Offer Carrots, Threaten Sticks

If China can go capitalist, and if Russia can go capitalist, and if Eastern Europe and India can go capitalist (heck, if Rhode Island can go capitalist—illustrated by their new flat tax reform plan) then you have just got to believe there’s a way to spur North Korea toward capitalism too.

I know, I know, it’s an absurd idea. But so were China, Russia and Rhode Island.

On last night’s Kudlow & Company, national security expert Thomas Barnett argued that China is the pivotal key to resolving the North Korea crisis. He urged the U.S. to make a deal with the Chinese in order to put the kibosh on Kim Jong-il’s nuclear development. I completely agree.

But we must go further: We need to offer carrots and sticks on capitalism as well as non- proliferation.

Yes, the U.S. and China must work together to develop an economic sanctions program that insists North Korea dismantles its nukes under U.N. inspection.

But, additionally, the deal should insist that North Korea takes definitive steps toward liberalizing their economy. Without de-nuclearizing their weapons and opening up their economy, the great powers will cut off their energy, food, and cash.

However, in return for de-nuclearizing and allowing greater economic freedom, it should be made clear that North Korea will be rewarded. In other words, threaten punishment and offer incentives. Be hard-minded and use diplomacy, but include carrots to accompany the sticks.

North Korea needs to steal a page out of China’s playbook from thirty years ago, when the Chinese government finally allowed farm peasants some ownership of their land. Follow China’s lead and allow foreign investment and private ownership of businesses. Poor, famished North Koreans resigned to eating bark off trees would go for this in a big way—just like the starving Chinese peasants did three decades ago.

Whatever happens to Kim Jong-il will happen. But I still believe—hope against hope—that Milton Friedman’s idea that open market capitalism is a precursor to free political reform. Friedman’s idea could work even in such a dark, despotic place as modern-day North Korea.

The smallest crumb of economic freedom would represent a giant step in reforming what ails North Korea. One day, in the not-so-distant future, encouraging such a course of action might even connect them to the world economy.

Tom Barnett’s approach makes sense. We have to make a deal with China. Economic and trade liberalization must form the foundation of any nuke stopping deal.

In the end, cutting off all their food and energy will only starve more North Koreans. It would only make matters worse, ultimately forcing a more dangerous rupture that might play into Kim’s hands. Such instability would almost surely lead to an even more adventurous militaristic response from their leader.

Is there no way to tame this beast through economic reform?