Kim Jong Un is tightening control as North Korea’s economy reels

Kim Jong Un
North Korean leader Kim Jong Un inspects a construction site in an undated photo released by North Korea's Korean Central News Agency.
  • In a rare admission, North Korean leader Kim Jong Un acknowledged that his regime's economic strategy wasn't working.
  • The announcement underscored the depth of the country's economic troubles and is another sign of how radically Pyongyang has had to temper its economic ambitions in recent years, writes Benjamin Katzeff Silberstein, a nonresident fellow at the Stimson Center.
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North Korea's young dictator is not known for issuing mea culpas. Yet, when Kim Jong Un announced last month that the ruling Workers' Party of Korea will convene for its eighth congress in January 2021, he also acknowledged that the regime's current economic strategy is not working. The party will thus adopt a new "five-year plan for national economic development" when it meets next year.

In one sense, this is a hopeful signal, given that such pragmatic admissions of failure are rare for North Korean leaders. But the announcement also underscored the depth of the country's economic troubles. It is a symbolic sign of just how radically Pyongyang has had to shift its economic ambitions downward over the past few years, with the global recession amid the COVID-19 pandemic posing an added difficulty.

Of course, Kim does not have to worry about competing in elections. But like all dictators, he must still seek some level of buy-in from the population, and he has staked a great deal of credibility on his promises to improve North Koreans' living standards. In his first major policy speech after coming to power, in early 2012, he vowed that his people would never have to tighten their belts again.

Kim Jong Un
Kim inspects a North Korean farm.

Indeed, in the subsequent few years, available data indicates the North Korean economy grew substantially—albeit from a low level — mostly owing to vastly increased trade with China and Kim's willingness to allow continued growth in the country's market economy.

Now, matters seem to be moving in the opposite direction. First came the severe international sanctions imposed in 2016 and 2017, in response to North Korean tests of nuclear weapons and ballistic missiles. Pyongyang's recent measures to protect the country from COVID-19, including a virtual closure of the border with China, have added to the damage. Just in the first half of this year, trade with China plummeted by 67% from the same period in 2019, after already having declined for some time.

North Korea also appears to be experiencing difficulties finishing important prestige construction projects, such as the new Pyongyang General Hospital. The regime will inevitably use the recent typhoons that hit the country as an excuse, but the fact is that several of these projects were already on track to be delayed.

Even the fertilizer plant where Kim returned to the public eye after a prolonged — and still unexplained — absence earlier this year is reportedly having a hard time acquiring necessary equipment.

Such ventures carry symbolic importance for propaganda purposes; they send a message to the population that the state is making progress to improve people's everyday lives. Although the vast majority of North Koreans will never directly see these high-profile projects, the implication is that one day, they or their children may benefit from the fruits of the state's caring investments.

Pyongyang street
A street in Pyongyang seen through a bus window.

Given these indicators of hardship, a change in ambition is understandable. The last North Korean five-year strategy for economic development was announced in 2016, and its main goals centered around diversifying the country's trade partners so that it is less reliant on China. According to leaked documents obtained by Japan's Mainichi newspaper, it also aimed for a specific, numerical growth target. But it has clearly failed on both counts.

The next five-year plan is more likely to focus on broad strokes than details. It may consist of fairly vague goals within broad economic areas where the regime wants to see progress. It is also unlikely to entail the kinds of economic reforms that were a hallmark of Kim's first few years in power.

His key initiatives, such as changes in agricultural management, seem to have slowed, stalled or paused. There have also been troubling signs of crackdowns against private markets and businesses in the past year or so.

While North Korea is often portrayed as a Stalinist command economy, the reality is much more complicated.

During the 1990s, the country suffered a devastating famine, owing to economic mismanagement, the scaling down of subsidies from China, and the collapse of the Soviet Union, one of Pyongyang's main benefactors. Between 600,000 and 1 million people are estimated to have died in what North Koreans call the "Arduous March."

The country's communist economy essentially collapsed, and private marketplaces arose to take its place, eventually growing to supply a variety of items to the North Korean people, from essential foodstuffs to relatively high-end consumer goods.

A man walks in front of portraits of North Korea founder Kim Il Sung and late leader Kim Jong Il in central Pyongyang, North Korea April 16, 2017.    REUTERS/Damir Sagolj
Portraits of North Korean founder Kim Il Sung and late leader Kim Jong Il in central Pyongyang, April 16, 2017.

At first, the state tried to suppress these markets, but later began to accept them.

Under Kim, the scope and scale of the markets increased, and the state continued to incorporate business activities that were previously illicit or informal into the official economic framework. Although private property still does not technically exist, private investments and real estate transactions now occur in a more-or-less official fashion, although still without any meaningful rule of law.

Much of North Korea's recent economic improvement, in other words, was a result of the authorities refraining from cracking down on the private economy. At the present moment, though, the regime wants to raise revenue for itself more urgently than it wants to see general economic growth.

There have been recent reports of authorities imposing higher taxes and utility fees, as well as fines on small businesses that have not been properly registered. Tightening control over certain aspects of the private economy in this way is short-sighted, but makes sense from the regime's perspective.

At the end of the day, reform measures that permit a greater role for the private sector are risky for the regime in Pyongyang. The political model is centered around one dynastic leader, and any signs of alternative power centers challenging Kim's rule are met with full force.

The very public purge and subsequent execution of Kim's uncle, Jang Song Thaek, in 2013, illustrated this with shocking clarity. Nothing suggests that these conditions have changed, which makes it unlikely that the new plan will entail anything akin to broad, sweeping economic reforms.

Kim Jong Un

Rather, it appears that the regime will continue to try and control more of the economy. Some of the language in the state media article announcing the upcoming congress and new five-year plan hinted at this, such as the call to:

"…strength[en] the Party by making sure that all the sectors and units including Party organizations and government and military organs at all levels review their work in time and on a regular basis, positively promote, expand and develop good results, and promptly overcome shortcomings and take corrective measures, so that they would not deviate from the implementation of the Party's basic lines, policies and decisions."

Ultimately, the new five-year plan is unlikely to change much of the direction or performance of the North Korean economy.

The specifics will depend somewhat on developments in North Korea's relations with China, South Korea and, not least, the United States between now and next January. But either way, the plan will be more about damage control than optimistic and forward-looking transformation.

Benjamin Katzeff Silberstein is a nonresident fellow at the Stimson Center and editor of North Korean Economy Watch.

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