North Korea's tiny economy holds global heavyweights to ransom
April 12, 2009
 By William Pesek
It didn't matter if it failed (as the US claimed) or succeeded (as North Korea said). It almost halted the world in its tracks.
Korea's launch is decidedly bad news for a global economy with too much on its plate already. Yet there were winners and losers in Pyongyang's dramatic news.
First, the winners, since it's a short list. Leading this group is Kim himself. Think about it: North Korea's economy, according to 2007 World Bank data, is worth almost $26 billion (R238 billion). It's not fair to compare that with the $14 trillion US economy, so let's go with investor Warren Buffett.
The Berkshire Hathaway chairman, according to Forbes magazine, lost as much in the last year as the total output of North Korea's 23 million people. Yet Buffett was still worth an estimated $37 billion last month.
Yet that really does put things in perspective. The second-wealthiest man in the world could buy Kim's Hermit Kingdom and still have enough for Mongolia and Namibia, too. And here you have this nation, which could easily be purchased by a single US investor, essentially holding entire parts of Asia hostage.
Rocket scientists arguing the missile was a dud miss the point. It eclipsed speculation that Kim's Stalinist regime is on its last legs. Gone is talk of Kim's health, after a stroke last year, or plans for a successor. And even if Kim is more afraid of the world than we are of him, the domestic public relations value was just priceless.
That leads us to the other winner: any rogue state looking to buy arms from Pyongyang. US officials worry that publicity surrounding the launch will drum up brisk demand from Iran and other nations.
The list of losers is far longer. At the top are the inhabitants of the Democratic People's Republic of Korea. What a contradiction in terms: There's nothing democratic about the place and its people are unfortunate pawns in the cult of personality sustaining the disastrous Kim Dynasty.
Rather than raising their standard of living, Kim seeks to boost his own standing. The cost will be less food and financial assistance flowing to a desperate population.
The US, Japan and South Korea are also losers. It was a final slap at the previous US administration, which painted its move to drop North Korea from its state-sponsored terrorism list as a big success. For Obama, it's a foreign policy crisis he didn't need.
Japan has some egg on its face for announcing the rocket firing a day early. Kim almost seemed to toy with an anxious Japanese government. The launch followed several warnings from Tokyo, showing how little leverage it has over its enemy.
South Korea lacks options, having halted most assistance to the north. Kim's provocations are bad news for an economy grappling to stay afloat amid the global crisis. Being south of Pyongyang means credit raters must consider the risk of war.
Count China among the losers, too. It's tempting to see signs of strength in its refusal to call for tougher sanctions against North Korea at an emergency UN Security Council meeting. In reality, this was very poorly timed for China's government.
Officials in Beijing are plenty busy shielding their $3.3 trillion economy from a global recession. Now North Korea's biggest trading partner is on the spot to rein in an unpredictable regime. Expect the US and Japan to increase the pressure on China to have a talk with Kim.
It's no secret China wants to avoid the collapse of a nation with which it shares a large border. Less well-known is China's desire to keep the US and North Korea at odds. Better ties between the two might counteract Beijing's influence.
Doing North Korea's bidding doesn't help China's image - at least not while Kim grabs the spotlight and shakes up the world.
William Pesek is a Bloomberg News columnist. The opinions expressed are his own.
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