Despite the deepening international
isolation of North Korea, Kim Jong Un is increasingly opening up the country’s
economy and tourism industry in hopes of securing more funds for his
leadership. Kim Jong Un’s tacit approval of private business activities has
resulted in the expansion of markets. Some suspect that Kim Jong Un is taking
advantage of the budding elements of the market economy such as stall taxes to
raise funds for his leadership. Over the past four years of his rule, the lives
of average North Koreans are seen as having improved through the North’s
various economic policies and here to tell us more about is Director Jeon Hyeon
Jun from the Northeast Asia Peace and Cooperation Institute.
1. Rice prices and the exchange rate in the
North remained relatively stable in 2015. Some attribute this to the market’s
stabilization of supply and demand, and this has also led to a boom in the
marketplace. What is your take on this?
It seems that more than 90 percent of North
Koreans maintain their livelihood through the marketplace. Though there are
general [official] markets in the North, the majority are unofficial markets through which
many people earn money. As rations under Kim Jong Un’s regime cannot provide for
them sufficiently, it appears market vitalization is being used as a means to
resolve this problem.
Of course, the North Korean economy is not
improving solely due to the pick-up in market activity. Factors such as natural
resources and labor exports, tourism, and overseas restaurant operations have
had an effect, but the basis of growth still comes from the markets.
Stable rice prices have always been an
important foundation for growth. In the past, 1 kg of rice has risen up to
8,000 KPW, but currently, it is stable, hovering around 5,000. The official
exchange rate is believed to be around 108 KPW to the dollar, or 8,400 KPW according to the black market rate.
2. So Kim Jong Un’s leadership does not
actively regulate the marketplace and allows some degree of freedom. If you
were to evaluate his overall policies toward the market?
Personally, I think his approach toward the
markets is positive. North Korean marketplaces should quickly grow and
introduce the capitalist mode of production, in order for it to receive
recognition in the global community and improve the quality of its people’s
lives. So I don’t view this trend of marketization in a negative light. But if
these marketization policies are temporary and short-lived, I think that would
be a problem.
These policies have, to some extent, resolved the problems that
the people face in making ends meet. That’s why there would be huge
implications if they start cracking down on markets or if they shut them down
just because conditions have improved somewhat for people. There have been many
instances in which the markets were shut down during Kim Jong Il’s time,
because there were concerns things would get out of control and lead to
unwanted rumors. I hope that’s not the case with Kim Jong Un.
3. Some say that Kim Jong Un is earning an
enormous amount of capital through the marketplace. Government funds are
secured through means such as market taxes and mobile phone sales. What do you
think of this?
You can say that government funds are being
secured through the markets. Market fees are collected based on the size of the
stall, and the types of items sold. These taxes are no doubt added to the state
coffers and used for state finances, but it is speculated that a portion of it
goes to Kim Jong Un. North Korea is fundamentally a suryong [supreme leader] economy. Since the
suryong has complete control over the nation’s channels of money, you can say
that everything is owned by the state and by extension, the suryong.
But it’s not that all profits earned from
the markets go to the leadership. This is because part of it is owned by
individuals. This is why in the North, we now have people called donjuLiterally "masters of money," donju refers to people who hav... More [new affluent middle class] who have
in essence become capitalists. These are the people who get to own some of the
profits.
One illustration would be the mobile phone
market, where it costs about 50 USD to import a handset from China, which is
then sold for roughly 200-300 USD. The profits from this are pocketed by the
North Korean government, but it is said to be split roughly by a 3:7 ratio: 30%
goes to the vendor, and 70% goes to Office No. 39 under the Central Party,
where it is used for leadership funds. Most is spent on the various projects
that Kim Jong Un puts forward.
4. Some believe that this movement of
marketization will help stabilize Kim Jong Un’s regime. What do you make of
this?
Along with the stabilization of prices
thanks to the boom in market activity, living standards have improved, so it
seems this has helped quell some of the disgruntlement people had. North Korea
promotes this improvement as an achievement of Kim Jong Un, so public support
for the leader has remained somewhat steady. If you look at surveys on
defectors, you’ll see that Kim Jong Un has about a 60% support rate. Of
course, this figure is lower than that of Kim Il Sung or Kim Jong Il, but it’s
still a very high approval rating, and it can be attributed to the policies
that have helped stimulate market activity.
5. But there’s also the belief that the
proliferation of markets will trigger a change in values among people. They say
the ‘jangmadang [marketplace] generation’ value the markets more than the
state, so their loyalty is getting weaker. What would you say to this?
A change in values will inevitably occur.
During Kim Il Sung’s rule, people strongly believed that their livelihoods
would be taken care of by the leader through state rations. As a result, they
had strong loyalty towards the leader. On the other hand, after experiencing
the Arduous March [famine] of the mid-1990s, as neither the Party nor the leader could
provide for them, doubt began to spread. So recently, love and passion towards
the family and self are becoming stronger than their devotion towards the
leader, state and Party.
6. Along with these market-friendly
policies, people are also saying consumption is improving. Particularly in
Pyongyang, the increase of things such as apartments and cars has led many to
believe that this is the effect of marketization. Could you please tell us
about some of the changes that we’re seeing in people’s everyday lives?
It goes without saying that a boom in
market activities will lead to a change in public perception. Individualism rather than collectivism and nationalism develops, and this also
leads to a change in actions. According to existing rules, the sale of
apartments or homes is not allowed since the property belongs to the state.
Instead, the type of exchange in North Korea is essentially not for the right
of ownership, but the right of usage. Yet the exchange for the right of usage
itself is still in conflict with the practice and rules of socialism. While it
used to be that one would be punished for this if caught, it has now become so
commonplace that the state security and people’s safety officials just turn a
blind eye to it.
Also, modes of transportation such as taxis
in Pyongyang have increased. This shows that the movement of Pyongyang
residents has become more active, and the need for long distance transportation
has increased. As the markets become more active, jobs normally found in
capitalist societies are emerging, and bureaucrats related to these changes are
accepting more bribes as corruption becomes worse.
7. Though the quality of life for people
has improved to some degree, unwanted side effects cannot go unnoticed. As the
reach of the private economy expands, the planned economy has collapsed, the
gap between the rich and the poor has grown, and other factors of instability
have increased.
It is true that with the expansion of the
private economy, there has been a collapse of the planned economy and the
wealth disparity has increased. The top one percent’s earnings are 18 times
more than the majority of the lower classes. The rate of factory operations has
started to increase, and this is because wealthy donjuLiterally "masters of money," donju refers to people who hav... More are finding ways to cut
corners and pay money to reopen those factories to pocket the profits.
While there are still food shortages, and
many are stuck in absolute poverty, we can say that the very fact that the
above events have become prominent indicates that the elements of production
from capitalism are being introduced, making it not entirely a bad thing.
8. Lastly, it seems that Kim Jong Un will
continuously look for ways to manage this marketization trend, given the side
effects it can produce. What kind of measures do you think we might see in the
future?
I think we might see a repeat of
marketplace regulation and tolerance. In other words, on one hand he will
overlook market activities so that it will improve people’s livelihoods, but if
it swells to the point that it threatens the regime, he will likely immediately
and ruthlessly control it. I think we’ll see a repetition of that.
Nonetheless, as seen in history, things
continue to move forward. Ultimately I believe that North Korea will inevitably
reach a point where it will have to officially introduce a market economy.
