Tuesday, June 30, 2009

A North Korean Economy in Tatters

Unlike China's leaders, who linked market-oriented reforms to the Communist Party's survival, Kim Jong Il and his North Korean cohorts see economic openness as a threat to their power and have in recent years intensified state control over the economy.

After severe famines killed perhaps one million people in the mid-1990s, the government tolerated a limited amount of market reform, including the proliferation of farmers' markets and the tilling of private plots. But in 2005, Pyongyang reversed course and began reestablishing the state's dominance over food distribution. Officials have even slapped new restrictions on the operation of marketplaces in recent years.

Due to bad floods in 2007, food shortages last year were likely the worst experienced since the 1990s. The World Food Program (WFP) says it has launched a program to feed 6.2 million people in North Korea, or more than a quarter of the population. Yet in March, North Korea, without explanation, rejected all food aid from the United States, its largest official donor, and kicked five aid groups distributing the food out of the country. The step is potentially disastrous for the North Korean people. The WFP figures that last year's harvest, though slightly improved on 2007's, still fell about a third short of the population's needs.

Marcus Noland, an expert on the North Korean economy at the Peterson Institute for International Economics in Washington, believes that efforts to roll back reform have intensified in the past six months. Kim Jong Il was quoted saying in a January editorial, North Korea "should launch a general offensive dynamically, sounding the advance for opening the gate to a great, prosperous and powerful nation."

North Korea watchers speculate that Kim Jong Il, who likely suffered a stroke last year, is maneuvering to install his son, Kim Jong Un, as his successor, and that Pyongyang's May nuclear test, recent war threats and anticipated long-range missile launch are all part of an effort to build support for the Kims, especially among the country's powerful military brass. Economic policy, Noland says, has become tied up in the succession as well. "Today inside North Korea, all officials have an incentive to demonstrate how committed they are to orthodoxy," he says. "As a consequence, there is an internal dynamic that encourages retrograde behavior."


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