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A Policy of Market Suppression

[Lee Young Hwa Reform Outlook ]
Prof. Lee Young Hwa, Kansai University, Japan  |  2012-07-25 18:00
According to recent defector testimony, low- and mid-level cadres and the North Korean people are expecting big things from the Kim Jong Eun regime. The focus is on economic reform. Everyone is wondering whether the Kim Jong Eun regime really will improve the lives of the North Korean people through economic restructuring. Widespread expectation means that many people are watching the Kim Jong Eun regime closely. The Kim Jong Eun regime needs to respond swiftly to these expectations.

However, the greater the expectation, the greater the disappointment. Everyone knows that; if peoples lives do not improve then the sense of disappointment felt could reach dangerous levels. Kim Jong Eun would soon be faced with a serious political crisis. To start with the conclusion, the probability that he will pass this test is low. A few experts and media outlets think that reform is being foreshadowed by the appearance of the youthful Kim Jong Eun energetically going here and there. This sense of expectation will unquestionably be betrayed.

Lee Young Ho was purged because of conflicts surrounding economic reform.

Kim Jong Eun has stated a few times that the people should boldly accept things which are good, even if foreign. However, this is no more than a trick. Kim Jong Euns foreign things are limited to the trivial; amusement park rides, emphasizing the importance of giraffes at the zoo, and the appearance of Mickey Mouse at a music performance.

Reform and opening, a matter of life or death for a dictatorship, is very different. Kim Jong Eun lacks the leadership to push bold reform in North Korea. Moreover, the regime is vulnerable to factionalism and internal conflict.

Recent events highlight the complex internal conflicts currently going on in North Korea. Lee Young Ho, the former Chief of Staff of the Peoples Army, was officially removed from all of his positions. Chosun Central News Agency announced this news on July 16th. The official reason stated for Lees dismissal was health problems; however, Lee was one of the closest people to Kim Jong Eun before he was removed from his position of power. Therefore, it is more likely that Lee Young Ho was purged. Although there must have been many behind the scenes power struggles following the announcement of Kim Jong Euns succession in 2009, the conflict surrounding economic reform was what pulled the trigger that led to this purge.

It is known that Kim Jong Euns economic policy is being carried out in secret. It is called On the establishing of a new economic management system in our own style. According to information I obtained from a senior North Korean cadres, Kim Jong Eun has described the policy as follows;

We shall improve our own economic management method by referring to the best examples in the world.

So far, examples of this thinking have included placing rollercoasters in Pyongyang amusement parks and the appearance of Mickey Mouse in musical performances. However, Kim has also ordered that the 6.28 Policy adhere to the military-first policy, strengthen national defense and realize Juche. A closer look at the economic policy reveals that it is riven with inconsistency and contradiction. This points to Kim Jong Euns uncertainty.

Implementation of the 6.28 policy is expected to begin on October 1st. However, the specific details remain unclear. Especially, It is hard to imagine that all internal conflict will be resolved by September, especially in light of the recent Lee Young Ho incident. Economic reform will be a difficult task in such an unstable situation.

According to the information I obtained, the gist of the new economic policy is as follows: 1) the state will fund the cost of the raw materials needed for production on cooperative farms and state-owned enterprises; 2) the production will be divided between producer and state at a certain ratio; and 3) payment will be calculated at market prices.

Although this is probably not the entire content of the reforms, it is clear that North Koreas 6.28 Policy is not like Chinas or Vietnams. The difficult problems to solve are financial issues (enormous payments), energy issues and the modification of wholesale and retail markets.

Above all, I want to point out the essence of the new economic policy. Rather than being market-catalyzing; the policy is more market-suppressing.

To be continued...
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