North Korea's nuclear program and economic threat to regional stability

Koreas

North and South Korea are technically still at war -- no armistice has ever been signed between them. As a result, tensions are still high on the Korean peninsula. While South Korea has emerged as a powerful economic force, North Korea remains a highly controversial nation.

North Korea operates as a communist dictatorship, but its lack of relations with the rest of the world is what makes it such a threat. The country is pursuing nuclear capabilities and is testing missiles that could reach Japan, Hawaii or even Alaska (Heliker, 2009). This has put the country in a cycle where they are condemned by the world community, then demand more concessions. At this point, however, direct action against North Korea seems unlikely, as that would essentially mean full-scale conflict (Ibid).

However, North Korea's actions have a destabilizing economic effect on both South Korea and Japan, two major trading partners of the U.S. North Korea is not only testing missiles, but running war drills (Moon, 2009). This threat is not expected to have much incremental effect on South Korea's economy, but it may raise the nation's cost of capital somewhat (Yoo, 2009). The same would be true for Japan is North Korea were able to demonstrate that they could deploy technology against that country. Furthermore, an outright war could embroil the United States in a conflict far bigger than Iraq or Afghanistan, causing serious detriment to life, liberty and economic stability (Farrell, 2006).

At this point, North Korea is still engaged in a process of saber-rattling. Their ability to impact markets and security is limited, but should the North Korean government make a bolder move, or force the West into a response, the situation on the Korean peninsula could destabilize the entire world.

Works Cited:

CIA World Factbook: North Korea. (2009). Retrieved April 20, 2009 from https://www.cia.gov/library/publications/the-world-factbook/geos/kn.html