The North Korean Economy: Current Situation, Crisis, and Possible Scenarios

Abstract

For more than a half century, the international community largely ignored North Korea. Since 1990, however, the situation has changed dramatically and North Korea has begun to attract increasing international attention. Throughout the 1990s, scenarios of a North Korean collapse were in vogue. Yet, these estimations were proved to be wrong. It is now widely accepted that North Korea is relatively stable in the sense that it seems to have little trouble keeping its political system intact and functioning. By now, the most striking aspect of the North Korean political system is its extraordinary resilience. Why then has the North not yet collapsed, despite the chronic shortages of food, energy, and foreign currency? In this paper, I would like to raise two main questions. The first question is: “How serious are the difficulties of the North Korean economy?” And the second is: “What actions has the North Korean regime taken to resolve these difficulties and how effective those actions have been?” The North Korean regime has been striving to readjust and improve its economic strucrure since the 1970s. The regime has sought foreign capital and technology. However, the regime has been attempting to reformulate its economic structure within the strict framework of the existing political system whose survival was its paramount concern, and therefore it has failed to link the domestic economy with the world economy. What the regime has been doing is, on the one hand, to map out policy measures designed to open up its doors, while on the other hand escalating its ideological and political campaigns to prevent the people from being “contaminated” by a capiralist culture which it anticipated would develop as a result of such measures. It is no wonder that, under these conditions, all attempts at reforming met with only limited success at best. The North Korean regime, however, has negotiated with its people the expansion of its second economy, despite its reluctance to do so. In fact, the regime explicitly defined farmers' markets as remnants of “backward” capitalism which would become extinct as socialism reached a higher stage of development. It is expected that the ruling hierarchy in North Korea will be able to survive for a considerable period of time, despite the threatening economic crisis. So far in North Korea, the need to safeguard the existing political regime has been given far greater priority than the need to bring about reform. However, the North Korean regime, if it intends to survive, will be compelled to carry out full-scale reforms sooner or later.