Bracing for the next black swan

We must be fully awake to all the geopolitical risks approaching us like a black swan.

Yeom Jae-hoThe author, a former president of Korea University, is the president of Taejae University. A black swan — a metaphor for an unpredictable event with a far-reaching impact — sometimes shocks the entire world, as clearly seen in the watershed moments like the attack on Pearl Harbor, the 9/11 terrorist attacks, the subprime mortgage crisis triggering the global financial crisis and the recent Covid-19 pandemic.

Nassim Nicholas Taleb, a risk analyst-turned-essayist, is famous for predicting the 2008 financial meltdown of Wall Street. In his 2007 book “The Black Swan: The Impact of the Highly Improbable,” he paid close attention to “outliers” over rational expectations within the boundary of convention. Even a prospering company can suddenly collapse due to its CEO’s minor mistake, whistleblowing of accounting fraud, or a drastic change in the market. That helps explain why an increasing number of corporations prioritize risk management over normal business management.

Inflection points in history tend to shun rational predictions, as unexpected events often change the currents of history. But there are portents of the arrival of a black swan at any time. The problem is the stakeholders turning a blind eye to them. It is too late to cry out for help once the black swan appeared before them.

Korea was no exception. In July 1949, barely a year before the breakout of the 1950-53 Korean War, then Defense Minister Shin Sung-mo nonchalantly brushed off warnings about North Korea’s possible invasion of South Korea. “If the president gives me an order, we can eat lunch in Pyongyang and dinner in Sinuiju [both cities in North Korea],” he spoke with bravado. But at the end of the year, the Kuomintang government in China was expelled to Taiwan. In 1946, when the civil war between Chiang Kai-shek’s troops and Mao Zedong’s Red Army started in China, many Koreans expected Chiang’s forces to overwhelm Mao’s. Chiang had 4.3 million soldiers at the time while Mao had only 1.28 million, but Mao eventually drove Chiang to the island of Taiwan in exile.

After dismissing such alarming developments in China, South Koreans suddenly faced a black swan approaching them.

Russia’s invasion of Ukraine also could be compared to a black swan. When it became an independent state after the dissolution of the Soviet Union in 1991, Ukraine was the third largest nuclear power with 1,804 warheads, 176 ICBMs and 40 strategic bombers. Ukraine, Kazakhstan and Belarus — former members of the Soviet Union — signed the 1994 Budapest Memorandum to hand over all their nuclear weapons to the Russians by 1996 for disposal in return for security assurances from Russian Federation, the United States and the UK. But following Russia’s annexation of Crimea in 2014, Moscow launched a massive war on its neighbor eight year later. Former U.S. president Bill Clinton, who led the signing of the memorandum, confessed in an interview that it was a terrible mistake to persuade Ukraine to abandon its nukes.

Before the pandemic, Bill Gates warned about the possibility of a new virus spreading the world. But no one believed in the arrival of a black swan. Some even raised conspiracy theory. In a book titled “Crisis of Japan, an elderly citizen-dominated state” — a collection of interviews between Emmanuel Todd, a French historian, anthropologist and demographer, and Japanese scholars — Todd declared the defeat of the globalization wave after the pandemic, criticizing the Emmanuel Macron government for being embarrassed over a critical lack of face masks even in an advanced economy like France. Protectionism in defiance of the global value chains bewilders even developed countries in the face of crisis. Todd advised Japan to have nuclear weapons after raising questions about trusting the U.S. nuclear umbrella.

The reappearance of former U.S. president Donald Trump in the turbulent world compels individual countries to survive on their own. How should we confront a black swan — a fully nuclear-armed North Korea this time — in defiance of all the hopes that the recalcitrant state across the border will open its doors to the rest of the world if it continues to receive sunlight from outside.

Wouldn’t the ever-tougher rhetoric from Chinese Ambassador to Seoul Xing Haiming and other top Chinese diplomats in Japan, France and the Philippines portend the emergence of another black swan? We must be fully awake to all the geopolitical risks approaching us like a black swan.

Translation by the Korea JoongAng Daily staff.