North Korea in the News

North Korea nears age of affluence
By Kim Myong Chol

There is every likelihood that in 2012, supreme leader Kim Jong-il and his heir designate Kim Jong-eun will preside over North Korea's admission into a third elite club, that of strong and prosperous states. The North is already a member of the space and nuclear clubs, and its emergence as an affluent state will fulfill a long-elusive policy goal of founding father Kim Il-sung. .

Today, North Korea indigenously manufactures a full range of heavy and light industrial products, chiefly to satisfy growing domestic demand. These range from complex machine tools, heavy-duty construction machinery, mining machines, high-strength steel, aluminum pipes and LED lights to semi-conductors and super-computers. The North also produces

LCD televisions and optical fiber cable.

The Western world will be left stunned as the North emerges as the next Asian Tiger economy, struggling to figure out how North Korea has achieved so much in the absence of financial and technological assistance from abroad and despite harsh US sanctions and a virtual state of war with the US.

Dr Gavan McCormack, professor at Australian National University, noted in a Japan Focus article November 5, 2007:
North Korea has faced the threat of nuclear annihilation for more than half a century. If anything is calculated to drive a people mad, and to generate in it an obsession with unity and survival, and with nuclear weapons as the sine qua non of national security, it must be such an experience. Its demand for relief from nuclear intimidation was unquestionably just and yet was ignored by the global community, till, eventually, as we know, it took the matter into its own hands.
Full of confidence and pride, Pyongyang also plans to follow up on next year's achievement by joining the ranks of the "most advanced" countries by 2020.

The timing of North Korea's 2012 emergence as an economic power could not be more auspicious and significant, and the success story carries five lessons of historic significance.

Kim Jong-eun a symbol of Kim Il-sung's immortality

The Korean people, the Workers' Party of Korea, government and the Korean People's Army consider Kim Jong-eun a manifestation of the founding father, Kim Il-sung that effectively keeps him alive and in charge for ever. Kim Il-sung's leadership provides the ancestral land of Korea with millenniums of prosperity and peace as enjoyed by the ancient Korean kingdom of Dankun 5,000 years ago and of Koguryo 2,000 years ago.

Kim Jong-eun has spent the past several years working as a low-key, young prodigy, all the time showing he has what it takes to be a third Kim Il-sung. Kim Jong-eun is credited with taking personal charge of the second satellite launch in February and two nuclear tests in 2009 and 2009. He also oversaw Korea's emergence as a leading manufacturer of machine tools, the country's development of an iron-making process free from coking coal, the nationwide introduction of LED lights and installation of 3G cell phone networks.

These achievements earned the "Young General" a reputation as a legendary great statesman who will lead the Korean people into a rosy future, also catapulting him to the position of heir-designate to Supreme Leader Kim Jong-il.

One reason why Kim Il-sung remains so revered is the gift he left the Korean people - Kim Jong-il. In turn, what makes Kim Jong-il great is his god-sent fortune to have Kim Jong-eun as the next leader, giving the Korean people uninterrupted access to Kim Il-sung-class statecraft.

Were it not for Kim Jong-eun, the Korean people would be in no mood to celebrate the emergence of their country as an affluent society in 2012, much less the centennial birthday of Kim Il-sung and the 70th birthday anniversary of Kim Jong-il.

North Korea would be like a powerful and prospering family without any successor that could be compared to a rudderless ship left at the mercy of the elements, running every risk of being sent to Davy Jones' Locker. There is no point in achieving prosperity against heavy odds if it is short-lived.

Without this leadership, the Americans, the South Koreans and the Japanese may have ended their strategic patience to launch a war, wreaking havoc in North Korea in a conflict that escalated into a third world war.

The most competent leaders of a reunified Korea

On look at the state of leadership in South Korea, Japan, European Union states and the United States shows how lucky and blessed North Korea is to have lived under three generations of brilliant statesmanship.

In the eyes of the world audience, Kim Jong-il and Kim Jong-eun have eloquently and indisputably proved themselves the best qualified leaders in the Land of Morning Calm to lead a reunified Korea that operates with two systems.

South Korea, as it is effectively leaderless, is anything but a sovereign and affluent society, with its Seoul subway stations full of homeless people.

For all its noisily publicized economic success story, South Korea is not close to entering the space and nuclear clubs and is host to a nationwide network of American military bases, equipped with nuclear arms. Seoul has no wartime operational command over its armed forces, which are only KATUSA (Korean Augmentation to the US Army).

The South failed remarkably in two much ballyhooed attempts to lift a satellite even with rockets imported from Russia.

The Financial Times reported in its May 29 article "Divided Economy": "South Korea has one of the world's highest suicide rates, worsening rapidly as the gulf widens between rich and poor in a faltering and uneven domestic economy. Suicide has doubled in the past decade to account for 31 in every 100,000 deaths."

A major south Korean daily Joong Ang Ilbo quoted July 20 ruling Grand National Party chairman Hong Joon-pyo as issuing "a withering criticism of President Lee Myung-bak".

"The president is good at everything, including diplomacy, but bad at politics ... Because he is a former CEO, he is running the country as if he is running a company."

Professor Kwon Yong-jun said in a June, 2009 speech at Kyonghee University: "The trouble is that what the ill-fitting or incompetent appointees by Lee Myung-bak is of less value than trash."

A year earlier, the Kyonghyang Sinmun ran a commentary headlined "Lee Myung-bak Government Devoid of Three Key Elements" June 10, 2008.

"The Lee Myung-bak government is found wanting in terms of awareness of popular feelings, responsibility as a government and in organizing a functioning system."

Meanwhile, in the US, President Barack Obama's leadership is under increasing fire. When Standard & Poor's decided on August 5 to strip the US of its cherished top-tier AAA credit rating for the first time, it describing it as a judgment about the US's leaders and wrote that "the gulf between the political parties" had reduced its confidence in the government's ability to manage its finances.

The New York Times quoted the rating agency as stating: "The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge."

Counter-productive sanctions
North Korea's membership of the space and nuclear clubs has not been enough to convince the Americans of the futility of any sanctions imposed on highly resourceful and resilient nation led by such a distinguished leader such as Kim Jong-il.

What underlies the US sanctions is the delusion that isolating North Korea from the outside world would eventually bring it to its knees.

The US appears utterly oblivious to the fact that sanctions have never worked. These have instead inspired the target country to redouble efforts to outperform them.

There is no overstating the fact that American sanctions aided North Korea's emergence as the fourth-most powerful nuclear weapons state, equipped as it is with nuclear-tipped inter-continental ballistic missiles (ICBMs) that put the whole of the Metropolitan US within effective range,

The Christian Science Monitor commented June 4, 2010: "But on the whole, it might be true: Tightening sanctions on North Korea may be like trying to squeeze lemon juice from a walnut.

"Western leverage over the DPRK [Democratic People's Republic of Korea] remains limited," concludes a study from the Congressional Research Service from 2009. The Boston Globe wrote in a November 2010 editorial:
The Obama administration's policy has been to keep up sanctions and pressure on North Korea. This has led only to military confrontations and an expansion of the North's nuclear capabilities. North Korea's leaders have been sending an either/or message to Washington and their neighbors: Either resume six-party negotiations leading to concessions on both sides, or be prepared for armed clashes.
The New York Times wrote on June 12, 2009: "But mandatory or not, many analysts and former diplomats questioned whether any sanctions regime would ever have enough bite to break the cycle. 'Sanctions won't bring North Korea to its knees,' said Kim Keun-sik, a specialist on North Korea at Kyungnam University in Seoul. 'The North knows this very well, from having lived with economic sanctions of one sort or another for the past 60 years'."

Unattractive offers of aid and security for disarmament

One of the most important upsides of North Korea's transformation into a thriving nation is that the American offer of economic aid and guarantee of security for disarmament has been rendered unattractive.

North Korea is unique in that it has successfully managed to join the three elite clubs as full members by uniting its people close behind supreme leader Kim Jong-il and sticking to its guns to face down 60 years of nuclear threats, harsh sanctions and isolation attempts by the Americans.

North Korea's success story carries an important message: any given small Third World country can afford to defend itself and grow into a prosperous state by itself, dispensing with security guarantees and aid from the US and its allies

A major prerequisite of this achievement was boasting national leaders competent enough to unite its population with deserved national pride and mobilize them into an organized national effort to achieve prosperity.

No wonder, the Wall Street journal reported July 30; "The South Korean diplomat who met North Korean officials last week said Friday that they reacted coolly to Seoul's proposals for an aid-for-weapons deal."

The North Koreans well remember the Americans are never as good as their word as exemplified by their failure to fulfill their pledge as apart of a framework agreed in 1994 to complete two lightwater reactors, provide fuel and establish full ties.

In fact, the Americans are not the least interested in fulfilling the obligations of any international agreement, though the US insists on other parties meeting them.

Dr Leon Sigal, director of the Northeast Asia Cooperative Security Project at the Social Science Research Council in New York, said in his op-ed in the May 23, 2003 edition of the Boston Globe: "The fact is, Washington got what it most wanted [in the 1994 framework agreement] up front , but did not live up to its end of the bargain."

Such so-called aid and security-for-disarmament programs are nothing but a trap as seen by the US-led invasion of Libya. Nuclear-tipped long-range missiles could enable Libya to launch an immediate retaliatory nuclear strike on the US, the United Kingdom, France and Italy, torching their capitals.

The North Atlantic Treaty Organization (NATO) strikes on the African state provides North Korea, Iran and many other states on the nuclear threshold with the most potent justification for their refusal to give up nuclear missile programs in exchange of security and aid.

The war on Libya serves only as a death knell of nuclear non-proliferation. The war in Libya and the wars in Iraq and Afghanistan remind the rest of the world that the US and NATO are doomed.

Songun or military-first policy a recipe for prosperity
The last and not least important point of North Korea's admission into the three elite clubs is that the songun or military-first policy fathered by Kim Il-sung and applied in the modern sense by Kim Jong-il and Kim Jong-eun serves Third World countries as the best recipe for maximum self-reliant national defense and economic success story.

The greatest benefit of the working military-first policy is to be found in that the Korean People's Army, armed with thermonuclear-tipped ICBMs, has put the Korean Peninsula out of war by keeping the US at bay.

In striking contrast, war has ravaged Iraq and Libya as they lacked nuclear arms and their long-range means of delivery.

What distinguishes the songun policy from the ordinary military-first policy as understood in the West is that North Korea is by no means a militarized state.

As society's largest institution of most disciplined, well-educated and highly motivated people, the North Korean armed forces play a key productive and benign role in national life in addition to their role of safeguarding national sovereignty and the safety and peace of the population from infringement from any foreign powers.

Contrary to their image as unbridled consumers, the North Korean armed forces are part and parcel of extended reproduction as leading manufacturers of heavy and light industrial items including foods.

So to speak, the Korean People's Army functions as the most efficient civil engineering corps and university complex providing good vocational training and able members of society.

Kim Myong Chol is author of a number of books and papers in Korean, Japanese and English on North Korea, including Kim Jong-il's Strategy for Reunification. He has a PhD from the Democratic People's Republic of Korea's Academy of Social Sciences and is often called an "unofficial" spokesman of Kim Jong-il and North Korea.

The secret world of North Korea's new rich
By Andrei Lankov

SEOUL - When people in the West talk about North Korea, they usually imagine a country of hunger and floods, populated by starving children, subsistence farmers and goose-stepping female soldiers. These stereotypes - like nearly all stereotypes - are not completely unfounded, but misleading nonetheless.

North Korea is a poor place, no doubt, even though recent reports about looming famine seem to be part exaggeration and part deliberate stratagem, initiated by the regime to obtain aid from the international community. Nonetheless, 2011 Pyongyang has a booming restaurant scene and the traffic on its broad streets - once notoriously empty - is steadily increasing in volume.

Well-fed North Koreans are frequenting newly opened sushi bars and beer houses as well as a local hamburger joint. On the streets of the North Korean capital, one can see a lot of visibly

undernourished people, but also a number of women clad in designer clothes.

One should not be surprised by these sights, which can be encountered not only in Pyongyang, but also in a number of major North Korean cities.

The past 20 years saw the slow-motion collapse of a hyper-centralized economy that was once a defining feature of North Korea's "nationalist Stalinism". Grassroots capitalism has replaced state socialism and this quiet transformation predictably brought in a remarkable income inequality.

North Korea's new rich made their fortunes amid the economic chaos and social disruption of the great famine of 1996-1999. This new bourgeoisie matured in the next decade as the North Korean economy started to partially recover from the disastrous 1990s.

As a North Korean female refugee said to this author a few days ago: "Until 2005, all but officials lived similar lives. But after 2005, everybody can see the difference between rich and poor." Perhaps the change is difficult to associate with just one year, but on balance she seems to be correct.

Who are they - the North Korean new rich? The upper crust of this social group consists of high-level officials. Some of them have gained their wealth through illegal means, but many have seen their business activities permitted and even actively encouraged by the government. Most of the money is made in foreign trade, with China being by the far the most significant partner.

Many North Korean companies, despite being technically owned by the state, are effectively private and are run by top officials and their relatives.

That said, these people are not that frequently seen on the streets of Pyongyang. They live in their own enclosed world, of which not much is known.

But if we go one or two steps down, we will encounter a very different type of North Korean entrepreneur - somebody who has made his or her (yes, surprising many of them are women) money more or less independent of the state.

Complete independence is not possible because every North Korean businessman has to pay officials just to make sure that they will not ask too many questions and turn a blind eye to activities that are still technically illegal. In many cases, North Korean entrepreneurs prefer to disguise their private operations under the cover of some state agency.

Take for example Pak. In his early 40s, he runs a truck company together with a few friends. The company has seven trucks and largely specializes in moving salt from salt ponds on the seacoast to major wholesale markets. The company employs a couple of dozen people, but officially it does not exist. On paper, all trucks are owned by state agencies and Pak's employees are also officially registered as workers of state enterprises.

Pak bought used trucks in China, paying the Chinese owners with cash. He then took them to North Korea where he had the vehicles registered with various government agencies (army units are the best choice since military number plates give important advantages). Pak paid officials for their agreement to "adopt" the trucks. This is so common in the North that there is even an established rate of how much fake registration of a particular type of vehicle costs at which government agency.

Kim was a private owner of a gold mine. The gold mine was officially registered as a state enterprise. Technically, it was owned by a foreign trade company that in turn was managed by the financial department of the Party Central Committee. However, this was a legal fiction, pure and simple: Kim, once a mid-level police official, made some initial capital through bribes and smuggling, while his brother had made a minor fortune through selling counterfeit Western tobacco.

Then they used their money to grease the palms of bureaucrats, and they took over an old gold mine that had ceased operation in the 1980s. They restarted the small mine and hired workers, bought equipment and restarted operations. The gold dust was sold independently (and, strictly speaking, illegally) to Chinese traders.

The brothers agreed with the bureaucrats from the foreign trade company on how much money they should pay them roughly between 30-40% and the rest was used to run the business and enjoy life.

One step below we can see even humbler people like Ms Young, once an engineer at a state factory. In the mid-1990s, she began trading in second-hand Chinese dresses. By 2005 she was running a number of workshops that employed a few dozen women.

They made copies of Chinese garments using Chinese cloth, zippers and buttons. Some of the materials was smuggled across the border, while another part was purchased legally, mostly from a large market in the city of Raseon (a special economic zone which can be visited by Chinese merchants almost freely).

Interestingly, Ms Young technically remained an employee of a non-functioning state factory from which she was absent for months on end. She had to pay for the privilege of missing work and indoctrination sessions, deducting some $40 as her monthly "donation". This is an impressive sum if compared with her official salary of merely US$2.

The North Korean new rich might occasionally feel insecure. They might be afraid of the state, because pretty much everything they do is in breach of some article of the North Korean criminal code. A serious breach indeed - technically any of the above described persons could be sent to face an execution squad at the moment the authorities change their mind.

Indeed, such was the sorry fate of a significant number of first-generation North Korean businessmen, those who began to make money in the early 1990s, immediately after the collapse of the Juche (self-reliance)-style Stalinist economy. In 1994-1995, the execution of profiteers and embezzlers, occasionally conducted in public, was a part of a large campaign launched by the central government. The fear still lingers, but over the past 15 years such large-scale campaigns have never been conducted on a nationwide level. But for any business person, the risk is quite real.

However, it is difficult to say that they try to keep a low profile. On the contrary, nowadays one can see a lot of conspicuous consumption in North Korea, where the average official figure is misleading - virtually no North Korean family survives on the official wage alone.

The average monthly income is actually higher - thanks to the nearly universal involvement with the unofficial economy - and seems to be close to $15. Business people earn much more. People like Kim or Young usually make as much as a few thousand dollars a month, while smaller businesses (like a corner shop or tobacco workshop) bring in income measured in a few hundred dollars a month.

It is no surprise that the new rich enjoy consumption. Overseas travel is out of the question (it is permissible only for top business people related to the upper elite and/or the Kim Jong-il family), and domestic travel does not seem to be very popular. Nonetheless, the new rich frequent restaurants where a good meal will cost roughly as much as the average North Korean family makes in a couple of weeks.

They buy houses - technically the sale of real estate is illegal, but in the past two decades North Koreans have developed many techniques that allow the circumvention of these measures with ease. They buy all kinds of household appliances, flat-screen TVs, computers, large fridges, motor bikes. Even private cars have begun to appear, though in most cases successful businessmen prefer to register their used Toyotas and Hondas as the property of some state agency.

There are some peculiar problems that the North Korean new rich face. For example, even Pyongyang, let alone smaller cities, has a very unreliable supply of electricity. Large batteries and small power generators are of help, but only to a certain extent. Batteries are enough to run a TV or a DVD player, but power-hungry air-conditioners and fridges need a constant supply of electricity that is not readily available.

Surprisingly, many people in the countryside still buy fridges, even though the contraptions are unusable most of the time. I have frequently come across North Koreans who have boasted of the fridge they own, only to admit that they do not have electricity to switch it on.

To my perplexed question of why they spent so much money on such a useless device, my interlocutors would usually reply that a fridge was an important and even useful status symbol. An affluent household nowadays is expected to own a fridge, even if it is used as a bookshelf (as was the case with one of my North Korean acquaintances).

In some cases, fridges are on all the time - like the air-conditioners which are seldom bought for prestige purposes alone. At first glance, a small power generator appears to be the solution, but this is not really the case. Such generators are easy come by in the North, but they are not reliable, consume a lot of expensive fuel and - last, but not least - are very noisy. So, even though many rich North Korean families have such machines, these devices are usually only used on special occasions.

Surprisingly, more common is the seemingly exotic practice of electricity theft. A North Korean of wealthy means makes a deal with a local military commander or manager of the local power grid, then an illegal power cable connects the entrepreneur's house with a power grid sub-station or military base (military installations are usually supplied with electricity even when the common customers are switched off).

I know of a rich neighborhood in a relatively affluent borderland North Korean city where half a dozen households made an illegal deal with a manager of the power grid. Each family pays the equivalent of $7 and has round the clock access to an unlimited electricity supply. All these houses boast air-conditioners, a supreme luxury in the countryside.

What will happen to these people? What is their role in the future of North Korea? Ostensibly, there seem to be reasons to be optimistic. The rising merchant classes in Europe of the 17th and 18th centuries eventually destroyed feudal monarchies. So why shouldn't we expect a similar fate for the Kim regime, which has a surprising amount in common with the states of pre-modern Europe?

This indeed might happen: the growth of the private economy is slowly eroding the authority and control of the government and concurrently is bringing dangerous ideas to North Koreans. Business people themselves see the state and its officials as a swarm of parasites (frankly, this feeling seems to be mutual).

However, there is an interesting twist. If a North Korean revolution comes, it is likely to be followed by unification with (or rather absorption by) the South: the allure of the rich and free South is seemingly irresistible. However, if this were to happen, the future of North Korean nascent businesses would not be rosy. It is telling that in the countries of the former communist bloc, surprisingly few bosses of communist-era black market businesses managed to adjust to the new, "regular" capitalist environment.

In North Korea, their peers are likely to fare even worse, since they will have to compete with the capital and expertise of South Korean businesses.

Paradoxically, the long-term interests of the emerging North Korean business class might coincide with that of the Kim regime. Unlike normal people in the North, both groups - officials and entrepreneurs - have an interest in maintaining a separate North Korean state. Unification with the South is bound to spell disaster for both groups.

A person who is now running a couple of small shops might eventually, if North Korean capitalism continues uninterrupted growth, become an owner of a supermarket chain. If unification comes, he or she would be lucky to survive the competition with the South Korean retail giants and keep the few corner shops they had.

However, the alliance between the regime and the newly emerged North Korean entrepreneurial class does not seem likely: neither corrupt officials nor greedy black market operators are that far-sighted. This is probably very good news for the vast majority of North Koreans who are likely to benefit much from the collapse of the regime and possible unification with the South.

Andrei Lankov is an associate professor at Kookmin University in Seoul, and adjunct research fellow at the Research School of Pacific and Asian Studies, Australian National University. He graduated from Leningrad State University with a PhD in Far Eastern history and China, with emphasis on Korea. He has published books and articles on Korea and North Asia.