Kim Jong Un's Mercedes Limousine Holds an Economic Lesson

A few weeks ago world champion Toronto Raptors forward Kawhi Leonard signed a free agent contract with the Los Angeles Clippers. This can’t have pleased his former team once removed in the San Antonio Spurs. When the Spurs traded Leonard after the 2018 season to the Raptors, they did so in order to keep him out of the Western Conference. No doubt the Spurs succeeded, for a time, but they couldn’t control what Leonard would ultimately do with his talents. He’s back in the NBA’s Western Conference.

Snuck Past Luxury Goods Ban

Leonard’s migration to Los Angeles came to mind while pondering a more recent question: “How Did That Mercedes End Up in Pyongyang?” The latter was a front-page headline/question in the New York Times last week. The Wall Street Journal similarly featured this seeming news of the weird, noting that Kim Jong Un’s possession of a Mercedes limousine had “stumped outsiders” in consideration of existing UN bans of luxury goods in North Korea.

No one should be stumped. There’s no mystery here. With market goods, there’s no accounting for their final destination. Try as politicians might to cut off individuals and countries from the world’s plenty, the power of politicians to control what we do is thankfully limited. Applied to Korea’s “beloved” leader, attempts to isolate him with sanctions are more than toothless. Though Mercedes can’t sell directly into the Hermit Kingdom, though U.S. companies are barred from trading with North Korea, neither Mercedes nor American companies are barred from selling what they produce. That they’re not ultimately means that the producers of useful market goods are essentially trading with everyone, including with people from “enemy” countries.

North Korea would merely purchase what the federal government won’t allow them to purchase from those the federal government will allow.

To be clear, American products are being enjoyed by North Koreans as you read this post. And if North Korea continues with its gradual economic liberalization, readers can rest assured that American products will become increasingly ubiquitous in a country that American companies are barred from trading with. If you’re producing worthy market goods, they’re everywhere.

The above truth will hopefully wake up confused American politicians, pundits, and citizens to how wrongheaded the treatment of Huawei CFO Meng Wanzhou is. U.S. officials justified their request that Canadian authorities arrest her based on Huawei’s trading with “Iran” despite sanctions limiting just that kind of exchange. What a waste. Huawei makes excellent products, which means excellent Huawei products would be found in Iran with or without sanctions. Same with brilliant products produced by Apple, Microsoft, and Alphabet. 

Ideally, this basic economic and common-sense truth will eventually quiet all the overdone desire among some Americans to “get” Huawei; plus it will hopefully wake them up to how worthless are efforts by the Trump administration to limit sales to Huawei by U.S. technology companies. Assuming a total ban, it’s not as though the latter would keep American technology from reaching Huawei’s brilliant minds. If desired, they would merely purchase what the federal government won’t allow them to purchase from those the federal government will allow to purchase American technology.

Controlling the Destination of Goods

Unless the Trump administration quite literally halts all technology sales by U.S. companies, its attempts to slow the flow of the fruits of American genius into Shenzhen (where Huawei is headquartered) will prove wholly ineffective. Who knows, but this may explain President Trump’s recent relaxation of attempted sanctions on Huawei. Not only are they mindless as policy; they’re also mindless from a common-sense angle.

That it’s thankfully impossible for politicians to control the final destination of market goods will also hopefully quiet the excuses of Cuban, Iranian, and North Korean leaders about sanctions and isolation strangling their economies. Such a view isn’t serious.

Precisely because sanctions can’t limit the flow of American products into “enemy” countries, so can’t those sanctions limit the economic productivity of the individuals within those countries.The answer for the United States should always and everywhere be inaction and a lack of intervention here and around the world. So long as individuals within other countries are free to produce, sanctions foisted on them by economically confused politicians can’t limit their production. As we see, Cubans, Iranians, and North Koreans trade with Americans despite sanctions, which means the sanctions can’t be used as an excuse for slow economic growth. The only barrier to economic growth is a lack of freedom.  

Of course, this speaks to why the U.S. political class should make a point to relax the various sanctions foisted on other countries. They plainly don’t work, and because they don’t work, they can’t be fingered as the reason for economic troubles in other countries. But politicians and dictators use what doesn’t work to paper over their unwillingness to set their people free. To be blunt, American attempts to isolate other countries economically are inhumane precisely because they give errant leaders cover to suffocate economically those they presume to lead.

The answer for the United States should always and everywhere be inaction and a lack of intervention here and around the world. When our politicians meddle economically, we’re not the only victims. The bigger ones are those not lucky enough to be American, but who suffer the illiteracy of governments always eager to blame their own errors on the economic illiteracy that can be found in U.S. capitals.

This article is republished with permission from Real Clear Markets.