Fearing a Repeat of the Great Expropriation

North Korea is preparing to implement the ‘June 28th Policy’ of economic improvement measures, yet there is little sign of excitement on the part of the North Korean people. On the contrary, last week’s sudden exchange rate and price hikes suggest a good deal of uncertainty over what the future holds.

The current atmosphere stands in stark contrast to that of ten years ago, when the 2002 July 1st Economic Management Reform Measures were brought in.

On October 1st, 2001, just one year before the launch of the 2002 measures, Kim Jong Il issued a statement to Party managers: ‘On improving and strengthening socialist economic management in keeping with the demands of strong and prosperous state construction’. Just ten months had passed since Kim visited vibrant Shanghai, a place that really impressed him.

The core contents of the July 1st Measures were not revealed in full at the time; instead, the regime kept reiterating in public education sessions that “They are groundbreaking measures that will maximize the independence and creativity of the people.”

The situation today is not so different. Those sparse aspects of the June 28th Policy that have been made public appear to indicate that in some areas it represents an improvement over the July 1st Measures, but in other ways that it is much the same. In one of the most notable changes, ‘self-sustaining’ factories and enterprises will no longer receive targets from the state and will be free to set production levels and prices. Elsewhere, while public distribution of rations has long been the responsibility of factories and enterprises themselves, under the June 28th Policy they are supposed to deliver all payment in the form of wages, while in one of the most distinct difference between the two periods, farm production will be distributed at a ratio of 7:3 between state and individual farming unit, with the producer keeping all over-production.

It has to be said that at the dawn of the July 1st Measures, there was also more confusion than results. But as managerial authority expanded in self-sustaining factories and enterprises, the atmosphere changed. Great energy emerged as personnel, production and sales decisions were made on managerial authority, and workers started to receive wages and rations according to the success of the enterprise.

Soon these incentives and performance-based pay structures elevated productivity. Attendance was often near 100% in factories where production levels were high, while more and more shops and stores operated by factories and enterprises came into being and individuals opened private stalls selling foods and daily necessities. The Ministry of People’s Safety, the Ministry of the People’s Armed Forces and various other organs all began operating shops and restaurants, clamoring for a piece of the action.

Admittedly, many of these changes were constrained by the abilities of the individual companies; however, overall they brought vitality to the country’s long-depressed economy.

One defector from Hyesan, 43-year old Lee Chul Ho recalls of the period, “There were new signs going up here and there literally overnight. In Pyongyang and the provinces, [people with money to invest] got involved and started reviving some moribund factories, while existing and new buildings were put to use not only for shops, stores, bars and restaurants, but also for karaoke parlors and billiard halls.”

“There were also massage parlors, hair and beauty shops and saunas,” Lee went on. “People were able to buy things more easily, so their lives became much more comfortable. The foreign currency shops and restaurants used by cadres and foreign currency earners gradually began to disappear.”

Economic revitalization naturally resulted in more active trade between North Korea and China as well. North Korea expanded the right to trade with the outside world to city and county enterprises, allowing transfers of technology, equipment, materials and raw materials, as well as joint ventures themselves. Various trading companies sprang up, representing another great opportunity for those with investment capital.

Of course prices skyrocketed, but a lot of jobs appeared and led to more opportunities to make money. There are even rumors, unverified, that Kim Jong Il commented as he watched a video of Pyongsung market, “That couch is better than the one in my room.”

But on April 25th 2005 it all came tumbling down as the state closed down shops and other services, calling them “anti-socialist elements”. Buildings, facilities and other property was expropriated, and patrols organized by the Ministry of People’s Safety smashed signboards down with hammers.

The people went into shock as their assets vanished overnight, and it is this type of experience that is rightly cooling expectations now. Speaking figuratively, “they eat the ones that have been fattened up”. In other words, whenever the economy of North Korea seems to be recovering thanks to the efforts of the people, the state takes everything by force. One cannot blame them for feeling uncertain.