestic expertise.

“Energy links” refers to money to be made by investment banks by pumping oil and gas through pipes from Russia, over North Korea, and on into South Korea, and perhaps beyond. The investment banks are deeply concerned with this pipeline. They want to make sure that the operation of the pipeline is private, and it is not cooperative, or run by the government. They want the discussions about who will own and run the pipeline to be opaque and the profits to be made to be kept out of the public record.

Needless to say, there is no discussion in the media about the catastrophic impact of oil, coal and natural gas on the climate regionally and globally. “Energy links” may also refer to strip mining North Korea for coal. One thing is for sure, Goldman Sachs is never going to suggest that the coal should be left in the ground, or the use of fossil fuels be quickly reduced to zero to avoid catastrophic climate change.

There are multiple interpretations possible for the expression “northern sea route,” but most likely it refers to the current bid to make money off of the melting of the Arctic by establishing new sea routes to Europe to the north of Russia, thus further damaging the ecosystem, releasing more emissions and of course making money for a handful of people.

But the kicker in the article is this line, “Amid sluggish growth at home, Seoul has increasingly looked to North Korea, with its untapped markets, substantial mineral deposits and inordinately cheap workforce.” That is to say that the creation of a destructive consumption economy in North Korea, and the construction of highways and apartment buildings will make some people quick cash, even if that process is ultimately destructive to the culture and society of North Korea.

There is a great attraction for some in that coal, iron and rare-earth metals can be mined in North Korea without concern for environmental impact, or for the rights of labor, or concern about where the profits go. What do you think the priority will be for a Goldman Sachs economist?

I find the term “inordinately cheap workforce” to be inordinately offensive. North Korea is attractive to Kwon and his friends because it offers laborers who have a good work ethic and will accept low salaries so they can be used as a substitute for laborers in Vietnam, or Myanmar, or China. The concern is 1000 percent about overseas profits and zero percent about North Koreans.

If anything, investment banks would like to use North Korea as a lever to drive down labor costs in South Korea and perhaps as a hammer to crush South Korean labor unions in the same way that American banks financed right-to-work factories in the South as a means of breaking the power of unions in the North.

What exactly is Goldman Sachs best known for? One of its greatest recent achievements was its work in Greece, where it engineered a program in 2015 that hid the true debt that the country took on and doubled the amount before producing a financial crisis that leveled the country. Goldman Sachs promoted the predatory lending in the United States that brought on the subprime crisis and destroyed many middle-income families in that country, and around the world. Goldman Sachs also lobbied for government policies that cut essential services to ordinary citizens and took advantage of tax dollars to generate private profit.

Goldman Sachs is expert at exploiting local residents to create profits for its clients overseas and engaging in open deceptions about the impact of the policies it pushes. Any careful analysis of its credentials would suggest that its former employees, let alone current employees, should be banned permanently from government work.

Of course, the claim that someone with a Goldman Sachs background could be helpful for resolving problems with the Trump administration is entirely appropriate. The Trump administration is dominated by members of this Goldman Sachs to a degree never seen in American history. The “vampire squid” that makes a profit through parasitic economic leveraging produced Treasury Secretary Steven Mnuchin, who had run various hedge funds and then gutted Sears for personal profit, before taking on the U.S. economy.

The short-sighted, profit-driven view of North Korea is not limited to the supercomputers calculating profits at Goldman Sachs. The National Land Forum on “Land use and infrastructure in an age of North-South Economic Cooperation” that was held on November 19 featured presentations by four professors, all experts in construction and development, who gave their perspectives on the potential of North Korea. The underlying assumption behind all four presentations was that the massive industrialization of South Korea, its tremendous dependency on imports of petroleum, coal and foodstuffs, the development of a consumption society that encourages waste and alienation, and a ruthlessly competitive culture were positive developments that should be introduced into North Korea quickly.

Two talks described North Korea as a “blue ocean” for building infrastructure that would revive the construction industry where some once imagined under President Lee Myung-bak that they would make a fortune in the Middle East and Central Asia.

There was no discussion in any of the talks about educating North Koreans, about training North Koreans to conduct environmental impact studies, about renewable energy, or about the impact of climate change on North Korea. Nor was the need to restore lost soil in North Korea touched on, or the need for reforestation.

Professor Choi Ki-ju of Ajoo University mentioned a fascinating statistic in his presentation. He noted that domestic transportation in North Korea is 86 percent rail, 12 percent highways and roads and 2 percent waterways. South Korea is, according to him, the reverse, with about 85 percent of transportation carried on by highways and roads.

But the implication of his talk was that North Korea should start building freeways and filling them with automobiles that release deadly emissions. The conclusion should have been that South Korea should adopt the healthier ratio that North Korea has kept since before highways were introduced en masse by Park Chung-hee as part of his development scheme.

North Korea does offer tremendous opportunities for South Korea, but the focus on development must change. We need to spend more time thinking about how individuals, families and local communities can work together with North Koreans to build new systems for education, for culture and for public service. A healthy integration will take place between individuals over years. It cannot possibly be achieved by those who calculate short-term profits. Moreover, climate change has altered the entire game so that ideas about development, even from recent history, no longer apply. Anyone who is accustomed to thinking only in terms of profit does not have much of a role in North Korea at this critical moment.