Great Confiscation Updates

Newspapers around the world are now coming to grips with North Korea’s most conspicuous policy disaster since the Great Famine, and the first one in which a state that has long claimed infallibility had to admit error:

The policy backfired. Prices skyrocketed as market activities ground to a near halt, while state-run stores failed to meet the demand. In recent weeks, Web sites based in Seoul that collect news from sources inside North Korea have reported starvation in some towns in the North, a protest rally by elderly military veterans and arguments between women and the soldiers trying to shut down markets.

The reported apology, from the North Korean prime minister Kim Yong-il, came just days after South Korean news outlets reported that the North Korean leader, Kim Jong-il, fired the senior official who had spearheaded the currency reform. The apology came a meeting in the North’s capital, Pyongyang, last Friday, according to Chosun Ilbo, a mass-circulation daily in Seoul. Its report, published Thursday, quoted Prime Minister Kim as saying, “I offer a sincere apology about the currency reform as we pushed ahead with it without sufficient preparation and it caused a great pain to the people. The paper’s account, published Thursday, quoted an unidentified source inside the North.

“We will do our best to stabilize people’s lives,” the prime minister Kim said, according to the newspaper. [….]

Poor weather, inept economic management and the cutting off of aid and trade following the collapse of the Communist bloc led to a famine that killed many North Koreans in the mid-1990s. Since then, illegal markets have sprouted up to supplement, or sometimes even replace, the state’s failed ration system.

But the markets have had a destabilizing impact on the regime. The smuggling of Chinese goods bred corruption among soldiers and party officials who took a cut from the growing underground economy, analysts in Seoul said. Profiteering spread as people scavenged for survival, and a mew moneyed class emerged in what was supposed to be a classless society. After years of turning a blind eye to the markets and even dabbling with Chinese-style market reforms, North Korea began cracking down on the markets in 2005. [N.Y. Times, Choe Sang-Hun]

“I am most heartbroken by the fact that our people are living on corn,” Kim said in a report monitored by South Korea’s Yonhap news agency. “What I must do now is feed them white rice, bread and noodles generously.”

Kim made a similar statement in January, mentioning white rice and meat soup. But the likelihood of his being able to improve nutrition in his country in the short term seems small. [Washington Post, Blaine Harden]

Adding to the poignancy, experts say the bungled reforms were done in the name of Kim Jong Un, the dictator’s third son and potential heir. His involvement may have been part of a strategy to reassert Stalinist-style state control of the enfeebled economy ahead of 2012, the 100th anniversary of grandfather Kim’s birth.

It seems unlikely the plan has been abandoned altogether, not least because the small markets that have flourished since the famine of the 1990s pose such a challenge to the state’s authority. But the ineptitude must have been glaringly obvious, even in the hermetic state.

“The government has never said sorry to the people, especially on a topic as sensitive as rice,” says Andrei Lankov, of Kookmin University in Seoul, a writer on North Korea. “Because of Kim Jong Il’s age and the age of those around him, it looks like he may be losing touch with reality. [….]

[T]he mere hint of economic fallibility in a regime that demands almost religious devotion from its subjects may turn out to matter more than the diplomatic manoeuvres. It comes at a time when North Koreans, using smuggled DVDs and telephones, have a better idea than ever before of how far their living conditions fall short of their neighbours’. That is a rare point of vulnerability for Mr Kim’s interlocutors to exploit. [The Economist]

My strong suspicion is that for a large percentage of the North Korean people, The Great Confiscation was a deal breaker. I don’t mean the social contract between the people and the state. For most North Koreans, that contract was breached during the Great Famine. This time, the broken deal is the pretense that the social contract still exists.