Marcus Noland

The Asian financial crisis has precipitated significant changes in real exchange rates in the region that will substantially alter the volume and pattern of international trade. The crisis countries will increase their exports and, especially, reduce their imports. Japan, China, and the other non-crisis countries will experience more complex changes. The trade balances of the United States and Western Europe will deteriorate by about $40-50 billion as a result of the currency movements in Asia. This study, newly updated in August 1999, quantifies the impact of the currency changes on the individual countries in Asia, on the United States, on Europe and on other regions on a sector-by-sector basis. It analyzes the additional impact that might occur if China, thus far a relative bystander in the crisis, were to devalue its currency as well. It then examines potential trade policy responses to these developments including the risk of an upsurge in protectionist pressure in the United States.

Because authoritarian regimes like North Korea can impose the costs of sanctions on their citizens, these regimes constitute "hard targets." Yet authoritarian regimes may also be immune—and even hostile—to economic inducements if such inducements imply reform and opening. This book captures the effects of sanctions and inducements on North Korea and provides a detailed reconstruction of the role of economic incentives in the bargaining around the country's nuclear program. Stephan Haggard and Marcus Noland draw on an array of evidence to show the reluctance of the North Korean leadership to weaken its grip on foreign economic activity. They argue that inducements have limited effect on the regime, and instead urge policymakers to think in terms of gradual strategies. Hard Target connects economic statecraft to the marketization process to understand North Korea and addresses a larger debate over the merits and demerits of "engagement" with adversaries.

Because authoritarian regimes like North Korea can impose the costs of sanctions on their citizens, these regimes constitute "hard targets." Yet authoritarian regimes may also be immune—and even hostile—to economic inducements if such inducements imply reform and opening. This book captures the effects of sanctions and inducements on North Korea and provides a detailed reconstruction of the role of economic incentives in the bargaining around the country's nuclear program. Stephan Haggard and Marcus Noland draw on an array of evidence to show the reluctance of the North Korean leadership to weaken its grip on foreign economic activity. They argue that inducements have limited effect on the regime, and instead urge policymakers to think in terms of gradual strategies. Hard Target connects economic statecraft to the marketization process to understand North Korea and addresses a larger debate over the merits and demerits of "engagement" with adversaries.

Asian financial systems, which serve the most economically dynamic region of the world, survived the global economic crisis of the last several years. In From Stress to Growth: Strengthening Asia's Financial Systems in a Post-Crisis World, scholars affiliated with the Peterson Institute for International Economics and the Asian Development Bank argue in separate essays that Asian systems must strengthen their quality, diversity, and resilience to future shocks in order to deliver growth in coming years. The book examines such phenomena as the dominance of state-owned banks, the growth of nonbank lending (the so-called shadow banks), and the need to develop local bond markets, new financial centers, and stronger supervisory tools to prevent dangerous real estate asset bubbles. China's large financial system is discussed at length, with emphasis on concerns that China's system has grown too fast, that it is overly tilted toward corporate borrowing, and that state domination has led to overly easy credit to state-owned actors.Asia needs investment to improve its infrastructure and carry out technological innovation, but the book argues that the region's financial systems face challenges in meeting that need.

Countries blessed with abundant natural resources often seek financial and political power from their supposedly lucky status. But the potentially negative impact of natural resources on development of poor countries is captured in the phrase "the resource curse." Instead of success and prosperity, producers of gold, oil, rubber, sugar, and other commodities-many in the least developed parts of Africa and Asia-often remain mired in poverty and plagued by economic mismanagement, political authoritarianism, foreign exploitation, and violent conflict. These difficulties and the many challenges they pose for American foreign policy are the focus of this important new book. Marcus Noland and Cullen S. Hendrix review recent developments as poor countries struggle to avoid the "resource curse" but fall too often into that trap. They call for support for international efforts to encourage greater transparency and improved management of natural resource wealth and for new partnerships between the West and the developing world to "confront the curse."

Compared to other regions of the world, the Middle East was once unique in its combination of authoritarianism and stultifying stability: No longer. Beginning in Tunisia, a wave of political upheaval has rolled across the region, reaching Egypt, Bahrain, Libya, and other countries caught between rising expectations and their antediluvian political systems, abetted by pan-Arab news channels and social networking media. This book examines the economics of the Middle East, with the aim of identifying changes to economic policy that could address at least the economic component of the challenges facing this part of the globe. The authors analyze the interaction of trade, productivity growth, and the political difficulties that may ensue as these countries move towards greater openness. Relevant comparisons are drawn from the experience of the transition economies and India on potentially successful policies and those likely to exacerbate existing problems. This new second edition contains a new introduction from Mohamed A. El-Erian and a new postscript.

This monograph reviews the efficacy of economic statecraft vis- -vis North Korea, with a particular focus on the use of sanctions and inducements on the part of the United States in seeking to achieve nonproliferation and wider foreign policy objectives. Two structural constraints operate: North Korea's particularly repressive state, with a narrowing governing coalition; and the country's changing economic relations. As an empirical matter, there is little evidence that sanctions had effect, or did so only in conjunction with inducements. However, inducements did not yield significant results either, in part because of severe credibility and sequencing problems in the negotiations.

Despite its nuclear capability, in certain respects North Korea resembles a failed state sitting uneasily atop a shifting internal foundation. This instability is due in part to the devastating famine of the 1990s and the state's inability to fulfill the economic obligations that it had assumed, forcing institutions, enterprises, and households to cope with the ensuing challenges of maintaining stability with limited cooperation between the Korean government and the international community. The ineffective response to the humanitarian crisis triggered by the famine resulted in the outflow of perhaps tens of thousands of refugees whose narratives are largely overlooked in evaluating the efficacy of the humanitarian aid program. Witness to Transformation: Refugee Insights into North Korea uses extensive surveys with refugees who now reside in China or South Korea to provide extraordinary insight into the changing pathways to power, wealth, and status within North Korea.These refugee testimonies provide an invaluable interpretation of the regime, its motivations, and its capabilities and assess the situation on the ground with the rise of inequality, corruption, and disaffection in the decade since the famine. Through the lens of these surveys, preeminent North Korean experts Stephan Haggard and Marcus Noland carefully document the country's transition from a centrally planned economy to a highly distorted market economy, characterized by endemic corruption and widening inequality. The authors chart refugees' reactions to the current conditions and consider the disparity between the perceived and real benefit of the international humanitarian aid program experienced by this displaced population. Finally, the book examines these refugees' future prospects for integration into a new society.

In the mid-1990s, as many as one million North Koreans died in one of the worst famines of the twentieth century. The socialist food distribution system collapsed primarily because of a misguided push for self-reliance, but was compounded by the regime's failure to formulate a quick response-including the blocking of desperately needed humanitarian relief. As households, enterprises, local party organs, and military units tried to cope with the economic collapse, a grassroots process of marketization took root. However, rather than embracing these changes, the North Korean regime opted for tentative economic reforms with ambiguous benefits and a self-destructive foreign policy. As a result, a chronic food shortage continues to plague North Korea today. In their carefully researched book, Stephan Haggard and Marcus Noland present the most comprehensive and penetrating account of the famine to date, examining not only the origins and aftermath of the crisis but also the regime's response to outside aid and the effect of its current policies on the country's economic future. Their study begins by considering the root causes of the famine, weighing the effects of the decline in the availability of food against its poor distribution. Then it takes a close look at the aid effort, addressing the difficulty of monitoring assistance within the country, and concludes with an analysis of current economic reforms and strategies of engagement. North Korea's famine exemplified the depredations that can arise from tyrannical rule and the dilemmas such regimes pose for the humanitarian community, as well as the obstacles inherent in achieving economic and political reform. To reveal the state's culpability in this tragic event is a vital project of historical recovery, one that is especially critical in light of our current engagement with the "North Korean question."

In the mid-1990s, as many as one million North Koreans died in one of the worst famines of the twentieth century. The socialist food distribution system collapsed primarily because of a misguided push for self-reliance, but was compounded by the regime's failure to formulate a quick response-including the blocking of desperately needed humanitarian relief. As households, enterprises, local party organs, and military units tried to cope with the economic collapse, a grassroots process of marketization took root. However, rather than embracing these changes, the North Korean regime opted for tentative economic reforms with ambiguous benefits and a self-destructive foreign policy. As a result, a chronic food shortage continues to plague North Korea today. In their carefully researched book, Stephan Haggard and Marcus Noland present the most comprehensive and penetrating account of the famine to date, examining not only the origins and aftermath of the crisis but also the regime's response to outside aid and the effect of its current policies on the country's economic future. Their study begins by considering the root causes of the famine, weighing the effects of the decline in the availability of food against its poor distribution. Then it takes a close look at the aid effort, addressing the difficulty of monitoring assistance within the country, and concludes with an analysis of current economic reforms and strategies of engagement. North Korea's famine exemplified the depredations that can arise from tyrannical rule and the dilemmas such regimes pose for the humanitarian community, as well as the obstacles inherent in achieving economic and political reform. To reveal the state's culpability in this tragic event is a vital project of historical recovery, one that is especially critical in light of our current engagement with the "North Korean question."

Today's North Korean regime embodies elements of both communism and Confucian dynasty, is sovereign with respect to only part of the divided Korean nation, is vulnerable to pressure from external powers, and confronts incipient internal demands for change, yielding an unusually broad set of possible transition paths and successor regimes. Such paths range from maintenance of the status quo to evolution, probably toward a more conventional form of military authoritarianism, to revolutionary upheaval, the latter in all likelihood implying the North's collapse and its absorption into the rival Southern state. This policy analysis quantitatively analyzes the probability of regime change and examines the character of possible successor regimes and the implications of these profoundly different trajectories for South Korea.

Globalization reigns supreme as a description of recent economic transformation-and it carries many meanings. In the policy realm, the orthodox terms of engagement have been enshrined in the "Washington consensus." But disappointing results in Latin America and transitional economies-plus the Asian financial crisis-have shaken the faith in Washington and elsewhere. One response has been to hark back to the more statist policies that the consensus marginalized. In this regard, Japan, Korea, and Taiwan are promoted as the poster nations that have derived great benefits from increasing integration with the international economy, without surrendering national autonomy in the economic or cultural spheres, effectively beating the West at its own game. The fundamental questions addressed in this monograph are whether industrial policy was indeed a major source of growth in these three economies, and if so, can it be replicated under current institutional arrangements, and if so, is it worth replicating, or, would developing countries today be better off embracing the suitably refined orthodoxy?

For more than three decades, the United States has conducted a unique Japan-specific economic policy. This policy was motivated by Japan's economic size and dynamism, fears that a unique "Japanese model of capitalism" enabled it to compete unfairly and threaten American prosperity during a period of prolonged US economic difficulties, and that the United States had unique capabilities to induce policy change in Japan due to its provision of security guarantees. No More Bashing argues that these assessments are mistaken and that the United States should abandon its Japan-specific policy. Japan's declining relative importance in the world economy, the waning distinctiveness of its economic institutions, the failure of most recent US initiatives toward Japan, and the emergence of strengthened international institutions such as the World Trade Organization, all underscore the advisability of formulating new approaches to bilateral relations rooted more firmly in multilateral institutions.This volume analyzes the outlook for the Japanese and US economies; their trade and financial relationships, including their trade negotiations over the past decade; the implications of new regional developments, most notably the rise of China and proposals for East Asian economic cooperation; and the roles of the United States and Japan in the provision of international public goods such as development assistance, environmental protection, and international security. It emphasizes that their trade agenda is increasingly moving beyond traditional border impediments toward the more politically sensitive issues of internal regulation and deregulation, such as competition policy. The authors propose a series of new initiatives to address these challenges and strengthen the multilateral system.

On the Korean peninsula one of the greatest success stories of the postwar era confronts a famine-ridden-and possibly nuclear-armed-totalitarian state. The stakes are extraordinarily high for both North and South Korea and for countries such as the United States that have a direct stake in these affairs. This study, the most comprehensive volume to date on the subject, examines the current situation in the two Koreas in terms of three major crises: the nuclear confrontation between the United States and North Korea, the North Korean famine, and the South Korean financial crisis. The future of the peninsula is then explored under three alternative scenarios: successful reform in North Korea, collapse and absorption (as happened in Germany), and "muddling through" in which North Korea, supported by foreign powers, makes ad hoc, regime-preserving reforms that fall short of fundamental transformation.

For half a century the US Congress effectively evaded its constitutional duty by allowing the US President to take the lead in the formulation of trade policy. The result was a system which avoided the danger of log-rolling exercises when setting tariffs. It facilitated the growth of trade and thus encouraged economic growth and rising living standards. For some, however, the system has shown signs of fragmentation arising from new pressures and challenges and is producing policy outcomes that lack coherence and rationale. New pressures include demands for trade protection arising from America's mounting trade deficit, as well as jolts to the system caused by the struggle to create a North America Free Trade Agreement. More recently, new demands largely unrelated to trade have perversely affected the policy as non-governmental organisations have demanded a role in its formulation, including those concerned with environmental, social and labour issues. To a significant extent they have effectively 'privatised' the policy process. Moreover, the US government has increasingly used trade policy for non-trade purposes - principally as a tool of foreign and security policy. The pro-liberalisation forces within Congress and the administration have been comprehensively outplayed. In the absence of political leadership and a greater public awareness of the issues at stake the stage is set for the still greater abuse of trade policy by narrow special interest groups in pursuit of particularist ends. In the circumstances, the best that can be hoped for may be a series of international agreements which could constrain the abuse of US domestic policy formulation. But even this will require greater courage and resolve by the advocates of free trade than has recently been shown.

The North Korean economy cannot sustain its population. Absent fundamental economic reforms, it will never be able to do so. Hence North Korea will require sizable external support for the foreseeable future. South Korea, China, Japan, and the United States have been willing to provide this support because they fear a collapse in the North or, even worse, a lashing out that would unleash war on the peninsula and put millions of people in Asia in jeopardy-including thousands of US troops stationed in South Korea and Japan. The status quo is thus closer to extortion than charity. In this volume, a diverse group of contributors analyze prospective developments on the Korean peninsula. The authors first address the three broad strategic possibilities of war, collapse, and gradual adjustment. Four immediate policy issues are then considered: the current economic conditions and policies in the North, the food crisis, the nuclear energy/nuclear weapons issue, and the possibility of large-scale refugee flows.Finally, the volume considers several longer-run issues concerning the inevitable integration of the peninsula: the potential relevance of the German experience, the costs and benefits of economic unification between North and South Korea, and the possible role of the international financial institutions in funding the new arrangement. The volume concludes with recommendations for policymakers, especially in the United States and South Korea, from the preceding analyses.