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North Korea: Witness to Transformation

Agricultural reform in Our Own Style

by | November 5th, 2012 | 06:33 am

Writing about North Korea approximates writing fiction insofar as it is nearly impossible to conclusively disprove any statement. It is still difficult to determine exactly what the North Koreans might or might not be doing in the agricultural sector. The FAO is supposed to release an analysis of the food situation shortly, and hopefully this will contribute to greater clarity.  In the meantime take what follows with the appropriate dosage of salt.

There is now consensus, derived from secondhand reports of what has allegedly been told to cadres as well as direct reporting with farmers, that the state plans to reduce the size of work teams on the cooperative farms to something like 6-10 people. This reform would approximate the household responsibility system introduced in China in the late 1970s. The North Korean agricultural system is notorious for the degree of central micro-management. These sub-units would be given more autonomy in decision-making, though it is unclear if that enhanced authority over planting decisions would extend to the choice of crops. Authority would shift from office-bound managers to sub-unit leaders in the field. So far, so good.

Farmers would also be able to retain output beyond their production quota. It is not clear how the quota would be determined. This is no small point. In pilot projects a decade ago, farmers complained about unrealistic target-setting formulas. Targets have to be set at realistic levels to elicit the desired supply response. Furthermore, apart from in-kind consumption or barter, it is not entirely clear how the farmers would be allowed to dispose of their surplus. Farmers are not permitted to sell grain legally in the market. Either that restriction must be relaxed, or it is possible that farmers would be allowed to sell their surplus back to the state at some unspecified price. One visitor reported being told that the farmers would be able to sell their grain at approved locations at set prices fixed by the state. Farmers would have to pay for inputs such as fertilizer at prices set by the state, either in cash, or in grain at a conversion rate set by the state.

In short, the policy changes would permit greater autonomy and introduce enhanced material incentives, but the state—not the market—would retain a central role in determining prices of both inputs and outputs—as well as the size of the marketable surplus.

If this understanding is correct, then it might be more accurate to characterize these changes as attempts to improve the functioning of the current system rather than reform it in any fundamental sense. And as observed in an earlier post, it is not even clear whether these changes will be implemented. One report already claims that the introduction of the new policy is being postponed until next year.