[Viewpoint] Economics and war indelibly linked

A war, at the end of the day, is about money. Roman historian Tacitus said that money is the muscle of war. World War II is a good example. The economic strengths of the Allies and the Axis forewarned the war’s outcome. If you convert per capita income in 1938 into the dollar’s value as of 1990, the per capita income of Germany was $5,216, Italy $3,244 and Japan $2,356. The average per capita income of the Axis was $3,575.

Let’s look at the Allies. The percapita income of the U.S. was $6,134, the U.K. $5,938, France $4,424 and the Soviet Union $2,150. The average comes out to $4,673, about 30 percent more than the Axis average. The forecast that North Korea would not start a full-scale war against the South is built on this reasoning.

However, even if it is not full-scale warfare, there is a possibility that Pyongyang will go forth with another provocation. To North Korea, a military provocation is a kind of political act. It is a highly calculated political project. If you look at the Yeonpyeong Island bombardment in terms of internal political dynamics in the North, it has the same effect as a self-coup supporting Kim Jong-il and Kim Jongun. By elevating military tension, the Kim family can strengthen its imperial control. It is hard to completely block such a political act with a military operation.

There is another undesirable variable. South Korea is desperate to avoid a war while other countries are not so resolute. As long as a war does not occur within a country’s territory, many American economists believe that a war has an effect of boosting the economy. It is known as Military Keynesianism. American economist William Nordhaus calls this the “iron law of wartime boom.”

In fact, the United States enjoyed an average annual growth rate of 11 percent in actual gross domestic product between 1941 and 1945 while America was fighting in World War II. The U.S. economy grew drastically during the Korean War as well. While the Korean Peninsula was being destroyed in devastating battles, the actual GDP of the United States continued to grow by 6.2 percent annually. Japan also enjoyed the boon of the war.

There is talk that foreign financial specialists are already estimating the economic effect in case a war occurs on the Korean Peninsula. They are calculating the impact of surging demand for military munitions during the war as well as postwar rehabilitation needs.

But we cannot let other countries take advantage of South Korea’s misery once again. We have to avoid a fullscale war at any cost. The only way to prevent a war is to resolutely punish North Korea’s provocation immediately. The ROK-U.S. joint drill displayed the solid will to avoid war.

However, what can we do one or two years later, and even a decade or two later? We need to contemplate the future more seriously. Unless a war of annihilation removes North Korea from the map, the presence of North Korea as a rogue state is a fact and a reality. The leftist administrations pursued an appeasement policy to stably control the threat and take a soft approach. It began from pure anticipation that if we help North Korea to become economically stable, they would loosen up tension.

Theoretically, it makes sense. Economists confirmed a clear inverse relation between the trade volume and the number of annual warfare from 1816 to 2000. After a country attains economic development, it has more to lose from a war. Moreover, the possibility of having a full-scale war is drastically smaller between countries with a shared trade network.

New York Times columnist Thomas Friedman came up with the Golden Arches theory of conflict prevention. Here, the golden arches refer to the fast-food chain McDonald’s in a shape of letter “M.” Friedman argued that when countries are economically developed and globalized enough to have a McDonald’s network, they would not want to fight a war with one another.

What contributed to the failure of the appeasement policy that appeared to be valid initially? The sunshine of the appeasement policy benefited not the entire country but mainly the Kim Jong-il regime. When we ambiguously provided aid to the North, we, in fact, assisted in boosting Kim Jongil’s hold on power. The assistance to the North in the last 10 years was supposed to be for North Korea in a broad sense, but the actual benefit was monopolized by the state in a narrow fashion.

The Lee Myung-bak administration doesn’t seem to have a reason or the time to review the failed appeasement policy. For now, it has no choice but to maintain the hard-line front. However, a retaliatory strike against a provocation and a long-term effort to lower the risk of a war are not contradicting tasks. Those eyeing the next presidential race need to contemplate what made past administrations fail, what this administration hasn’t accomplished and what we can do aside from military operations.

*The writer is business news editor of the JoongAng Ilbo.

By Nam Yoon-ho