Welcome to capitalism, North Korean
comrades By Andrei Lankov
SEOUL - A creeping revolution, both social and
economic, is under way in North Korea and it seems
there's no turning back. For decades, the country served
as the closest possible approximation of an ideal
Stalinist state. But the changes in its economy that
have taken place after 1990 have transformed the country
completely and, perhaps, irreversibly.
For
decades, Pyongyang propaganda presented North Korea as
an embodiment of economic self-sufficiency, completely
independent from any other country. This image sold
well, especially in the more credulous part of the Third
World and among the ever-credulous leftist academics.
The secret of its supposed self-sufficiency was simple:
the country received large amounts of direct and
indirect aid from the Soviet Union and China, but never
admitted this in public. Though frequently annoyed by
such "ingratitude", neither Moscow nor Beijing made much
noise since both communist giants wanted to maintain, at
least superficially, friendly relations with their
small, capricious ally.
But collapse of the
Soviet Union made clear that claims of self-sufficiency
were unfounded. From 1991, the North Korean economy went
into free fall. Throughout 1991-99, the gross national
product (GNP) of the Democratic People's Republic of
Korea (DPRK) nearly halved. The situation became
unbearable in 1996, when the country was struck by a
famine that took, by the best available estimates, about
600,000 lives. The famine could have been prevented by a
Chinese-style agricultural reform, but this option was
politically impossible: such a reform would undermine
the government's ability to control the populace.
The control on daily lives was lost anyway. What
we have seen in North Korea over the past 10 years can
be best described as collapse of what used to be rigid
Stalinism from below. In the Soviet Union of the late
1950s and in China of the late 1970s, Stalinism-Maoism
was dismantled from above, through a chain of deliberate
reforms planned and implemented by the government. In
North Korea the same thing happened, but the system
disintegrated from below, despite weak and ineffectual
attempts to keep it intact.
In the 1960s, North
Korea was unique in being the only nation in the world
where markets were outlawed. The retail trade in a
strict sense almost ceased to exist since virtually
everything, from socks to apples, was distributed
through an elaborate public distribution system with
money payments being rather symbolic. The rations
depended on a person's position in the intricate social
hierarchy, which eventually became semi-hereditary. In
Kim Il-sung's North Korea, there was almost nothing that
could be sold on market since production outside the
state economy was almost non-existent.
Unlike
governments of other communist countries, until the late
1980s the North Korean government did not even allow its
farmers to cultivate kitchen gardens - the individual
plot was limited to merely 20-30 square meters, hardly
enough to grow enough chili pepper. This was done on
purpose. In many other communist countries, farmers had
bigger plots and made their living from them, ignoring
their work obligations to the state-run cooperative
farms. Without their own plots, farmers would work more
for the state - or so believed the North Korean
government. In the utopia constructed by Kim Il-sung,
every single man or woman was supposed to work for the
state, and was rewarded for his and her efforts with
officially approved rations and salaries.
In
1969, Kim himself admitted that the anti-market policy
had been a failure. Thus private markets were gradually
legalized, but remained small and strictly controlled.
However, as late as late 1980s, markets were still
considered inappropriate for a "socialist paradise".
They were something to be ashamed of, so they were
pushed to the margins of the city. Until the early
1990s, most markets were in places more or less hidden
from view, inside residential blocks and behind high
concrete walls. In Pyongyang, the main city market was
set up under a huge viaduct at the easternmost part of
the North Korean capital, as far from the city center as
possible.
However, the economic disaster of
1991-95, and especially the subsequent famine, changed
the situation. Markets began to spread across the
country with amazing speed. From 1995-97, nearly all
plants and factories ceased to operate. The rations were
not issued anymore: in most areas people still received
ration coupons but these could not be exchanged for food
or other rationed goods. Only in Pyongyang and some
other politically important areas did food continue to
be distributed. But even there, the norms were
dramatically watered down. In such a situation, the
ability and willingness to engage in some private
business became the major guarantee of physical
survival.
The government also relaxed the
restrictions on domestic travel. Since around 1960,
every North Korean who ventured outside his native
county was required to have a special "travel permit"
(an exception was made for one-day travel to neighboring
counties). However, in the mid-1990s, the authorities
began to turn a blind eye to unauthorized travel. It is
not clear whether it was a deliberate relaxation or just
inability to enforce regulations when the state
bureaucracy was demoralized. After all, a bribe of some
US$5 would buy such a permit from a police officer.
The tidal wave of small trade flooded the
country, which once came very close to creating a
non-money-based economy. People left their native places
in huge numbers. Many sought places where food was more
available while others enthusiastically took up the
barter trade, including smuggling of goods to and from
China. Women were especially prominent in the new small
businesses. Many North Korean women were housewives or
held less-demanding jobs than men. Their husbands
continued to go to their factories, which had come to a
standstill. The males received rationing coupons that
were hardly worth the paper on which they were printed.
But North Korean men still saw the situation as
temporary and were afraid to lose the trappings of a
proper state-sponsored job that for decades had been a
condition for survival in their society. While men were
waiting for resumption of "normal life", whiling away
their time in idle plants, the women embarked on
frenetic business activity. Soon some of these women
began to make sums that far exceeded their husbands'
wages.
The booming markets are not the only
place for retail trade. A new service industry has risen
from the ashes: private canteens, food stalls and inns
operate near the markets. Even prostitution, completely
eradicated around 1950, made a powerful comeback as
desperate women were eager to sell sexual services to
the newly rich merchants. Since no banking institution
would serve private commercial operations, illegal money
lenders appeared. In the late 1990s they would charge
their borrowers monthly interests of 30-40%. This
reflected very high risks: these lenders had virtually
no protection against the state, criminals and, above
all, bad debtors.
In North Korea, which for
decades was so different, this meant a revolution. The
new situation undermined the government's ability to
control the populace. People involved in the new market
activities are independent from (or inured to) subtle
government pressures that had ensured compliance for
decades. One cannot promote or demote a vendor, transfer
him or her to a better or worse job, nor determine his
or her type of residence (though admittedly, most people
still live in the houses they received when the old
system was still operating).
The growth of new
markets also undermined some pillars of old North Korean
hierarchy. Of course, many people who became affluent in
the new system came from the old hierarchy - as was the
case in most post-communist countries. Officials or
managers of state-run enterprises found manifold ways to
make an extra won. These managers often sold their
factories' products on the market. But many hitherto
discriminated-against groups managed to rise to
prominence during this decade. The access to foreign
currency was very important, and in North Korea there
were three major groups who had access to some
investment capital: the Japanese-Koreans,
Chinese-Koreans and Korean-Chinese.
The
Japanese-Koreans moved into the country in the 1960s
(there were some 95,000 of them - with family members,
children and grandchildren, their current number can be
estimated at 200,000-250,000). These people have
relatives in Japan who are willing to send them money.
Traditionally, the authorities looked at
Japanese-Koreans with suspicion. At the same time, since
money transfers from Japan have been a major source of
hard currency for Pyongyang, their activities were often
tolerated. This particular group even enjoyed some
special rights, being privileged and discriminated
against at the same time. When the old system of state
control and distribution collapsed, Japanese-Koreans
began to invest their money into a multitude of trade
adventures. It did not hurt that many of them still had
the first-hand experience of living in a capitalist
society.
Another group were people with
relatives in China. The economic growth of China meant
that the relatives could also help their poor relatives
in North Korea. In most cases, this was not in the form
of money transfers, but assistance in business and
trade. The local ethnic Chinese were in an even better
position to exploit the new opportunities. For decades,
they have constituted the only group of the country's
inhabitants who could travel overseas as private
citizens more or less at their will. Even in earlier
times, the ethnic Chinese used this unique position to
earn extra money by small-scale and part-time smuggling.
In the 1990s, they switched to large operations. There
is an irony in the sudden economic advance of these
groups. For decades, their overseas connections have
made them suspect and led to systematic discrimination
against them. In the 1990s, however, the same
connections became the source of their prosperity.
Until recently, the government did not try to
lead, but simply followed the events. The much-trumpeted
reforms of 2002 by and large were hardly anything more
than the admission of the situation that had been
existing for a few years by then. The official abolition
(or near-abolition) of the public distribution system
did not count for much, since this system ceased to
operate outside Pyongyang around 1995.
But the
North Korean economy has indeed come a long way from its
Stalinist ways. Now the government has neither money nor
support nor the political will to revive the
Stalinist-style central economy. There is no way back,
only forward. Stalinism is dead. Welcome to capitalism,
comrades!
Dr Andrei Lankov is a
lecturer in the faculty of Asian Studies, China and
Korea Center, the Australian National University. He
graduated from Leningrad State University with a PhD in
Far Eastern history and China, with emphasis on Korea,
and his thesis focused on factionalism in the Yi
Dynasty. He has published books and articles on Korea
and North Asia. He is currently on leave, teaching at
the Kookmin University, Seoul.
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