Sunday, November 17, 2013

N.Korea's Informal Economy Thrives

It will be interesting to see how long the regime allows this to go on.  It must be benefiting from this otherwise it would not tacitly allow it to continue.  But I imagine at some point it will want to absorb it into the official economy which would likely cause it to fail because as we know from history no centrally controlled planned economy has ever been successful in the long term.

The Catch 22 for the regime however may be this.  One the one hand allowing this economy to exist releases internal pressure and allows some segments of the population to survive and in some cases thrive.  Yet as some thrive the likelihood of demands for political change will increase.  And if these demands happen to coincide with declining coherency and support of the military (who benefit from the money from the informal economy) we could see a rise in political action.  If the informal economy is shutdown before it gets too large and entrenched, political action might also result (and the military and security forces themselves might be unhappy as they would lose their access to the money from this informal economy).  The bottom line is that this bears watching.  While some will be hopeful that this could bring about reform we should also realize that this could eventually destabilize the regime and then we will see what happens when the regime is threatened with  potential internal collapse.  

N.Korea's Informal Economy Thrives

Two years after Kim Jong-un took power, North Korea's official economy shows no signs of improving, but the informal economy is thriving.

North Koreans set up small farmers markets initially to get hold of daily necessities after the famine of the 1990s, and now there are more than 300 authorized markets throughout the country.

Cho Bong-hyun of the IBK Economic Research Institute says the North's informal economy is worth between US$1 billion and $3 billion and almost equal in size to the official economy.

 ◆ Money Talks

The belief that money can buy anything is rife in North Korea. Farmers can buy membership of the Workers Party, the gateway to the elite, from a senior party official for about $300. Factory or company workers or soldiers have to pay about $500 for party membership. College admission can also be bought with a bribe.

"Anybody can buy admission to Pyongyang Medical University for $10,000 and to the law or economics departments of Kim Il-sung University for between $5,000 and $10,000," said a South Korean government source. 

The opportunity to work overseas costs $3,000, plus an extra $1,000 if workers want their stay extended another year.

Problems with the law can also be made to go away with bribes. "Two people in Cheongjin, North Hamgyong Province were sentenced to two years in prison for watching a South Korean film. They were put in prison in Kangwon Province but paid some money and were released three days later," a defector testified. "Rumor has it that prison guards are getting rich."

A source said, "There's a widespread sense that everything from cradle to grave can be solved with money." In border regions, guards earn money by turning a blind eye to or even helping would-be defectors. 

Currently, a U.S. dollar is worth about 7,000 North Korean won. Would-be defectors pay border guards $40 to cross the Apnok or Duman rivers, and $60 to carry old or feeble people on their back.
North Koreans trade goods at an outdoor market in Anju, South Pyongan Province in this file photo from German NGO Cap Anamur.North Koreans trade goods at an outdoor market in Anju, South Pyongan Province in this file photo from German NGO Cap Anamur.
◆ Trading

Seoul National University's Institute for Peace and Unification Studies interviewed 261 defectors over the past two years. Most respondents -- 92.3 percent of those in their 30s, 88.2 percent of those in their 40s, and 71.9 percent of those in their 50s -- said they had experience selling goods in North Korean markets. That was even true for 68.4 percent of former party members. 

This suggests that all classes engage in trading goods.
(Continued at the link below)

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