Tuesday, May 2, 2017

Has Kim Jong-un Launched a North Korean Economic Miracle?

Growing wealth in North Korea

By Robert Wenzel

I am far from ready to award North Korean leader Kim Jong-un a Ludwig Erhard economic policy medal.

However, there is a fascinating report in The New York Times on Kim Jong-un's policy steps to free up the North Korean economy.

To appreciate this step one must understand that the 33-year old Jung-un is the third in line of a brutal communist dictatorhsip that tolerated little in the way of free markets. 

He follows
his father  Kim Jong-il  and his grandfather  Kim Il-sung as leader of North Korea. He is the first North Korean leader born after the country's founding by his grandfather.

The New York Times reports:
Despite decades of sanctions and international isolation, the economy in North Korea is showing surprising signs of life.

Scores of marketplaces have opened in cities across the country since the North Korean leader, Kim Jong-un, took power five years ago. A growing class of merchants and entrepreneurs is thriving under the protection of ruling party officials. Pyongyang, the capital, has seen a construction boom, and there are now enough cars on its once-empty streets for some residents to make a living washing them.

Reliable economic data is scarce. But recent defectors, regular visitors and economists who study the country say nascent market forces are beginning to reshape North Korea...

a limited embrace of market forces in what is supposed to be a classless society also is a gamble for Mr. Kim, who in 2013 made economic growth a top policy goal on par with the development of a nuclear arsenal.

Mr. Kim, 33, has promised his long-suffering people that they will never have to “tighten their belts” again. But as he allows private enterprise to expand, he undermines the government’s central argument of socialist superiority over South Korea’s capitalist system...

Kim Jong-il, the father of the North’s current leader, had been ambivalent about the marketplaces before he died in 2011. Sometimes he tolerated them, using them to increase food supplies and soften the blow of tightening sanctions imposed by the United Nations on top of an American embargo dating to the Korean War. Other times, he sought to suppress them...

But 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, according to a study by the Korea Institute for National Unification in Seoul.

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...

Shoes, liquor, cigarettes, socks, sweets, cooking oil, cosmetics and noodles produced in North Korea have already squeezed out or taken market share from Chinese-made versions, defectors said.

Regular visitors to Pyongyang, the showcase capital, say a real consumer economy is emerging. “Competition is everywhere, including between travel agencies, taxi companies and restaurants,” Rüdiger Frank, an economist at the University of Vienna who studies the North, wrote recently after visiting a shopping center there....

When Kim Jong-un stood on a balcony reviewing a parade in April, he was flanked by Hwang Pyong-so, the head of the military, and Pak Pong-ju, the premier in charge of the economy...

The measures resemble those adopted by China in the early years of its turn to capitalism in the 1980s. But North Korea has refrained from describing them as market-oriented reforms, preferring the phrase “economic management in our own style.”

In state-censored journals, though, economists are already publishing papers describing consumer-oriented markets, joint ventures and special economic zones.
Things are really changing. Economist reported in 2015:
This growing segment of the population is already visible on Pyongyang’s streets as young women shrug off dowdy outfits for fitted jackets, bolder colours and sunglasses (long the mark of female villains in North Korean films). Coats with a discreet Burberry pattern on the lining are popular. One North Korean in her 30s was recently sporting a large diamanté Chanel brooch directly above her obligatory pin of the Kim rulers. A woman was even spotted carrying a tiny pet dog in her designer handbag—a sight common enough in Tokyo or Seoul but improbable in Pyongyang even five years ago. High heels have appeared, some in leopard print or silver.

They should really teach in Dictatorship 101 that free markets improve an economy and make life better even for the ruler. 

Jung-un appears to get this.

Kenji Fujimoto, a Japanese chef who used to work as Kim Jong-il's personal cook, has stated, "Stores in Pyongyang were brimming with products and people in the streets looked cheerful. North Korea has changed a lot since Kim Jong-un assumed power. All of this is because of leader Kim Jong-un."

In 2012, Business Insider reported that there were "[s]igns of a rise in luxury goods ... creeping out of North Korea since Kim Jong-un took over" and that his "wife Ri Sol-Ju was photographed holding what appeared to be an expensive Dior handbag, worth almost $1,594 – an average year's salary in North Korea"

Jong-un likely was exposed to the wealth of the western world at an early age. He is believed to have attended, under an assumed name, private schools in Switzerland. He may have wondered how the average person in a country like Switzerland had such a high standard of living.

According to chef Fujimoto, when Jong-un was 18, he once questioned his lavish lifestyle and asked, "We are here, playing basketball, riding horses, riding jet skis, having fun together. But what of the lives of the average people?"

By allowing free market activity, it means that at least on a gut instinct level that Juog-un funderstand ree markets are the way to lead a country to prosperity,

It is said, his two goals are to make North Korea a growth economy and a militray power.

Sadly, the United States, with its actions against Saddam Hussein in Iraq and Muammar Gaddafi in Libya, has likely taught the young leader that in addition to free markets he needs a strong military to keep the American empire at bay.

President Trump could help advance the North Korean miracle by removing sanctions against the country and opening the border between North and South Korea or he could continue taunting Kim Jong-un militrarily, reinforcing the idea that Jong-un should continue his military buildup. 

The direction Trump should take is obvious.

Robert Wenzel is Editor & Publisher of  EconomicPolicyJournal.com and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics, on LinkedIn and Facebook. The Robert Wenzel podcast is on  iphone and stitcher.

Also see: Dennis Rodman on Kim Jong Un


The New York Times and North Korea


  1. I'll take the more cynical view that Kim realized starving citizens eventually eat their rulers. His change is one of self-survival. Or perhaps he was so inspired by Dennis Rodman's individualism and personal success that he now wants the same for his people.

    1. Except your theory doesn't fit the timeline. According to the article Kim started his free market move in 2010, Rodman's first visit wasn't until 2013.

      Why can't you give credit to the possibility that during the time Kim lived in Switzerland he realized the wealth free markets could bring?

    2. His motives don't seem very relevant.

      "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest."

  2. How do we know these reports are a reliable indication of broad trends, and not just a case of gullible reporters being led around by state-approved chaperones to see model cities/markets, or how the elite live? Haven't we seen these types of reports before from those who idolized the Soviet Union and Castro?

  3. Most of what we see (same as with China and Russia) is bull shit American war propaganda. Now with the freak Mc Master as head of national security we can't expect to see lies let up anytime soon.

    Kim has stated, supposedly, the reason he is concentrating on nukes is because they are much cheaper to develop and maintain than conventional weapons.

  4. The New York Times wrote glowing articles about the worker's paradise in the Soviet Union in the twenties and thirties. The Times could be pulling the same stunt with regards to North Korea.