Signs of a developmental crisis in North Korea

In August I outlined some of the problems that will obstruct Pyongyang’s economic reform efforts.

Based on anecdotes of visitors and the price of rice/exchange rates, it was clear that the DPRK was investing heavily in Pyongyang, creating a significant divergence of income and living standard within the country. This inequality formed a gross imbalance in prices that made it harder for people outside the capital city to purchase basic goods – I hypothesized that this was in part also a long-term consequence of the currency revaluation as Pyongyang enjoyed easy cash flow before the rest of the country could acquire the new tender.

This condition was symptomatic of the monopoly of resources by cadres of the Korean Workers’ Party and their close elite associates. From being the vanguard of the nation, the governing elites were quickly descending to mere rent-seekers.

Recently, I wrote a followup article on the changes in North Korea with the erosion of the traditionally egalitarian (relatively speaking) state institutions and subsequent shift in the state’s ability to mobilize change (labor).

The silence over the economic reform, both agrarian and retail, has prompted many questions in the media. While some speculated that such a touchy subject would not be publicized by the KCNA – I contend that it is wholly possible that the project has been scrapped.

As Professor Aidan Foster-Carter already noted, the state may not be able to provide for its privileged elites if the reform goes through – considering that Pyongyang conducted field tests of the reform in the months between the announcement and October, it is possible that the state assessed the cost incurred on its special urban population to be unacceptable. The effort was a serious one as indicated in reports of people being forced back onto agrarian collectives throughout the country.

In addition to the high cost, the state probably discovered how entrepreneurial society has gotten since the Great Famine of the 1990s. Mobilizing them to come back to the highly volatile central-planned farming system is going to be difficult, especially considering the DPRK’s previous record with securing survival for the general public. Based on reports from within the country, the level of distrust in Pyongyang seems to be at an all-time high. No longer can the socialist or nationalist ideology motivate the people into accepting the socio-economic burdens of growth and development.

Pyongyang still maintains a strong grip on the country as the monopolizer of violence, but it has little ability to change the country economically or socio-culturally. It has gone from a Stalinist state to a protostate phase (Robert Cox) where the extent of political influence is limited to tribute collection.

This is not to support the idea that the country is going to collapse soon. There are still 60 percent urban dwellers who are dependent on the state and are presumably loyal to the institution that keeps them fed, clothed and housed. Nonetheless, the loss of the rural, agrarian farming community shows that the character of the state is changing.

And it is an imperative for analysts abroad to be more aware of these changes to best fit policies around them, including food aid and demilitarization. Best to look deeper and more intensively into the matter.


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
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One Response to Signs of a developmental crisis in North Korea

  1. Pingback: Andrei Lankov on Land Reform – Is Pyongyang afraid of the farmers? | DPRK Food Policy Blog

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