I warned you about North Korea

Were you surprised to see North Korea’s Kim Jong-un and South Korea’s Moon Jae-in shake hands over the Korean border?

Then you didn’t read Capital & Conflict on 23 November 2017.

In fact, I’ve been predicting the reunification of Korea since 2013. For a simple reason. The same reason that totalitarian regimes with command and control economies always fail: hunger.

More specifically, the end of hunger.

On Thanksgiving last year, you could’ve read about my prediction in Capital & Conflict. It’s not a coincidence that the day was also Thanksgiving in the US. North Korea’s new political position is closely related to the US’ original Thanksgiving.

But before I reveal just why Korea is set to reunify, what would the momentous occasion actually mean for the world?

Kim and Moon signed the Panmunjom Declaration for Peace, Prosperity and Unification of the Korean Peninsula. It’s all about how they’ll go about reunifying the country.

Yes, reunification is a hit in Korea. It always has been. Even though the countries couldn’t be more different.

Nobody is entirely sure what reunification actually means though. At least not since the two sides claim to have given up on invading and ruling the other.

For a taste of the bizarre problems that will come up, watch the brilliant German film Good Bye, Lenin! An East German mum wakes from her coma to a reunified Germany. But any severe shock could make her black out again. So her son desperately tries to pretend East Germany is still up and running, with hilarious results. By the time she figures out what’s going on, East Germany has changed dramatically.

Perhaps my German background helped me see the change coming in Korea. My mum always says that, if she hadn’t been nursing me at the time, she’d have been at the wall as it fell. One of the first West Germans to climb into the East…

Back to Korea.

Will an outbreak of peace and unity affect you? The South Korean stockmarket is a promising bet on many measures. Cheap labour and rare resources used in electronics from the North would help South Korean companies gain an edge. It’s easy to invest with an exchange-traded fund (ETF) on the London Stock Exchange.

When Germany reunified, the stockmarket tumbled, but then outperformed Western peers. Having to take care of millions of East Germans with their moribund economy turned out to be a cost and an opportunity.

The trouble with investing in South Korea is that it’s not an isolated bet. A thousand other things could impact the South Korean stockmarket. Peace with the North is just one.

If I’m right, 2018 is a disastrous year to put your money to work in the markets. The biggest financial crisis ever is on the cards.

But let’s stick with the good news story for a moment. The peace agreement in Korea is a momentous occasion. How did I see it coming?

The giveaway came all the way back in 2013. Here’s how I explained it late last year…

Why Thanksgiving happened in the first place

In the early 1600s, the English King James I implemented a religious crackdown in England and persecuted anyone who didn’t recognise the Anglican Church.

Forty Puritans who had escaped the persecution of the Anglican Church and left for continental Europe decided to make for the New World instead. They didn’t want their children to become too Dutch. If only they knew what Americans are like now…

On 1 August 1620 they joined 62 others and hopped on a ship called the Mayflower seeking to establish a religious colony based on the biblical references to the Israelites. They landed on the famous Plymouth Rock (near Boston) and went about establishing a foothold in their new land.

Things didn’t go according to plan.

Half the pilgrims died of starvation in the first winter. Recent evidence from an archaeological dig indicates the highly religious community even resorted to cannibalism. They may have eaten a 14-year-old girl.

Come springtime, those who pulled through only survived thanks to the kindness of Native Americans. The story of that kindness, expressed as a meal of thanksgiving shared between strangers, is the source of Thanksgiving today.

What really happened at Thanksgiving

Those who celebrate Thanksgiving today overlook a far more important part of what happened to the community.

One of the features of the new colony, which its merchant financiers back in Europe insisted on, was that everything should be shared. The “common store” and “common share” requirement meant that everything from food, homes and land had to be doled out equally.

William Bradford, the leader of the group, soon figured out what was going wrong with the efforts of the community to grow enough food to survive. Here’s an excerpt from his journal:

For this community was found to breed much confusion and discontent, and retard much employment that would have been to their benefit and comfort. For young men that were most able and fit for labor and service did repine that they should spend their time and strength to work for other men’s wives and children without any recompense…that was thought injustice.

In other words, people were lazy because they didn’t receive the fruits of their labour. Somebody else did. And when you’re starving, that’s not a great incentive to work hard.

As soon as Bradford breached the agreement with the merchant financiers and assigned land to individuals, giving them the right to keep their own property, “it made all hands industrious, so as much more corn was planted than otherwise would have been.” There were pregnant women in the fields alongside tiny children, reaping and sewing.

The pilgrims were quickly growing so much food they could trade with the Native Americans instead of begging. They even managed to repay their debts to the merchants who financed them.

Ever since, the same experiment with collectivism has failed time and time again. And because food is the most important of goods, agriculture is always the first place collectivism breaks down.

The rulers that be are eventually forced to give up collectivised farming in order to have enough food at all. The moment they privatise farming is what I call the Mayflower Signal, named after the Puritans’ ship.

The predictive power of the Mayflower Signal comes from the realisation that collectivism doesn’t work among big groups. If privatising farming solves the problem, why not privatise shops. And then factories…

The Mayflower Signal also went off in Cold War communist Russia in much the same way as Puritan Plymouth Rock. Communist officials couldn’t work out why their collectivised farms were failing. Mass starvation ensued. (Even when it wasn’t official Stalinist policy.) Eventually, agriculture was gradually privatised.

Chairman Mao’s China experienced the very same signal too. In fact, every government which uses collectivised farming eventually has to change its mind. Or allow the black market to operate.

These days, there seem to be very few places left with collectivised agriculture. But there are some.

The inevitable failure of collectivism

If you apply the lessons of what really happened at the first Thanksgiving to today, you can see how the world is set to change.

You might’ve foreseen the mess in Venezuela, where the government began to heavily mess with agriculture in 1999. And now shelves are empty.

Europe’s agricultural sector is the core of the European Union’s budget and policy power. Almost 40% of the EU budget goes to agricultural spending. It’s intranational welfare that destroys incentives. That in turn destroys productivity and hollows out the industry.

With Britain set to leave, Europe faces tough budget decisions. Will it continue to zombify the continent’s agricultural sector? Or will this be a turning point for Europe – a Mayflower Signal?

North Korea is perhaps the only country left to use true collectivised farming on a grand scale. And the same mass starvation plagues the country as in the Soviet Union, communist China and the Puritan colony.

But North Korean sources have confirmed this may be coming to an end. Another Mayflower Signal went off there a few years ago.

Another Mayflower Signal went off there a few years ago

According to the website Daily NK, some farmers are now allowed to rent land from the collectivised farms they work on and then keep 30% of their output for themselves.

The new agriculture policy measures are designed to reduce the same starvation that plagued the American Pilgrims, the Russian communists and everyone else who’s had a go at communism. The new opportunity is reportedly taking off in much of the country, with individuals renting as much land as they think they can cultivate.

This incredibly important change didn’t get much of a mention in the Western media. It doesn’t seem important. Unless you’re aware of the history of the Thanksgiving. And if you are, you know what’s coming next.

Until next time,

Nick Hubble
Capital & Conflict

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Category: Geopolitics

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