North Korea’s economy continues to move ahead despite years of isolation and international trade restrictions. The economy is performing at a moderate rate with a mean GDP growth rate of 0.7 percent from 2004 to 2015, and appears to be a focus of the regime’s policy decision-making, researchers have found.
“The government has embraced markets as an acceptable and effective way to improve performance and enhance legitimacy but maintains the ability to regulate marketized activities,” SK Center Fellow Yong Suk Lee and Shorenstein APARC Fellow Thomas Fingar wrote in a joint report released today.
The report, available in English and Korean (forthcoming), is an outcome of research collaboration between the Shorenstein Asia-Pacific Research Center (APARC) and the Institute for National Security Strategy (INSS), a research body focused on national security policy that is part of the South Korean government.
Conducted over the course of six months, the collaboration included two roundtable meetings at Stanford and in Seoul with the report’s co-authors from the INSS, Kwang-Jin Kim and Hyung-Seog Lee, and Korea-focused scholars at Shorenstein APARC, including Gi-Wook Shin, director of the center; Kathleen Stephens, the William J. Perry Fellow; and Daniel Sneider, associate director for research.
“We set out with the research question ‘how is the current North Korean regime performing,’ and through our engagements with the INSS, were able to combine our expertise and look at the question from new and different angles,” said Shin, also a professor of sociology and director of the Korea Program, who initiated the collaboration.
The researchers participated in discussions and parsed through data and qualitative accounts, including surveys from the INSS and reporting by journalists. From their collaboration, they determined two approaches to understanding the country’s economic and institutional expansion since Kim Jong-un assumed power six years ago, both of which are outlined in the report.
Their first approach suggests that organizational and personnel changes in Kim Jong-un’s cabinet, key ministries and committees were undertaken, at least in part, to enact operational effectiveness and a more productive economy.
“There’s evidence that indicates new appointments by Kim Jong-un were intended to maintain or enhance the ability of the government to meet continuing and new policy objectives,” said Fingar, a political scientist with an emphasis on Northeast Asia.
Kim Jong-un has attempted to consolidate control by removing at least two-dozen officials in the government’s main governing body – the Korean Workers’ Party, and in some cases, promoting them to different positions.
In the report, the researchers mapped the systems of North Korea’s three rulers since its founding in 1948 and the significant leadership changes under Kim Jong-un, noting that recent vice-premier promotions have included new economic responsibilities.
Personnel changes in the military have also involved positions responsible for oversight of foreign relations, commerce, oil and statistics, which suggest that officials are judged not only on their loyalty to the regime, but also on their performance at the job, Fingar said.
Their second approach suggests that North Korea’s improved economic performance is linked to its expansion of markets, and since 2009, its increased trade and investment with China.
“While the government maintains the ability to regulate market activities, North Korea’s growing dependence on the ‘private sector’ is a sign of the priority assigned to it and of its movement away from a socialist-style economy,” said Lee, an economist and deputy director of the Korea Program.
Officially licensed markets in North Korea have been estimated to number in the hundreds and the government collects taxes from them. There also exists a similar estimate for unofficial markets operating in the country, according to data cited in the report.
The researchers said it is improbable that North Korea will abandon market-oriented activities and capital inflows from outside its borders, particularly from China, in a time of tightening sanctions from the U.N. Security Council and other countries in response to North Korea’s repeated nuclear and missile tests.
“Taken together or apart, the two approaches we’ve put forth provide a comprehensive puzzle for future study,” said Lee. “We hope this report brings additional lenses that researchers can apply to analyze the performance of the North Korean regime and that policymakers can use to assess the efficacy of international sanctions.”
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