[Column] Introducing Ju-ae as economy weakens

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[Column] Introducing Ju-ae as economy weakens

Kim Byung-yeon

The author is a professor of economics and head of the Institute for Future Strategy at Seoul National University.

North Korean leader Kim Jong-un’s policy has noticeably changed. Backpedaling on his practical employment of socialism, he pushes economic policies quite detached from reality. For a lengthy period since taking the helm of the embattled country, Kim condoned off market activities and took advantage of material incentives to develop the moribund economy. But now he intends to control the market and have the state monopolize commerce and trade. The government purchases most of the grains produced at cooperative farms and sells them through state-administered outlets to reduce or kill food trade in the market.

Victims of the about-face are ordinary people of the country as they are forced to reduce their meals and live off corn instead of rice. There are reports of starvation after their rice supplies decreased. Kim’s heedless policy is destroying the fledgling market ecosystem and its adjusting role.
North Korean leader Kim Jong-un is excited when his daughter Kim Ju-ae greets him at the podium during a military parade to celebrate the 75th anniversary of the founding of North Korea’s People’s Army, Feb. 9, in Pyongyang. [YONHAP]

But why has Kim changed his policy direction? It may stem from his fear about the market influence. Most people attribute the change to Pyongyang’s need to control the market to help prevent the spread of Covid-19, but the shift was already declared at the end of 2019, a few months before the pandemic. In a full meeting of the Worker’s Party, Kim pledged to “swiftly restore state-led commerce system.” North Koreans turned to black market trade from the 1990s, when a famine killed hundreds of thousands. In the process, they found that the market system worked better than ration-based state control system. But to a dictator, the market poses a potential danger. The market can help the economy, but on the longer run, it can change public awareness and enrich personal wealth enough to threaten the state power. The Covid-19 environment gave the regime a pretext to tighten its hold over the market. If not for Covid-19, the state control would have resulted in strong resistance from the people.

In the past, North Koreans could make money from the market. Farmers sold their harvests left after the state purchase in the market. And merchants and traders bought or imported grain from farmers to sell when prices rise. That earned them a profit. Money lenders also appeared to back their business. Since people could make money from the market, they worked harder than during the rigid state-control period. Government workers who were paid less than $1 in terms of market exchange rate received bribes in exchange for handing over rice. But since the 2020, the Pyongyang regime began to meddle in their market and trade activities — the very source of their newly-found income. As a result, household income shrank further than under international sanctions on the North’s nuclear programs. Many families cannot buy food due to a lack of money today. If the regime wanted to return to the days of strict socialism, it should at least have kept to the textbook basics of matching the income and expenditures by the people.

The state ration system has led to sporadic hunger. The government cannot beat the market in the efficiency of resource distribution. In the past, smuggling used to play a key role in coordinating market prices. And the market helped efficient distribution of food among regions. When supply cannot keep up with demand in a certain region, food prices there go higher than in other regions. Merchants exchange information on price levels through mobile phones and transport the food supplies that can get higher prices.

However, the state rationing system based on its grain outlets cannot distribute food in a timely manner. It takes longer due to the administrative procedures and involvement of bureaucracy and corruption. After market activity came under control, gaps in food prices across the region widened by a big margin. North Korea’s current food crisis is a manmade disaster.

Kim himself has changed. Soon after gaining power, he promised that his people will never go hungry. In his New Year’s address in 2017, he even blamed his lack of ability to make the people richer. In his address during a military parade in 2020, Kim was in teary gratitude towards the people. But that man is no more. The economy has retreated to the level of the Great Famine in the 1990s, with people dying of starvation. Imagine the agonies of the parents who cannot feed their kids whining of being hungry. Yet Kim shows his “beloved” daughter Ju-ae over and over.

Kim is ruining his own power base. Nuclear weapons are being sold as an insurance policy. But the economy is about survival. Insurance cannot sell when people go hungry. Kim may be fielding his daughter to sell more nuclear insurance, but it is a poor marketing strategy. If succession is the real goal, it will have a bigger backlash. How will North Koreans feel about seeing their leader causing starvation while flaunting an obviously well-fed — and well-dressed — daughter?

Translation by the Korea JoongAng Daily staff.
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