Historian: North Korea will reform economically, but not politically

Scholar Andrei Lankov expects any change in the secretive state to be accompanied by a tightened grip on its citizens

In "Hidden State: Inside North Korea," Fault Lines gains rare access into North Korea and examines the impact of U.S. policies on the secretive nation. The film airs Monday, January 19, at 9 pm Eastern time/6 pm Pacific on Al Jazeera America. | Click here to find Al Jazeera in your area.


In the avowedly communist state of North Korea, there are signs that capitalist elements are slowly starting to seep into the economy. That is the main point Andrei Lankov would like people to understand about the mysterious country. Lankov, a Korean studies scholar based at Kookmin University in Seoul and author of "The Real North Korea: Life and Politics in the Failed Stalinist Utopia," has been studying and writing about North Korea for decades. He has a unique perspective on the country, having grown up in St. Petersburg before the fall of the Soviet Union. In the 1980s, he studied at Kim Il Sung University in Pyongyang as an exchange student.

According to Lankov, the turning point for North Korea’s economy was the 1990s. First came the shock of the dissolution of their sponsor state, the Soviet Union, followed by the devastating famine that took the lives of hundreds of thousands of North Koreans. The public distribution system also collapsed and never recovered. North Koreans turned to black markets to attempt to earn a living.

The state has pursued different policies towards the markets. According to Lankov, Kim Jong Il made a few failed attempts to exterminate them. But his son, Kim Jong Un, actively ignores them, he says. Beyond tolerating the markets, Lankov believes Kim Jong Un’s government is quietly but actively seeking to emulate the economic reforms of China in the 1970s and 1980s.

But those shifts won’t come easy to North Korea. Reforms, while necessary, are also a threat to the regime’s hold on power, said Lankov. And so the government will attempt to tighten its grip on the people to maintain control.

Fault Lines spoke with Lankov in his office in Seoul. What follows is an edited and condensed version of the interview.


How would you explain what’s happened in North Korea since Kim Jong-Un took office?

Kim Jong-Un looks funny, he is overweight and sometimes does strange things. But he is smart. He is really smart. When his father died, seven top officials—four generals and three civilian bureaucrats—walked next to the coffin in December of 2011. In two years time, none of them was alive or in a high-level position. All were purged.

So his first move was to get rid of his father’s officials. Including people who were initially meant to be his chief assistants, according to his father’s plans. But his father was dead, and plans were dead, too.

He appointed people who are still much older than him, but people whom he can trust. He tried to get support of the common people by doing a measure of populism—building all these resort facilities, kind of amusement parks—which partially reflects his own view of the people. But he sincerely wants to get support and he is probably getting a measure of support, indeed.

At the same time, very quietly, without making any noise, he began to change the country’s economy, more or less following the Chinese model of the late 1970s. As a result, in 2013, North Korea had the best harvest in 25 years. And now they are beginning, Chinese-style, market-oriented reforms in the economy. At the same time he was remarkably tolerant about the unofficial black market economy, which exists and is very powerful. So the idea is to gradually, like China did, move North Korea towards capitalism—without admitting it, without waving red flags and yelling as loudly as possible about the greatness of Juche socialism and of course remaining oppressive.

There's a construction boom in Pyongyang, but most of the nice apartments in new high-rises are set aside for the country's elite, said Lankov.
Nicole Salazar for Al Jazeera America

Why is this type of reform happening now?

The growth of the market economy and the spread of information about the outside world, especially South Korea, is highly dangerous. They are slowly undermining the power basis of the government. So they have no choice but to start reforms. However, they have to be very careful. And their major problem is the existence of “dirty,” rich South Korea. The income gap between North and South Korea is the largest income gap between two countries which share a land border. If you believe the optimists, it’s 1 to 15. If you believe the pessimists, 1 to 40. For your information, the gap between East and West Germany was between 1 to 2 and 1 to 3.

They understand that if the North Koreans can interact with the outside world freely and see a picture, a glimpse, of South Korean prosperity, and they become less fearful of the government, they are likely to do what East Germans did in 1989: Get rid of the government and demand unification on the assumption that they will immediately enjoy the same living standards. Problem is, they are not going to enjoy the same living standards anytime soon. But illusions are powerful. Revolutions are always driven by illusions.

Well, we visited this house in an apartment building, this enormous 2,800-square-foot house of a professor ...

It’s propaganda. If these people are speaking about these enormous apartments being given to workers and professors, its propaganda. Most of such apartments go to high level officials, and the remaining significant part go to, you know, people who are successful in smuggling tobacco from China. But not only tobacco, they can make money by running a small private mine and selling gold to China, and they will earn enough money to buy a couple of nice apartments in Pyongyang for their family and maybe for their mistress.

Pyongyang has a booming real estate market. Most of the flats in these new, large high-rise apartment buildings are for sale. People who have money can buy a house for themselves, and they can invest as a matter of fact into some construction projects and they will make money by investing. So it's not much different from any market economy. It’s really a market economy. And the price can be quite impressive. The highest price I have ever heard about a flat in Pyongyang was $160,000. Impressive for a country where the average actual salary is about 50 cents a month.

What do the people of North Korea do for work? Do they work in state-run factories?

You have to purchase your right to be unemployed, and most men cannot afford it. Mostly you have the situation where the man has to go to the factory and spend a few hours in the morning doing nothing.

While the husband is probably now sitting idle in a factory, the wife is, you know, moving maybe dry wood for sale or selling tobacco or something. And she is the person who makes money. And some of these women—most of them remain poor but some of them are smart, ruthless, hardworking, manipulative, self-controlled, educated—you name it, all the good and bad qualities you need to succeed in business. You need to be a bit of angel and a bit of devil to succeed in this business world. And some of these women have succeeded, and they have become rich.

Which is why someone who may have begun selling stuff on the street 20 years ago might be running, say, a bus company today. Because nearly all who started on the street are women. So as a result they have a lot of women in the new elite.

In the North Korean official parlance, 'reform' is something religionists, bad people, traitors do.

Andrei Lankov

Kookmin University in Seoul, South Korea

And the government doesn’t intervene in these black markets?

A very large part of the North Korean economy is private nowadays. It is the market where most people make a living. You see a large amount of merchandise—maybe shoes from China arrive here to be sold. Most retail, the largest part of the service sector, has been private for say 15 to 20 years. It’s not officially admitted, but it’s private.

Most of the money for the average family comes from the private economy. Something that is not understood is that three-quarters of the average income comes from the private economy. And these women are probably making money while their husbands are sitting in the non-functioning or almost non-functioning state plants doing nothing. And they wait for customers to sell stuff which might be anything—South Korean shampoo, Chinese tobacco. riding shoes, coats, some kind of whichever.

What’s the significance of the South Korean goods that are sold?

It’s important. The South Korean goods are important because the quality of the South Korean goods tells volumes about the level of the South Korean economy. It’s not incidental that in principle you are allowed to sell South Korean goods only when the labels are removed.

There have been some attempts to exterminate private markets under Kim Jong Il. The current leader basically takes a benign neglect approach. So they quietly encourage the market economy without admitting it, but then never mention its existence in their official media. It’s not something which is supposed to be mentioned when you are talking to the foreign media and the like.

Why are they so secretive about these changes?

They cannot call it “reform” because they spent 25 years using this word essentially as a term of abuse. In the North Korean official parlance, "reform" is something religionists, bad people, traitors do. Because, as you know, “North Korea has the world’s best system. It was devised by the greatest politician and leader the world has ever seen.” How can you reform such a system? But you can talk about improvement and amendment. You can change everything insisting it was just a minor improvement. And this is what they are doing.

There are essentially two types of reforms we can see: First, in agriculture, starting from 2013, they started to emphasize family-based agriculture. So individual families are given individual fields. Technically fields are state property, but families are told that they are going to work at the same fields for the foreseeable future. And they are allowed to keep a certain share of the harvest. In 2013 and 2014, it was 30 percent. In 2015, it is likely to be increased to 60 percent.

And, in industry, government-appointed managers essentially are allowed to operate as though they are owners of the factories. They should ignore the plan. Plans don’t exist anymore. They are looking for raw material. They are looking for technology. They pay for what they need. They sell the stuff. They can sell it domestically. They can sell it internationally. They can hire and fire personnel. They can pay as much as they like to their personnel. This is what they are doing right now.

A kiosk operator in Pyongyang sells DVDs to a growing consumer class of North Koreans.
Nicole Salazar for Al Jazeera America

And this is happening with tighter political control?

Absolutely. And this is what is not always understood. However, in the case of North Korea, economic liberalization is not going to be accompanied by a political relaxation. There is a simple, affluent “dirty” rich and very very attractive South Korea located just across the border. And so, what to do? Obviously the policy of Kim Jong-Un is to emulate Chinese political reforms of the ‘70s and ‘80s, slowly and very carefully—but, at the same time, to remain very harsh, very repressive with anyone who has any doubts about the system or is going to challenge the system in any meaningful way.

What impact do you think the UN sanctions are having in the country?

I would say the sanctions have zero impact. Partially because China is not going to participate, and partially because the sanctions are not designed in an efficient way. So it largely gifts more fuel for their propaganda—so they can say this nonsense of economic blockade. Sanctions are not going to have much impact, and they are not having much impact.

As a matter of fact, the North Korean economy is growing. Most of the world media has this cliché of North Korea as a starving country with a stagnant economy. North Korea is a malnourished country, not starving, with a slowly growing economy. According to the official estimates of the South Korean government, the average annual growth rate of the last 15 years is 1.3 percent.

As a matter of fact, for 2015, they forecast a much larger growth of perhaps 5 or 6 percent. This growth began roughly at the time when sanctions were introduced.

How do you see North Korea developing in the coming years?

I would dare to speculate we have three possible scenarios: If we are talking about North Korea in the year, say, 2035, first, there is a small possibility that Kim Jong-Un will succeed in his undertaking and will create in North Korea a developmental dictatorship somewhat similar to dictatorships in South Korea and Taiwan in the 1960s and the present day fake communist dictatorships in China and Vietnam. Which means, little political freedom, but a lot of prosperity and economic reform.

Second option, we might have a massive crisis. Triggered by what? God knows. Maybe popular discontent, maybe clashes with the elite and then regime collapse and Chinese intervention. So China will install there a pro-Chinese puppet state—maybe still run by some member of the Kim family, but not Kim Jong-Un himself. Again, same scenario, economic growth, but under Chinese control.

Third option, probably most likely, but by no means the only one, is the same collapse, followed by South Korean intervention and essentially assimilation—pretty much like what happened in Germany 25 years ago.

I would bet 10 percent on the successful developmental dictatorship, 40 percent on the Chinese dependency and 50 percent on unification, German-style.

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