In normal circumstances, economic growth is achieved by investing in labor-focused skills and physical infrastructure, the introduction of a marketized economic system, and protection of the lower class and vulnerable populations.
But this is no easy task in North Korea, which would require it to escape from the shackles of its planned economic system, bring in outside investment and technology, and implement efficient systems. All of this depends on policymakers.
When Kim Jong Un missed a meeting with U.S. Secretary of State Mike Pompeo during his visit to North Korea, his whereabouts were unknown. According to North Korea’s state media, however, Kim was in Yanggang Province, Samjiyon County. There, he was allegedly overseeing potato cultivation, and handed down orders to mechanize and modernize the equipment, according to North Korea’s media. This hints at a greater focus being placed on the area.
Currently, North Korea’s agricultural equipment is in a state of ruins and disrepair. Farms are using obsolete equipment manufactured some 30-40 years ago. Lacking spare parts, tires, and oil, much of the equipment is unusable. Kim has apparently noted such observations and reacted with disappointment.
Faced with this reality, Kim urged that “change and development” must occur in order to meet modern standards and keep up with global trends. But what needs to be changed first to enable such development?
The most important changes are improvements to the country’s political system and economic structure. Policymakers bring their outdated points of view to modern issues, so changing this problem takes precedence. If policymakers continue to override the advice of their subordinates, significant change will remain difficult.
A large proportion of the national income has been devoted to the military and heavy industries, and social overhead capital has been focused principally on core facilities with “public good” characteristics.
So what about the ordinary North Korean resident? Through working as laborers in commercial enterprises involved in the markets, they’ve achieved unprecedented improvements in living standards. The number of public industry laborers has declined as public enterprises have struggled to provide them with adequate wages and a reasonable quality of life.
The principle source of most family income has quickly changed from public entities to market entities. The market economy has attracted droves of laborers from the public sector.
The North Korean authorities are transitioning from socialist education towards a wider scope of education aimed at creating a labor force with a broader set of practical skills. But problems remain. Material capital is insufficient, the finance system has numerous issues, and the economic system is faulty.
In order to make meaningiful strides toward development, this system will need to change. Let’s look at the agricultural sector for one example. Farmers in North Hwanghae Province have not been able to receive proper benefits or compensation from their harvest because they are required to contribute bribes to the military and the capital city. The agricultural market will be able to survive if it gains access to internal and external markets and pursues profit-driven incentives. This will result in increased productivity and diminished burden on the rest of the economy.
In truth, it has been a long time since products were produced in adequate supply, and the markets have entered an important place in the lives of most North Korean residents. These markets will be instrumental in eliminating the remaining vestiges of the old socialist economic system.
The opportunity for an economic boon in North Korea is at hand, one that North Koreans could not even dream about a few decades ago. Many of North Korea’s economic woes can be alleviated through earnest cooperation and exchange with South Korea. This would increase the economic competitiveness of North Korea’s outputs and help to raise the standard of living.
The important thing is to transition towards becoming a normal country. By fulfilling its promise to denuclearize, cast away its policies that violate human rights, and join the international community, North Korea can substantially change its reputation and place in the world.
The international community has a need for countries like North Korea with ample resources and an educated workforce. North Korea can position itself to benefit from this.
These resources can be acquired much more cheaply in North Korea than elsewhere. Economic opportunities are also created by the ready supply of labor in the services industry as well as manufacturing. It can also acquire advanced technologies from South Korea. This all depends on how sincerely North Korea wishes to transition towards market-friendly policies.
Witnessing his country’s economic problems, Chairman Kim Jong Un demanded that his officials make progress towards change and development. But in reality, change needs to start from the top.