The Bank of Korea announced that North Korea’s economic growth rate was -3.5% in 2017. This came as no surprise, given the actions taken by North Korea’s leaders, who believe that ideological enthusiasm toward political goals can overcome the country’s economic crisis. North Korea’s leaders have committed several fatal policy mistakes, with their “eyes and ears” having been covered by inflated economic statistics.
The most significant mistake has been increasing military spending while investing the country’s resources in nuclear development. The resource shortages caused by increasing military expenditures have been exacerbated by the country’s continued adherence to “self-reliance” policies and its planned economy. Moreover, leaders have blindly chosen to believe that they can develop the country’s science and technology fields without allowing the their economy to open up to the world.
Industrial workers are forced to work seven days a week for 10 or more hours per day due to so-called “speed battles” aimed at accomplishing a large volume of work in the shortest possible time. North Korea’s economic sphere is awash with all kinds of “battles” and “shock troops.” The country’s plans for industrial production rates continue to increase, particularly in the spheres of agriculture, coal, mining, electricity and steel.
Continued international sanctions and economic trouble has led to a reduction in imports and a rise in food shortages throughout the country. Some areas of the country are on the verge of mass starvation. Recent droughts, floods and other natural disasters have only added to the country’s difficulties.
International sanctions have worsened the country’s economic situation, but the fundamental problem is political in nature. The failed strategies of North Korea’s policymakers have almost completely disregarded the trends and changes occurring across the globe.
This year, North Korea’s leadership ascertained the need for drastic measures and hinted at new policy changes. The New Year’s Address emphasized peace, while the Pyeongchang Olympics, two inter-Korean summits, and the US-DPRK summit have continued to raise interest amongst the international community toward denuclearization and peace on the Korean Peninsula.
The North Korean leadership presented a new strategy for economic growth, and the country’s general markets are continuing to be revitalized. The responsibility for agricultural production has moved from co-op farms to family units, and the country is attempting a wide variety of economic recovery measures.
North Korea’s leadership, however, has still failed to move away from its outdated economic policy framework of “self-sufficiency,” and is not moving forward resolutely toward measures that will fully implement the market economy in the country.
Why is North Korea’s self-reliant economy irrational?
Priority is placed on policies that support national defense and so-called “military-first” measures. The Korean People’s Army (KPA) intervenes in economic matters to resolve the serious economic issues affecting the country. Ultimately, the military has become so intertwined in economic matters than a new term has been created: the military economy.
Emphasis on agriculture and manufacturing has been made through economic management, but the economy is still largely dependent on a planned system, which makes it near-impossible for market-competitive management methods to infiltrate from the outside.
The country’s dual pricing system, which has arisen due to the co-existence of the planned and market economies, is preventing progress toward a completely market-based economic system.
Moreover, the country’s inability to remove itself from the socialist planned economy is an issue. The government is still unaccommodating toward the market and entrepreneurs, and co-op farms and organizations that hold the right to joint ownership are still being restricted from participating in free market activities due to government’s policies.
The dearth of foreign capital investment in the country’s manufacturing sector has made it difficult for real competition to take place in the consumer market and has led to stagnation in product innovation and quality.
The state’s investment is focused on heavy and military industries along with construction projects for the elite, which has created a gap in the development of economic infrastructure. North Korea’s focus on heavy industry has consumed a great deal of capital and technology, at the expense of the consumer goods industry. For this reason, the country has insufficient infrastructural resources, and North Korea’s leaders have been using the sparse resources that do exist very ineffectively.
So how can North Korea become a strong and prosperous country?
The following excerpt from an article published in the July 16, 2018, edition of the state-run publication Rodong Sinmun makes for sobering reading.
“Now is not the time to sit down and wait or cry for the right conditions to fall into place. This is the time for all workers to make a brave decision and work proactively as fighters with a do-or-die spirit by becoming the everlasting flame that spurs rapid development and implement perfectly and rapidly whatever is given to them by the Party. Our workers have no right to faint or die before carrying out the Party’s policies and orders.”
This article hints at the position North Korea’s mid-level bureaucrats find themselves in. They don’t have sufficient resources available to them, but nonetheless must unconditionally strive to achieve the tasks demanded of them by the Party.
For the country to develop, the right conditions must be set by the government. The regime must reform the country’s economy and show the world that it is attempting to rid itself of corruption.
Instead of criticizing bureaucrats for failing to finish building projects, the government should focus on reforming the country’s irrational economic system and cooperating with the outside world. This will propel North Korea toward becoming a respected member of the international community.