North Korea’s invisible war

North Korea looks fine on the surface. But a deep dive into the country tells a different story.

Kim Byung-yeonThe author is a professor of economics and the head of the Institute of Future Strategy at Seoul National University. Is North Korea secure? Can its regime be sustained? From the way its leader ventures to Russia for a summit with the Russian president and frequents missile firings, North Korea looks fine on the surface. Kim Jong-un responded to the U.S. denuclearization pressure with his order of an “exponential expansion” of its nuclear arsenal and mandated nuclear armament in its Constitution to manifest his confidence over regime control.

But a deep dive into North Korea tells a different story. The political and economic realities are worlds apart. There has never been such contradiction between politics and economy in the history of socialism. The North Korean political system based on a one-man rule is the most rigid in the history of socialism. The dictator in the North is a near-deity figure of absolute perfection. At the same time, the progress in the bottom-up marketization also has been rare among socialist states.

North Korean leader Kim Jong-un inspects a new fisheries processing factory in Tongchon county, Kangwon, on Nov. 19, 2019. [YONHAP]

The collision between the extremely vertical political system and the horizontal market system is what makes the unique leadership of North Korea so fragile. The one-man rule cannot tolerate the market economy, yet the market overrules the dictatorial regime. The late North Korean leader Kim Jong-il attempted currency reform in 2009 to subjugate the market to politics. His son Kim Jong-un is waging the second battle with the market. The defiant provocation by North Korea suggests its desperation to hide its inner fragility.

Autocracy demands complete submission from the people. To sustain its one-man rule, people must be passive enough to dutifully follow state orders. Pyongyang has brainwashed its people through various political schooling, food rationing and personality cults. In other socialist countries, the party is the top decision-maker. But in North Korea, the party is only a body to execute the orders of the supreme leader. Nuclear weapons also become a tool for dictatorship, as they exist to protect the supreme leader from outside forces. In North Korean ideology, the life of the top ruler is more important than that of the surviving multitudes.

But the market made the people become more proactive and liberal. Before the 1990s, North Koreans were used to taking orders from those in higher positions. But once they tasted the juice of the market, they were able to make decisions for themselves. In the market, the people were the dominant players, not Kim Jong-un. They could find ways to make money and connections through business and trade. If they made enough money, they were respected by the elites. The so-called juche (self-reliance) ideology has lost its authority, giving way to hard cash.

Kim Jong-il hoped to crush the market through currency reform, but he was defeated. In the mid-2000s, he ordered a crackdown on the market by labeling it as a hotbed for capitalism. But the collusion between bureaucrats and merchants dumbed the command. Kim then implemented a currency reform to dry up money in hopes of killing the market. But he had to withdraw the policy in the face of strong resistance from both residents and bureaucrats. The prime minister had to apologize to the people and condone market activities.

Kim Jong-un was more organizational in his war with the market from 2019 so as not to repeat the failures of his father. He used the Covid-19 pandemic threat and invisible hands to choke the market. North Korea attempted to regain control over commerce, trade and finance to return to the Stalin-style economic system. The grain sales outlets were installed to retrieve the control over food sales from the market. The state commanded full responsibility over food distribution from cooperative farms and imports, and distributed them through grain sales outlets to restrict individual smuggling and market sales.

The private trade of foreign currencies was banned through the crackdown on foreign exchange dealers. If North Koreans cannot trade in foreign money, the market would lose power and the economic control would return to the state. The money spent at grain sales outlets and state shops would be placed in state banks. State-controlled finance would be entirely restored when the public money is used to back companies. According to Marxian economics, the politics at the top changes the economy at the bottom. But can that work in reality?

The collision between the ruler desperate to defend his power and residents hoping to survive is panning out in North Korea. The outcome could influence not just the North Korean nuclear program but also the regime’s sustainability. The reality of North Korea cannot be deciphered from outside. It must be read within and without, as a whole. The policy on North Korea must be built through comprehensive understanding over its politics, military, economy and society. A good strategy cannot be produced without insight.

Translation by the Korea JoongAng Daily staff.