international analysis and commentary

North Korea’s economic predicament behind the official rhetoric

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Conventional wisdom about North Korea’s war rhetoric is that it is solely designed to escalate tensions in order to extract concessions at a later stage. After recent threatening actions which included the DPRK’s third nuclear test, cancelling the 1953 ceasefire that ended the Korean War, warning of “surgical strikes” and the sentencing of a US citizen to 15 years of hard labor, the regime of Kim Jong Un is probably getting ready to start the next round of dialogue. Others view the young leader as trying to consolidate power domestically by showcasing his military might and nuclear ambitions. However, a third interpretation is the most interesting: Kim Jong Un may be directing the discontented population’s attention away from the need for economic reforms by allowing the military apparatus to display its toughness and strength.

Although the regime does a reasonably good job of keeping the country isolated and its population unaware of what is happening outside its borders, information is still more accessible than ever before. Radio networks can broadcast across the border regions and North Koreans now own somewhere between two to five million cell phones – some of which have internet access. The number of laptops being sold is also on the rise. In short, there is another (and more complex) North Korea beyond the production of nuclear weapons and the regime’s official rhetoric. The recent growth of the availability of the internet and social media – including the first tweet sent by a foreign journalist from the DPRK – and the visit of former American basketball star Dennis Rodman confirms that at least some segments of the population are opening up to the outside world. An explanation for the escalation of tensions in the region could be that the young leader, confronted with the potential rise of a “middle-class”, is tactfully drumming up support for his regime by instilling fear of an imminent nuclear war.

The possibility of a change of course is reinforced by the appointment of a Prime Minister, Pak Pong Ju, who is an economic expert. With all eyes on North Korean troops ready to pour across the demilitarized zone, artillery being hidden in caves, foreign embassies being asked to close and foreigners in South Korea being warned to leave before a war starts, the news of the appointment of the new Prime Minister in Pyongyang went greatly unnoticed.

This appointment signals a willingness to start tackling the need for economic development in a country where, according to the UN, two-thirds of the population of 24 million face regular food shortages. Pak previously served as Prime Minister from 2003-2007 when he spearheaded hesitant market reforms intended to provide state firms with greater autonomy and gradually reduce state rationing of food and daily necessities. No one expects radical economic changes for the time being, but in the longer term it is possible to envision a shift of part of the country’s military spending to the civilian economy. This might be especially true if Kim’s promise is to improve the living conditions of his people and not to wage war on South Korea or to attack the USA with a nuclear missile. Since Kim took office in December 2011 he has claimed on several occasions – including at the 2013 New Year’s address – to have improved the economy.

Given the DPRK’s isolation, accepting foreign aid and reforming the crippled economy are the only options Kim Jong Un has to ensure his population is not faced with new and disastrous food shortages. China is continuing to exert pressure on Pyongyang to tone down its warmonger rhetoric but it remains unclear to what degree China is willing to accommodate Pyongyang’s tactics and if it would support greater economic development in the country.

If North Korea’s economy is to change, it would likely evolve into some kind of export-oriented model, probably relying on industrial growth based on a strong “developmental state”. The models can range from that of China to Vietnam. In either case, no growth can be attained in isolation, and here China’s role is pivotal in granting access to its market, becoming a trade partner and heavily investing in the country.

However, the latest diplomatic signals raise doubts about China’s support for Pyongyang. On March 7th at the UN Security Council, China supported the adoption of new sanctions to further isolate North Korea. Since then Chinese inspections on cargo entering North Korea have reportedly been strengthened, but no major effect has been observed at the border. China offers the greatest policy uncertainty but for the time being its position is to give stability a higher priority than denuclearization.

Overall, it appears the DPRK might soon be ready to start dialogues with the international community. It is finishing a cycle of provocations and is getting ready for its next cycle of negotiations. In light of the current circumstances, now more than on previous occasions, back-channel dialogues and informal “track-two” mediation efforts should focus on the status of North Korea’s economic development.