North Korea: The Family Business Is Failing

Michael Hirsh

The United States could, if it so chose, destroy Pyongyang in a split second, probably even without using nuclear weapons. Not only could the U.S. arsenal make “the rubble bounce,” in Winston Churchill’s tart phrase; it could, with a second strike, turn the rubble into much smaller pieces. You might, in the end, find a few strands of Kim Jong Un’s retro haircut.

North Korea, for the foreseeable future, can do nothing to jeopardize America beyond threatening the 37,000 U.S. soldiers deployed in South Korea. That’s a serious threat—Seoul is only 30 miles from the demilitarized zone—but it’s all Pyongyang has ever been able to do. Which raises an important question: Just what does Kim Jong Un think he’s up to? The young, untested “supreme leader” is actually suggesting he might attack the U.S. mainland, declaring he’s at war with a U.S. ally, planning another missile test, threatening to restart plutonium production, and miniaturizing warheads just enough to make U.S. officials wonder whether he must be stopped. Even Kim’s only ally, China, is calling him delusional. "Pyongyang should drop its illusions that it can make the world stay silent over its desire for nuclear arms through its hard-line stance and deceptions,” the Global Times, which is published by the ruling Communist Party's People's Daily, wrote in an editorial.

With North Koreans, whose internal discussions are as little known as any closely held family firm’s, no one is ever sure what is going through their minds. But the best conjecture is that young Kim is simply trying his best to ply the bread-and-butter trade of the Kim family business: nuclear blackmail. It’s just that, like most third-generation heirs, he’s not very good at it.

A classic 1987 study of family firm succession by John Ward of the Kellogg School of Management at Northwestern University concluded that only 30 percent of family businesses survive the third generation, and only 3 percent survive beyond that—no matter what the culture or country. The reasons are usually the same: With each generation the heirs grow more spoiled, fail to make the transition, possess less competence, and squabble more with shareholders, professional management, and among themselves. The ravages of nepotism and an uncreative desire to preserve the status quo make such businesses weaker and weaker.

Kim seems to fit the pattern. He badly wants to emulate his grandpa—Kim Il Sung, whose birthday will be celebrated Monday in grand style—even adopting his haircut, but he doesn’t seem to have mastered the tradecraft he learned from his dad and granddad. Like them, he is seeking to use the combined threats of the North’s technology and its military’s proximity to Seoul and U.S. troops in order to extract food and fuel aid to his self-impoverished country. It’s not really a growth business, but it has kept the Kims fat and well stocked in movies, athletic shoes, and fine cognac, in kidnapped celebrities and in visiting clueless ones, like Dennis Rodman.

But by overdoing the threats Kim may be alienating those, including the Chinese communists, he needs most. In the past, Beijing has been inclined to supply measured support to the North (if only to avoid a mass of refugees when the regime collapses), but its patience is being tried as never before. Kim is even cutting off the meager economic progress zones that his father started. If he keeps it up, it's bound to end badly for him.

The family firm model occasionally applies to other countries’ politics as well, and to our own. The most noted example, perhaps, is George W. Bush, the erstwhile black sheep of the Bush dynasty who, as Maureen Dowd of The New York Times liked to write, ultimately “crashed the family station wagon into the globe.” Saudi Arabia has been somewhat more successful than the Kims, largely because the family concern controls some 20 percent of the world's oil reserves, and boasts a vast network of Saudi princes who operate in a manner more reminiscent of the Sopranos than a modern, relatively transparent government, according to a former senior CIA and FBI official with long experience in the country. 

The Kim family business is much more tenuous. Kim still has some things going for him. The North has always depended on one trump card: unlike, say, Iraq or even Iran, an attack by the U.S. or other outside power allied with the South would mean an almost certain human catastrophe. That is why even neoconservatives hesitate over recommending regime change in Pyongyang. According to my former Newsweek colleague John Barry, one reason that President Clinton decided to make a deal with Pyongyang in 1994—the first of several U.S. negotiations—is that his defense secretary, Bill Perry, had briefed the president shortly before on the likely costs of invasion. The estimate: 52,000 U.S. military and 490,000 South Korean soldiers killed or wounded, and untold numbers of civilian casualties, all in the first 90 days. Perry ultimately was the one who went to Pyongyang to negotiate.  

But everyone’s getting fed up with the Kims, and despite new fears of technological advances—the Defense Intelligence Agency assessed with "moderate confidence" that North Korea could put a nuclear weapon on a ballistic missile, though the reliability would be "low"—the West and Washington will always remain very far ahead of the Kim family. And let’s face it: Washington is constantly developing new means—cyber, among them—of fostering regime change. "North Korea will not be accepted as a nuclear power," Secretary of State John Kerry said at a news conference in Seoul on Friday. "The rhetoric that we are hearing is simply unacceptable."

The only hope that Kim might have, family-firm research suggests, is that he convert the old family business into a new one. If the family abandons the old business and finds new entrepreneurial outlets, that increases survivability dramatically, says Judy Green, president of the Family Firm Institute. Kim seems like a “normal” enough guy, as Dennis Rodman described him. Kim's former classmates at the super-posh Liebefeld-Steinholzi school on the outskirts of Bern, Switzerland, told the British newspaper the Mirror in December 2011 that he went out for pizza, sang from Grease, and loved joking and basketball. "He hated to lose. Winning was very important," said former classmate Marco Imhof. And local education chief Ueli Studer remembered him as being “well-integrated, diligent, and ambitious.” But now Kim’s been asked to take over a dying enterprise, and he doesn’t seem to have figured out how to revive it.

North Korea is an invented more than a real country. After the World War II defeat of Japan, which had occupied Korea, the regime was created by Stalin in 1945 out of the northern half of the Korean Peninsula. As the Cold War developed, Moscow propped up Kim Il Sung as a strongman. The Americans, meanwhile, built their client state in the southern half. Both sides never gave up their claims to the whole peninsula even after the 1953 armistice, putting them on a permanent war footing. To consolidate power, Kim Il Sung created a cultlike ideology around himself, which his son and then grandson have continued. There is no political system to speak of; just the family business.

All the world can do now is hope that North Korea follows the usual pattern—and goes bankrupt.