Investing in North Korea

Whole slew of articles out today about South Korean firms setting up shop across the border. While I find many aspects of South Korea's policy towards the North absolutely reprehensible I don't have much of a problem with this. In fact, I think I'm in favor of it.

As I've said before, perhaps the biggest threat to authoritarian regimes is economic engagement. Indeed, the Washington Post says North Korea has been careful to try to limit interaction between South Koreans and their northern employees (for some reason the online version cuts off the last two paragraphs of the article where this is from):

Ever fearful that contact with their richer southern kin will weaken teachings that exalt North Korean leader Kim Jong Il, the North has gone to great lengths to limit such interaction. One company official here said informal contact between South Korean managers and their employees is banned outside work hours. It is permitted only during lunch breaks.

The L.A. Times also notes the threat posed by interaction between citizens of the two countries:

For the North Koreans, the experiment is a way to build their economy with only the most limited dose of openness to the outside world. But the North is also bearing all the political risk: Contact with the better-fed, better-clothed South Koreans could endanger the government's grip on power.

If we want to promote change in the North increased trade is a great way to do it. The virus of capitalism, once it takes hold, is not easily cured.

I also think the idea of trying to promote change by further isolation of the country or making it even more economically depressed -- basically that things have to get worse before they can get better -- should be rethought. North Korea policy has to be based on what is best for the North Korean people. Starving them and further isolating them is not the ticket. Besides, who is better positioned to overthrow a government: someone starving and ignorant or strong and well-informed?

Coincidentally the Financial Times has an article in today's edition that says some Chinese communists are warning that capitalism is threatening to destroy the country's traditional socialist policies from within:

Liu Guoguang, a once influential but long retired Marxist economist, recently burst back onto the scene with an incendiary warning for the Chinese government. If it did not rein in market reforms and deal with the growing, gaping rich-poor divide, China would "change its colour": code for the "red" Communist party losing power.

That, of course, is the whole idea.