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North Korea: Witness to Transformation

Sources: New Focus International and the North Korean Political Economy

by | April 3rd, 2013 | 07:00 am
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We are always interested in new sources of material on North Korea, and thus were pleased to come on New Focus International.  A distinctive feature of New Focus is that it is run by North Koreans “in exile,” as they site puts it nicely; the choice of words suggests the promise of return. The editor-in-chief is Jang Jin-sung, a graduate of Kim Il-sung University, a former member of the DPRK Central Broadcasting Committee (and the Party of course) as well as being the DPRK State Poet Laureate. Since going into exile in the South, he has been affiliated with the Seoul Institute for National Security Strategy and Sogang University and offered his services to the government. As with other efforts of this sort, New Focus relies on a network of informants in China and North Korea itself.

The site raises a broader of issue of interest: the fact that so much analysis of North Korea’s political, economic, and social system—including ours—comes from people with no direct contact with the system. Of course we can tap refugee surveys and elite defector interviews, but that is somewhat different from ongoing analysis that is rooted in some intuition of the politics of the system.

A few recent standout posts at New Focus on North Korea’s political make the point about how insider information can shape an understanding of the system. Many North Korean analysts focus on formal institutions and political-military elites. But that can’t be the whole game, and it isn’t. Money makers examines the emergence of unconventional financial brokers, in effect, informal financial markets. The story talks about how these curb market lenders straddle the public and private spheres, relying on the former for protection—including through bribery—while simultaneously advancing the development of the market.

Even more interesting is a fascinating story called Capitalism in North Korea and the exaggerated drug trade story. The headline and story suggests that the state is not as directly involved in the drug trade as South Korean and other sources contend. But the reasons are somewhat different than might be thought: that in fact there are independent sources of capital and economic power in the country that exist in a symbiotic relationship with the state. On the one hand, they are dependent on it. But they also have clout because of their ability to deliver resources to the regime; put differently, someone actually has to know how to run a business, and party apparatchiks are not exactly selected for those skills.

The story details the family behind the Ryugyong Corporation, which manages the illicit North Korean drug industry, and how it is exemplary of a larger class of market players. Some of these families were Korean Japanese who brought resources to the regime, but others were so-called Overseas Agents dispatched abroad to do business; again, they were no doubt selected for some business acumen. The Son family patriarch invested in Macau at the regime’s direction, made money, and the position became a kind of family sinecure. Heirs of the enterprise were the first to introduce a property development model in North Korea, whereby the State provided the land and individuals provided the capital. The profits were split 60 / 40.  Luxury condos sold for as much as $50,000 per unit, suggesting the nascent wealth associated with the new market economy (the article even provides an address of this building: Sunnae-dong 5-ban opposite the Chosun Computer Center, in Pyongyang Mangyongdae). When the author of the article defected in 2004, Son Gyung-chul was still using the 8th and 9th floors as his personal flat. Do the math on the cost of that spread.

As we always say, caveat emptor; third-party verification of story lines is not on offer. But that applies to our work as well, and any effort to understand the country is going to be pieced together from implicit analytic models and bits of evidence that are highly imperfect. The analysis contained in these two stories is theoretically plausible to us: that markets depend on market-makers and that the regime’s resources are taxed from entrepreneurs with some business skills. In any case, uur belief is that the more in the business of getting information out on the country, the merrier; there is clearly a lot to learn from this project and we are going to bookmark it for sure.

Thanks to Steve Denney, who is doing some English-language editing for the site.