UNVEILING THE NORTH KOREAN ECONOMY: Collapse and Transition | By Byung-Yeon Kim | Pacific Affairs
BOOK REVIEWS, NORTHEAST ASIA
VOLUME 92 – NO. 2
UNVEILING THE NORTH KOREAN ECONOMY: Collapse and Transition | By Byung-Yeon Kim
Cambridge, UK; New York: Cambridge University Press, 2017. xii, 329 pp. (Tables, graphs.) US$35.99, paper. ISBN 978-1-316-63516-2.
Unveiling the North Korean Economy is divided into three parts:
- a theoretical chapter (6–40) covering socialist economic systems from a general perspective;
- a discussion of some key features of the North Korean economy (41–216);
- and a final part (217–304) devoted to the dynamic aspects of transition.
Author Byung-Yeon Kim takes the position that effective policies towards North Korea can only be drafted if there is a proper understanding of that country’s economy, and argues that so far the related level of understanding in the international community is inadequate. His book aims to fill that gap.
The first part emphasizes the role and position of firms and households in a socialist economy, which is the central theoretical argument of the book and something that, according to Kim, has so far been mostly neglected by other studies on North Korea’s economy. He discusses the problem of economic statistics and their reliability, drawing on past experience of studying the Soviet Union. Kim reminds his readers of the huge discrepancies between data from various sources despite the relative transparency of the Soviet Union compared to North Korea: “[working with Soviet data] is … like playing with jigsaw puzzles … Working with North Korean data is more like looking for a needle in the haystack” (2). His response to that challenge is the use of accounts of North Korean refugees living in South Korea, and of surveys of Chinese firms that do business with North Korea.
In the second part, Kim explores some specific features of North Korea’s economy. He is highly critical of the leaders’ custom of arbitrary micro management through on-the-spot guidances and concludes that “the North Korean economic system can be characterized as a ‘plan-less’ planned economy” (64). After an extensive critical discussion of Bank of Korea estimates of North Korean GDP data, Kim offers his own, more pessimistic calculations and argues that the GDP of 2013 was only about 80.5 percent of the 1989 value (83). Section 2.3 offers insights from surveys among North Korean refugees conducted in 2009 and 2011.
The first part emphasizes the role and position of firms and households in a socialist economy, which is the central theoretical argument of the book and something that, according to Kim, has so far been mostly neglected by other studies on North Korea’s economy. He discusses the problem of economic statistics and their reliability, drawing on past experience of studying the Soviet Union. Kim reminds his readers of the huge discrepancies between data from various sources despite the relative transparency of the Soviet Union compared to North Korea: “[working with Soviet data] is … like playing with jigsaw puzzles … Working with North Korean data is more like looking for a needle in the haystack” (2). His response to that challenge is the use of accounts of North Korean refugees living in South Korea, and of surveys of Chinese firms that do business with North Korea.
In the second part, Kim explores some specific features of North Korea’s economy. He is highly critical of the leaders’ custom of arbitrary micro management through on-the-spot guidances and concludes that “the North Korean economic system can be characterized as a ‘plan-less’ planned economy” (64). After an extensive critical discussion of Bank of Korea estimates of North Korean GDP data, Kim offers his own, more pessimistic calculations and argues that the GDP of 2013 was only about 80.5 percent of the 1989 value (83). Section 2.3 offers insights from surveys among North Korean refugees conducted in 2009 and 2011.
The data shows that more North Koreans participate in the informal economy (71.2 percent) than in the official economy (50.6 percent) and that this behaviour does not depend on Party membership, educational background, or location (101). Some of the numbers are striking; an average official monthly salary of 2,171 won (102) contrasts with an average informal monthly income of 172,758 won (104). Furthermore, the surveys explore consumer behaviour. A key finding is that on average, two thirds of all North Koreans identified markets as their main source of procurement of food and consumer goods, and that even in Pyongyang this rate included about half of the population (tables 2.15 and 2.16). This is all the more significant if we consider that the survey was conducted almost a decade ago, and that marketization has meanwhile continued. It also helps explain why there are instances of North Korean leaders calling in speeches for luring consumers back to state-operated stores (Peter Ward, communication with the author).
Turning to the firms, the author identifies three waves of decentralization (1980, 1991, and 2002). In his analysis, the disintegration of the economy into four parts—army, party, cabinet, and regional government—has “virtually destroyed” central planning (126). He shows that almost 60 percent of all North Korean firms allowed some of their staff to work informally and used part of the resulting income for their regular operations in lieu of sufficient funding by the central state. Kim’s survey of 176 firms in Dandong (China) of 2012–2013 confirms anecdotal reports from practitioners. It shows that most of the North Korean partners of these firms were related to either the party or the military, and that these were more productive compared to other types of North Korean business partners because of their access to licenses and permits. An interesting detail is the suggestion that the North Korean trade deficit as it has been reported by organizations such as KOTRA—an unsustainable phenomenon in the long run—could be explained by a commission paid to North Korean exporters by their foreign partners that is not reflected in trade statistics (165).
In the final part of chapter 2, the author discusses the results of a survey on the extent and effects of corruption in North Korea. Among the key findings is that “bribery and informal markets are likely to reinforce each other” (187), and that corruption has remained relatively stable at about nine percent of total household expenditures (199).
The third and final chapter reviews the existing experience of transition and draws policy recommendations for the future of North Korea including privatization as well as price and exchange rate liberalization.
A few critical words are in place regarding formal aspects. The romanization of Korean terms is somewhat odd, for example “Chullima” instead of the widely used Chollima [Ch’ŏllima] or Giubso instead of Kiopso [kiŏpso]. The usual English translation of hyŏnji chido is “on-the-spot guidance”; the author has chosen “Spot Guidance” instead. References are not always complete; for example endnote 27 in chapter 2 (65/205) refers to a Kim Jong-il speech for which only title and date are provided. Given the dynamic development of North Korea and its economy, some of the data used in the book must be regarded as slightly outdated at the time of publication in 2017, such as refugee surveys of 2009 and 2011 which are described as “recent” on page 93. And especially in times when conventional books face increased competition from electronic media, the publisher needs to be asked why the quality of the print is relatively low.
The book is based on continuous research of a senior expert over many years. Its main strengths are the solid theoretical foundation as well as primary data collected through refugee surveys. The critical approach to conventional wisdom, such as BoK data on GDP or trade data, is very welcome and thought provoking.
Unveiling the North Korean Economy is suitable as supplementary reading in graduate courses on North Korea. It takes a closer look at the country from the perspective of firms, households, and the process of transformation. Scholars and students who are already familiar with the structure of the North Korean economy, its resource endowment, and the chronology of its development, will benefit from detailed insights based on surveys among Chinese firms in Dandong and defector surveys conducted in South Korea. An update of these surveys would be most welcome to reflect the changes in North Korea over the last decade.
Rudiger Frank
University of Vienna, Vienna, Austria
Turning to the firms, the author identifies three waves of decentralization (1980, 1991, and 2002). In his analysis, the disintegration of the economy into four parts—army, party, cabinet, and regional government—has “virtually destroyed” central planning (126). He shows that almost 60 percent of all North Korean firms allowed some of their staff to work informally and used part of the resulting income for their regular operations in lieu of sufficient funding by the central state. Kim’s survey of 176 firms in Dandong (China) of 2012–2013 confirms anecdotal reports from practitioners. It shows that most of the North Korean partners of these firms were related to either the party or the military, and that these were more productive compared to other types of North Korean business partners because of their access to licenses and permits. An interesting detail is the suggestion that the North Korean trade deficit as it has been reported by organizations such as KOTRA—an unsustainable phenomenon in the long run—could be explained by a commission paid to North Korean exporters by their foreign partners that is not reflected in trade statistics (165).
In the final part of chapter 2, the author discusses the results of a survey on the extent and effects of corruption in North Korea. Among the key findings is that “bribery and informal markets are likely to reinforce each other” (187), and that corruption has remained relatively stable at about nine percent of total household expenditures (199).
The third and final chapter reviews the existing experience of transition and draws policy recommendations for the future of North Korea including privatization as well as price and exchange rate liberalization.
A few critical words are in place regarding formal aspects. The romanization of Korean terms is somewhat odd, for example “Chullima” instead of the widely used Chollima [Ch’ŏllima] or Giubso instead of Kiopso [kiŏpso]. The usual English translation of hyŏnji chido is “on-the-spot guidance”; the author has chosen “Spot Guidance” instead. References are not always complete; for example endnote 27 in chapter 2 (65/205) refers to a Kim Jong-il speech for which only title and date are provided. Given the dynamic development of North Korea and its economy, some of the data used in the book must be regarded as slightly outdated at the time of publication in 2017, such as refugee surveys of 2009 and 2011 which are described as “recent” on page 93. And especially in times when conventional books face increased competition from electronic media, the publisher needs to be asked why the quality of the print is relatively low.
The book is based on continuous research of a senior expert over many years. Its main strengths are the solid theoretical foundation as well as primary data collected through refugee surveys. The critical approach to conventional wisdom, such as BoK data on GDP or trade data, is very welcome and thought provoking.
Unveiling the North Korean Economy is suitable as supplementary reading in graduate courses on North Korea. It takes a closer look at the country from the perspective of firms, households, and the process of transformation. Scholars and students who are already familiar with the structure of the North Korean economy, its resource endowment, and the chronology of its development, will benefit from detailed insights based on surveys among Chinese firms in Dandong and defector surveys conducted in South Korea. An update of these surveys would be most welcome to reflect the changes in North Korea over the last decade.
Rudiger Frank
University of Vienna, Vienna, Austria
No comments:
Post a Comment