Who Can Kill the 3-Tiered Economy?

Is real reform on the horizon in North Korea? Before we don our rose colored glasses — as some already have — with respect to impending reform by Kim Jong Eun (“Kim the 3rd”), we need to take a hard look at what he intends to reform. What Kim the 3rd inherited from father Kim Jong Il (“Kim the 2nd”) is an infrastructure in sad shape. In all fairness to Kim the 3rd, he was dealt a messy, messy hand.

According to our former teacher Hwang Jang Yop, the economic model that is in place now is a brainchild created by Kim the 2nd based solely on his greed for power and control.

In the mid 1970s, Kim the 2nd, then a young understudy to the throne, devised a three-tiered economy: the Party; the military; and third, the general masses. These units are separate, independent and don’t interact with each other.

The Party economy is operated and managed by the Chosun Workers’ Party. It consists of the most lucrative enterprises in mining, shiitake mushrooms, light manufacturing, fisheries, and other industries that produce foreign currency. Kim the 2nd kept his hand in the Party economy and amassed his personal fortune, which he used to reward his loyal followers, through it. As a result, Party elites enjoy the ‘life of Riley’; the best food, housing, clothing and education for their children. They are able to accumulate wealth.

The military economy consists of production and the sale of arms and munitions, as well as heavy construction projects like roads, railroads, tunnels and power plants. The military sector manages these enterprises, generates its own revenue and feeds a huge army. Military elites do fine as well. They live in fine houses, drive nice cars and so on.

Finally, the general public ends up with whatever is left over. There is no trickling down of any sort. Average workers and farmers scrap for what’s left and barely manage to subsist on their own with no help forthcoming from the Party or the military. The latest typhoons and floods shrank their food supply to a dangerous level, and people worry about the second coming of the famine, not to mention perennial shortages of fuel and electricity.

In short, the bulk of the country is starving and freezing in the dark, contrary to the promised “nation of great strength and wealth by 2012.” There are signs of discontent all over, and people continue to escape across the border in droves despite attempts to seal it.

This is what Kim the 3rd inherited from his father. Where does he go from here? He first needs to understand where he is before he can figure out where to go next. The question is — does he understand where he is?

Does he understand that the system his father had devised was intended to lord over his subjects rather than to foster economic expansion? Economics 101 should tell him that robust economic activity is a prerequisite for a healthy economy. But in his case, he is looking at a chopped up, disconnected system that is not designed to facilitate economic flow and circulation throughout the country. The most he can do with the existing system is to play traffic cop, directing what resources go to where, just like his father did. Most likely, Kim the 2nd gave young Jong Eun a crash course in how to run a dictatorship before he died.

Teacher Hwang didn’t think much of “that snot-nosed kid,” but said that as long as Kim Kyung Hee (Kim the 2nd’s sister) and her husband Jang Song Taek are around, things will be okay, meaning that the transition will go smoothly. This turned out to be the case…. as far as we know.

Now, young Jong Eun appears to be working hard to show that he is his own man, making public speeches, showing off his wife, etc. It is difficult to tell if that was part of the script Kim the 2nd worked out for him, but chances are that Kim the 2nd wanted the nation to remain “shrouded in a fog,” a strategy that he utilized so effectively throughout his life. No doubt Godfather Corleone’s axiom, “Never show your enemy what you’re thinking,” was driven hard into the young Jong Eun’s head. But it seems it didn’t take. Disney show? Wild ride on the rollercoaster? Come on now, is that the way for a true dictator to behave?

Some experts opine that Kim is trying to reach out and project a softer image. To what end, I ask? If he has in mind initiating real changes to improve the lives of the people, he needs to go back to square one, starting with the dismantling of his father’s aberration, the three-tiered economic system. Artificial changes like the failed currency reform of 2009 or the impending agricultural reform are not going to do it. Letting the farmers keep 30% of their crop seems like another empty promise conjured up by Party bureaucrats whose sole purpose is to please Kim the 3rd with a quick fix, rather than offering a real incentive for farmers to increase crop production.

Kim Jong Eun needs to come up with a bold initiative, his own brand of glasnost and perestroika in such a way that the majority of the people feel they have a stake in society. Image-building and sloganeering belong in the past. People are not buying them anymore.

* The viewpoints expressed in Guest Columns are not necessarily those of Daily NK.

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