A futile dream
The author is an economics professor at Seoul National University.
I had an important choice to make in the summer of 1992 as I packed to return to my family in Britain after a research stay in Moscow. I had to choose between a toy gift I got for my little son and books I collected for over two months to put into the luggage. The gift I finally got for my son was a 15-kilogram (33-pound) Soviet tank with a remote control. At the end of the day, the tank went into my luggage on my way home. The moment I saw the joy in my son’s face, I knew I made the right choice.
The toy lasted for two days. The remote control did not work and the wheels fell off. It was truly made-in-Russia. I felt more resentful and skeptical of Soviet products upon remembering the books I had to give up over the toy. I learned how naive I had been when I studied the socialist system. Under a state-controlled economy, consumer products and raw or intermediary materials were inevitably lacking, leading to poor quality in the finished goods. Since there cannot be enough bolts for a toy tank, makeshift bolts had to be used to connect the wheels. Under a socialist system, factory workers only have to meet their work quota.
The deficiency naturally had been much more serious in North Korea. The Soviets planned and implemented supply distribution systematically. North Korea did not. Manufacturers hardly got necessary raw materials and parts. North Korean founder Kim Il Sung hoped to solve this problem. A state entity was established in 1962 to oversee distribution of raw and intermediary supplies. The authorities attempted to establish a vertical integration system to plan and control the system, from materials to finished product, in the 1970s and 1980s, but that ended in failure.
North Korea found clues to addressing the problem after it started trading following the Great Famine in the1990s. It imported raw materials from China and exported minerals, fishes and apparel. Some of the deficiencies in the socialist economy were solved. In the 2000s, Pyongyang added capital goods to its list of factory products. The trade contribution to the economy jumped to 26 percent in 2005 from 15 percent in 1999 and further to 48 percent in 2015. As a result, the economy was able to grow by an average 2 to 3 percent annually from 2012 to 2016.
Global trade had some trade-offs. The North could no longer stay self-sufficient. Any lack in necessary materials and parts would disturb manufacturing activity. An upset to the existing supply chain would bring havoc to the economy, according to Olivier Blanchard, a professor of economics at MIT. It was also impossible for North Korea to replace imports with local products. Such self-sufficiency could wreck the economy further.
The rupture in supply system can dismantle the North Korean economy and ideology. National income would shrivel. Factories will close and market activity will come to a halt. Jobs will disappear and people will become disgruntled. If North Korea cannot make cosmetic products due to a lack of materials — and packaging and foreign brands run out — the craving for beauty products would overwhelm ideological belief. North Koreans, who have tasted consumer life from trade and the market, have long forgotten juche, or self-reliance ideology. Once the regime runs out of foreign currency, food, oil and fertilizer cannot be imported.
To maintain a viable economy, North Korea inevitably would have to reconnect with the global economy. Removal of sanctions in return for nuclear dismantlement is the only way to reviving the economy shaken after its trade share sank to 10 percent from over 50 percent. North Korean leader Kim Jong-un has betrayed himself by saying he would wait for a change of attitude from Washington until the end of the year. The ultimatum could also mean the country can only last until then. The ruler’s dignity could be in jeopardy if people’s lives become difficult. The year-end deadline was set by Kim, not by the United States.
It is a pipe dream to think the North Korean economy can prosper on its own after having been integrated, albeit partially, into the global economy. That is impossible in today’s world. South Korea was naive to think that its income-led policy could work out even when the possibility of success was less than 5 percent. North Korea will be more foolish if it pushes self-reliance with a 99 percent chance of failure. It is like thinking people can live solely on water and air. I was stupid to have confidence in a Soviet toy. But a leader’s stupidity can wreck the country. The faster Kim wakes up from his futile dream, the bigger chance his country will be saved.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, May 1, Page 31