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Despite nuclear tests, North Korea makes capitalist-style reforms

media North Korean leader Kim Jong-un reacts during a celebration for nuclear scientists and engineers who contributed to a hydrogen bomb test, in this undated photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang on September 10, 2017 KCNA via REUTERS

North Korean leader Kim Jong-un this weekend praised the "perfect success" of the country's sixth and largest nuclear test during a massive banquet and display of pageantry to celebrate the 69th anniversary of the country’s founding. Unknown to many, and parallel to its nuclear development, North Korea is also reforming its economy using capitalist techniques.

Street markets are spreading like wildfire in the streets of Pyongyang and other cities, allowing people to live better than their meagre state salaries allow them.

Contrary to popular belief, the North Korean economy is veering away from hyper-communist "juche" (self-reliance) and embraces ideas that come straight out of the playbook of US economists, based in the “den of the Imperialist wolves,” as America is routinely called in North Korean propaganda.

RFI talked to Kim Byong Yeong, professor of economics at the Seoul National University. Author of the book Unveiling the North Korean Economy, Collapse and Transition, he sheds a new light on the wheeling and dealing of the hermit kingdom.

It is a slow process, but a definite process. Therefore Kim Jung-Un may recognize that this can be quite dangerous for him to maintain power in the long run.

North Korea economy 10/09/2017 - by Jan van der Made Listen

Q: You write that there’s been substantial economic growth over the past couple of years, markets have been opened for the general population. Contrary to popular belief in the west, you write that North Koreans are actually starting to enjoy the fruits of a more capitalist-oriented economy.

A: The North Korean economy used to be a socialist system. But this system broke down in the mid- and late 1990s. After that there was a massive marketisation process that spread into the country’s economic activities. And today the share of household income from market-related activities is between 70 and 90 percent of the total income. Markets are now the survival line for most of the households in North Korea.

The economy is changing towards being more open. Initially the party propagated a closed, self-contained system. But they found out that growth was not possible in a closed economic system.

The economy opened up in the 1990s. When today we measure economic “openness” in terms of trade dependency as the sum of export and import divided by GDP, it is somewhat higher than 50 percent. So North Korea can be described as an “open economy”, because the world average of trade dependency is about 50 percent. Marketisation and openness are the most important factors for economic growth in North Korea nowadays.

In China there was a similar development. As of 1978 the Chinese Communist Party got rid of its old concept of “class struggle” and replaced it with its “reform and open door policy" that led to the massive boom we are seeing today.

This was sold to the public as a hybrid system called “socialism with Chinese characteristics” where these characteristics meant full-scale market economy but in fact it is completely undermining the very idea of communism by injecting it with the very elements it was struggling against.

Q: How did the North Koreans sell this to the public that is so completely brainwashed with the “Juche” theory of communist self-reliance?

A: The difference between China and North Korea is that China recognised markets as of 1978 and institutionalised marked activities. In North Korea markets are tolerated without being institutionalised. That is the big difference. China is politically socialist country but economically capitalist. In North Korea marketisation has been expanding, but this has not been officially recognised by the authorities.

Q: What impact do these small street markets have on the population?

A: In the long run, North Koreans will change. Because they used to rely on state- rationing but now they generate their own income. So their social mindset will change according to market capitalisation.

[Professor Kim Byong Yeong interviewed North Korean refugees who came to the South.]

“I classified them into two groups. Those who took part in market activities while they were living in North Korea and those who did not. There were huge differences in the mindsets of these two groups. Those who did participate preferred private ownership to state ownership and preferred competition to egalitarianism. So they are changing from those brainwashed into the ideology of “Juche” to homo economicus (or a human being that wants to possess wealth.)

Q: Isn’t the North Korean regime digging its own grave by changing the mindset of the people at large?

A: Exactly! It is a slow process but a definite process. Therefore Kim Jung-un may recognise that this can be quite dangerous for him to maintain power in the long run. This may be one reason why he split up the development of nuclear weapons and long-range missiles.

This simultaneous development of nuclear capability and the increased tolerance of market forces is called the “Byongjin policy” of “parallel development”. Kim Jung-un’s objective is, on the one hand developing a nuclear capability, while [Kim Jung-un] is aware that marketisation may undermine his power in the long run, the development of nuclear weapons may mobilise the people’s support, so he can maintain his power for the time being. Afterwards he may want to concentrate more on economic development. But it is difficult to balance these parallel developments because of the sanctions.

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