Tag: North Korea

Iran’s Inflation Statistics: Lies, Lies and Mehr Lies

The Mehr News Agency is now reporting that Iran’s annual inflation rate has reached 31.5%. According to the Central Bank’s official line, Iran’s annual inflation rate has bumped up only 1.3 percentage points from February to March.

Never mind that this official inflation statistic is well below all serious estimates of Iran’s inflation. And yes, Iran’s official inflation statistics are also contradicted by the overwhelming body of anecdotal reports in the financial press.

Since September 2012, I have been estimating Iran’s inflation rate – which briefly reached hyperinflation levels in October 2012 – using a standard, widely-accepted methodology. By measuring changes in the rial’s black-market (read: free-market) U.S. dollar exchange rate, it is possible to calculate an implied inflation rate for Iran.

When we do so, a much different picture of Iran’s inflation emerges. Indeed, Iran’s annual inflation rate is actually 82.5% – a rate more than double the official rate of 31.5% (see the accompanying chart).

As I have documented, regimes in countries undergoing severe inflation have a long history of hiding the true extent of their inflationary woes. In many cases, the regimes resort to underreporting or simply fabricating statistics to hide their economic problems. And, in some cases, such as Zimbabwe and North Korea, the government simply stops reporting economic data altogether.

Iran has followed a familiar path, failing to report inflation data in a timely and replicable manner. Those data that are reported by Iran’s Central Bank tend to possess what I’ve described as an “Alice in Wonderland” quality and should be taken with a grain of salt.

North Korea’s Kim Jong-Un: Basketball Fan, Closet Liberal?

KGB director Yuri Andropov was a jazz aficionado and collector of abstract art, so he must be a liberal, it was said. Great change was expected when he took over as the general secretary of the Soviet Communist Party in 1982. 

Well, no. It turns out that he did not use the KGB as a clever cover for his secret liberal soul. Brutal repression continued apace. The U.S.S.R. had to wait for Mikhail Gorbachev, who did have a secret liberal soul. 

Much the same blather continues to be spread about North Korea’s Kim Jong-un. After all, he attended prep school in Switzerland. He likes Disney characters. And he is a fan of American basketball. 

Not just any basketball player. According to the BBC

Mathew Syed, [London] Times sports columnist, told the Today programme: “When I heard that [Dennis] Rodman had gone to North Korea, I was genuinely shocked.  

But it turns out that Kim Jong-un is a lifelong fan, apparently enjoyed it enormously, and sport being used as a potential tool for political rapprochement has a very long history.” 

So forget “ping-pong diplomacy” with Mao’s China. Dennis Rodman is the vehicle for the Kim dynasty as it inaugurates democracy, establishes capitalism, and protects human rights. Perhaps Rodman and Kim will share the next Nobel Peace Prize. 

It would be a wonderful story. But as yet there is no hint of serious reform in the North. Kim is younger and more open, attending events with his attractive, designer-handbag-toting wife. However, the labor camps remain full, controls on the border with China have been tightened, rumored economic reforms remain just rumors, and Pyongyang has moved ahead with rocket and nuclear tests. 

Reform may—indeed, must—eventually come. But in the meantime it is important to remember the essential character of the North Korean regime. The Kim family empire’s power is built upon a comprehensive system of pervasive discrimination and repression built on social classification, through which entire extended families are punished for an individual’s transgressions. Like Stalin’s Soviet Union, Kim’s North Korea is a gulag state, with citizens facing punishment and death for any number of transgressions. For decades Pyongyang even turned kidnapping into state policy, both enticing and forcing other peoples into what probably is the worst, most brutally repressive system on earth.  

Kim Jong-un likes basketball. Unfortunately, that does not make him a reformer, but only a dictator who happens to like basketball.

North Korea’s Economic Outlook: Cloudy with a Chance of Statistics.

During the past few weeks, North Korea has been the subject of outsized news coverage. The recent peacocking by Supreme Leader Kim Jong Un – from domestic martial law policies to tests of the country’s nuclear weapons capabilities – has successfully distracted the media from North Korea’s continued economic woes. For starters, the country’s plans for agricultural reforms have been deep-sixed, and, to top it off, I estimate that North Korea’s annual inflation rate hit triple digits for 2012: 116%, to be exact.

Unfortunately, the official shroud of secrecy covering North Korea’s official information and statistics remains more or less intact. But, some within North Korea have begun to shed light on this “land of illusions”. For example, a team of “citizen cartographers” helped Google construct its recent Google Maps’ exposition of North Korea’s streets, landmarks, and government facilities.  In addition, our friends at DailyNK have successfully been reporting data on black-market exchange rates and the price of rice in North Korea – data which allowed me to conclude that the country experienced an episode of hyperinflation from December 2009 to mid-January 2011. 

Yes, things may be getting a bit brighter in North Korea. According to recent reportage by Carl Bialik of the Wall Street Journal, statisticians from the U.S. and Europe are bravely making their way into North Korea to teach students basic statistical methods. These lessons may only represent material from an introductory stats course, but they are a step in the right direction, because they force students to at least think about analyzing data. Unfortunately, in North Korea, reliable data continue to be a scarce commodity.

While these developments in North Korea have hardly shaken the dismal economic status quo, one can only hope that they will start to bring about some much needed change . But, don’t hold your breath. If flamboyant basketball hall-of-famer Dennis Rodman’s recent “basketball diplomacy” mission to Pyongyang is evidence of anything, it’s that North Korea is more interested in scoring cheap headlines than it is in turning around its economy. Until North Korea begins to open up its markets and make transparency a priority, its economic prospects will be cloudy, at best.

Sequestration Will Not Make the United States Less Safe

Will sequestration undermine U.S. national security? Hardly. Today, the Cato Institute released a new infographic putting these minor cuts in perspective.

Military spending will remain at roughly 2006 levels—$603 billion, higher than peak U.S. spending during the Cold War. Meanwhile, we live in a safer world. The Soviet Union has been dead for more than two decades; no other nation, or combination of nations, has emerged since that can pose a comparable threat. We should have a defense budget that reflects this reality.

To be clear, sequestration was no one’s first choice. But the alternative—ever-increasing military spending detached from a legitimate debate over strategy—is worse. We should have had such a debate, one over the roles and missions of the U.S. military, long before this day of reckoning. And politicians could have pursued serious proposals to prudently reduce military spending. Instead, they chose the easy way out, avoiding difficult decisions that would have allowed for smarter cuts.

Until now, there have been few constraints on Washington’s ability to spend what it pleases on the military. As my colleagues Benjamin Friedman and Justin Logan put it, Americans “buy defense like rich people shop, ignoring the balances of costs and benefits.”

Policymakers can’t postpone the tradeoffs forever, especially when the public has grown increasingly weary of foreign entanglements. If forced to choose between higher taxes, less military spending, or lower domestic spending, in order to balance the budget, the military fares least well, with solid pluralities favoring cuts in military spending over cuts in other programs.

Which is why it is so important to get the foreign policy debate right. If we are going to give our military less, we need to think about asking it to do less.

A number of experts have done that, rethinking the military’s purpose, and documenting the savings that would flow from a more modest foreign policy. The sequester is a first step, albeit an imperfect one, that could finally compel policymakers to do the same.

Download and share this infographic on your blog, Twitter, or Facebook.

North Korea’s Cute Leader Isn’t So Cuddly

North Koreans might be impoverished and starving, but Pyongyang has entered the Internet age. Unfortunately, the new leadership isn’t using its skills to make friends. 

Thirty-year-old ruler Kim Jong-un has followed his “Great Leader” grandfather and “Dear Leader” father, so some of us call him the “Cute Leader.” But he’s not proving to be warm and cuddly—at least toward the United States. 

The so-called Democratic People’s Republic of Korea recently posted an animated YouTube video showing Manhattan in flames after a missile attack from an unnamed country. The images are cribbed from the video game Call of Duty and the audio is an instrumental version of Michael Jackson and Lionel Richie’s “We Are the World”—so it’s not exactly an ILM-quality production. Scrolling across the pictures is Korean text reading, “It appears that the headquarters of evil, which has had a habit of using force and unilateralism and committing wars of aggression, is going up in flames it itself has ignited.”

The DPRK video—removed from YouTube because of copyright violation but still available elsewhere—occasioned hand-wringing and worries that maybe the United States should take the threat seriously. However, the threat is nothing new. Pyongyang previously issued posters showing missiles hitting America’s Capitol Hill.

The North Koreans aren’t the only people to view Washington as the Center of All Evil. However, most of the rest of us, especially here at Cato, don’t view foreign missile attacks as a particularly good solution to political disagreements.

How to Respond to North Korea’s Latest Threats

Relations between North Korea and the world are off to a familiar start in 2013. Last week, the United Nations Security Council passed a resolution tightening sanctions on Pyongyang in response to its missile test last December. The reclusive regime responded by predictably issuing threats against America and its allies. It seems likely now that Kim Jong-un will order a nuclear test in the next few weeks. What will follow? The kabuki dance continues. 

If North Korea does indeed detonate a nuclear device, the United States and its allies should avoid reacting hysterically. As I counseled on the missile test in December, provocative acts by Pyongyang do not deserve a response from Washington. The North carries out these tests to upset its rivals. The White House’s reserved response to the missile test was an encouraging sign. Any nuclear test warrants only an extended yawn. 

But what can Washington do to ultimately prevent North Korea from developing its nuclear program further and force it to engage the international community? I authored a piece running today at the National Interest that provides a few suggestions: 

The United States should not push for renewal of the Six Party talks. The North announced that it would not surrender its nuclear weapons until “the denuclearization of the world is realized.” This may well be yet another negotiating ploy. However, Washington and its allies should take it seriously.

Instead of begging Pyongyang to return to negotiations and requesting China to make Pyongyang return, the administration should indicate its openness to talks but note that they cannot be effective unless North Korea comes ready to deal. No reward should be offered for the North’s return to the table. 

Third, the United States should spur its allies to respond with the only currency which the Kim regime likely understands: military strength. Washington has had troops on the peninsula for nearly 63 years, far longer than necessary. That has left the ROK and Japan dependent on America. They should take over responsibility for dealing with the North’s military threats.

Washington should unilaterally lift treaty restrictions on the range and payload of South Korea’s missiles, a bizarre leftover from Seoul’s time as a helpless American ward. The administration also should indicate its willingness to sell whatever weapons might help the ROK and Japan enhance their ability to deter and even preempt a North Korean attack. The changing security environment should cause Japan to formally revise the restrictions placed on military operations by its post-World War II constitution.

I have a number of other policy recommendations in the full article, which you can find here

North Korea’s Hyperinflation Legacy, Part II

Following North Korean supreme leader Kim Jong-il’s death last December, many around the world had high hopes that his successor (and son), Kim Jong-un, would launch much-needed economic and political change. Unfortunately, in the months since the new supreme leader assumed power, little has changed for North Koreans outside of the small, communist upper class. The failed communist state has not delivered on its advertised economic reforms.

One thing it has delivered, however, is weapons, which have flowed through its illegal arms-trafficking pipelines. And, if that’s not enough, North Korea is planning another missile test  in the near future. But, as it turns out, the only thing that is certain to blast off is inflation.

In my recent blog post, I pointed out that one of North Korea’s communist legacies is hyperinflation (in addition to starvation). Indeed, hyperinflation may soon plague North Korea once again.

From what little data are available, it would appear that, in the span of six months, the price of rice has increased by nearly 130%. This is par for the course in North Korea, where the price of rice has increased by roughly 28,500% over the last three years (see the chart below).

 

 While the North Korean government worries about rocket launches and how to supply Syria with weapons, and while its archaeologists “discover” ancient unicorn lairs, its citizens’ food bowls are becoming quite expensive to fill. The supreme leader’s priorities, it would seem, are supremely out of whack.