The Potential Dangers of Economic Reform

A North Korean man bowls on April 6, 2012. Photo credit David Guttenfelder / Associated Press.

Everyone is bruiting about a new openness in North Korea. The opinions range; many news sources seize on Mickey Mouse concerts, photos of Kim Jong Un on a rollercoaster, and even appearances of Coca-Cola in small Pyongyang restaurants as evidence that North Korea is, finally, opening up to the outside world. Others—senior intelligence experts in South Korea, policy analysts at universities—believe these to be irrelevant details blown out of proportion by the media’s perennial interest in finding evidence of reform in the reclusive state.

The most balanced conclusion seems to be that North Korea is indeed experimenting with small economic reforms. In fact, North Korea has tacitly attempted or conceded economic reform in many instances already; most of those cases were reactions or concessions to an already extant reality. But the pace of change in later years has increased. Even before the succession of his son, Kim Jong Il had refocused energy on a special economic zone along the border with China, announced a renewed focus on the economy, and permitted small markets to be held. And since Kim Jong Il’s death, most analysts—even the KCNA, North Korea’s official news organ—have found evidence that changes of some sort are on the horizon.

Some writers falsely conflate these market-based experiments with the dawn of an impending market economy. I don’t want to commit to that—such a dawn is not yet apparent. Still, it might be useful to flesh out the possibilities down the road from such economic reforms. What problems might North Korea face if it continues along the path of more open markets?

To answer, I’ll turn to Andrei Lankov. Lankov has taught North Korean studies in South Korea’s Kookmin University since 2004. In the field of North Korean affairs, he has been among the most hesitant to give credence to reports of economic reform, arguing that small, isolated, reversible experiments in new economic practices should not be construed as overt indications of reform. In general, he’s been a consistent voice against believing everything you read.

Andrei Lankov is interviewed on July 7th, 2011. Photo credit Mok Yong Jae / Network for North Korean Democracy and Human Rights.

But even he, in an article posted on September 7th, 2012, writes that “North Korea has begun to change with almost alarming speed.” He goes so far as to say, in an interview with Radio Free Asia, “I think that [Kim Jong Un] faces a really high probability of regime collapse in a few years. And I don’t think he fully understands this.”

What’s the connection between change and regime collapse?

He says that it seems almost undeniable that economic reform is being attempted—yes, the experiments are still small, but they are too widespread and too many in number not to reflect a genuine policy interest from a high level. This economic reform is intended, he speculates, to manifest itself as a part of a “developmental dictatorship” in which the Kim family and other senior power-holders retain a largely absolute power over political matters in the country even as a market economy emerges; he also says that, at least at first, even a market economy would disproportionately empower the political elite.

Lankov claims, though, that such a developmental dictatorship cannot function in the context of the Korean peninsula. Greater economic opening will necessarily mean greater knowledge of the huge divide in prosperity between North and South Korea, which will tend to make North Koreans want unification. And unification is an everything-to-lose prospect for the North Korean elite. They fear, he claims, that they will be pushed aside after unification or maybe even punished by their own subjects.

All in all, Lankov says that reform is likely, and it is also likely to be destabilizing. This might mean two different paths:

1)   The leadership will rein back reforms if they prove unstable, or else:

2)   The instability will grow away from the capacity of the state to control, in which case North Korea will have a revolution on its hands. What happens then is anyone’s guess.

In the end, we don’t know what to expect. Lankov quotes a colleague’s summation: “Poor North Korean leaders… If they do not start reform, they will wait for their demise. But if they start reform, they will speed up their demise.” What would anyone choose in that type of situation?

However things proceed, it seems clear that change of some sort is in the air. If economic reform is truly in the works, we can hope that the knowledge and, ultimately, the policies of all involved parties will be shaped by careful analysis of the possible dangers of reform in the specific context of the Korean peninsula.

For more details, check out:

Associated Press

Washington Post

Korea Economic Institute


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