Market Reform the Chinese Way

Human beings do not have the ability to foresee the future, as history has shown. Theories by which we can scientifically prophesize the future, such as Marxism, have all turned out to be failures.

However, if we investigate historical experiences and global trends, we can predict some believable scenarios for the medium-term. These kinds of scenarios are just hypothetical reasoning, but through them we can guess the future in a broad way.

For example, here are four scenarios for the foreseeing of North Korea’s future as of June 2008: market reform in the Chinese way; unification by co-option into South Korea; establishment of a pro-Chinese regime; and long term chaos.

Market reform in the Chinese way

Kim Jong Il or his successor might start a gradual reform policy which imitates the experiences of China and/or Vietnam. This reformer’s regime would share the land with farmers, privatize medium-and-small-scale businesses, and also concert the outdated and moribund planned economy into the effective market economy. While carrying out these series of reforms, in the politic field the authorities could stabilize the nation under the banner of communism and hold on to authoritarian policies.

As we saw in the case of China, this policy has a great latent ability to arouse high-speed growth of the economy. As long as North Korea chose this policy, every North Korea citizen would eat no corn rice or mixed rice anymore, but just unadulterated white sticky tasty rice. A few years after the launch of the reform policy, the people would be able to change old shabby bikes into motorcycles. The fears of the National Security Agency and the Party would still remain, but private freedom would sink gradually into the mindset of the society. North Korean elites would transform themselves into competent managers or entrepreneurs and could keep their privileges, while switching the residents from warriors of the Leader into the cheap labor power.

It is natural that South Korean people would welcome the policy because they are fearful of enormous unification costs and North Korean chaos. Although for reform North Korea needs a lot of support, South Korea will not be reluctant to support such efforts rather than face the risk of other scenarios. In this case, there would be almost no possibility of military collision between the South and the North and a massive refugee crisis.

However, there is one more very important point to this reform policy, and that is that there is “zero possibility” of it, even though it is the perfect future.

As I have insisted many times, the existence of free and affluent South Korea can profoundly influence North Korean people. Simply put, although Chinese people know that the U.S. and Japan are much wealthier than themselves, they know, at the same time, that China cannot be united with these countries to match their level of consumption with the developed countries’ ones.

If North Korean people achieve the freedom to access information and to do at least as much as Chinese people have lately been able to do, the attraction of South Korea will make the Northern regime insecure.

The North Korean people will think that North Korea can easily solve its economic problems and raise their consumption level up to South Korean standards through unification and subsequent co-option into South Korea. Sure enough it is a fantasy, but this fantasy can weaken the North Korean regime.

In other words, if the North Korean regime starts a reform and opening policy similar to that of China, it will result in political turmoil and the collapse of the regime rather than high speed economic development. Political turmoil can also bring about the second scenario (unification and co-option into South Korea) or it may be an overture for the third (a Chinese satellite regime) or fourth (long term chaos) scenarios.