What the markets tell us

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What the markets tell us


Michael Green

My colleagues at the Center for Strategic and International Studies (CSIS) in Washington, Victor Cha and Lisa Collins, have just released a remarkable new report on their website, Beyond Parallel. Using a combination of overhead satellite imagery and micro-level surveys within North Korea, the CSIS scholars have concluded that there are 436 officially sanctioned markets across North Korea generating approximately $56.8 million a year.

According to the study’s micro-surveys within North Korea, a significant majority of North Koreans now appear to receive their daily foodstuffs and household goods from either the officially sanctioned markets included in the CSIS study or from illegal “black” markets. The report’s detailed map indicates that the officially sanctioned markets are distributed across North Korea, averaging close to 50 per province.

The bottom-line conclusion is that markets are now a fully institutionalized feature in North Korean society.

The authors of the CSIS report are careful not to speculate too much about what this means for the future of North Korea. Since I was not one of the authors, I will feel free to engage in just such speculation in this column.

There are three broad ways to interpret the significance of these market forces in North Korea.

The first and most optimistic interpretation would be that we are seeing the early seeds of reform and opening up in North Korea. China’s reform and opening up under Deng Xiaoping began first with the establishment of local markets and the Communist Party’s recognition of limited individual property rights. From those seeds sprouted China’s openness to trade and investment and membership in the World Trade Organization.
Pyongyang introduced its own reforms in July 2002, allowing local markets because the public distribution system had broken down with the collapse of the Soviet Union and famines of the 1990s. This may have been reform under duress, but China’s reforms were also introduced in large part because of the Communist Party’s failures during the Great Leap Forward and Cultural Revolution.


A farmer’s market in Hamhung, South Hamgyong, North Korea, in 2011. [JOONGANG PHOTO]

Pyongyang’s efforts since 2002 to limit market forces and social disruption through currency redenomination and Security Ministry crackdowns have angered North Koreans, according to the CSIS micro surveys, but they have done little to constrain the growth of markets.

The Kim Jong-un regime is now dependent on markets to allow society to function and people to survive. If there is an inevitability to further market opening as there was in China, then the international community might want to prioritize engagement with North Korea that accelerates that process.

The second and more pessimistic scenario is that the institutionalization of local markets is irrelevant to Kim’s internal repression and nuclear weapons programs. Dependence on markets for food distribution may represent a failure of collectivism under communism and Juche, the North’s state ideology, but not necessarily a failure of authoritarianism. Hitler’s Germany and Saddam Hussein’s Iraq had thriving markets, as do Sudan and Uzbekistan, which Freedom House lists as the most repressive regimes on earth after North Korea. Authoritarian states have successfully used instruments of coercion, such as the secret police, to prevent markets from weakening political control in more cases than not.

Moreover, North Korea’s tolerance for markets has happened at the same time the regime has institutionalized its nuclear-armed status in the Constitution. Under the more pessimistic scenario, the institutionalization of markets in North Korea indicates the regime’s resilience as it continues the dangerous pursuit of intercontinental ballistic missiles and continued human rights violations. Isolation and pressure make the most sense if this scenario is right.

A third and more nuanced scenario suggested by the new CSIS report is that North Korean society and the North Korean state may be in the early stages of decoupling. With the proliferation of markets and increasing opportunities for internal communication through cell phones and informal private sector distribution, North Koreans are increasingly motivated to “organize separately from the state,” as Prof. Andrew Yeo finds in defector interviews cited in the CSIS report. The North Koreans do so not out of ideological opposition to the Kim regime per se, but rather because of the basic need to feed themselves and their families.

Under this scenario, the Kim regime cannot co-opt the nascent civil society forming in North Korea and may even resort to increased repression to limit its influence. Nuclear weapons would still be critical for regime survival, but this evolution from below could ultimately lead to the collapse of regime control.

If the third scenario represents the most accurate interpretation of current market forces within North Korea — and I think it does — then the right policy would be a mix of pressure and selective engagement. It is information and social organization resulting from markets that matter, not markets per se.

Any economic engagement should therefore be designed to empower North Koreans rather than put cash in the hands of the regime that seeks to repress them. And since the evolution of market-driven social connectivity is happening at a much slower pace than North Korea’s nuclear weapons development, we cannot rely on markets to spare us from the threat of Kim’s arsenal. A strategy to impose costs, deter Pyongyang and roll back its weapons programs has to be established on its own merits and not based on wishful thinking about markets.

But that said, the CSIS report suggests why we should position ourselves for the North Korea that could be rather than the North Korea that was.

JoongAng Ilbo, Aug. 31, Page 29
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