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An international expert presents an analysis of why and how nations make business decisions while demonstrating how the U.S. can best act in its own interests, revealing how the examples of Saddam Hussein and Fidel Castro can inform us about North Korea's Kim Jong-il, the role America should take in strengthening China's economy, and the importance of acting in Saudi Arabia before it is broken apart. 40,000 first printing.
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Ian Bremmer is president of Eurasia Group, a political risk consultancy.Excerpt. © Reprinted by permission. All rights reserved.:
and the J Curve
On February 10, 2005, North Korea's state-run Pyongyang Radio informed its captive audience that the president of the United States had developed a plan to engulf the world in a sea of flames and to rule the planet through the forced imposition of freedom. In self-defense, the newsreader continued, North Korea had manufactured nuclear weapons.
That evening, Rick Nieman of the Netherlands' RTL Television asked U.S. Secretary of State Condoleezza Rice to respond to Pyongyang's assertion that North Korea needed nuclear weapons to cope with "the Bush administration's ever more undisguised policy to isolate...the Democratic People's Republic of Korea." Rice countered: "This is a state that has been isolated completely for its entire history.... They have been told that if they simply make the decision...to give up their nuclear weapons and nuclear-weapons program, to dismantle them verifiably and irreversibly, there is a completely new path available to them.... So the North Koreans should reassess this and try to end their own isolation."
That's the official U.S. policy on North Korea: If North Korea submits to the complete, verifiable, irreversible dismantlement of its nuclear program, Washington will end North Korea's isolation and support the integration of Kim Jong-Il's regime into the international community. If, on the other hand, North Korea persists in developing its nuclear capacity, Washington will "further deepen North Korea's isolation."
To many, this policy is grounded in common sense. If North Korea begins to behave as Washington wants, the United States should reward the regime. If it does not, Washington should further seal it off. If Kim will quiet the relentless drumbeat of war and renounce his campaign to build an arsenal of the world's most destructive weapons, Washington should allow North Korea to escape its wretched isolation. If, on the other hand, North Korea insists on causing trouble, bargains in bad faith, ratchets up tensions in East Asia, violates its agreements, and perhaps even sells the world's most dangerous weapons to the world's most dangerous people, the regime must be swiftly and soundly punished. Kim Jong-Il and those who administer his government must be persuaded that his broken promises and misdeeds doom his regime to perpetual quarantine.
If this policy is properly applied, so the thinking goes, the message will be received far beyond North Korea. Common sense demands that Washington demonstrate that America stands ready to achieve its foreign- and security-policy goals with the sweetest carrots and sharpest sticks available. So the thinking goes.
But, as we'll see in the next chapter, this approach has failed to help Washington achieve its goals in North Korea. In fact, it has produced policies that have had virtually the opposite of their intended effects. Of course, U.S. foreign policies that produce the reverse of their intended consequences are not limited to either North Korea or the George W. Bush administration. Policy failures over many decades in Iraq, Iran, Cuba, Russia, and many other states demonstrate that policymakers need an entirely new geopolitical framework, one that captures the way decision-makers within these states calculate their interests and make their choices -- and one that offers insight into how more effective U.S. policies can be formulated.
There is a counterintuitive relationship between a nation's stability and its openness, both to the influences of the outside world and within its borders. Certain states -- North Korea, Burma, Belarus, Zimbabwe -- are stable precisely because they are closed. The slightest influence on their citizens from the outside could push the most rigid of these states toward dangerous instability. If half the people of North Korea saw twenty minutes of CNN (or of Al Jazeera for that matter), they would realize how egregiously their government lies to them about life beyond the walls. That realization could provoke widespread social upheaval. The slightest improvement in the ability of a country's citizens to communicate with one another -- the introduction of telephones, e-mail, or text-messaging into an authoritarian state -- can likewise undermine the state's monopoly on information.
Other states -- the United States, Japan, Sweden -- are stable because they are invigorated by the forces of globalization. These states are able to withstand political conflict, because their citizens -- and international investors -- know that political and social problems within them will be peacefully resolved by institutions that are independent of one another and that the electorate will broadly accept the resolution as legitimate. The institutions, not the personalities, matter in such a state.
Yet, for a country that is "stable because it's closed" to become a country that is "stable because it's open," it must go through a transitional period of dangerous instability. Some states, like South Africa, survive that journey. Others, like Yugoslavia, collapse. Both will be visited in Chapter Four. It is more important than ever to recognize the dangers implicit in these processes. In a world of lightning-fast capital flight, social unrest, weapons of mass destruction, and transnational terrorism, these transformations are everybody's business.
The J curve is a tool designed to help policymakers develop more insightful and effective foreign policies. It's meant to help investors understand the risks they face as they invest abroad. It's also intended to help anyone curious about international politics better understand how leaders make decisions and the impact of those decisions on the global order. As a model of political risk, the J curve can help us predict how states will respond to political and economic shocks, and where their vulnerabilities lie as globalization erodes the stability of authoritarian states.
J curves aren't new to models of political and economic behavior. In the 1950s, James Davies developed a quite different curve that expressed the dangers inherent in a gap between a people's rising economic expectations and their actual circumstances. Another J curve measured the relationship between a state's trade deficit and the value of its currency. The purpose of the J curve in this book is quite different and much broader. It is intended to describe the political and economic forces that revitalize some states and push others toward collapse.
What is the J curve? Imagine a graph on which the vertical axis measures stability and the horizontal axis measures political and economic openness to the outside world. Each nation whose level of stability and openness we want to measure appears as a data point on the graph. These data points, taken together, produce a J shape. Nations to the left of the dip in the J are less open; nations to the right are more open. Nations higher on the graph are more stable; those that are lower are less stable.
In general, the stability of countries on the left side of the J curve depends on individual leaders -- Stalin, Mao, Idi Amin. The stability of states on the right side of the curve depends on institutions -- parliaments independent of the executive, judiciaries independent of both, nongovernmental organizations, labor unions, citizens' groups. Movement from left to right along the J curve demonstrates that a country that is stable because it is closed must go through a period of dangerous instability as it opens to the outside world. There are no shortcuts, because authoritarian elites cannot be quickly replaced with institutions whose legitimacy is widely accepted.
"Openness" is a measure of the extent to which a nation is in harmony with the crosscurrents of globalization -- the processes by which people, ideas, information, goods, and services cross international borders at unprecedented speed. How many books written in a foreign language are translated into the local language? What percentage of a nation's citizens have access to media outlets whose signals originate from beyond their borders? How many are able to make an international phone call? How much direct contact do local people have with foreigners? How free are a nation's citizens to travel abroad? How much foreign direct investment is there in the country? How much local money is invested outside the country? How much cross-border trade exists? There are many more such questions.
But openness also refers to the flow of information and ideas within a country's borders. Are citizens free to communicate with one another? Do they have access to information about events in other regions of the country? Are freedoms of speech and assembly legally established? How transparent are the processes of local and national government? Are there free flows of trade across regions within the state? Do citizens have access to, and influence in, the processes of governance?
"Stability" has two crucial components: the state's capacity to withstand shocks and its ability to avoid producing them. A nation is only unstable if both are absent. Saudi Arabia remains stable because, while it has produced numerous shocks over the last decade, it remains capable of riding out the tremors. The House of Saud is likely to continue to absorb political shocks without buckling for at least the next several years. Kazakhstan is stable for the opposite reason. Its capacity to withstand a major political earthquake is questionable but, over the course of its fifteen-year history as a sovereign state, it hasn't created its own political crises. How Kazakhstan might withstand a near-term political shock, should one occur, is far more open to question than in Saudi Arabia, where the real stability challenges are much longer-term.
To illustrate how countries with varying levels of stability react to a similar shock, consider the following: An election is held to choose a head of state. A winner is announced under circumstances challenged by a large number of voters. The nation's highest judicial body generates con...
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