Signs of Economic (Reform) Life in North Korea?

Since Kim Jong-un inherited the throne from his father in 2011, there’s been widespread debate over the chance of North Korean economic reform. A 2015 report on the North Japanese economy pointed to domestic markets expanding in size and quantity, despite periods of government suppression. Black markets possess long existed in Northern Korea, but the growth of formal markets signals progressive changes in the North Korean economy. Just how far can these markets go?

In the past, North South korea has attempted to exercise small-scale reforms in order to make up for the loss of national income due to the fall of the Soviet Bloc as well as increasing international sanctions. In 1991, it established the Rason Special Economic Zone (SEZ) — based on the Chinese change structure — as a means to promote economic development through foreign investments.

The Kim Jong-il government began experimenting with economic liberalisation by permitting the development of unofficial markets in Two thousand and two. In July of the same 12 months, the regime launched its Economic Management Improvement Measures, which increased the independence of entrepreneurs and farmers. The Kim Jong-un administration enhanced this in 2013.

At a peek, these reforms represent the harbinger for economic transformations in North Korea. There are many forecasts that North Korea will soon follow China and Vietnam’utes lead. However, these small-scale changes do not yield a comprehensive image of North Korea. The alterations have been temporary and inadequate. It is essential to look beyond financial reforms, not only to understand Pyongyang’s incentives behind such adjustments, but also to examine the impact of monetary liberalisation on regime survival.

During the 1990s, the North Korean distribution system collapsed, paving the way in which for the formation of nationwide underground markets. These marketplaces soon replaced the government’utes role of supporting the people and became the backbone of the unofficial economy. Some 60 per cent of the population earned their residing from underground trade as well as 80 per cent of household income originates from black marketplaces.

Although the government continuously denies the presence of a market economy, it widely engages with private businesses. It leases spaces within markets, levies heavy taxes on merchants and dictates the type and number of goods that can be sold. These rules are to provide party cadres having a stable income and to strengthen the regime’s control over the unofficial economy. In this context, federal government reforms only serve as a validation for government interference through legalising existing economic institutions.

While permitting small-scale restructuring to take place, the government obviously marks a line between economic reform and celebration survival. It understands that marketplaces grow disproportionately to its own power. Liberalisation would involve the government reducing travel restrictions, tolerating higher freedom in information flows and allowing foreign firms to exert influence on household politics.

The basis for the legitimacy of the North Korean regime may be the people’s belief in the righteousness from the Communist revolution and the Kim dynasty’utes cult of personality. As such, outside information about how North South korea could be prosperous and democratic under an alternate political system would shake such beliefs for their cores.

The impact of Détente on Communist bloc politics and society also makes Pyongyang more hesitant to pursue an open economic policy using the outside world for fear of politics oppositions. This is because Détente stoked domestic resistance and civil rights protests in the Soviet Union, which North Korea wants to avoid. Growing contacts between North South korea and its trade partners (particularly South Korea) may encourage civil society to demand more independence and political reform. This might put the regime’s survival within serious danger.

More importantly, an abrupt change in economic situation may affect the distribution of power inside the party system. Since Ellie Jong-il’s death, the ‘moderate’ faction, which favours economic openness, and the ‘hardline’ faction, led by the Organisation and Guidance Department and the army divides the party. The actual hardline faction seeks to maintain the ‘army first’ policy by continuing atomic weapons development. Economic liberalisation may shift the balance of power against the hardliners, which could put Kim Jong-un’s position at risk.

The regime prefers political stability and unity to economic changes. Pyongyang will not pursue any large-scale changes, as economic liberalisation would likely undermine the stability of the regime.

In the actual meantime, it is likely that the Northern Korean regime will keep on walking a thin line between collapse and revolution by turning a blind eye to markets — as long as they don’t pose serious threats to the survival. The government will endure some degree of market independence that can safeguard national balance and provide party cadres with enough bribes to remain loyal to Pyongyang.

One should interpret indications of changes in the market system because the regime attitude towards private businesses. It is also an indication of the present balance of power between your moderate and hardline factions within the party. Still, no matter how little these changes are, these people shed some light upon life in the Hermit Kingdom. Northern Korean watchers must patiently continue following these changes for future analysis.

Will North Korea embrace market change? is republished with permission through East Asia Forum