The High Cost of Extortion
The High Cost of Extortion
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  • 승인 2006.11.01 12:01
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On October 9, 2006, North Korea successfully conducted an underground nuclear test. News agencies all over the world scrambled to confirm this historic and chilling event. Governments of the world unanimously condemned the action. Analysts everywhere began to offer their opinions on the ramifications of the explosion, especially regarding North Korea's closest neighbor on the peninsula, South Korea. Speculation even arose about which neighbor North Korea would attack first. Some said that the threat of nuclear attack would destroy South Korea's economy. Foreign investment would dry up, imports and exports would trickle out, IT companies would fail, and South Korea's dreams to become the hub of southeast Asia would disappear like so much radioactive smoke. Analysts used a lot of paper explaining exactly how the economy of this country would collapse before being burned in an infamous sea of fire, as North Korea has been promising for such a long time. Newspapers said that the tragedy was a failure of South Korean diplomacy, or Japanese policy, or US tactics. Some even placed the blame on China. Others, however, had a different idea and more faith in the technological South, and a more practical view of the situation as a whole. They cited the small dip and recovery of the South Korean stock market as evidence that the impact of the North's actions were not so devastating. No shocked CEOs ran screaming from the country. No multinational corporations closed up shop and headed for greener pastures. The South Korean won did not plummet, and no extra IMF intervention was required. In fact, new corporations continued to announce plans to invest in South Korea. Most notably Google announced plans to invest a large sum into the South Korean economy, undeterred by the threats of its northern neighbor. Business continued as usual in the nation's capital. Business as usual in Seoul is business at the point of a gun. Actually, it is business at the point of approximately five hundred 170mm Koksan artillery guns, which are rumored to be able to fire a chemical warhead every fourth round. It is also business within the range of over two hundred multiple-launch rocket systems and approximately six hundred Scud missiles. Potentially, North Korea could also use its approximately one hundred No-dong missiles against South Korean business targets as well although it is more likely they would be used against a more distant target such as Japan. Business in Korea has been at the point of quite a few guns for quite some time now. When stacked up against all of the conventional ways Seoul could be destroyed in a matter of minutes, what difference does a few nuclear bombs make North Korea's constant threat of war has become a well-known song by now. The North has specifically threatened to turn various areas of the region into a sea of fire no less than 8 times in the past decade. The phrase has become so well-used it has become the title of a Tom Clancy novel in the United States. This latest threat is only a small pebble added to a mountain. Any foreign investor or domestic company in South Korea is already quite familiar with the threat level of North Korea. And any sound investment company or business enterprise on the peninsula has long ago factored the risk of North Korea into their bottom line. Nasty surprises tend to wreak havoc with international business, but there are no surprises here. However, business as usual on the Korean peninsula has an effect that is more sinister and more difficult to detect. Anyone familiar with North Korea's diplomacy over the past ten years can easily see a pattern. The North wants as much free stuff as it can get. Whether it is humanitarian aid like rice and grain, or more substantial aid like concrete and steel, the North wants it all. It has quickly caught on to the fact that more threats give more aid. Like a street corner gangster, the North will threaten to attack its neighbors until it gets as much money and aid as it can. That is nothing more than simple extortion. North Korea has more in common with organized crime than just extortion. It also resorts to counterfeiting, kidnapping, theft, burglary and murder. The reason for such acts is always the same - profit. And South Korea makes a very tempting target for the neighborhood mafia. In global rankings, South Korea is 10th in nominal GDP, right below Spain and right above Brazil. South Korea is also 17th highest worldwide in ranking of investment as a percentage of GDP, and its government is also ranked as the 20th richest government by savings. How much higher could South Korea's nominal GDP ranking be if it was not being extorted by the North Perhaps the country could pull ahead of Canada at 8th, or maybe even surpass France at 6th without such a monkey on its back. How much higher would investment in Korea rise without the constant threat of being turned into a sea of fire It might be able to surpass Thailand's ranking at 10th or perhaps pull even with Vietnam's slot at number 6 in the future. Without providing such a large expense of material to the North in response to threats, how much higher could the national savings of Korea climb It could probably easily surpass China at 18th, and might climb to the level of Singapore at 11th. But if it continues to give such large tribute to the North, it might not climb at all. So, while a constant threat of violence from North Korea will probably not adversely affect South Korea's economy, it does have an immeasurable repressive effect on South Korea's potential. North Korea's criminal activities are keeping South Korea down. Extortion is always a bad investment. It is, as the English idiom goes, throwing good money after bad. Or, as the Korean idiom says, it is like pouring water into a bottle with a hole in the bottom. The only thing that paying extortion money accomplishes is to make sure that the thug will come back and ask for money again. Therefore, the only thing that giving economic aid to North Korea accomplishes is that North Korea will continue to ask for more in the future. One could think of South Korea as a business, with its citizens as investors. Every businessman knows that a business has a obligation to its stockholders to make good investments. Bad investments by the company hurt the company, the employees, and the investors. Bad investments by a country hurt the economy as a whole, both in the public and private sector. South Korea could do this by requiring more obligations from North Korea. If the South gives monetary aid, it could structure the aid as a loan rather than as charity. If the North was obligated to pay back the aid after some time, the relationship between the two countries would be a more professional business relationship rather than a criminal-and-victim relationship. The South could begin to attach requirements to food shipments as well, becoming more involved in food distribution in the North to make sure that the aid actually gets to the North Korean people rather than being sold to another country. But if South Korea cares about its own future, it must stop making bad investments in the North.

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