[Viewpoint] What Kim’s third phase means

The North Korea regime of Kim Jong-il has trumpeted the third phase of its economic planning, starting with a sweeping and surprise currency revaluation. It beat its drums in a New Year’s editorial announcing the new policy.

The new strategy encompasses the old rigid ideas of centrally planned economy prioritizing light and farming industries. The currency reform, that knocked off two zeroes from the country’s paper notes, aimed at wiping out black markets and herding the working population back to controlled industrial activity.

The New Year’s editorial promised improved living conditions through advancement in the select industries. The contradicting features - retrogression and progress - make up the core of the third-phase economic planning.

When in 1974 Kim Jong-il became the General Secretary of the Workers’ Party, nothing was more urgent than maintaining state order. He announced that the first-phase of economic planning would focus on the military. He thought he had to reinforce military forces to fend off market forces and outside threats.

The scheme proved effective in guarding against a possible state collapse but fell shy of aiding the economy. After the unaware population was forced to undergo a “March of Agony” and breathing room was provided by economic rewards in the aftermath of the first summit talks with South Korea, Kim announced an experiment with capitalism on July 1, 2002. The second-phase of the planned economy was launched with the modest adoption of limited market principles.

But a tantalizing flirtation with capitalism left the people more frustrated and feeling relatively more impoverished. The state’s first priority still rested with the military with little few resources left for the light industrial and agricultural sectors. The second summit meeting, held during the final months of the South Korean president’s term, ended mostly in rhetoric.

After that, black-market activities flourished, threatening the basis of the planned economy.

Alarming signs of another collapse lit up. Central authorities needed another fundamental change. For Kim, with his health deteriorating at 68, the third-phase planning meant his last.

He would have given his deepest thought on this final economic design. He probably asked himself, “How should I wrap up my era?”

He had to culminate his era with completion of a strong self-sufficient state. He had promised to deliver a strong nation and needed to get his name secured in history as the “Dear Leader who built a strong state” next to his father’s legacy of “Eternal Leader who has built a self-sufficient state.” The third-phase planning centered on improving lives of workers.

It also had an ulterior motive of setting the groundwork for the third hereditary power succession. To do so, the regime needed to regain complete control of economic activities. Hereditary power succession would only be possible under a rigid socialist planned economy.

The third-phase economy planning attempts a forced marriage of the conflicting ideas of upholding antiquated socialism and improving public lives while also safeguarding the regime and developing the economy. Of course, these ideas cannot coexist in one society for long.

But they may last for about two years. Kim himself probably had that calculation in mind. While touring a reactor construction site in March of last year, Kim reportedly murmured, “I may not be around to see it” on hearing the building would be finished by 2020 and ordered completion by 2012. The year marks a centennial for the birth of the Eternal President Kim Il Sung and the Dear Leader’s 70th birthday, an opportune time to declare completion of his mission.

The North’s current paradoxical behavior of firing shells toward the South on the sea while meeting with the South on land is in line with the third-phase plan. To defend the regime, Kim and his followers can use military force, but cannot deny it needs economic aid. But we cannot conclude that the North is desperate for aid. Improvement in living conditions with the help of the South can be perilous to the regime. The North wouldn’t have embarked on the third-phase planning without thorough preparations. It probably acquired necessary resources from China. It couldn’t have set up a state institution to promote foreign capital under the current stringent international trade ban without Beijing’s promise of aid.

The South Korean president coincidentally suggested a summit meeting with his North Korean counterpart. He must be fully aware of Kim’s third-phase plan. He cannot win merely with the reward of aid or with arguments of the opening of markets. He best use his “denuclearlization-or-no-reward” card. To Kim, nuclear arms are the means to realize his goal. If Seoul can assure him it can go along with the third-phase plan, denuclearization talks may be easier than thought. A planned economy without nuclear arms is safer to live with than an open economy with nuclear arms.

*The writer is a professor on North Korean affairs at Ewha Womans University.
Translation by the JoongAng Daily staff.

by Cho Dong-ho