North Korea Appears to Have Slowed Down Economic Reform Drive

A commentary by Andrei Lankov
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Kim Jong Un (C) inspecting a live fire drill at an undisclosed location in North Korea, March 20, 2013.

If we are talking about the economy, the last two or three years have been a time when hitherto unheard of stories began coming out of North Korea with ever greater frequency. Indeed, from late 2012, the North Korean government began to quietly implement reform policies highly reminiscent of what China did back in the late 1970s. Such reformist policies largely centred around two important documents, namely, the so-called ‘June 28th Instructions’ of 2012 and the so-called ‘May 30th Measures’ of 2014.

The most important part of these sets of policies was a far reaching change to North Korea’s incentive mechanism in agriculture. The ‘June 28th Instructions’ envisioned that farmers would be permitted to work in family-based teams and allowed to retain 30% of the harvest. As economists often say, incentives work, and sometimes even work wonders. Working under the new system, North Korean farmers have produced more food than at any time in the last 25 years, bringing the country quite close to the goal of food self-sufficiency.

The ‘May 30th Measures’ were even more ambitious in their scope. The measures allowed factory managers to buy industrial supplies and produce at market, while also being permitted to sell what their factories were to produce to whomsoever they pleased. They were also given the right to hire and fire personnel at will, as well as setting wages at levels they choose. This system was first implemented in early 2013 in some experimental enterprises. Such enterprises were easy to spot because workers there were paid what can be described as exorbitant wages by North Korean standards. Musan Iron Mine, for instance, being one such experimental enterprise, pays its workers 300,000-400,000 won a month (roughly 100 times what workers would get paid under the old system).

Slowdown but no reversal

The ‘May 30th Measures’ envisioned that the new system would be expanded to include all North Korean enterprises, but this is not what has happened. Reports emanating from North Korea in the last two months leave little doubt that the expected transformation has at best been postponed, at worst, cancelled entirely. Right now, only a minority of North Korean industrial enterprises have been allowed to implement the new model.

What happened? Frankly, it is unlikely we will receive a definite answer to this question any time soon. Of course, it is quite possible that Kim Jong Un suddenly changed his mind and decided to stop reformist activities that he found to be politically dangerous and ideologically suspicious. It is also possible that the reforms faced determined opposition from conservative members of the bureaucracy and military. Last, but not least, it is also possible that North Korean leaders have come to understand the problems that such reforms would face without prior and proper changes to the financial system.

Whatever the reasons, it is clear that the North Korean government has decided to slow down the reform process. At the same time, there has as yet been no reversal.

One can only hope that the North Korean government will not spend too much time in such oscillations between reformism and conservativism. Time is running out for Kim Jong Un, and this is largely because of popular political psychology.

Kim Jong Un, contrary to what many might believe, is quite popular in North Korea. According to many inside and outside the country, the ordinary North Koreans have pinned their hopes on Kim Jong Un for improving their lot. If he wants to succeed, he should not waste the potential that such popular support gives him. Many changes are potentially controversial and painful, and popularity can help smooth the process.

However, reservoirs of good will are depleted unless leaders live up to expectations. Painful reforms need to be implemented quickly, if he waits too long such reforms could prove to be dangerous.

Unlike his father and grandfather, Kim Jong Un cannot afford to ignore the popular will. His father and grandfather had a great deal of control over society and they could always count on the North Korean people’s docility and obedience. However, the surveillance network is not what it was twenty years ago. People are increasingly aware about how poor their country is and how prosperous China and South Korea are. They can also make a living outside government structures, making them potentially less easy to control.

Thus, in such circumstances, it is crucial that Kim Jong Un does not waste time. Let us hope that reforms will get back on track because they may otherwise be grave for Kim Jong Un and the North Korean people alike.


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