North Korea and the Wisdom of Economic Sanctions

International news over the past few weeks has been dominated by the issue of the threat of nuclear strikes from North Korea, directed at both the United States and South Korea. Impetus for these new threats stem mainly from the United States’ success in convincing the United Nations to enforce harsher sanctions against North Korea, following an underground nuclear test carried out in February by the highly secretive nation. The ultimate aim of the sanctions is to suppress the activity of banks and money launderers who are suspected to channel a great deal of money to the regime’s missile and nuclear program. The sanctions include (among others):

  • Banning export of luxury goods
  • A freeze on funds and economic resources
  • A ban on procuring arms and other technology listed by the U.N
  • An embargo on arms and related weapons

Economic sanctions enforced upon North Korea are not a new strategy of foreign policy – the regime has been existing in an environment of externally imposed sanctions for 60 years. The question remains, however: are these sanctions really an effective way for the United Nations Security Council to achieve their goals? Are they the best way to cripple the powers of North Korea, who are determined to ensure that their nation is equipped with nuclear weapons, and will prove the strength of such weapons through continued, escalating tests?
Economic sanctions can be defined as “coercive measures taken against one or more countries to force a change in policies or at least to demonstrate a country’s opinion about the other’s policies”.[1] This “change in policy” is clearly what the United States and the United Nations are seeking, yet economists should first question the wisdom and assess the effectiveness of such a strategy. Largely, the mainstream international economic community has remained quiet on the issue of sanctions imposed upon North Korea. Admittedly, condemning the sanctions could be perceived as quite backwards considering North Korea is under the power of a highly secretive dictatorship who are guilty of some of the most brutal human rights abuses in the world today. However if these sanctions are not effective then continuing them makes little sense, and suggests that aims to debilitate the country economically should be replaced by actions that are likely to have a greater success rate.
As mentioned previously, North Korea has been under economic sanctions imposed by the United States for around 60 years. Political change has not occurred in this time, conversely, the latest round of sanctions (which have been some of the most restrictive ever) has led to the acutely grave situation that the world now finds itself in – with North Korea issuing constant threats to its political enemies. There is a case for the argument that the sanctions make it far more difficult for the North to obtain large quantities of weapons and illegal goods to work towards nuclear proliferation. They have been essentially cut out of the international finance system and any weapons that they wish to purchase must be paid in cash, a hugely inefficient way to conduct business. From this point, the sanctions seem to make sense. The undoing, however, comes from China’s refusal to properly enforce the United Nations’ designed sanctions. This leads us to a common realisation in international economics – that if the United States is to achieve its goals of destabilising the North Korean government, it must work in close collaboration with China, South Korea and Japan.[2]
The issue of economic sanctions is made more complicated by the fact that North Korea is in a state of near-autarky and relies very little on trade with neighbouring countries in order to keep its economic system functioning. Unlike comparative advantage trade models used by most of the rest of the world, Korea imports only goods that it cannot itself produce domestically. In turn, it only exports the minimum amount that is required to earn enough hard currency to pay for these necessary imports.
One formal study carried out on this issue was by international economists Gary Hufbauer and Jeffrey Schott, both experts on trade and foreign policy. They studied over 100 instances of sanctions being imposed on various nations, mostly by the United States, and mostly without cooperation from allied countries. Their study did not include the current sanctions forced upon North Korea, however they drew five conclusions about what is most likely to be a “successful” sanction. They found that economic sanctions were most likely to be effective when:

  • Goals of the imposing country are modest.
  • The target is already economically weak and politically unstable.
  • The imposing country and the target country conduct substantial trade with one another.
  • The sanctions are imposed quickly to maximise impact.
  • The imposing country avoids high costs to itself.

In the case of the United Nations/United States’ mandated economic sanctions, only the fifth criterion is truly met. Whilst North Korea is economically weak, it is far from politically unstable, and these findings suggest that continued sanctions which increase in severity are unlikely to have the desired outcome.
It is almost impossible to assess the effect of the economic sanctions on the civilian population of North Korea due to the high level of secrecy surrounding the country, its operations, and the state of human rights there in general. However evidence from former sanctions placed on Iran and Iraq suggests that it is predominantly civilians, rather than members of government and the elite, who truly suffer from this externally imposed economic instability. Whilst the world waits to see whether North Korea will actually carry out their threats, it is worth reflecting on the wisdom of the economic sanctions levelled on the country. History suggests that they will not work, so is it time for the United States and the United Nations to try a different tactic altogether in dealing with this nuclear-armed threat?

[1] “Economic Sanctions and Culture.” Defence and Peace Economics. Volume 22, Issue 4, 2011.
[2] “Economic Leverage and the North Korean Nuclear Crisis.” International Economics Policy Briefs. April 2003.

3 thoughts on “North Korea and the Wisdom of Economic Sanctions”

  1. This article pretty much nails it. Economic sanctions as it stands never hand and never will simply because China uses North Korea as a buffer state against US ‘sponsored’ South Korea and Japan.
    Someone has to do China’s dirty work, but I guess the US/rest of world can’t really not do anything about it either.

  2. An interesting read, but you fail go that final step and actually offer an alternate strategy with which the West can deal with North Korea. Now, of course, you’re only looking at this from an economic point of view, only judging the success or failure of these sanctions from an economic point of view, so your entire premise is flawed from the outset.
    “History suggests that they will not work, so is it time for the United States and the United Nations to try a different tactic altogether in dealing with this nuclear-armed threat?”
    The alternative courses of action number but three:
    1. Invade North Korea
    2. Economic and political sanctions
    3. Let North Korea do whatever they want
    Given that North Korea is something of a rogue state, has repeatedly stated its intentions unify the Korean peninsula by force if necessary, and it’s general hostility towards its neighbours, complete American disengagement from the region is obviously unacceptable.
    Invading North Korea, in terms of pure numbers of lives lost, would be an enormous cost to both America and South Korea. Seoul, the South Korea capital, lies within range of North Korean artillery, and much modern military analysis believes it likely that in the event of war, Seoul will be largely destroyed whether North Korea uses nuclear weapons or not. Plus the fact that it does have nuclear weapons and seems intent on using them would make any potential invasion a costly affair for foreign troops. With a dovish President who made avoiding aggressive confrontations a core element of his campaign, it is unlikely that America will pursue a path to war for at least the next three or four years. South Korea, too, would rather avoid war, knowing that it would quickly become responsible for 20 million starving, diseased North Koreans as soon as the war ends. China knows that North Korea would never prevail in any conflict against America without Chinese support, and direct Chinese opposition to America in any conflict is extremely unlikely, but it also requires North Korea as a buffer to prevent the encirclement of the Chinese nation. So no regional actor actually wants war, and North Korea knows it can’t win either. Most people think of North Korea as this crazy insane irrational nation but they know that they can’t win, and they need to bluff and aggravate to stay relevant. When the White House says that North Korea has used similar tactics in the past, they’re not lying.
    So that leaves only one pathway to the future; shutting North Korea in, preventing it from expanding its influence and ensuring that North Korean society stagnates, creating the best possible conditions for an internal reorganisation of leadership and eventual opening up to the West…either that, or North Korea aggressing into a conflict, giving America and her allies a simple and clear casus belli.
    So have the sanctions worked? Well, yes. The fact that North Korea keeps pushing the boundaries of acceptable behaviour is testament to that, that they need to manufacture crises in order to prise concessions out of the West is testament to that. And any failing in the efficacy of these sanctions, for example China’s nonadherence, can be traced back to failings within the United Nations and it’s inability to force binding resolutions on any of the Permanent 5 members of the Security Council. The supposed failure of the sanctions are merely reflections of a deeper cause.

  3. Thank you for your thoughtful reply Oliver (and Hungry) and I apologise for my delay in responding. I am always hesitant to make conclusive, definitive statements and recommendations when it comes to matters of international conflict. I’m not an expert in this field, having studied economics rather than peace and conflict studies. Yet I’ve always found it interesting that economic tools (in this case, sanctions) are used by countries to achieve a desired outcome, often without truly considering whether they will work, or work in a way that ensures civilians are not the ones who end up suffering. You bring up many relevant and important point regarding the apparent “hopelessness” of the situation. As it stands, the U.N. Security Council sanctions are still in place; the US, North Korea (and to some extent China) are still in a Mexican standoff, so I really don’t see how the sanctions can be considered a policy that has “worked”. War would, as you mention, be absolutely catostrophic for the entire Korean peninsula. The likelihood of it happening I suppose depends largely on a variable we know relatively little about – the militancy of Kim Jong-un.


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