ESSA

ESSA

Making sense of a “stable” North Korean economy


Sao Yang Hew

By

September 24th, 2019


Despite increasing sanctions and international pressure, the North Korean economy seems to be more stable than before. Sao Yang Hew investigates why.


North Korea has long “enjoyed” conflicted attention in international media since its inception. Throughout the post-Korean war era, criticisms on the North Korean regime, in the treatment of its own citizens and its supposed violations of humanitarian principles have long been a hot topic for the capitalist West. It is hard to refute the fact that criticisms against the regime are justified to some degree, but we seem to have repeatedly failed to successfully forecast the regime’s future outcomes. Renowned experts in think tanks and academia have been expecting a tragic downfall of the “archetypal hero” in the next 5 years since the 20th century. [i] Individuals and groups are still declaring (or are even hopeful) that the North Korean government would collapse within the next decade. North Korea’s performance shows that it will not collapse anytime soon, however, as its apparent economic and political environment seems to be robust to turbulence despite international pressure and historical economic failures.

North Korea’s stability

When examining the outlook on the North Korean economy, the one problem that bedazzles economists often lie on the fact that we do not have accurate or feasible data on the North Korean economy itself. With that, researchers have salvaged and decided on a few incomplete but relatively reliable metrics on estimating the condition within the hermit kingdom. The two most reliable measurements are the regularly reported black-market exchange rate of the North Korean Won to the US dollar and rice prices. Examining these yields quite surprising results:

Despite outbursts of destructive famines in the 1990s and more recently the international sanctions and pressure imposed by the United States, North Korea’s current economic state, its stability and growth have confounded the economists of the West. [ii] This could be attributed to a few possible factors.

The dual economy under sanctions

The North Korean economy after former leader Kim Jong-Il’s death in 2011 projected an abysmal reality for the nation, which was swiftly picked up by his son Kim Jong-Un, who initiated simultaneous privatisation of local industries and its stabilisation of the Won. Such policy reforms have been quite effective in strengthening the North Korean economy and indirectly provided a boost to its black-market economy, which still forms a large portion of the economy in general, hence the rationale to still utilise black market rates to reflect on the current economic outlook. The results of this reform suggest that we have been undermining the North Korean economy by a large degree, and the press have long given credit for North Korea’s ability to stabilise its economy with monetary policy. [iii]

The results also show that North Korea has been working the odds against international sanctions called upon by several countries and most importantly the United Nations since its first nuclear arms test in 2006, though many have speculated that the sanctions have brought Kim Jong-Un to the negotiating table. While large-scale sanctions certainly pose a threat to the hermit kingdom, it is unclear as to whether these sanctions take the intended blow on North Korea itself. With a dual economy in place within North Korea, experts have suggested that such sanctions would give rise to difficulty in maintaining the state-run economy instead of the thriving underground economy of the people. The regime should be aware of this, hence its efforts in promoting privatisation of enterprises which would domino benefits for the underground economy, stabilising the overall economy by benefitting this aspect of the country. Aside from that, North Korea is also reported to evade sanctions by trading with rebels within Yemen, Libya and Syria, and hacking computer systems using surprisingly sophisticated and hard-to-track techniques, which would ultimately render the sanctions ineffective in forcing the regime to reciprocate with regards to its nuclear activities. [iv]

Propaganda and social psychology

North Korea’s stability can also widely be attributed to factors that transcend economic theory, in particular, its sociopsychological and its highly successful use of nationwide propaganda. The Kim family’s Juche ideology which incorporates overt nationalism and attention towards the military has been refined and revised over the past few decades, which is then implanted within every corner of North Korean society.

The average North Korean would expect to meddle extensively within the ideological manifestation of racial superiority and fear towards the outside world and with propaganda that extends toward remotely all aspects of daily life, it is fair to expect that the moral compass or the ethical psyche of the North Korean people would be of a different calibration compared to most people outside the kingdom. Often, we in the West are normally critical of the use of propaganda within the regime and may externalise our perceptions onto the North Korean people to deem them as abnormal. This is particularly condescending and is counter-productive in leading us to understand not only the lives of North Koreans but also the pertinent implications of propaganda utilised by entities in the West in terms of classifying the normal and the contrary and how it affects our personal liberty. [v] With limitations on this article, I would like to redirect you to more detailed analyses on this specific theme in Rob Montz’s documentary, “Juche Strong”. [vi]

Conclusion

However, what we do know about North Korea is that we don’t really know much about the country. The hermit kingdom has been and will continue to be one of the most secretive nations on the planet, and even with thorough analysis based on official documents and unofficial data, any form of inference from limited amounts of information, including the above may be inaccurate in nature. With that being said, it is actually refreshing to see the regime being more open to privatisation and stabilisation of the economy, albeit possibly


[i] Power, J. (2017, January 27). The long history of predicting North Korea’s collapse. Retrieved from https://thediplomat.com/2017/01/the-long-history-of-predicting-north-koreas-collapse/

[ii] Hanke, S. (2018, June 13). North Korea’s economic crisis. What crisis? Retrieved from https://www.forbes.com/sites/stevehanke/2018/04/24/north-koreas-economic-crisis-what-crisis/#4726bf82437a

[iii] Byrne, L. (2019, February 20). How international sanctions have? and haven’t? affected North Korea’s economy. Retrieved from https://www.nknews.org/2019/02/how-international-sanctions-have-and-havent-affected-north-koreas-economy/

[iv] Luce, D. D., & Mitchell, A. (2019, March 11). U.N. report: North Korea smuggles oil, hacks banks despite sanctions. Retrieved from https://www.nbcnews.com/news/north-korea/u-n-report-north-korea-evading-sanctions-buying-oil-selling-n981821

[v] Jonathan Haidt, interview outtake from Juche Strong [Video file]. (2013, January 1). Retrieved from https://www.youtube.com/watch?v=0TC4sw4uJ9o

[vi] Montz, R. (n.d.). Juche Strong. Retrieved from https://juchestrong.com/

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

Founding sponsors

 

 

Partner

Platinum sponsors

Gold sponsors

 

 

 

 

Silver sponsors

 

 

 

 


Affiliates