Tag: Howard Pack

Troubled Times Ahead for North Korea?

The death this weekend of North Korea’s Kim Jong-il, who ruled the country with an iron fist since his father’s death in 1994, had immediate repercussions throughout Asia and beyond.

The New York Times reports that South Korea — which has been at war with North Korea since the early 1950s — immediately put its military on alert, “boosting surveillance along the 155-mile border between the two countries, one of the world’s most heavily armed frontiers.” The tension between the two countries escalated during the past several years after North Korea demonstrated nuclear capability.

According to The Wall Street Journal, Asian stock markets took a dive in response to the news, “with South Korea’s stock market and the won tumbling to multiweek lows…. With markets already reeling from the European debt crisis and global growth concerns, Kim’s death has added a dangerous layer of instability to the Korean peninsula,” the Journal noted, adding that “many Asian neighbors [are] uneasy about the leadership transition phase in one of the world’s most reclusive regimes.”

That unease was further heightened by the announcement that Kim’s son, Kim Jong-un, has been named the country’s new leader, despite his youth (he is in his twenties), lack of experience and isolation from other governments.

Wharton faculty echoed the anxiety expressed in news reports. “Missiles have already been fired in the Sea of Japan” by North Korea, says Wharton management professor Witold Henisz. “This gesture demonstrates the internal uncertainty over succession, with Kim Jong-un or others trying to demonstrate their loyalty to the military or, perhaps, the military trying to demonstrate its independence. No one knows very much about the new potential ‘great successor.’ He will have to consolidate his power internally after having been raised in a two-generation cocoon [removed] from reality.”

The next days and weeks “are fraught with hazards such as Asia has not seen in years,” Henisz added. “Is China ready to step up and assume a position of international political authority? How will Japan, South Korea and others respond to provocations? Making the situation even worse, Europe is focused internally on the need to avoid the break-up of the euro, and the U.S. is increasingly turning inward as its election campaign heats up. In these circumstances, North Korea will have to act out even more to gain the international attention that it so craves. These are dangerous days.”

Wharton management professor Mauro Guillen points out that “leadership transitions in North Korea are a big deal because this is only the second one in half a century. The key issue is whether the youngest son has the support of the army or not, or whether the generals will use him as a puppet. His father alienated everyone, including China and the U.S., with his nuclear policy.”

Along with the country’s isolation is the fact that the North Korean people “are starving and are politically repressed,” Guillen adds. “Korean unification is still far away, and one can only hope that when it comes, it does not destabilize South Korea. Just think about how hard it was for West Germany to absorb East Germany. North Korea is much poorer and larger, and South Korea is not as resourceful as West Germany was. I think [U.S. President] Obama should go to the Demilitarized Zone separating the two Koreas and deliver a Reagan-style speech to [Chinese] President Hu, demanding that he ‘ cut off this barbed wire.’ China must seize the opportunity to put an end to this disaster.”

According to Howard Pack, Wharton professor of business and public policy, the death of Kim Jong-Il has been widely anticipated following rumors that he suffered from pancreatic cancer. Meanwhile, the succession issue “is very unclear – he favored his third son, but it is not [apparent] that [this son] is acceptable to the military. North Korea’s economy is very weak. While precise estimates of income per capita cannot be calculated, stories from emigrants both in China and in South Korea suggest a very low per capita income. [Yet] the country’s military capacity, especially in rocketry and atomic knowledge, is more than capable and has also been the only major source of foreign exchange.”

Pack adds that the “South Korean government has intensively explored the possibilities of an implosion of the North Korean economy and alternative policies to deal with it. South Korea is much larger, and its per capita income is probably 15 times greater. However, the government is well aware of the enormous costs to West Germany of absorbing East Germany. Except for the unlikely scenario that the new government would launch a war against the South, the death of Kim Jong-il has no obvious short-term implications for financial markets given its absence of exports, imports and financial interaction with the rest of the world.”

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Osama bin Laden: A Victim of His Own Success?

The biggest manhunt in history is over. U.S. President Barack Obama announced last night that American military operatives had raided Osama bin Laden’s compound outside Islamabad, Pakistan, killed bin Laden with a gunshot to the head and buried his body at sea. One of bin Laden’s sons was also killed, as were three other people.

Yet by the time the U.S. finally caught up with him, bin Laden was seen by many as more of a symbol of terrorism than a major threat. The political upheaval throughout the Arab world of the past few months is not associated with Al Qaeda, nor does it espouse the violence that is the hallmark of bin Laden and his followers.  

Osama bin Laden “could be described as a victim of his own success – providing that ‘success’ applies to getting star billing as the world’s most wanted terrorist,” says Ann Mayer, Wharton professor of legal studies and business ethics, and an expert on the Middle East. ”After attaining a high international profile with the 9/11 atrocity, he became so relentlessly hunted that he had to disappear from the international stage where he had enjoyed the spotlight.”

As bin Laden became more and more isolated in order to “minimize the chances of detection and capture, he increasingly lost real practical relevance for the cause that he ostensibly championed,” Mayer notes. He wound up “cowering behind the high walls of a villa in Abbottabad, far from the action and totally dependent on the services of an old-fashioned human courier to communicate with the outside world. [Global] events quickly outstripped his limited obscurantist vision, a vision that did not contemplate that youths dedicated to nonviolent protests would turn out to be far more powerful forces in changing the political environment than [he] had ever been.”

Mayer compares bin laden to Carlos the Jackal, “who became the world’s most notorious terrorist” in the 1970s after his attack on the OPEC headquarters in Vienna, “only to dwindle into a fugitive preoccupied with evading detection by intelligence operatives around the world…. For his diminished coterie of fervent followers, bin Laden may be a martyr whose death will incite revenge attacks, but for the Muslim world at large, there are much bigger issues on the agenda than the killing of a terrorist general who effectively abandoned his troops on the field for a luxury prison of his own making.”

Howard Pack, Wharton professor of business and public policy whose interests include Arab and Asian economies, suggests that the death of bin Laden helps “to restore American deterrence against terrorism but has few substantive implications. The evolution of the revolutions in Egypt, Tunisia, Libya and Syria will be affected only to a limited extent. Bin Laden was not a factor in any of these nations, and their political and economic futures will be determined by the strength of domestic interest groups. His death has no obvious implications for any of the contending political factions….”

Regarding the costs of protecting against future terrorist incidents, Pack notes that “no economic benefit can be anticipated, since the network that was put together presumably remains intact. Most analysts of the Middle East attribute strategic thinking for Al Qaeda to Ayman al-Zawahiri who presumably remains alive.”

Perhaps the most “jarring aspect of the operation,” Pack adds, was the close proximity “and conspicuousness of bin Laden’s compound to the Pakistani military facilities. This, of course, does not bode well for the future of Afghanistan and Pakistan. Thus, while it is a substantial symbolic and emotional victory and a testament of the abilities of the U.S. military and intelligence community, the impact [of bin Laden's death] will be limited.”

Howard Kunreuther, co-director of Wharton’s Risk Management and Decision Processes Center, suggests that people will feel both a “great sense of relief that we got bin Laden but also a great deal of concern in terms of what might happen” should Al Qaeda seek revenge for bin Laden’s death. “There is so much uncertainty; we don’t know what Al Qaeda can and cannot do; we don’t know whether they are well organized or if they will have an influence on other groups who don’t like the U.S.”

It was very important for President Obama to talk about the need for heightened security, Kunreuther notes, because the costs of not issuing that warning “could be extraordinarily high.” And yet, because the President did in fact issue that warning, “we all now think about things in a different way…. It stirs up emotions and feelings that are very hard to control.”

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