Monday, August 18, 2008

When the hermit kingdom comes out of its shell

What a sad state of affairs:

BEIJING -- North Korea is heading toward its worst food crisis since the 1990s because of flooding, successive crop failures and worldwide inflation for staples such as rice and corn, the United Nations World Food Program said Wednesday.

The agency shied away from predicting another famine like the one that killed as many as 2 million people in the 1990s, but said its field staff was observing some of the same warning signs.

People are again foraging for wild plants, grass and seaweed to supplement their meager diets. Hospitals are reporting an increase in chronic diarrhea and illness that are often linked to malnutrition. Many families have cut back from three meals a day to two.

If we just had to knock out one member of the Axis of Evil, it should've been North Korea. With a presumed average IQ around 106, possibly depressed a few points from nutritional deficiencies, what prevents it from becoming a smaller version of South Korea a generation or two from now?

Using a simple linear equation built from IQ estimates and '06 purchasing power parity numbers provided by the CIA Factbook predicts PPP to be $38,200, assuming an average IQ of only 100. That's obviously a very simplistic way of formulating a prediction, and South Korea, forty years ahead of the North, is only a little over halfway to that level of economic prosperity. But in terms of distance from potential, contemporary North Korea is much further away than either Iraq or Iran are.


Joseph Moroco said...

Why aren't George Clooney and all the cool people on this case?

Sleep said...

Almost all people alive in North Korea today have never known anything other than Kim Jong Il and Kim Il Sung. Socially, they would be as out of place in South Korea as a Neanderthal. Even if Kim Jong Il went nuts and democratized the country tomorrow, I dont think South Korea would want them back; the economy of South Korea would not be able to support the rehabilitation of the 25 million lost souls in the North. It will have to be a very slow process.

They may have an average IQ of 106, but remember this is the country where a crowd of people died trying to save a bunch of poster of the Dear Leader from burning up in a fire. Of their own free will. In terms of life skills I think the average North Korean scores a little bit above the Wild Boy of Aveyron.

And today's North Korean youth are 6 inches shorter than South Koreans, as well as shorter than their parents; and they have many have diseases which would have been easy cures if they had been treated properly but have now progressed far beyond the time for treatment. A democratic North Korea would probably have its first free generaton go mad with rage at all that they have lost, and the South would be unable to control them. Illegal immigration to the South could easily turn out to be another problem.

Anonymous said...

"And today's North Korean youth are 6 inches shorter than South Koreans..."

I bet they are running out of taller soldiers to stand around at the 38th parallel.

Audacious Epigone said...


In the end they'd probably come out looking better if they did. Ironically, it would make the blank slate messianic democrats look better than Iraq has (as the argument goes with Germany and Japan a couple of generations ago) because blank slatism is off the mark.


I think it'd take two generations to get to South Korea's level of prosperity. The Sunshine policy has apparently lost its popularity among the South Korean public, but support for the US troop presence isn't strong, either.

rob said...

If the North Koreans are 6 inches shorter, they are likely considerably below their genetic potential for intelligence. The evidence points to short-term malnutrition being fairly benign. But chronic malnutrition is almost certainly enstupidating.

I would love to see IQ tests done in NK year-by-year when they become free. A natural experiment for the Flynn Effect.

MensaRefugee said...

This is one of those rare moments when I stop bitching about how things are in decline, and give a silent prayer that I live in a relatively free country.

Audacious Epigone said...


It would provide a nice case study for a whole host of things, that's for sure.


I'm reminded of one of my favorite Dostoyevsky quotes:

"Man is fond of counting his troubles, but he does not count his joys. If he counted them up as he ought to, he would see that every lot has enough happiness provided for it."

...even though it's hard to believe given the article excerpted.

rob said...

AP, do you have any ideas on what to invest in now/soon to benefit from NK going free? I'm thinking a long-term (20-40 year)investment strategy, since it may take a while to recover from the social and biological damage the communists did. OTOH, the famines have been short, and the offical percap income is like 2K. But those are communist stats.

South Korea is the best place to invest right now to profit from NK. Given both Korea's good non-age demographics, SK is a safe bet anyway. Infrastructure builders especially, NK has some catching up to do: construction and engineering firms. SK will outsource a fair amount of low-skill assembly and manufacturing, so that kind of company will get more profitible. SK land near the border will be way valuable post-communist. Wonder if foreigners can buy land? NK will import lots of food. Korean transportation companies will see there market size double.

I wonder if the North Koreans are educated and healthy enough to pull-off a technology leapfrog. No landlines, all cell phones. Will they do a a big, modern power electric grid, or distributed generation? Is there a Korean-language version of University of Phoenix, either online or by television? I'd invest.

The safe assumption is within a generation NK will grow fast. Maybe even fast enough to pull a big a chunk of speculative investment capital.

I really want to see what technologies win out starting from even footing and almost no legacy infrastructure.

Even a sane dictator following the China strategy and mending fences with the US and SK and they will boom. And slow may be better than shock.

Audacious Epigone said...


Great food for thought. I'm not familiar enough with South Korean industry to offer anything. I've stayed with big global players like Hyundai and Pohang in SK--I'm more comfortable with Japanese companies and have turned to China for higher risk equities. I'm sure NK's advance, whenever it comes, will be lucrative for a lot of Chinese companies and even some Japanese ones. I'll probably look for ETFs that cover NK rather than try to navigate on my own.