How to avoid losing out

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How to avoid losing out

North Korea has sustained socialism for the 70th year this year, nearing the Soviet Union’s record of 73 to 74 years. Most South Koreans, as well as experts, believe that the state’s system could continue. North Korea is what people refer to as exceptional, even by the standards of socialism.

But history attests that there is no such thing as an exception. Doomsayers who prophesied the end of North Korea in the 1990s were wrong because they blindly believed that the regime would fall if the economy collapsed.

The Soviet Union, albeit at a snail’s pace, grew even when it fell apart. The Soviet empire collapsed because people in belief and behavior were drawn more and more to capitalism amid a dire shortage of consumer products and brisk unregistered economic activities, thus changing the minds of people who were increasingly dissatisfied with the ruling system. A similar phenomenon is under way in North Korea. North Koreans rely on unregistered market activities for 80 percent of their household incomes, and their lifestyles and mind-sets are changing.

A poll on North Koreans who fled their country less than a year ago showed that the more they earned from unofficial activities and the higher their incomes were, the more they preferred the free market system over the state-controlled one. Rank in the Communist party or ideological education did not matter that much.

In other words, a person who has tasted the benefits of capitalism through market activities supported capitalistic principles. The rigorous party training and ideological brainwashing did not stop them from fleeing their country for greater freedom in economic activity. It is human nature to follow money.

Changes in North Korea are also seen among middle-rank officials. North Korean public officials earn 3,000 won (about $2) a month. But about 300,000 won is needed to sustain a family of four in North Korea. Officials manage by collecting bribes. Bribing has become a way of life in North Korea with about 10 percent of household income spent to pay off officials. Bribes drive the underground economy, feed the families of officials and, therefore, help sustain the regime. At the same time, bribes can put other ideas into the heads of officials. They no longer blindly follow orders from above. The currency reform attempt in 2009 as a part of the regime’s aim to wipe out the underground economy failed because middle-rank bureaucrats who lived off bribes from private merchants did not faithfully follow orders. The once mighty and effective top-down command system in North Korea showed serious fissures.

Similar signs are also evident among the elite class. The word “waku,” commonly used by tradesmen, refers to trade permits. One can earn 10 percent of their revenue in commission simply by lending the permit to another. Senior officials compete and fight fiercely to have authority over licensing. Jang Song-thaek, the uncle of North Korean leader Kim Jong-un and then the second most powerful figure in the regime, was purged and executed in late 2013 because those who envied his mighty authority over licensing joined forces to topple him. Conflicts among ruling elites often become the tipping point to the collapse of a regime.

The North Korean economy has expanded during the last three years under Kim Jong-un. But growth has come at the expense of a political and ideological price. The North Korean people’s growing market activities, corruption among middle-rank officials and fighting over licensing authority among ruling elites suggest the same mechanism in history that transformed the West from feudal to modern is at work in North Korea. Unfortunately, the leadership is oblivious to the changes and clings to its old ways.

We are also in danger. If North Korea suddenly implodes, we are unprepared to lead a happy reunion. If graded, we would get a D at best in our unification capacity. The same goes in diplomatic and economic performance. We would flunk in social and political capabilities. We urgently need to normalize the inter-Korean relationship and help develop the North Korean economy quickly so that the economy can serve as a buffer to the vulnerabilities of the North Korean regime.

The year 2015 could be a turning point in history if President Park Geun-hye has resolute will to pave a new course in the inter-Korean relationship. The government must devise a creative economic outline with a pool of experts on North Korea, economy and finance. If summit talks are necessary, she should meet with the North Korean leader. If the two Koreas are left this way, they could both end up as losers. Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Jan. 1, Page 31

*The author is an economics professor at Seoul National University.

by Kim Byung-yeon

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