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North Korea: Witness to Transformation

The 6th Session of the 12th Supreme People’s Assembly (SPA)

by | September 26th, 2012 | 07:00 am

We have argued in some detail that reform is unlikely to come with big announcements. Nonetheless, like others we got swept into the speculation that maybe—just maybe—there might be a sign from the SPA meeting.

The silence on reform was deafening.

The Education Bit

The main initiative coming out of the meeting was the expansion of universal, compulsory education from 11 to 12 years. Prior to the announcement, North Korea’s education system included a year of kindergarten, four years of primary school and a six-year middle school. At that point (age 15-16), students come to the end of mandatory education and either exit the system or are channeled into technical school (two to three years), college (four years) or university (four to six years), and from the latter on to postgraduate studies.

Our refugee surveys, reported in Witness to Transformation (Chapter Two), cast some doubt on whether this system operates as claimed. In the South Korea survey 63 percent reported completing mandatory education; in the China survey, only a slight majority of 53 percent did. Some of this disparity arises from the age of older cohorts. But considering the timing of the introduction of the compulsory 11-year education in 1972 and the age of our respondents, a significant share of school-aged cohorts have clearly not been 11 years of education.

As a result, we should not be overly cynical about the proposed reform. In a long piece in the KCNA (“Issues Concerning Enforcement of Universal 12-year Compulsory Education Discussed at SPA Session”), the regime indirectly signaled a number of weaknesses in the educational system: that resources to education had to be increased, that “electricity, equipment and materials needed for education be provided on a preferential basis,” that the system needed to expand both teaching of IT and its use, strengthen foreign language training and adjust the curriculum.  An optimistic interpretation of the July 26 speech to the Central Committee (“Let Us Step Up the Building of a Thriving Country by Applying Kim Jong Il’s Patriotism”) is that Kim Jong Un was calling for a more practical and action-oriented patriotism rather than the mere mouthing of slogans. If this is the North Korean version of Deng Xiaoping’s “seek truth from facts,” hallelujah.

The Reform Bit

But that is not what everyone was waiting for. The expectation was that either policy or personnel changes would endorse the experimental reforms in agriculture that we covered in previous posts (in addition to the above, see our post that adds some detail). Additional reporting provides more evidence that these experiments are occurring (the Reuters version of events;  Jean Lee’s reporing for AP, based on interviews with farmers south of Pyongyang). Still other reports suggest that the regime may be bowing to necessity by allowing state firms to transact with one another in cash.

The absence of an SPA announcement does not mean an end to these experiments; in fact, the political economy may require the new leadership to take a low-key approach. It is also possible that the SPA provided an opportunity to discuss these issues in closed session or with important party people in attendance. However Luke Herman, or guru on the leadership, notes that the marginal personnel appointments announced at the meeting didn’t give any signs either.

Most importantly, the North Korean conception of “reform”—or more precisely “economic adjustment” or “improvement” (경제개선, kyung jae gae seon, or 經濟改善 in Chinese)–does not exactly comport with the Washington Consensus. In addition to reports of the agricultural experiments we now have competing reports that the regime may be considering price controls. The country has been experiencing an extremely stubborn–and increasingly problematic–inflation; my colleague Marc Noland paints a picture of an economy experiencing much more serious distress than the stage-management would leave one to believe.

Such price controls won’t work, but in the absence of any other macroeconomic policy tools you can understand why the regime resorts to them. But the controls are only likely to compound the regime’s problems, as black markets thrive to circumvent them and the regime is forced to do something about severely lagging nominal wages. The possibility for so-called inertial inflation is serious.

And it gets worse.  Every decade since its founding, North Korea has experienced urban food shortages and the regime has responded by sending the army into the cooperatives to seize grain. Apart from KJU’s “happy days are here again” speech, all signs point to worsening conditions over the next six months.  Even if the regime is undertaking constructive reforms in the agricultural sector, will they have the patience and political will to stay the course if, as expected, conditions deteriorate for unrelated reasons? How will the government respond if inflation accelerates?

The severity of the situation is signaled by the following part of the Reuters story, based on an informant who claims ties to both North Korea and China. It is so strange—and desperate—that it bears quoting in full:

“The food (shortage) problem will hopefully be resolved by learning from the [Chinese] Xinjiang Construction and Production Corps,” the source said, referring to the sprawling quasi-military network of state farms and factories in northwestern China intended to secure stability in the restive region by developing the economy and helping control borderlands.

The Xinjiang corps was founded in 1954 by late vice president Wang Zhen. As of March 2011, more than 2.6 million people lived in the corps’ 14 divisions, which cover a combined area of more than 70,000 sq km (27,000 sq miles). The corps owns 179 farms, 1,400 enterprises, 13 listed companies, universities, media outlets and medical institutions, and its output was worth 75 billion yuan ($11.9 billion) in 2010.

North Korea’s military also has significant economic interests and its armed forces are required in part to feed themselves as transport and a central distribution system have broken down, while fuel is in short supply.

The armed forces also have little to do, experts say, to occupy their time, and so farming is encouraged and praised in visits by Kim Jong-un and by his father Kim Jong-il, whose “field guidance” advice trips were a staple of North Korean state media reports.

The source said boosting the army’s food self-reliance would not be a major change in North Korea’s “military first” policy.”

If this is what is meant by “the Chinese model,” we are in for a bumpy, experimental ride as the regime grapples with a staggering array of economic difficulties.