Doubling Down on a Losing Hand: The Economy of Threats Yet Again

The American president is threatening North Korea again. You can find out some of the details here. I expect this threat to work just about as well as the last bunch. The problem with threats, I've tried to argue, is that they have limited effectiveness and that limited effectiveness, eventually, comes home to roost. I don't think, by any measure, that we are near the end of the line on threats. I don't think the US is anywhere near a serious confrontation in Korea. The heightened tension that both the US and North Korea created was, as it were, intentionally, as part of its own economy of threat. The North Korean government uses threats to try to accomplish its objectives because, frankly, it has precious few other resources. The US government is using them because (a) its power and influence *are* waning and (b) its government has seriously misjudged how foreign policy works (or, at least some in its government have).  The fact that threats have been uttered, however, does not mean that you, I, or anyone else can, should, or even will pay attention to them -- other than talking heads whose job depends on paying attention to them. What is interesting about this latest set of threats is not that they have been made, but what they illustrate about the economy of threats as part of IR. That is the matter I'd like to look at. What I want to argue is that the current US government does not make good use of threats as a tool of foreign policy.

Using the latest threat as an example, there are at least two things that this latest development illustrates about the economy of threats.

First, doubling down on a weak strategy -- upon threats that have little purchase -- is likely not going to get the results you want, particularly if you've already used hyperbole in previous rounds of threats. According to New York Magazine, President Trump has tried to up the ante, as it were. After imposing the latest round of sanctions he apparently said: “If the sanctions don’t work, we’ll have to go to Phase 2,” Trump replied. “Phase 2 may be a very rough thing. May be very, very unfortunate for the world.”  This is intended to increase the tension and to draw other governments in, ideally spurring action where previous US efforts have failed, because they are worried about some unnamed -- but ominous sounding -- threat.

Here is where the problems begin. The US has already unleashed the supposed toughest sanctions ever. So, if those were the toughest sanctions ever ... sanctions that would supposedly cripple North Korea ... what happened? How did we get a new round of tougher toughest ever sanctions? Was the US holding something back? Did it not make quite the toughest sanctions it could have made? In fact, North Korea has no serious international economic activity except, I read, for China and, truth is, China just ain't gonna pay attention to this. Thus a threat like this carries a twofold risk: (a) it makes previous statements look ... well ... bad. Frankly, it makes the US President sound a bit like the North Korea dictator ... and that ain't good. And (b) it will be ignored and then what do you do?

You see the point: if you are trying to use threats as a foreign policy tool, you need to be sure that the threat has a reasonable chance of working. If it has failed in the past, doubling down likely means only that it won't work a second time and, in the process, you end up harming yourself because you make yourself look blustering as opposed to threatening.

Second, there is nothing new in threats. Governments have been making them, I bet, for as long as there have been governments. In talking about an "economy of threat," what I am trying to do is draw attention to the fact that threats are a tool. I may not like them; you may not like them but that does not mean that governments will not use them.  As a tool, they can have more than one use. For instance, the target audience of a threat against a foreign country could actually be a domestic audience. By "talking tough" a political leader might be looking to solidify their positions as a tough leader in a way that appeals to voters (or, more likely, a specific subset of voters).

I suspect that some of this is what is going on with the Trump administration. After all, no one can seriously think -- any more -- that threats will have any effect on China or North Korea and so simply stating them is little more than a waste of time. They thus might, possibly be directed to a domestic audience and this makes sense. After all, Republicans faulted Democrats (well, they faulted just about everyone but especially Democrats) for the supposedly bad position of the US on the international stage. The US government was just, in their view, not acting tough enough and letting other countries get away with things. It was time to get tough and get others towing the American line. It is possible that these threats are intended to maintain that image of toughness, which was an important element of the Republican campaign and self image.

The problem is that this is where the economy of threats also breaks down. The US has duly and fully threatened North Korea already and has not accomplished its aims. Its tried upping the ante -- remember "my button is bigger" -- and it ended up looking silly, at least in the eyes of the international community. At least in the eyes of ... well ... a thousand comics, the US president looked a clown. If the goal, then, was to look tough, precisely the opposite happened. It is still possible that the Trump base found his stand and discourse convincing but ... even if that were true (and, it might be) ... then the building up of empty threats must (sooner or later) lead them to see matters differently. In other words, they must realize, after a time, that the hardline discourse they were sold as the route to power and influence is ... well ... not working. Far from having more power and influence ... it is actually having the opposite effect: few people on the international stage or, again other than those who are paid to take it seriously or at least talk about it in the media, even in the media, are offering much commentary on it.

I do not mean to say anything good about the North Korean regime but you can see how they are far more experienced players of the threat game than Trump. After making a threat, they are busy de-escalating and doing things with South Korea for the Olympics. In other words, they recognized that their credibility was gone and they needed to adopt a different tactic. Recognizing that the people of South Korea would prefer cooperation or even just live and let live (not their ideal solution to be sure) to the discourse of war, they played a different card. Rather than threatening, they look cooperative, held "high level" meetings (from which the US is excluded) and put together at least one joint Olympics team. I have no doubt that they will return to bluster because, well, they have little else but the distinction is important. Internationally, the US now looks like the aggressor.

Threats have a certain economics. They cannot just be used over and over again. After a year of Trump government one thing we have learnt -- among the others -- is that they don't really realize this. Adverse to soft power options (talks, joint projects, culture) by virtue of their very discourse but unable to really use hard power they way they promised (because, well, they just ain't gonna start a war), they are debasing their own currency: threat. In the process, rather than gaining influence, they are losing it but because their ideology is based on hard power and threat, they cannot recognize what the problem actually is and so have doubled down on a losing hand.

North Korea and the Economics of Threat

North Korea is in the news so much ... that no one pays attention to it. And, in my view, rightly so. Yes, some people have to pay attention. The US government has to say something about threats, if for no other reason than they don't want them to escalate, the UN has to say something, South Korea, Japan, China, but one has the sense that one is trapped in a deja vu all over again. I guess Trump provided a moment of entertainment by sounding a bit like a Kim Jung-un (which earned Trump moderate but near universal condemnation) but other than that ... really? The latest, I gather, is that North Korea will attack Guam sometime in the next X months.

There is not much to say about this that has not been said. North Korea is clearly an odd place run by odd people. So, we might be better off trying to riff on this latest flare up to ask a question that emerges out of it: what are the economics of threat? Since I've been burbling on about the economics of health care, this seems like a natural connection. Is there an economics of threat that we can use to assess not simply this situation but others?

The short answer is that I don't know. I'm not well versed in this subject, in North Korea politics, in the risk/trust literature and the like. But, it seems to me that there might be an unusual rationality to what North Korea is doing. Let us assume that the North Korean government is looking to get something out of its threats. What might this be? Well, it could be all manner of things. It could be favourable trade agreements, international respect, increased longevity for itself, since as a non-democratic regime it must face some international opposition (no matter how well it is repressed).

Can threats advance objectives? There is an interesting connection to Trump here, as well. The Trump government has initially attempted to get what it wants (whatever that might be) by threat. If you don't build a factory in the US, we will impose a tax on your product.

Moreover, threats are not confined to governments. I've been involved in organizations that worked with threats and implied threats. For instance, I was on strike. The threat is there: "if we do not get what we want, we will withhold services." In part, we reacted to an implied threat: "do X or something worse will happen," as a negotiating position from my employer. There were threats all around, even if no one actually used the precise word "threat."  Parents threaten children ... clean your room or you are grounded.

Threats then are not confined to North Korea (even if theirs are a lot more grave by an order of magnitude). We use threats because they work. In economic terms, the threat is a currency that allows us to buy something: better labour relations (ideally), chores done, higher domestic employment. Most of the time, threats lurk in the background. Indeed, polite people are not supposed to really threaten someone else. Its not really considered ... well ... appropriate. So, we leave the implication of the threat floating there, in the air, so that people are aware of it, but no one is really saying it. The difference (or, one difference) with North Korea, and to a lesser extent Trump, is that threats are part of the regular political arsenal. (By contrast to Trump, the Bush, Jr., regime thought up a whole new language to disguise threats ["regime change," "pre-emptive defense," "coalition of the willing"]).

The problem with threats -- and I suppose implied threats -- from what I can see is that they have a short shelf life. They might produce immediate results but ultimately, they tend to produce only limited results. Why? Well, because they are not economically efficient.

For instance, imagine that I am running a government and I decide that I will cave in to North Korea's demands (whatever they happen to be) and agree to, say, ease trade sanctions. I have not done this not because I *wanted* to. I've done it because of the threat.  What happens when you do something you don't want to? Well, you do it as little as possible. In other words, I might cave, but I don't want to cave in a big way. I might be willing to ease sanctions but I am not going to offer any development aid or IMF loans or a lessening of troops along the border. I'll do precisely -- and only -- what I have to do to respond to that threat.

And, I bet you folks knew that already. After all ... if you threaten to ground your child, how much effort do they spend on cleaning up their room? They meet the basic demand and that is all.  (I strongly suspect Trumpian economics will be like this because they are founded on the same false idea that threats work well to accomplish objectives, but that is an issue for another day). Thus, for instance, if we assume North Korea has objectives, its threats help it meet those objectives *but just barely.* Its government might get a bit of international respect (it is involved in international negotiations -- other governments have to talk to it -- at least with regard to scaling back its threats, but that is all. It is not welcomed into the UN Security Council, no one rushes to side a free trade agreement with it, it garners no international free passes to cultural or athletic events, etc.).

What this means is that the threat is actually less economically efficient than other methods of attaining aims. For instance, there are other ways of winning international respect or attracting investment that produce more long-lasting effects. For instance, capacity is important. The US is invited to a host of international fora not because it threatens to get in the door but because it has the capacity to actually effect changes (be these medical care in Africa, famine or natural disaster relief, international athletics, the arts, scientific developments, post-secondary education, etc.). This runs against the grain of much neo-realist thinking with regard to power and the military but the US is not invited to international hockey tournaments because of its army. It is invited because it has a good team (aka, capacity). Its scientists are invited to international conferences because they are good (aka, capacity) not because its leadership had a fit on TV and makes demands. Threats become, in other words, a substitute for other capacity which is, actually, what North Korea lacks (capacity). Hence, it reverts to threats and these then compound the problems.

The other economic issue with a threat is that it is does not circulate endlessly. Sooner or later, other countries get tired of threats and say, in effect, "shit or get off the pot." Said differently, if you don't act on a threat, people start to think you are bluffing. Then ... what do you do? This means that if you rely on threats you either (a) have to act on it or (b) look like a dufus and back off. In the case of  North Korea, neither option is particularly good. Imagine if the goal of North Korea's threats is to help the regime stay in power by creating an evil other against which the population will rally. Well, this works ... until they actually launch a missile. After that, the regime's time in office is numbered in the days. Hence, acting on the threat is economically irrational because it will produce the opposite of the desired effect. But B is equally unpalatable because the threats are intended to win respect, the opposite of being seen as a dufus. Either way, threats make bad sense.

So, what does one do? Well, in the case of North Korea, I don't know. In the case of the US, I have some ideas but in the case of North Korea, the absence of capacity in other areas and the fact that its government has transformed itself into a pariah state creates serious problems. There is no easy out, but I don't want you to miss my point. There is no easy out because of the economics of threats. In the longer run, they have a shelf life and if I were running a government, I'd recognize that and try to make sure I had some other -- more efficient -- way of meeting my goals.