Isolated and Alone: North Korea

ISOLATED AND ALONE: NORTH KOREA

An examination of the development that brought DPRK to its present economic position

By Joshua Tucker

The Democratic People’s Republic of Korea (hereafter the DPRK) is the only country in the last decade to be found guilty by the UN Human Rights Council of crimes against humanity, as well as organising politically motivated assassinations such as that off Kim-Jong-nam (half-brother to Kim Jong-un). Furthermore, the CIA ranks the DPRK as having the 214th lowest GNI per capita out of 228 countries (Country Comparison – Central Intelligence Agency 2020). Yet the DPRK has held and, in some cases hosted, historic summits with the heads of both China and the USA.

So how did one of the most secretive and isolated countries in the world end up in such a unique position? Answers might be found by looking at the history of economic development in the DPRK, and its potential role in the global economy.

Established in 1948 by Kim Il-sung the DPRK modelled itself on its communist allies, China and the former Soviet Union, economically it developed incredibly quickly up till the 1970s, with a GDP per capita similar to that of South Korea (Kim 2017). However, rapid over-investment in industries, funded by billions in foreign loans that it could not repay, and a structural decline like that faced by the Soviet Union led to a fall in living conditions and growth. Unlike the Soviet Union, the ruling party managed to maintain complete power and punished any political opposition. Despite its history, the view that the DPRK has a failing economy oversimplifies a complex issue. Although it lags behind its more developed democratic neighbours including South Korea and Japan, the exact scale is hard to measure as the government restricts access from foreign countries.

This represents over 5% of the population, and to this day 41% of North Koreans are malnourished. In response to the famine, black markets emerged selling food and medicine. These products were obtained and smuggled in illegally from China, organised by defectors. This was the first sign of deviation from a controlled economy.

One consequence of the slowdown in growth combined with the mismanagement of food supplies, and poor farming conditions, was famines in the 1990s. An estimated 1–3.5 million North Koreans died due to famines (Natsios 2001).

Recent crackdowns on defections from the DPRK has restricted the supply of information as refugees put the secretive state in context and help journalists report on the country. However, at the same time tourism in the DPRK has increased, although still very dangerous guided tours can travel to more regions and the overtly propagandised tours show that the DPRK is concerned with foreign perceptions. The elite in the DPRK have unprecedented power to travel abroad, and their children are often privately educated in foreign countries (North Korean Students Studying Abroad 2020). The possibility of adopting western attitudes are higher now than ever before, boosted by increased access to media and foreign news. Large scale changes such as these show that the DPRK is open to more development than in the past.

In 2015 The Economist referred to the DPRK as a “changing region” as countryside farmers defied official crackdowns and a slow change to a market rather than state collective began. The state wage which most people earn is not enough to live on and international food aid rarely reaches the people that need it, so most citizens also work in the private (illegal) economy. Many of these unregulated activities are ignored as long as bribes are paid to those in charge (Tudor 2020). Reports of movement towards a less oppressive state get wildly reported and may have influenced the international community to regard the DPRK as being open to seismic change, however, any deviation from the party line is dependent on there being no threat to the ruling party’s power.

The DPRK still heavily relies on foreign support to evade sanctions levied against it due to its continual development of nuclear weapons. By employing the argument that food and oil are humanitarian goods” (Wertz et al. 2020), China avoids the sanctions placed on the DPRK by the international community and continues to mitigate some of the damage. There is also evidence to suggest that many Chinese companies violate sanctions to work with the DPRK and that Chinese tourists help provide the struggling nation with foreign currencies. However, there is a conflict as much of the support from China and, to a lesser extent, Russia is not the high-value capital and skills-transferring investments that would help the DPRK develop and is instead merely enough to keep them reliant on foreign governments allowing them powerful influence over the DPRK. The summits between China and the DPRK are a fragile show of interdependence when the DPRK relies on China as their largest trading partner, accounting for 90% of all trade.

The DPRK still heavily relies on foreign support to evade sanctions levied against it due to its continual development of nuclear weapons. By employing the argument that food and oil are humanitarian goods” (Wertz et al. 2020),

The role of the DPRK as a potential proxy country for China draws similarities with how the Soviet Union and the USA vied for influence during the Cold War. This has led to fears of China’s growing power (Zhang 2018), which push western states to welcome the DPRK into the international community. China’s vested interest in the DPRK can be argued as a partial justification for the US-DPRK summits, along with the aim to denuclearise the DPRK.

A more optimistic sign for future development and integration into a globalised economy occurred on the 31st March 2013, at the Central Committee of the Worker’s Party of Korea, when Kim Jong Un, the first secretary, announced the construction of economic zones (Mimura 2015). The special economic zones were to act as incubators of foreign investment both for the central government and the individual provinces. They were planned to be specific areas where foreign companies would be encouraged to enter and where economic negotiations could take place.

These had been enormously successful in China and helped open the economy to foreign investors. In 2015 there were 19 economic zones set up in the DPRK; to facilitate them the ruling party had to change their manifesto which originally banned foreign intervention indicating clear signs of change from their previously hostile position to any cooperation. The history of the SEZ’s in the DPRK shows that the zones adjacent to the south were easily influenced by tensions between the North and the South and those bordering China developed slowly but steadily. The economy of the DPRK is more diverse than a decade ago, but the

In 2015 there were 19 economic zones set up in the DPRK; to facilitate them the ruling party had to change their manifesto which originally banned foreign intervention indicating clear signs of change from their previously hostile position to any cooperation.

Pyongyang’s establishment of foreign investment zones suggests the country is wary of over-dependence on China.” Their trade deficit is always increasing with China: The Chinese may overlook some debt, but North Korea is spending its own money,” Go Myonghyun of the Asan Institute told Asia Times. “China only gives North Korea enough to survive, and that is why North Korea complains about Chinese lack of generosity.”

Certain border cities in China have become important areas for North Korean businesses. High ranking North Korean officials have even visited China’s border cities to discuss cooperation (Chunshan 2020), and in May 2018, shortly after Kim Jong Un announced that economic development would now be the country’s top priority, Pyongyang sent a large delegation of top officials to China to tour industrial sites (China-North Korea Relations 2020).

A rarely reported reason why the DPRK attracts attention from foreign countries is their natural resources. The Korea Mining Improvement Corporation Report (Republic of Korea) 2004, estimated the DPRK has over $2 trillion of natural resources, thought to be nearly thirty times of that of South Korea’s as of 2005 (Kim, Young Yoon, 2007, p. 13). Private mines are illegal, and although state-run mines provide 15% of the country’s GDP, they are extraordinarily inefficient. The potential for developing this business in the DPRK remains incredibly high, many of the resources include rare metals needed in electronics and coveted in China. The potential trade with countries that are allied with them increases the DPRK’s bargaining power, especially as the supply of resources in the world is depleted and shifts to higher-cost sources.

A rarely reported reason why the DPRK attracts attention from foreign countries is their natural resources. The Korea Mining Improvement Corporation Report (Republic of Korea) 2004, estimated the DPRK has over $2 trillion of natural resources, thought to be nearly thirty times of that of South Korea’s as of 2005 (Kim, Young Yoon, 2007, p. 13).

Despite issues with national security and the risk of a nuclear North Korea; there are strong motivators that push countries to still engage with this unique country. Influence over human rights abuses and de-nuclearization is often reported as the most pressing concerns onlookers have regarding the DPRK. However, it is clear that the potential

The potential trade with countries that are allied with them increases the DPRK’s bargaining power, especially as the supply of resources in the world is depleted and shifts to higher-cost sources.

upside which could be achieved by integrating the DPRK into the global economy, along with the politics of power and influence in an increasingly fractured world, enable western states to push for reconciliation and turn a blind eye to the totalitarianism and corruption of the DPRK.

References

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Natsios, Andrew S. 2001. The Great North Korean Famine. Washington, D.C.: United States Institute of Peace Press.

“North Korean Students Studying Abroad”. 2020. World.Kbs.Co.Kr. https://world. kbs.co.kr/service/contents_view.htm?lang=e&menu_cate=northkorea&board_ seq=379188.

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Chunshan, Mu. 2020. “North Korea’S Economy: The View From China”. Thediplomat.Com. https://thediplomat.com/2019/11/north-koreas-economy-theview-from-china/.

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Kim, Young Yoon “DPRK’s Mineral production systems and future”, Korea Reunification Institute, 2007