A quick look at economic conditions in the post-Kim Il Sung era

Picture via Rodong Sinmun

Picture via Rodong Sinmun

It has been 20 years since the death of Kim Il-sung and North Korea is still reeling from the consequences of his economic mishandling. However, many North Koreans appear to have fond memories of the Kim Il-sung era, perhaps because it was a time period marked by relatively good economic conditions compared to the famine years that immediately followed Kim Il-sung’s death and the economic turmoil that had defined the Kim Jong-il and Kim Jong-un eras.

Of course, the North Korean state is also aware of the fact that the ongoing economic difficulties reflect poorly on the current leadership. Thus it is little surprise that the state-run Rodong Sinmun often emphasizes the fact that Kim Jong-il did much to establish industries for “high-quality” consumer goods.

But for whom are these articles written? It must be for those who actually have access to high-quality consumer products so that they can attribute their good fortune to the late leader. Then this leads to the question of how big this consumer demographic is in North Korea.

South Korean newspaper Chosun Ilbo remembered the passing of North Korea’s founder by publishing excerpts from interviews conducted with 100 North Koreans currently living and working in the Chinese cities of Dandong and Yanji, across the border from North Korea. Their testimonies revealed interesting insights into the conditions in the country.

One aspect of North Korea that was repeated throughout the interviews was the growing urban-rural divide in the country. Many criticized the concentration of wealth and resources in Pyongyang and one interviewee went as far as to state that conditions outside urban zones were no better now than they were during the famine years. One interviewee, who identified him/herself as being from Kangwon Province, also noted that no visible changes had taken place since the transition of power to Kim Jong-un.

When asked about experience conducting business at the jangmadang, 70% of the interviewees admitted to having traded at the informal marketplaces. Many told the interviewers that it was a matter of necessity as an average monthly wage for a laborer was about 3000 KPW.

The most recent market data from North Korea gathered by Daily NK notes that rice prices (between June 14 and June 20, 2014) in Pyongyang stood at 4300 KPW while in Sinuiju and Hyesan, they were 4500 and 5050 KPW respectively. This means that a North Korean laborer would not be able to purchase 1 kg of rice at market price with a month’s wage.

Complementing their wages with commerce at the jangmadang, interviewees revealed that there was a lot of absenteeism in manufacturing plants. It is apparently commonplace for the workers to get their cards stamped in the morning at the factory and then immediately go to the jangmadang.

At the same time, it appears productivity of the manufacturing plants other than those in Pyongyang or other major cities have long ago ground to a halt due to material deficits. Some interviewees noted that many workers have resorted to stealing machinery from these plants and selling for scrap iron.

These economic conditions have induced many North Koreans to seek work across the border in China where one could make 1800 RMB a month doing dishes in a restaurant. Although the official conversion rate from RMB to KPW (1 : 145.04) suggests that 1800 RMB is equivalent to 261,071.54 KPW, if you consider that 1800 RMB is about $290.06 (US), then by the current Pyongyang street exchange rate (1 USD : 7300 KPW), the actual figure is probably closer to 2,117,438 KPW, a value equivalent to 492 kg of rice in Pyongyang. However, as interviewees with experience in commerce highlight, much of the people’s income from jangmadang or remittances from China go towards bribing party cadres and security personnel.

The overall picture painted by these interviews is not one that readers of North Korean affairs are unfamiliar with – nonetheless, details on the fragility of the North Korean industry and on the attractiveness of finding work in China provide greater context for the country’s ongoing struggle to keep its economy and currency afloat.

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
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