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PYONGYANG
WATCH
North Korea caves in to the
market
By Aidan Foster-Carter
Something nice is happening in North Korea, on
paper at least. As state employees (which is just about
everyone) open their end-of-month pay packets, they're
finding what looks like a raise to die for. All wages
have been hiked at least tenfold; for some lucky ones,
twice that. A socialist paradise indeed.
There's
a catch, of course. Salaries are up 10-20 times, but
prices have rocketed 20-40-fold. Bus fares in Pyongyang,
hitherto 10 jon (the DPRK won has 100 jon, or used to:
this minuscule unit is no more), are now 2 won
(officially about 90 US cents). Housing and utilities,
previously heavily subsidized, will cost around 10
percent of income.
Or so it seems. In a normal
country, a change of such magnitude would go through the
proper channels. It would first be officially gazetted
in government publications. Before that, it would be
duly enacted in law according to due process: passed by
an assembly of some kind, even if only a rubber-stamp
one. In a democracy, nothing so major would happen
without parliamentary, press and public debate.
Not in North Korea. Even as it takes a bold
first step toward at least economic normality, Pyongyang
is still doing it in in the time-honored manner: by
stealth. As of July 29, not a word on any of this had
yet appeared in any official DPRK (Democratic People's
Republic of Korea) publication; although a pro-North
Korean paper in Japan confirmed the gist of it. Instead,
it was left to wire reports to unleash an orgy of
frantic speculation from afar.
But one lucky
journalist happened to be in Pyongyang when the news
broke - and duly got his scoop. The Economist's Beijing
correspondent, James Miles, was able to confirm the
basic facts (and figures, even) on the spot, while also
pondering the wider implications from a firmer
foundation than most.
Some numbers first. The
most striking increase is the price of rice, from 8 jon
per kilo - virtually free - to 30-35 won, close to the
black-market rate. Not only consumers, but factories too
must henceforth forgo subsidies and pay the real cost of
goods and services. Diesel - if you can get it: oil is
like gold - is up from one to 38 won per kilo, while
electricity has rocketed 60-fold from 3.5 jon per
kilowatt-hour.
On the salary side, the increases
are not only inadequate for most people, but avowedly
unequal. The Economist was told that while office
workers are to get 17-20 times their previous 100 won
per month, coal miners' wages will rise 30-fold. We're
talking incentives here. Or perhaps payoffs. Other
reports claim that the million-strong armed forces - a
huge drain on the economy, despite their involvement in
construction and farming - have also gained
above-average raises. Can't have grumbling in the ranks.
Down on the farm - which still means
collectives, at this point - government procurement
prices for rice rose 40-fold overnight from July 1.
Other increases are much less: fourfold for potatoes,
which North Korea is trying to promote as an alternative
staple to rice and maize (corn), and from 14 won to 110
won per kilo for pork. One official estimated average
farmers' incomes would rise tenfold overall, from 3,000
won to 30,000 won, depending on the harvest. Rather less
then, it would seem, than for most other groups.
Not that he was complaining. You still don't do
that in North Korea. Yet Miles heard some surprisingly
blasé remarks. His farm official noted: "Most people in
the country had been thinking about the price of rice.
It was too low. It was almost free." Similarly, an
office worker was less than overjoyed at her 20-fold
wage increase: "But I will have to pay for housing and
rice." And how.
As comments like this suggest,
formerly alien concepts such as prices and markets are
no longer strange to today's North Koreans. Since famine
struck in the mid-1990s, the public distribution system
(PDS) that used to guarantee a basic minimum in food and
other necessities has largely broken down. To survive,
most people have had to turn to farmers' markets. These
had always been there, grudgingly tolerated as a blot on
socialism. But in recent years they've expanded vastly,
and for many have literally made the difference between
life and death. Even so, the state still views them with
suspicion. Or has, until now.
While the full
scope of these changes is still unclear, and their
effects remain to be seen, at a minimum they represent a
(very belated) tacit acknowledgment by Pyongyang that
ultimately you can't buck the market. The official
planned economy - or what's left of it - couldn't carry
on in a permanent state of disconnection from the real
market one. Some reconciliation had to be sought. There
had already been hints, especially in efforts to get
enterprises to pay their way and not expect handouts
from the center. But that couldn't work while most
prices remained artificially set way too low to send
sensible signals.
And so, not before time,
someone in Pyongyang took a deep breath and decided to
take the plunge. All credit to the Dear Leader and his
advisers for seeing the light at last. Better late than
never. The way ahead may be rocky, but at least it's no
longer the road to nowhere.
Future articles will
report further on these epochal changes as they unfold,
and ponder their implications. To start with, the next
week Pyongyang Watch column will examine the plight that
drove North Korea to jettison some of its most sacred
shibboleths.
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