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North Korea’s Covid crusade exposes Kim Jong Un’s propaganda strategy
After North Korea disclosed its first cases of coronavirus in May this year, many feared the worst for the isolated country’s unvaccinated and undernourished population.
For more than two years since the onset of the pandemic, the country’s totalitarian regime maintained that not a single person had tested positive for Covid-19 within its borders, a claim treated with scepticism by foreign public health experts.
But less than 10 days after suddenly admitting to a series of outbreaks across the country in May, an editorial in the state Rodong Sinmun newspaper declared that North Korea was “successfully overcoming” the crisis, trumpeting leader Kim Jong Un’s response and admonishing other countries for “weak” lockdown policies.
Since then, the North Korean authorities have claimed that there have been just 74 deaths resulting from 4.8mn cases in the country, or a fatality rate of approximately 0.0015 per cent, compared with 0.7 per cent in Britain, 0.3 per cent in the US and 0.1 per cent in South Korea over the same period.
On Saturday, North Korea reported not a single new fever case for the first time since it first announced the outbreak. State media praised “the organisational power and unity unique to the society of [North Korea].”
The twists and turns of North Korean propaganda in recent months have obfuscated the reality of the pandemic in the country. But they have also served to illustrate the regime’s complex and shifting relationship with reality itself.
“It is important for the North Korean leadership to show the people that it is fully in control of the situation,” said Rachel Minyoung Lee, a senior analyst at the Open Nuclear Network in Vienna and an expert on North Korean state media.
“But it is also risky for state media to create too large a disconnect between the regime’s claims and the experience of citizens,” she said. “The regime lives and dies by propaganda.”
In a rare televised speech in October 2020, Kim wept while describing the hardships his country faced as it wrestled with the threat of Covid-19 and a series of devastating floods.
“Our people have placed trust, as high as the sky and as deep as the sea, on me, but I have failed to always live up to it satisfactorily. I am really sorry for that,” said Kim, wiping his glasses as he praised soldiers toiling on flood recovery projects.
“My efforts and sincerity have not been sufficient to rid our people of the difficulties in their life.”
Analysts said that rather than a spontaneous display of emotion, the speech constituted the hardheaded execution of a shift in strategy that Kim had outlined in a letter to officials the previous year.
“What is important . . . is to make people deeply understand that the leader is not someone who is removed from the people, but who shares life and death and joys and sorrows with the people,” Kim wrote to propaganda workers in 2019.
“In the name of highlighting his greatness, we end up hiding the truth . . . [Only] when the people are captivated by the leader as a human being and comrade does their absolute loyalty gush forth.”
The memo put an emphasis on humility and transparency that has been reflected in regime messaging since Kim assumed control after the death of his father Kim Jong Il in 2011.
“For decades, North Korea claimed that its leaders didn’t have any flaws,” said Go Myong-hyun, a senior fellow at the Asan Institute for Policy Studies in Seoul. “But Kim Jong Un was different, admitting problems. It was a strategy to differentiate himself from his father, and it was successful.”
The coronavirus pandemic has presented the greatest challenge for Kim’s evolving media strategy. State media’s rapid acknowledgment in May of 2mn cases of an unspecified “malignant virus” took many experts by surprise.
“My guess is that when they said for two years they had controlled the pandemic, what they actually meant was that the virus had not taken hold in the capital,” said Christopher Green, senior consultant for the International Crisis Group.
“That’s probably the thing that changed. But in the spirit of turning lemons into lemonade, they have since pivoted to propagandising Kim Jong Un’s leadership in guiding the government response.”
Lee argued the regime was “trying to be more transparent not for transparency’s sake, but because they needed to raise awareness of the steps that citizens needed to take to combat the spread, and to secure people’s buy-in for that process”.
She described North Korean news bulletins featuring slick graphics with the latest official infection figures and a sombre public health official — dubbed the “North Korean Anthony Fauci” — presiding over calm daily briefings.
“The regime has clearly learned a lot from South Korean and western Covid broadcasts,” Lee added, noting the steady infiltration of foreign media into the country in past decades.
“But the North Korean population has also been exposed to too many outside influences for their leaders to continue to be mythologised as God-like figures.”
Green stressed the implausibility of the regime’s Covid-19 infection and death statistics, as well as North Korea’s widely ridiculed recent claim that the virus had entered via “alien things, climate phenomena and balloons” floated into the country from South Korea.
North Korea imported 3,554 invasive ventilators from China in June, a large increase since April despite a sharp downturn in trade between the two countries over the same period.
Pyongyang has also accepted some Covid-19 vaccines from China and started administering doses, according to Gavi, the global vaccine alliance. The regime previously refused offers of jabs through the World Health Organization’s Covax initiative.
“They have adopted a strategy of acknowledging problems when they cannot be denied,” said Green. “But their instinct to deny, obfuscate and hide has not fundamentally changed — this kind of regime has a structural problem with honesty.”
Additional reporting by Song Jung-a in Seoul
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Business
Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024
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Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.
A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.
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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.
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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.
“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.
That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.
Millions of 529 accounts hold billions in savings
There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.
529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.
However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.
This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.
Some think it’s a handout for the rich
However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.
“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.
A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.
You’re giving savings incentives to those who can save and leaving behind those who cannot save.
Steve Rosenthal
senior fellow at the Urban-Brookings Tax Policy Center
Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.
The new 529-to-Roth IRA transfer provision doesn’t carry income limits.
Limitations on 529-to-IRA transfers
While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.
The restrictions include:
- A $35,000 lifetime cap on transfers.
- Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
- The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
- The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
- Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.
In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”
“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.
Are 529 plans already flexible enough?
Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.
For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.
Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Savingforcollege.com. Funds can also be used to make up to $10,000 of student loan payments.
The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.
In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.
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The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.
Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.
Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).
He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.
In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts.
“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.
Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.
For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.
Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.
Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.
Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.
Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.
Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.
Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.
There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.
At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.
As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.
Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.
It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.
Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.
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