The most remarkable aspect of the shock-horror reaction to North Korea’s nuclear test is that it should have come as such a shock. If you run a dictatorship that is branded as part of ‘the axis of evil’ and you observe that a fellow member of the axis has been invaded, it is a natural response to build up your defences as fast as you can. The physical position of the existing nuclear powers that lecture you may be strong, but their intellectual position is weak.

Inevitably the first response the US and other leading nuclear powers have come up with is some form of economic sanctions. It is tempting to ask how economic sanctions can be applied to a country that doesn’t have an economy. One is reminded just how difficult it was to prescribe appropriate macro-economic policies for Russia after the collapse of the Soviet Union in 1991, because for macro-economic policies you need a macro-economy.

Quite apart from the ethics of applying sanctions, which might cause starvation among a population that is already dependent on outside food aid, there is the question of how effective economic sanctions can be anyway. Older readers will recall how the sanctions applied to the breakaway state of Rhodesia by the British government in the mid 1960s were easily circumvented - indeed openly flouted by ‘respectable’ corporations quoted on the London stock exchange.

One of the few examples of the successful application (or threat) of sanctions was the way the major US banks were finally shamed into isolating South Africa’s apartheid regime. Their stance was generally considered to have played a vital role in the final fall of that regime. To put it crudely, if a capitalist system is threatened with the withdrawal of capital, it is in trouble. The most effective sanction the US had against the UK when it disapproved of this country’s disastrous Suez venture fifty years ago was to refuse to prop up the Pound Sterling when the financial markets panicked. That very refusal put paid, as it were, to the British plan. North Korea is impervious to financial sanctions. After all, it is one of the last remaining non-capitalist regimes.

At the recent meetings of the World Bank and International Monetary Fund in Singapore the US Treasury Secretary called for financial sanctions against Iran - another member of the supposed ‘axis of evil’ but the response of bankers I talked to was far from supportive. One senior European banker said that if the Bush administration expected him to stop financing an Iranian road-building programme for fear that the road might one day be used by terrorists, it was going to be disappointed.

The truth is that the North Korean episode is yet another example of the almost wholly disastrous foreign policy of the Bush administration. It is noteworthy that the Republican veteran James Baker pointedly said over the weekend: ‘I believe in talking to your

enemies. It’s not appeasement to talk to your enemies’. This is Churchill’s ‘to jaw jaw is always better than to war war’. — The Guardian