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North Korea: Witness to Transformation

Slave to the Blog: Economic Policy Roundup

by | July 25th, 2013 | 07:00 am
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A number of recent stories—very much below the radar—are indicative of economic struggles going on within the North Korean regime. The outlines of these struggles are “through a glass, darkly,” but something is going on. And so far at least, it doesn’t look to us like “reform.”

First up, we have always watched closely for signs that the Cabinet might be delegated greater responsibility; last year, around the time of the SPA meeting, we reported on the “cabinet responsibility” debate.  The reasons for focusing on the cabinet are theoretical more than empirical, frankly. The Cabinet consists of ministers with portfolios that are more diverse than those represented in institutions such as the National Defense Commission. It is better to have a Premier listening to a Minister of Health than it is for Kim Jong Un to be getting all his information on the economy from the Chairman of the Second Economic Committee, which oversees the defense industrial base. There is also the lingering question of whether the appointment of Pak Pong Ju to the position of premier mattered, or whether coverage of his activities constitutes a signal of some sort. He had at least some experience with the 2002 reforms (Haggard’s skepticism here; Noland’s here).

On July 15, KCNA reported on the convening of an “expanded cabinet meeting.” Reporting on cabinet meetings is relatively rare, so with Luke Herman’s assistance we tracked down all mention of them since 1996. As it turns out, there are only five such references in the KCNA database: two from 2002 (here and here, largely perfunctory), 2005 (chaired by Pak Pong Ju), 2006 and 2007. The exercise was dispiriting; the expanded cabinet meetings all appeared to be heavily-scripted top-down affairs rallying the troops around the latest forced-march campaign. The latest seems to conform to type; excerpts from the KCNA reporting are appended below and it is all “shining achievements” and “unprecedented production swings.”

To date, the organizational action has not been in the Cabinet but in the Party. Radio Free Asia, based on two unidentified informants, reported last week on the creation of a new Economic Department by the Central Committee; Michael Madden’s North Korea Leadership Watch provides a close reading of the RFA story and its possible implications.  The department would presumably be in the Secretariat and would have branches reaching into the provinces and below. Among the powers granted to the new department were control over appointments and the capacity to punish officials for economic malfeasance.

There are several possible interpretations for the creation of the new entity, not altogether mutually exclusive. The optimistic interpretation is that this could be linked to the so-called June 28 directive, the purported reform initiatives of next year; Madden suggests this link. A second interpretation, and the one we favor, is that the organizational changes are more control-oriented in intent.  The RFA story references the fact that new institutions are springing up, from businesses to welfare societies, that are engaged in unauthorized foreign exchange-making activities.  The new department would parallel the Administration and Organization and Guidance Departments in trying to rein in these activities and bring them back under party control. A third possibility is that a massive struggle is underway over rents. The RFA story notes that “[some of] the functions of [the Party’s] Department of the Executives and Department of Organization Management were already taken away by the Department of Economy, and also the Department of Administration has seen interference from the department as well.” Jang Song Thaek is head of the Administration Department. There are rumors going around that there is tension between Jang and Choe Ryong Hae, and Jang’s appearances with Kim Jung Un have been way down. Could this all reflect intra-elite struggles for control of a stagnant economy?

Out skepticism about reform is related to a third economic story of note in recent weeks: several references to an “historic” speech by Kim Jong Un called ” Let Us Usher in a Fresh Heyday on All the Fronts of Socialist Construction by Creating the ‘Speed on Masik Pass.’”

We don’t know whether to laugh or cry, but if you have serious interest in North Korea, unfortunately you have to read this speech; we forward you the version posted up by Juche Idea Study Group of England.

Masik Pass is the location of a ski resort that Kim Jung Un has closely identified himself with; Curtis Melvyn has an early overview of the project at NKNews. Three things about the project are interesting. First, it is connected with the broader interest of the Young General in spending resources on sports and leisure activities. Back in November, he went so far as to create a somewhat novel new organizational form called the Physical Culture and Sports Commission; North Korea Leadership Watch covered the new body which was headed by no less than Jang Song Taek (in addition to the family connection, Jang was also Vice Chairman of the DPRK National Defense Commission and Director of the KWP Administration Department on which more in a minute). The pecuniary and patronage motives of a ski resort are obvious: it could be a lure for foreign tourists and a winter playground for Pyongyang’s elite. The speech’s claims to the contrary (“Our people, including young people, are picturing with confidence the happy day when they would train their bodies while skiing…”) we have a hard time imagining the average North Korean hitting the slopes at the North Korean equivalent of Vail. But this is actually too cynical: the marriage of sport with authoritarian nationalism can be seen in regimes as diverse as the Third Reich and the Soviet Union.

Second, an interesting part of the speech is the revelation that the military is going to be moving the boulders to clear the ski runs. The engagement of the military in civilian projects has been a perennial feature of the North Korean political economy, but you would think that building ski resorts might test the limits. The speech’s denouement is worth quoting:

“Let us finish construction of the ski resort on Masik Pass unconditionally within this year by waging an all-out onward campaign, an all-out death-defying campaign!”–this is the militant slogan the soldiers enlisted in the construction should hold high.

But the ski resort is not the end:

“The KPA officers and men should make ceaseless innovations not only in the building of the ski resort on Masik Pass but also in all other major construction projects the Party has entrusted to them and the laying out of provinces, cities and counties in the country.”

Corvee labor anyone? Diverting the military into the provision of public goods has been rumored for some time to constitute a point of contention within the regime.

But the main takeaway is that the tenor of the speech resorts to the long-standing tradition of Chollima and forced-march economic campaigns. As we have observed on numerous occasions, exhortation is a substitute for material incentives in socialist systems, an effort to extract more effort. This is not exactly change we can believe in.

Enlarged Session of Plenary Meeting of DPRK Cabinet Held

Pyongyang, July 15 (KCNA) — An enlarged session of the plenary meeting of the DPRK Cabinet was held recently.

Present there were Premier Pak Pong Ju and members of the Cabinet.

Present as observers were leading officials of the institutions under the Cabinet, directors of management bureaus, chairmen of provincial, city and county people’s committees, provincial rural economy committees and provincial regional planning committees, directors of provincial management bureaus of food and consumer goods industries and directors of major industrial establishments.

The session first discussed the issue of carrying out the important tasks set forth by the dear respected Kim Jong Un in a historic appeal “Let Us Usher in a Fresh Heyday on All the Fronts of Socialist Construction by Creating the ‘Speed on Masik Pass’”. Then it reviewed the fulfillment of the national economic plan for the first half of the year and discussed the measures to successfully carry out the national economic plan for the third quarter of the year.
….

Reclaimers of the Sepho tableland made shining achievements with the goal to reclaim more than 50 000 hectares of grassland and finish the construction of stock-breeding management center within this year, they noted. Fresh successes and innovations are being made in the construction of major projects including the construction of the Chongchongang Power Stations in Tiers and apartment houses for scientists.

They said unprecedented production swing is being effected in the different sectors of the national economy amid the efforts to carry out the tasks advanced by Marshal Kim Jong Un in his New Year Address and appeal.

The service personnel and people of the DPRK are faced with the heavy yet responsible tasks to usher in a new heyday on all fronts of socialist construction by working hard to create the “speed on Masik Pass” in hearty response to the historic appeal made by the Marshal while carrying through the tasks laid out in his New Year Address, they said, advanced tasks and ways to do so.

The meeting adopted a relevant decision.