Thursday, July 6, 2017

North Korea is not Collapsing

So far as anybody can tell, the economy of North Korea is growing. In the 1990s North Koreans endured devastating famines after the withdrawal of Soviet support, and many experts in South Korea and the US thought the regime might collapse at any moment. But the country seems to have recovered from that crisis and entered an era of modest but real growth and real improvement in living standards. Opinions about this vary a lot, but at least one economist consulted by the Times thought that recent growth might be as high as 5%.

Today the Times is running a set of aerial photos that show North Korean investment in infrastructure: new dams, markets, schools, even a ski resort and a tree plantation that grows seedlings to replant the forests cut down for firewood during the crisis years.

How? We're talking about a country crippled by energy shortages, dominated by a bizarre dictatorship, suffused with a siege mentality that leads to enormous investments in missiles, nuclear weapons, and a vast network of artillery and rocket emplacements designed to rain destruction on South Korea in the event of war.

A concerted long-range plan to improve electricity supplies has probably helped. But most economists – that is, the ones who believe that this growth is happening – credit the loosening of state economic control that began in the famine. When the government could not feed people or pay their wages at state jobs, they allowed the development of markets and small private farms. Once the famine was over the government of Kim Jong-Il intermittently cracked down on private markets, attempting to keep them within tight limits. But over the past five years Kim Jong-un has, people say, embraced the markets and helped them to flourish.
Since 2010, the number of government-approved markets in North Korea has doubled to 440, and satellite images show them growing in size in most cities. In a country with a population of 25 million, about 1.1 million people are now employed as retailers or managers in these markets. . . .

Unofficial market activity has flourished, too: people making and selling shoes, clothing, sweets and bread from their homes; traditional agricultural markets that appear in rural towns every 10 days; smugglers who peddle black-market goods like Hollywood movies, South Korean television dramas and smartphones that can be used near the Chinese border.

At least 40 percent of the population in North Korea is now engaged in some form of private enterprise, a level comparable to that of Hungary and Poland shortly after the fall of the Soviet bloc, the director of South Korea’s intelligence service, Lee Byung-ho, told lawmakers in a closed-door briefing in February.
I suspect that the example of China is key here. North Koreans used to follow the Stalinist model, but lately they have seen that China's Communist Party has held onto political power despite the booming market economy. As long as they insist on confrontation with the US, they will never achieve China's spectacular growth, which was jump-started by exports and foreign investment. But they can certainly get improved results domestically.

But to get back to where I started: North Korea is not exactly thriving, but conditions have improved a lot since 1995. An American strategy of refusing to talk to them and occasionally making ominous noises about war will not force their government to capitulate. They can go on like this pretty much indefinitely. Nor will they be overthrown in some sort of revolution, since their complete control of the media, the military, education, and all other levers of power will keep any alternative power center from developing.

To broaden the picture: the resurgence of markets in North Korea is yet another argument in favor of capitalism and against strict socialism. One thing we have learned from the past century of socialist experiments is that business – markets, exchange, the pursuit of profit – is quite fundamental to human life and aspiration, popping up wherever it is allowed. It takes a Bolshevik or Maoist level of repression to stamp out markets. And as long as there are markets, some people will become successful businessmen and make lots of money. In any large-scale society there will therefore be rich people, and inequality will become an issue. I don't see any way around this. Any society free enough for me to want to live there will have business, and in business there are always winners and losers. Since strict socialism can only be created by grim oppression, and raw capitalism leads to a world of billionaires and paupers that I find deeply unappealing, that leaves a mixed economy with progressive taxation as the only route we know of to a decent world.


Shadow Flutter said...

We're backing ourselves into a corner with N.K. and it could end badly. A war would be foolish, devastating to both Koreas and to our image in Asia and elsewhere. I find it interesting that with all the demands for trade sanctions, the U.S. trades with NK -- no major money involved -- but with tariffs. Perhaps its time for a different approach. Let's eliminate the tariffs and stop isolating them. I've always thought the U.S. as enforcer, especially the nuclear weapon ban, was a mistake. Can't do it without bullying and threatening and making enemies, and it probably will fail as often as not anyway. Those countries that get nukes won't soon forget who tried to stop them.

I'm tired of hearing how unstable and crazy Kim Jung Un is. He seems rational to me. Doing things we don't approve of and even abhor doesn't make him irrational. Opening markets and pursuing a nuclear arsenal while the US, their enemy, can't do anything about it directly seems rational to me. It's like calling bullies cowards. Most of them certainly are not. Let's stop reducing people we don't like to caricatures.

G. Verloren said...

On the matter of economics, markets are pretty much necessary. But socialism doesn't have to mean a command economy, which we've seen fail over and over - not only in the modern age, but in the distant past, traceable back as far the Late Bronze Age Collapse.

You can have socialism and markets at the same time. The trick is making sure the markets operate in as fair a manner as possible, and preventing things like exploitation of the poor by the rich and outright market failures.

Let's take investment banking as an example. I have absolutely no problem with people offering a paid service where they help individuals decide where and how to invest their fortunes. But I absolutely believe we need to heavily regulate such an industry, place it under intense scrutiny, and legally require that industry be operated in a fiduciary manner. It should be wildly illegal to charge someone money, and then abuse their trust of your knowledge in the face of their ignorance to advise them to invest in a manner that is not in their best interests, but which lines your own pockets.

The biggest single problem with capitalism is that it invites immense abuse and exploitation unless you constantly work to prevent such things. Trade itself isn't the problem - it's allowing trade to become predatory. Markets aren't the issue - the issue is people who distort the markets for their profit at the expense of others.

Trade may be essential to human civilization, but for most of human history it has been tainted by predation and unfairness. Mercantilism, protectionism, colonialism, and all the rest have been the expressions of human greed writ large, all too often written in blood.

And in the modern age, where we finally have the technology and tools to properly observe and influence markets on incredible scales, and to legislate and police how people interact with each other within those markets, there is no real excuse for not putting a stop to unjust trade practices, and allowing inequality to flourish.

We simply choose, as ever, to allow the greedy and the selfish to make and enforce the rules, and for some reason we ignore the fact that, as ever, they prey upon the weak.