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North Korea: Witness to Transformation

North Korea as Ireland

by | May 23rd, 2012 | 06:38 am
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Two common misconceptions about famines are that (1) people starve to death (2) and because there is not enough food to go around.  In reality, (1) people normally succumb to other maladies before they literally starve, and (2) there is usually enough food to go around. But in market economies famine victims do not have the income to purchase food, and in non-market economies, they do not have the political influence to protect their allocation. Amartya Sen’s insight about this fundamental role of distribution in creating famines was cited by the committee that awarded him the Nobel Prize in economics in 1998.

The Irish Potato famine of the 1840s is one of history’s best remembered.  One of the odd things about the Irish case is that Ireland actually exported food during the famine as economic historian Joel Mokyr has demonstrated. The potato, the island’s mono-crop, was very heavy in value or caloric terms due to its high water content.  The transportation network across Ireland was underdeveloped and presented an impediment to internal trade.  Moreover, incomes in western Ireland were relatively low. So cultivators on the more fertile east side of the island could earn more money by exporting their crop across the sea to Britain than by hauling the potatoes across the island to be sold to their poorer relations.

An interesting counterfactual is what might have happened if an export ban had been imposed.  The local price of potatoes would have fallen, as would have incomes due to the loss of export revenue.  But the impact on the famine would have depended on the specifics of those price and income declines.  Depending on the incidence of real income adjustment across the population, the famine could have been ameliorated—or made even worse.

I was reminded of all of this when I saw several accounts in Good Friends of North Korea’s reported ban on food exports.  These reports come amid continuing stories of starvation in North Korea, most recently in the DailyNK. One can easily make the case that such an export ban is self-defeating: relatively high value items such as sea urchins should be exported to earn revenue that can be used to import low cost grains such as barley and millet for the poor. But that policy is unlikely to obtain, and in reality, the impact of the move will depend on who experiences lost income, who benefits from the fall in the internal price of food, and specifically which foodstuffs are consumed by which segments of the population. Given the unaccountability of the North Korean political regime and the country’s almost Hobbesian economy, the answer to whether this policy will be beneficial  or destructive is by no means apparent.