Crisis Doesn’t Mean Collapse: Changing Perspectives on North Korea’s Ability to Endure Economic Crises

 

*A gloomy day in Pyongyang. We often talk about ‘economic crisis’ in North Korea, but ‘crisis’ may well be part of the North Korean system. ⓒiStock

 

Il Young Jeong

Research Professor_Institute of Social Sciences_Sogang University

I have to confess that I have been expecting another North Korean economic crisis for many years now, perhaps even since I first began researching North Korea. While I draw the line at promoting the theory that North Korea is bound to collapse if it faces another economic crisis, I have made comments in the past about how difficult it would be for the regime to survive “if things continue as they have” or in the “next three (or five) years”. However, after experiencing the COVID-19 pandemic, I became suspicious that my judgment could be wrong.

This article does not attempt to debate whether an economic crisis will lead to North Korea’s downfall, but rather to look for an explanation as to how the system has continued to survive in spite of these crises.

 

Where did the economic crisis in North Korea begin?

It is difficult to determine the origin of North Korea's economic crisis. The food, energy, and natural resource shortages of the mid-1990s are often cited as sources of the current crisis. However, the fact of matter is that North Korea’s economy has not functioned normally since the Korean War. This is largely due to the fact that the U.S. has sanctioned North Korea as an enemy state since the Korean War. Moreover, the armistice system on the peninsula has led to excessive national defense costs. North Korea also began pushing for a self-sufficient economy in response to the Sino-Soviet Split of the 1960s, and an economy characterized by shortages has since become the norm.

On top of all that, the Public Distribution System(PDS) which had stood as the pillar of the state was destroyed by the collapse of the Soviet Union and the Eastern Bloc in 1990 and the resulting simultaneous food, energy, and natural resource shortages in the mid-1990s. The state maintained supplies to Pyongyang and its core factories, but outside of the capital the factory operation rate in the provinces fell to a shocking 20-30%. On top of that, with the death of North Korean leader Kim Il-sung in 1994, North Korea ended up facing converging political, economic, and social crises all at once.

The crisis in the mid-1990s led to rumors of the seemingly imminent collapse of North Korea. At that time, not only the majority of the media but the majority of North Korea experts all judged that North Korea’s collapse was just around the corner. Yet, North Korea endured the “Arduous March” famine period by adopting the songun(military-first) strategy. However, the country’s central supply system(PDS) did largely collapse with the market taking its place.

North Korea’s second crisis hit when the U.N. Security Council imposed strict sanctions on North Korea in response to the DPRK’s two nuclear tests and ICBM launches in 2016. The international community's sanctions against North Korea were certainly stronger than ever before. The sanctions regime strictly curbed North Korean exports and allowed only limited imports with quotas set on specific items, including crude oil.

In addition, the U.S. State Department leveraged the power of the US Dollar to crack down on trade with North Korea. The sanctions made it difficult to send North Korean workers abroad, leading to a sharp decline in the remittances that made up much of North Korea’s foreign currency imports. Above all, Chinese sanctions compliance, as the country responsible for 95% of North Korea’s foreign trade, maximized the effectiveness of the sanction.

Paradoxically, the COVID-19 pandemic has proven the durability of the North Korean regime

Even I, who distanced myself from the claim that North Korea would collapse at the time, had predicted that the North Korean regime would struggle to hold out if the international community’s sanctions were carried out in earnest. And we saw the most comprehensive sanction regime of all: the outbreak of COVID-19.

North Korea closed off its border with China following the spread of COVID-19 in China in February of 2020. The border shutdown was a measure meant to prevent the inflow of COVID-19 into North Korea, but it also served to effectively isolate North Korea. I personally estimated that, thanks to the border shutdown, the international community's sanctions against North Korea were almost completely implemented from 2020 onwards. I also judged that should North Korea's self-imposed blockade continue, there North Korea might face a ‘truly’ unbearable crisis.

However, North Korea has endured the situation for three years. Every country is facing difficult times due to the pandemic, and North Korea is no exception. Yet, with North Korea facing pandemic difficulties as well as other internal struggles, the regime is clearly not on the brink of collapse. How should we understand this situation? I think we should move away from the prevailing perspective that these crises will culminate in an existential crisis for the regime. Instead, I propose that we instead focus on the key factors in how North Korea has overcome these crises.

 

Does North Korea overcome crises? Or does it simply manage them?

Did North Korea overcome the crisis caused by international sanctions against North Korea? I don't think so; the sanctions problem persists. How then do we explain North Korea’s current state? I would like to suggest that North Korea is judiciously 'managing' the crisis.

My evaluation that North Korea ‘manages’ its crises requires us to re-evaluate what we have assumed to be true about North Korea. First, we must look at North Korea's "self-sufficient economy" strategy. Since the Korean War, North Korea has pursued economic self-reliance from the United States. Later on, North Korea came to pursue economic independence from the Soviet Union and China as well. The goal of the self-reliant economic strategy is to mobilize North Korea’s domestic resources to the fullest possible extent such that the economy can continue to operate even without any outside support.

Is it even possible to run an economy without any outside support? Many people may believe that a truly independent economy is impossible, myself included. However, North Korea has been forced to continue this strategy, whether of its own volition or as a result of external conditions. While the capitalist world system might dismiss the notion of a fully self-sufficient economy as nonsense, North Korea has - admittedly imperfectly - operated a large part of its economy under the basic principle of self-sufficiency.

In the North Korean economy, where not everything cannot be provided by domestic resources alone, a policy of economic self-reliance leads to chronically poor economic conditions. Yet, the fact remains that North Korea also possesses an ‘quasi-war system’ to respond to an international environment in which these crises have become commonplace.

By focusing on the limitations of the economic self-sufficiency strategy, have we actively ignored the perspective and reality of North Korea, where economic self-reliance has been unavoidable? Isn't North Korea 'managing' the crisis by maintaining its self-sufficient economy even if it bears the tribal economy?

Under both international sanctions and the COVID-19 pandemic, not everything about the current North Korean economy can be explained by "crisis management” alone. We must also bear in mind that the markets operating throughout North Korea have enabled more efficient allocation of the domestic resources that the self-sufficient model relies on.

Another possibility is a potential influx of foreign money into North Korea. This possibility lies within the realm of reasonable doubt but cannot be confirmed. North Korea is a ‘global’ monetary economy where residents use the North Korean won as well as the US dollar and Chinese yuan. This mixed monetary economy is the result of public distrust in the North Korean won, but it is also an important element of the North Korean economy. I believe it is reasonably possible to import US dollars or Chinese yuan into North Korea from the outside. If it is possible to bring foreign currency into North Korea, this would certainly help to mitigate North Korea’s economic crisis.

Lastly, I believe that the Workers' Party of Korea in North Korea has continued to maintain domestic legitimacy and that the social control system established after the Korean War is still operating effectively. Moreover, the COVID-19 pandemic seems to have paradoxically restored North Korea's relaxed control system, in other words, that the pandemic has actually strengthened the regime’s control. (See my previous post: “The COVID-19 Paradox: North Korea Does Not Collapse Easily”)

 

North Korea's ‘economic crisis’ is ongoing, but a crisis ≠ collapse

Even today, the economic crisis in North Korea is ongoing. But we need to re-evaluate the idea that North Korea will collapse if the crisis continues. What are we anticipating and preparing for in the face of the North Korean economic crisis?

Obviously, North Korea is now in crisis and will continue to be so. We have long expected that a continued crisis would pose an existential threat to the North Korean regime, leading in turn to reform and opening. Now, we need to re-evaluate our expectations about where that crisis might lead. In fact, in the midst of a world economic crisis like now where globalization is shrinking and nationalism is expanding, North Korea may have stronger ‘survival DNA’ than any other country.

In reality, we have long since passed the point where we can genuinely expect that North Korea will accept South Korean help or respond to dialogue during difficult times. Unless we look for a more fundamental way to restore trust between the two Koreas, it is highly likely that the security competition on the Korean Peninsula and the stalemate in inter-Korean relations will continue for a considerable time yet.

 

*IL-Young Jeong is a research professor at Sogang University in Seoul. His key research interests include North Korea's social control system, inter-Korean relations, and peace on the Korean Peninsula.

*This article is a column published in OhmyNews. https://omn.kr/212h1