North Korea’s Great Leap Backward

It’s not just on this blog where the ill-informed and the self-deluded continue to defy years of bitter experience and advocate “engagement” with the North Korean regime as a way to encourage economic reform.  You can still hear academics in Washington cite the potential for economic reform in North Korea as a reason not to impose sanctions after North Korea’s nuke and missile tests.  Some day, we must make a point of tabulating the amount of money spent on this failed strategy with some accuracy.  The amount is certainly in the billions, and may well be as much as $10 billion.  Who — aside from Kim Jong Il, anyway — still thinks that was money well spent?

In the markets of Kilju, a city of 100,000 near North Korea’s eastern seacoast, the ruling Korean Workers’ Party has ordered the removal of Chinese-made cookies, candies and pharmaceuticals.  Even soybeans, many articles of clothing and shoes are now forbidden.

It is all part of a great leap backward taking place in the secretive autocracy. North Koreans interviewed in China in recent weeks say that the regime of Kim Jong Il has made a concerted effort to roll back reforms that had over the last decade liberalized the most strictly controlled economy in the world.

“They’re telling us that we don’t need markets and that socialism provides everything we need,” said an unemployed factory worker in her 50s, who gave her name as Lee Myong Hee. (North Koreans outside their country often give fake names because speaking to foreigners can be considered treason under North Korean law.)

Lee sneaked across the border last month into China, hoping she could make some money for her family. Thin and nervous, her body sculpted by a diet of two bowls of porridge each day, she said the party’s unbending ideology has squeezed the life out of the city’s economy.  “If they don’t give us food and clothing and we’re not allowed to buy things, how can we survive?” Lee said, tears rolling down hollowed cheeks.  [L.A. Times, Barbara Demick]

Demick is not the only one to have observed this trend.  The Washington Post’s Blaine Harden also wrote about it recently, though in a way that seems to be in some tension with Demick’s report at first.  Harden observed an increase in trade with China, although the trade Harden wrote about was conducted directly between China and the North Korea regime itself.  Those two observations can be reconciled if we deduce that the regime itself is monopolizing the China trade and denying its people the benefit of it (and from my private discussions with Harden, I’d say that his views aren’t in much conflict with Demick’s).  Indeed, even as Harden cited statistics for the growth of trade between China and mines owned by the North Korean Peoples’ Army, he observed:

As North Korea’s trade with China grows, so does the hostility of Kim’s government toward homegrown free-market reform.

“The leadership has reverted to a more control-oriented — even Stalinist — approach to economic policy,” Nolan and Stephan Haggard wrote in a paper published this month.

In the aftermath of a famine in the 1990s that killed perhaps a million people, the number and importance of private markets rose in North Korea. The government, overwhelmed and substantially crippled by the famine, had no choice but to allow markets to replace its collapsed food distribution system. By some outside estimates, markets now account for about 80 percent of household income and have become the primary means for most people to obtain food.

But since 2005, as trade with China has revived the state’s capacity for control, the government has imposed increasing restrictions on what can be sold in private markets and who can sell it. It has also cracked down on border crossings into China, dramatically reducing the number of small traders who can move between the two countries, according to human rights groups.  [Washington Post, Blaine Harden]

This would not dramatically alter my views of North Korea’s economic policies.  It’s probable that North Korean economic reform was never more than a self-serving myth propagated by Sunshine advocates anyway.  As Marcus Noland and Stephan Haggard argued in their recent book on the subject, the “reforms” were really just the collapse of state control during the Great Famine, a trend that the regime has tried to reverse since 2002.  Although the regime itself hasn’t shied from profit-making ventures to fund itself, or from showpiece projects that serve the elite, no evidence suggests that the regime ever intentionally instituted economic reforms for the benefit of its broader economy and population.

The biggest question is whether North Korea feed these people on state rations, or whether these new policies trigger a new famine.  There is also the potential for a crackdown to trigger outbreaks of dissent, something that occurred in Chongjin in 2008 and Hoeryong in 2006.  One wonders why the regime feels able to summarily cut access to the markets on which millions of North Koreans had come to depend for their survival.  Even the most ruthless statist regimes tend to moderate stifling policies of state control during hard times.  In the 1920’s, Lenin and Stalin called their version the New Economic Policy.  In the case of North Korea, economic weakness in Pyongyang had recently forced a relaxation of state control and allowed ordinary North Koreans to obtain reasonably steady food supplies though the markets.  But as with Stalin’s USSR, as soon as the regime had reestablished sufficient finances and political control to do so, it smothered private trade and reconstituted state control.

Once more I observe, but cannot explain, that in late summer or early fall of 2008, North Korea suddenly went from the verge of economic desperation, with people in Pyongyang going hungry for the first time in a decade, to the sudden ability to engage in profligate spending on luxury cars and grandiose buildings that contribute nothing to feeding the hungry.  Another factor may be the tightening of border controls between North Korea and China, which helps the regime to cut off cross-border migration, the exchange of subversive ideas, the development of the black market, and the supply of South Korean and Chinese goods that compare favorably with the North’s.