Time for a united stanceMost economic phenomena are hard to test in the lab, so an economic phenomenon is analyzed and predicted ceteris paribus, or in other words, with other conditions remaining the same. For example, an economic forecast is made based on the premise that the national security situation or geopolitical risk remains the same.
In fact, a renowned international credit rating company raised South Korea’s sovereign credit rating because the Korean Peninsula’s security situation was considered “stable.” But the report also said that if geopolitical tension related to North Korea was elevated, the credit rating would be lowered. We are yet to see whether North Korea’s provocations, such as its fifth nuclear test, the submarine-launched ballistic missile test and divided public opinion over deployment of the Terminal High Altitude Area Defense (Thaad) system in South Korea, qualify to this term.
Nevertheless, since security and economy are inseparable as the report indicates, it reminds us that our national security and the South Korea-U.S. alliance cannot break apart from the economy.
The South Korean economy is small to midsize on a global scale, yet it is highly dependent on trade. South Korea’s dependency on trade and finance is far higher than the average OECD member country. The stock market is especially open to foreign investors compared to major economies, and one-third of listed stocks are owned by foreign investors. As a result, the South Korean economy is especially sensitive to fluctuations in security situations.
Moreover, the U.S. Federal Reserve is expected to raise its interest rates soon, and the European and Japanese central banks are likely to further reinforce their quantitative easing and negative interest rate policies. Most emerging economies vulnerable to global financial shocks need to prepare for a sudden outflow and inflow of funds.
South Korea is no exception. At this critical moment in particular, we must convince the international community of our determination to manage our politics and economy with timely economic crisis management and enhanced policy coordination, along with a united stance on national security and cooperation among the ruling and opposition parties. Otherwise, we won’t be able to defend our own security in the face of Pyongyang’s claim that it is on the threshold of developing nuclear weapons.
We must not waste time over the worn-out Korean Peninsula denuclearization principle that Pyongyang has openly scrapped. It is desirable to continue UN and individual state-level sanctions to pressure the North to abandon its nuclear programs. But unless China changes its fundamental Korean Peninsula strategy, the ultimate effects cannot be expected.
China would not want a nuclear-armed North Korea to collapse as it hopes to maintain the status quo on the divided peninsula. Therefore, China will not cut off minimum food and energy supplies. Even if China officially participates in the international community’s sanctions on the North, they can hardly lead to Pyongyang abandoning its nuclear program.
It is too early to expect China to display global leadership befitting of a de-facto “G-2 nation.” The Group of 20 summit meeting in Hangzhou was a perfect opportunity for China to display leadership. As the summit was held amid a dramatic upsurge in trade protectionism despite global low growth and an anticipated prolonged slump, it could offer an opportunity to induce strong G-20-level policy cooperation.
But due to the scarcity of China’s global leadership, the meeting ended without noticeable outcomes, in sharp contrast with China’s confidence in taking regional hegemony.
As North Korea’s nuclear weapons possession has become a fait accompli, what are South Korea’s choices? First, we might consider our own nuclear development. If it is not a realistic option, considering international politics, diplomacy and economic conditions, the alternative would be persuading Uncle Sam to redeploy tactical nuclear weapons and introduce a NATO-style shared nuclear system along with deployment of the Thaad antimissile system.
Our citizens should also be willing to bear the inevitable tax burden for national security. While it may vary depending on the outcome of the U.S. presidential election in November, the cost for the security umbrella provided by the South Korea-U.S. alliance would also increase for sure.
When the hydrogen bomb was being developed, Albert Einstein was asked what a third World War would be like. “I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones,” he said. When it comes to the issue of national security, we desperately need a united stance and joint governance of the ruling and opposition parties for the nation.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Sept. 21, Page 28
*The author, a former finance minister, is an adviser to the JoongAng Ilbo.