South Korean aid rejected while economic instability rises

Pummeled by a series of climatic phenomenons harmful to crop production and the general health of the rural population, Pyongyang will be struggling to meet the deficit in food demand and services necessary for the welfare of its citizens. This is, as many observers of North Korea know, a perennial problem. Chris Green noted in a recent interview (with the author himself), the country is consistently confronted by cases of starvation in its poorest communities – Amartya Sen described starvation in poorer developing countries with the analogy of a man who is already neck-high in water and could drown because of the tiniest ripple or wave – this is an apt image for a sizeable portion of North Koreans who are unable to estimate long-term prospects for income or food consumption.

Unable to rectify the situation, the state’s policy objective in the last two decades in regards to this matter has been to limit the proliferation of what amounts to the socio-economic collapse of communities. The priority placed on keeping the urban populations fed, in particular those in Pyongyang, has been explicit even with the limited information leaving the country.

On top of the existing problems hindering the increase in food output, South Korea’s Red Cross estimates that around 176 North Koreans were killed and 21,000 displaced by Typhoon Bolaven and the floods that preceded it, disrupting food production itself or its distribution. This will no doubt leave a long-term human cost in the low-priority regions as the meager initial harvest are consumed in the weeks to come.

Either recognizing the acuteness of the emergency at hand or seeing the need to reconstruct relations with Pyongyang, Seoul has offered to give food aid. The most recent offer initially seemed even more generous than last year’s proposed deal (which was rejected by Pyongyang) as the South Korean government announced the possibility of directly providing rice.

However, 10,000 tons of flour, 3 million packages of ramen noodles (while good intentioned, ramen may be a poor choice of food for people without a reliably sanitary source of water) and medical supplies suggested by Seoul were deemed “negligible quantity of goods” and “insulting” by Pyongyang and was rejected. The leadership clearly wanted cement, rice and heavy equipments, which seemed to have been on the table a few days ago, but not offered in the actual proposed package.

Meanwhile, North Korea is racing towards the start of the economic reforms – the signs, as noted in previous articles, indicate a genuine effort to change behaviors in the agricultural communities. This will take time as the state must find means to dismantle practices informally established over the last two decades that insured the survival of farming cooperatives against irresponsible and excessive government appropriation.

Nonetheless, if the semi-liberalization of agriculture and the plans to cooperate with China on food production work out, North Korea may see significant rise in food security.

But there is absolutely no guarantee that the changes implemented under the June 28 Policy will truly work. The leadership in Pyongyang know this better than most of us. For one, Marcus Noland notes that

Simple calculations suggest that the value of the won may have depreciated at an annualized rate of 200 percent or more over the past 6 months… rice prices appear to be increasing even faster than the exchange rate is depreciating, with most data from the past 3 months implying annualized price increases well over 1,000 percent annually. Such increases may reflect temporary price spikes, not sustained trends; time will tell.  But these data also suggest that at least for the last several months, the real price of rice has increased markedly.

In addition, general distrust of the government’s promise to allow the people to control a portion of the output has made the food market even more erratic as hoarding has begun to prepare for the expected economic disruptions. Beyond the issue of food prices, the over concentration of resources in Pyongyang has already undermined balanced growth that is necessary to ensure welfare for the general public and the disadvantaged rural communities.

This economic (and moral) crisis will not have a magic solution – far from it, in solving the problem, the cost and burden of the changes will be transferred to the people least prepared to deal with the transition. Pyongyang has the right idea that the problem of both output and distribution must be tackled simultaneously – alas, the system is still far too coercive and prone to arbitrariness for the producers of industry (of food and otherwise) to conceptualize economic and food security. Until that is achieved, the economy will continue to dwindle and suffer.

More to come.


About Yong Kwon

I develop trade advocacy strategies for a DC-based consulting firm. Studied economic history at the London School of Economics, and can be found on twitter at @ykwon88
This entry was posted in Rice and tagged , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s