The End of South Korea's Economic Growth

That's means kpop will die along. 

Come to think of it, Korean peninsula is sandwiched between 3 powers China, Russia and Japan. If Americans dont care about South Korea, it would be a target for 3 powers.

For 33 straight months, South Korea’s population has been undergoing a natural decline as deaths have outnumbered births.

https://english.hani.co.kr/arti/english_edition/e_national/1060709.html

Since the pandemic, South Korea's population has been on decline.

https://zeihan.com/crf-files-part-i-the-future-of-korea/

When Donald Trump became president, world leaders fell into two broad buckets. The first thought that if the Americans were going to drop the global mantle of leadership, then perhaps there is some space for us. Russia’s Vladimir Putin became more aggressive throughout the Russian near abroad. France’s Emmanuel Macron tried to become the voice of the West. Canada’s Justin Trudeau became a liberal supermodel.

The second were those leaders who weren’t sure the Americans knew what they were doing in electing an isolationist, and thought the best bet was to not rock the boat. This club included Germany’s Angela Merkel, Australia’s Malcolm Turnbull, and Britain’s Theresa May. All and more bet/hoped that Trump would be little more than a hiccup in normal relations. They kept quiet and aimed to not do anything that might annoy the Americans as a whole, so that when Trump left the stage their relations with America could get back to normal.

There was one exception: South Korean President Moon Jae In. Rather than strike out or hunker down, Moon bluntly asked for the terms of a revised trade deal that Trump would approve of.

Moon’s logic was unassailable. Put simply, Moon recognized that he completely lacked leverage, (correctly) calculating that being an eager first volunteer might allow South Korea to walk away without undue sacrifice as the Trump administration looked for an early win. The revised deal’s technical talks took but a few weeks, and the revised KORUS is already implemented.

Good thing too. “Logic” was about all Moon had going for him. Everything about Korea’s success is exclusively because of the Order.

South Korea imports all its oil and natural gas, and its import/export flows are so large that it is the world’s 5th-largest trading power by value despite having a population of only 51 million. As with many of the world’s developed economies, South Korea cannot look internally for greater economic growth; The country’s population has all but peaked and, again like much the rest of the world, faces a rapidly aging demography supported by an ever-smaller working age population.

South Korea’s largest trading partner today is actually China, but that is the beauty of the Order. South Korea can trade with whomever is willing to buy their goods. For now. It all relies on American guarantees that seem to be crumbling.

That’s the numbers and dollars argument. In strategic terms things are far more complicated.

South Korea sits among Japan, China and North Korea and has adversarial relationships with all of them. The only reason South Korea even exists is because American troops ward off the most salient threat to the north, while preventing Japanese and Chinese imperialism. That security guarantee is not easy to maintain:

North Korea believes the best way to beat a Grand Master at chess is to never let them make a first move. Infamously, North Korea has aimed an untold number of pieces of artillery at Seoul, just across the border and home to nearly half the country’s population. In a real war, by the time the first shell lands in Seoul, tens of thousands of others would already be airborne. But this is only one of its many preparations. Turns out that if you dedicate a country’s entire attention span for 70 years to a seething hatred of what’s on the other side, you can accomplish some pretty impressive things, up to and including an effective nuclear deterrent.

South Korea decided to focus instead on ships and trains and petrochemicals and white goods and electronics and computers and cellular tech. South Korea may be able to prevail against North Korea in a knock-down, drag-out fight, but there is no way the South Koreans can K-Pop themselves out of hideous infrastructure damage and mass civilian casualties. Only American forces – massed in and near Seoul and the DMZ – can provide the hitting power to at least partially preempt and mitigate such carnage.

That’s just North Korea. The South Koreans, accurately reading their history and geography, view China and Japan as even more significant security threats. Japan outpopulates South Korea by well over 2:1, China by over 20:1. The navies of either country could wipe the Korean navy from the seas in days. To the south, east, and west, South Korea is surrounded by waters that either Japan or China could dominate given the right push. South Korea’s second city, Busan, is in a particularly vulnerable spot separated from mainland Japan via the Korea Strait, barely more than 100 miles across. Inchon, the western extremity of the Seoul metro region, isn’t much further away from China. And of course, Korean trade links to the wider world are impossible to maintain without both Japanese and Chinese quiescence.

For decades this has all been moot. South Korea, Japan and China were all members of the U.S.-led global Order. The U.S. Navy has ensured peaceful seas and ample trade. Oil, LNG and raw materials flow in, finished goods flow out, and Korea is one of the world’s largest transshipment and manufacturing nodes. So long as the Americans remain involved, Korea’s economic and security problems remain purely theoretical.

But the Americans – left, right and center – want to slim down America’s global position. The Korean deployment is America’s third-largest (after Japan and Germany), and the one that is by far in the trickiest and riskiest strategic position. And that is what keeps Moon’s administration up at night. The Americans are losing interest, and there is no version of a post-Order world where South Korea continues to survive at all – much less as a wealthy, trading nation – unless Seoul can obtain a powerful, dedicated ally.

So it was all Moon could to do cave in trade talks with the American administration on everything. And not just in trade negotiations. The Trump administration is insisting that South Korea compensate the United States for ongoing troop commitments to the tune of at least $5 billion annually. That’s a lot for a country Korea’s size, but honestly it’s a bargain considering what 26,000 American troops can do when they are suitably motivated.

Is caving to the U.S. on trade and defense reimbursement enough to keep the American troops in-country in this post-Order world? No clue. But Moon, correctly, concluded that without conceding to American terms there was no chance whatsoever. 

That’s hardly the end of the story.

First, in the post-Order world, getting a deal with the Americans on trade or troops or whatever is not the end of the negotiations. It is the beginning. Because the Americans no longer have a global strategy or see a national interest in play aside from getting some better market access, keeping the Americans interested requires giving in not once, but every single time they ask for anything.

If the Yanks are displeased with the Koreans’ response, they will leave and there is no guarantee they can be induced to come back. It’s bad business to allow a homeowner that refused to pay for fire insurance to do so after the house catches fire. The Americans can – and will – watch the neighborhood burn. They won’t feel good about it, but they won’t feel all that bad about it either.

Second, the one item in the neighborhood the Americans really do care about – the North Korean nuclear program – is one that they may have found a way to muddle through. The handshake deal Donald Trump appears to have reached with North Korean dictator Kim Jung Un is that the reclusive country can keep their nuclear program so long as they abandon their ICBM program. The Trump administration seems to think it can live with a localized NorK nuclear threat so long as Pyongyang cannot nuke Seattle and beyond. What North Korea “projectiles” that have been launched since the first Trump-Kim summit are of the decidedly short-range sort, and there are at least some indications that North Korea dismantled a significant portion of their long-range missile testing facilities.

In a world where the Americans are blasé about South Korean issues, in a world where Americans no longer consider North Korea a direct threat, the Americans need a lot fewer forces in-theater. That’s great for the Americans…and the ultimate statement of no-interest in South Korea. The Trump administration appears to have handed off the entire North Korean issue to the local powers. And since North Korea already has the capacity to drop a nuke anywhere in South Korea or Japan or in the parts of China that are home to over 80% of the population, the entire region now has to deal with something that has stymied ten American administrations.

Finally, the Koreans have a hideously distasteful choice to make. They must prepare for a world without the Americans and that means they must find a new security guarantor. The menu of options are not encouraging.

While China is currently Korea’s largest trading partner, China is just as dependent upon the Americans as the Koreans for maintaining its economy and security. With the Americans checked out, China’s future will likely mirror its past; that of a broken, impoverished nation completely unable to maintain its own security or even feed its own people. Culturally, China might be Korea’s closest relation, but a long-term partnership will only bring Korea destitution.

In comparison, the future of Japan is bright. It already maintains the world’s second-most-powerful expeditionary navy and is one of the very few countries that has a chance to maintain its supply lines without active American assistance. The “smart” play for the Koreans would be to find a means of inserting themselves into the Japanese sphere of influence. Unfortunately, the politics of such insertion are wretched. The Koreans charge the Japanese with carrying out a cultural genocide during Japan’s 1905-1945 occupation of the Korean peninsula and, so far, have been unwilling to let the past go. Even then, letting that past go would only be the first step to entering Tokyo’s world. Much kowtowing by the proud Koreans would be required.

The third option is for South Korea to become its own defender. That is impossible with conventional weapons, but it just might work if the Koreans build a few dozen nukes to hold everyone at bay. Technically, the obstacles to South Korea becoming a nuclear power are minimal; it could be done in a few months at most. Operationally, however, it would turn South Korea into a regional pariah of the North Korean type and cut the country off from not just global trade, but regional trade (although post-Order that is unlikely to cause the same problems, as much as it is frowned upon today).

Partnership with China might be somewhat comfortable, but it would end with a starvation diet. Partnership with Japan might preserve the Koreans’ standard of living, but it would be politically toxic. Going nuclear might preserve independence, but it would force mass deindustrialization.

For the South Koreans, the future is a land of fear and want.

But that’s not the case for everyone…

https://zeihan.com/north-korea-part-iii-why-i-already-worry-about-south-korea/

In the aftermath of North Korea’s Sept 3 nuclear test, a Donald Trump Twitterstorm delivered its greatest disdain not to North Korea, but instead South Korea. Trump accused Seoul of being overly pacifist in the face of the North’s belligerence, as well as using a wide variety of measures to steal jobs from American workers. Later, piling on his own comments, Trump indicated that he was highly likely to soon withdraw completely from the United States’ free trade pact with South Korea.

Many found themselves head-scratching. The United States seems to be sliding towards a military confrontation with North Korea, and in any war scenario, coordination between the United States and South Korea would be key. As the New York Times editorial board summed it up,

“For Mr. Trump, the crisis lays bare how his trade agenda – the bedrock of his economic populist campaign in 2016 – is increasingly at odds with the security agenda he has pursued as president. It is largely a problem of Mr. Trump’s own making. Unlike several of his predecessors, who were able to press countries on trade issues while cooperating with them on security, Mr. Trump has explicitly linked the two…”

Unpacking all this – North Korea, South Korea, Trump and the relationship between trade and security – requires a few steps back.

American foreign policy since World War II has been based on a simple premise: the United States create a global security structure for its allies, enabling them to access resources and markets the world over without the need to protect themselves, those resources or those markets. In exchange, those allies would allow the Americans to fight the Cold War their way. In essence the Americans bribed up an alliance via the Bretton Woods system to fight the Soviets, and in doing so not only attracted the allegiance of traditional cultural allies, but also countries with which the Americans had fought long, bitter wars – up to and including the former Axis and the U.S. own former colonial master. The end result was the strongest military alliance in human history, and also history’s longest and greatest period of peace and prosperity because nearly every imperial power of the past was on the same side (with the notable and obvious exception of the Soviet Union).

To put this in the Times‘ lexicon, trade and security were linked – with the Americans sacrificing their position on the former in order to gain deference on the latter.

The Cold War ended in 1989. The Soviet Union dissolved in 1992. And at the moment of truth when then-President George HW Bush stood poised to update America’s strategic policy, he was booted out of office in a federal election. His successor – Bill Clinton – had no time for foreign policy and so let the old system ride without a foe. The next U.S. President – George W Bush – pursued a monochromatic foreign policy completely focused on the Islamic world, and he too let the Cold War trade-for-security rubric continue, just without the trade-off. Then came Barack Obama who, in essence, didn’t have a foreign policy at all. Obama would on occasion go through the motions and say the right things about trade and allies, but actions were but rarely matched with words and the whole system atrophied. After 24 years of autopilot, the world barely resembles the bipolar alignment of 1945-1989. New power centers – think China – have emerged into what feels like a more multi-polar system.

This is the world the Times sees: trade and security are no longer linked. The United States negotiates on trade as an independent topic, while providing security for the global commons free-of-charge.

Everyone would do well to remember three facts:

First, throughout human history, there has never been a multipolar period in which widespread wars among constantly-shifting alliances were not the norm. If a post-American, multi-polar system really is where the world is headed, the future will be a dark, poor and war-torn place as various regional powers struggling for regional supremacy utterly overturn the global trade system that makes the world’s current safety, wealth and prosperity possible. For example, if the U.S. releases the security reins, Japan and China quickly fall into cutthroat competition over Middle Eastern oil. (Fun fact: there’s a full chapter on this “Tanker War” in http://zeihan.us11.list-manage.com/track/click?u%3Dde2bc41f8324e6955ef65e0c9%26id%3D4cc3ee18fc%26e%3D2e41767ed5&source=gmail&ust=1504974175088000&usg=AFQjCNFskm9pMb-GwxUIv0VwCEWOcXaTr g">The Absent Superpower.)

Second, all the powers that have arisen since 1989 are utterly dependent upon the security and trade systems the Americans created to fight the Cold War, and none of them are capable of taking up that burden from the United States. The U.S. Navy is more powerful than the combined navies of the rest of the world by a factor of ten (and that without nuclear weapons), and even if multiple powers could agree to pool their forces…whose interests would they look out for? It is hard to imagine the Chinese contributing to a force that facilitates French commercial penetration into Southeast Asia or the French navy providing the security environment required for Chinese commercial penetration into Belgium. If there is no American commitment to global order, there is no global order. That pushes every trans-national organization designed around a benevolent global security environment – that’s everything from the European Union to the Chinese Communist Party – over the brink.

Third, for the Americans, trade hasn’t been about economics – it’s been about security. Trade was the bribe to get all the world’s once-imperial powers to cooperate. Not only does an American withdrawal unleash heretofore quiescent powers as varied as Japan, the United Kingdom, and Iran to attempt to reshape their neighborhoods more to their liking, it further means that the Americans never really integrated their economy into the global whole like nearly everyone else did. And since the United States is by far the least integrated of the significant countries into the global trade system, it would be the one to suffer the least should that system collapse.

You might not care for Donald Trump very much, but if the United States is getting out of the global management business, you’ve got to admit that a rejiggering of the relationship between trade and security makes a lot of sense. (Whether the specifics of Trump’s preferred rejiggering make sense is, of course, an entirely different topic.)

And what about the raft of countries that did not even exist before 1945 because the various regional powers could easily subjugate them? What about places that in the intervening decades used this historic opportunity to transform themselves from backwaters to advanced economies? What happens to them when the global environment changes?

What happens to South Korea?

South Korea is a country roughly the size of Indiana with a mid-sized population and a gigantic role in global trade, currently ranking in the top ten in terms of total value of trade. Its markets span the world, with the majority not within a thousand miles. It sucks down vast volumes of raw materials – again, almost none of which are from East Asia – including over 2 million barrels of crude a day, almost all of which is sourced from the Persian Gulf. American economic sponsorship has transformed South Korea from being the world’s fifth-poorest country in 1953 to one of the richest. Remove the Americans from the world writ large, and South Korea would experience an economic crash at least twice as bad as the Great Depression.

Then there is South Korea’s military problem. The United States is South Korea’s security policy. U.S. troops not only face off against North Koreans opposite the demilitarized zone, American rapid reaction forces are stationed in Seoul, elsewhere in South Korea, Japan and throughout the Pacific to respond to any military situation the North might trigger. Remove the Americans, and the South Koreans lose air superiority, naval strike capability, ballistic missile reach, cruise missiles, missile defense and all those tough, zippy tanks. In a North-South war I firmly believe the South would emerge victorious – invasion routes through the DMZ are remarkably constrained and the South’s industrial plant and population are much larger than the North’s – but the damage to the south would be immense: North Korea has dug thousands of artillery emplacements into the hills on their side of the DMZ, most of which could target Seoul with withering fire. It isn’t something that anyone is looking forward to.

Finally, there is the overall American strategic angle:

Part and parcel of the Americans maintaining the Bretton Woods system is making the world safe and keeping the American market open for everyone. In the case of South Korea, that has come at immense cost.

As a mid-sized economy, South Korea could only develop with the direct physical and economic sponsorship of the United States. Resource-poor South Korea could have never obtained the raw materials and energy it needs without Bretton Woods. It would have never been independent without the U.S. military’s involvement in the Korean War and the decades since. It could have never grown without the American position in the Persian Gulf to ensure energy flows. It could have never built its infrastructure and industrial plant without American capital. It could have never exported its way to affluence without the American market. And there is meat to Trump’s trade accusations against South Korea: South Korea regularly uses everything from corporate welfare to state-sponsored intellectual property theft to advance corporate Korea’s interests.

The mismatch in the American mind between South Korea’s (lack of) commitment to American actions against North Korea, and the ongoing outlay of American blood and treasure for South Korea’s benefit has been an irritant in relations between Washington and Seoul since the Carter administration. The only thing that’s new about the recent criticism from the White House is that it is public. If the Americans really do back away from maintaining the global system, South Korea – as a country that cannot possibly field a navy capable of securing the markets and resources it needs – faces cataclysmic decline.

Yet while the South Koreans cannot do much about their economic exposure, they can do quite a bit about their military position. The land of Samsung, LG and Hyundai is one of the world’s most technologically advanced economies. Remove the Americans from the equation and the South will arm itself very rapidly. But tanks and planes and missiles all take time.

For a first-world country like South Korea with a lively civilian atomic power program, nukes are much easier. Delivering a ruggedized, miniaturized, thermonuclear weapon halfway around the world http://zeihan.us11.list-manage.com/track/click?u%3Dde2bc41f8324e6955ef65e0c9%26id%3D5a437611b3%26e%3D2e41767ed5&source=gmail&ust=1504974175088000&usg=AFQjCNGSE0pvXJnJHVrkyLPnuAjzAEexD g">is hard stuff. But that’s not what South Korea would need to do. They’d just need a basic device they can lob a couple hundred kilometers. The South Koreans could probably build an explosive nuclear device in a matter of days, and mate it to a bare-bones delivery system shortly thereafter. The North Korean leadership – used to needling a Washington who views Pyongyang as a mere irritant rather than a terrified, angry sibling who knows just where to kick for the biggest effect – probably doesn’t not yet realize just how complicated their lives are about to become.

And keep in mind that North Korea is only South Korea’s danger-of-the-month. Before World War II, what is today’s South Korea tended to alternate between being an unwilling colony of China or Japan. Under most scenarios South Korea may be the runt of the neighborhood, but it will be a runt with a desperate population, a functional nuclear program and a couple million engineering doctorates used to making the impossible a functional reality. Poor, friendless, nuclear-armed, devilishly creative and testy – that is South Korea’s future.

The South Koreans won’t be alone.

Every country that was once either an imperial power or an imperial province is going to have to beef up its military simply to look after its own interests, and South Korea is hardly the only smallish country that lives in a dangerous neighborhood. A partial list of countries about to face drastically different security environments and starkly poorer economic futures while also boasting sufficient technical (and/or financial) skills to acquire a nuke include Sweden, Finland, Poland, Ukraine, Uzbekistan, Kazakhstan, Japan, Taiwan, Saudi Arabia and Turkey. All of which have pressing security concerns now, much less after the global security architecture collapses. For those of you into international relations, you may recall that some of the personalities that have topped some of those countries make Donald Trump seem calm, prudent and patient in comparison.

Each of these countries – indeed, nearly every country likely to go nuclear in the next couple of decades – sees a very specific security threat very close to home, and in no case is that threat the United States. One of the few topics on which I agree with today’s Twitterati is that a nuclear exchange is very likely a part of the not-so-distant future. But that doesn’t mean it’ll be part of America’s.