Session:

7

Date/Time:

September 26, 2013 / 14:00-15:30

Moderator:

Nicholas Eberstadt, American Enterprise Institute/The Asan Institute for Policy

Speakers:

Lee Suk , Korea Development Institute

Nick Eberstadt, American Enterprise Institute/The Asan Institute for Policy Studies

Zhang Dongming, Liaoning National University

Zhang Huizhi, Jilin University

Session Sketch

The seventh session of the North Korea conference was moderated by Nicholas Eberstdat of the American Enterprise Institute and also a fellow of the Asan Institute. The session focused on the discussion of the North Korean economy and confronted the difficulties of measuring an isolated state’s economy. Eberstadt gave the panel and audience a very important reminded that the discussion on the North Korean economy is still at a pre quantitative stage due to the lack of national account information and foreign trade finance data.

The first panelist, Dr. Lee Suk of the Korea Development Institute, talked about how the North Korean economy is discussed and perceived domestically. According to Lee, in fact many economists South Koreans are confused about the North Korean economic situation. For example, some South Korean economists say that the North Korean economy’s is still in very big trouble but others say it isn’t. Many South Korean economists will point out that Pyongyang’s economy is booming. So there is some confusion at the moment among many South Koreans considering the North Korean economic situation. Lee discusses this confusion and the implications.

Lee admits that it is difficult to know exactly what the economic situation is but perhaps the real economic situation may be a little better than what the available data suggests. But at the same time the real economic situation may be not so good as we can see in Pyongyang. We can understand the signs of economic reform and openness but we still don’t know if the reforms are genuine or politically motivated. Lee believes that in this economic situation the North Korean government doesn’t want to abandon or give up its nuclear capabilities because the North Korea government needs money so they allow market activities and get more dollars from the people. While it is a kind of a reform in a way but this market may be politically dangerous for the Korean government. they have to rely on China and Russia more in order to get dollars but its also politically dangerous. So how can the North Korean government mitigate this danger? Perhaps having nuclear capability is one way. If so, it is becoming more difficult for the North Korean government to give up its nuclear capabilities even while they are carrying economic reform and openness. And if this continues, it will become a big dilemma in the future.

Nicholas Eberstadt, acting as both moderator and panelist, followed Dr. Lee’s presentation with his own, spending the next few minutes trying to put North Korea economic performance over the last forty or fifty years into international perspective with numbers. The point that Eberstadt tries to leave participants with is that North Korea is not a special case. For years Eberstadt has been reading that conventional style of socialism and North Korea’s is different and distinctive, which is also Pyongyang’s official view point. Eberstadt shows that, in fact, it’s not so different and that things are just as miserable as you would expect from a place that tries to organize their economy like North Korea is. Eberstadt demonstrates this by using big data sets to show what international patterns are like and where North Korea fits into them. He shows that North Korea is as expected going the opposite direction and basically falling off the face of the earth. This is a story about policy and institutions and where they lead you and your unfortunate people. One could ask what would a country be like if it were a Stalin style, unreformed soviet style economy reform socialist, China or Vietnam style economy. How would it be doing if it were post socialist economy? The best of course is never having been socialist. How would you be doing if you were never socialist? Classical socialist would be doing twice that well, if only the DPRK was as efficient as Stalin. if it were a classical socialist state it would be twice that. if it were a mercantilist type state like China, Vietnam it would be way more than that. You see the same sorts of pattern with imports of merchandise, service exports, service imports. This is the story about the importance of institution and policies on human results and human wealth. We know the general story on how the world has gotten richer. we know the role of human capita, social complexity, institutions and policies. North Korea is not a special case. it is doing what exactly what the scope of the human story would tell us, it’s just in a very very bad part of that long story.

Professor Zhang Dongming of Liaoning National University continued by talking about the economic policies and development trends in the DPRK. The 2013 new year message by the new DPRK leader, Zhang reminded, said that they will take development nuclear and economic together as its new developing strategy and policy objectives. The new regime has emphasized that economic power house construction is the most important issue in building a powerful, prosperous socialist nation. According to Zhang the DPRK’s policy has put more attention to economic development and policy by emphasizing politics and economic development. There are also new developments occurring with a new cabinet. The DPRK appointed economic officers in charge of government institutions. The new premier Park Bong Ju was appointed in 2002 and he was responsible for developing and promoting the economic management. The main goal is to improve methods which purpose was to promote and expand the business to improve wages and expand the operational independence. What premier park bong ju did was achieve the strategy of development of nuclear and economic together after he took the office on April 1st 2013. Zhang also adds that the regime has taken up new methods of development. The DPRK, Zhang insists, has taken some noteworthy management measures in economic fields and background of promoting a new development strategy especially in coal, electricity, metal, and rail transport that are areas of national leading economic and their basic industrial sectors.

The next speaker, Dr. Zhang Huizhi of Jilin University reiterated the previous speakers’ opinions on the North Korean economic improvement. North Korea wants to exchange more economically with other countries and the two establishment economic zone. For example, North Korea is trying to give each province plans to establish a special economic zone to induce foreign investment, that means people in North Korea understand that their efforts alone will not help the economy. During his visit with North Korea scholars, Zhang’s biggest impression about North Korea is that many in the north has had a lot of expectation of trade that could boost their standing in the international community. Zhang also talked briefly about trust politic and its implications on North Korean relations. Park Geun hye declared the trust politic and that induced a lot of expectation in the international community. but today many scholars say that the trust process in South Korea is not really focused on US but more checking with North Korea behavior. In other words, its more political. In his perspective, many important players are now at a loss they cannot find breakthroughs. In the north they want to keep nuclear possession because it provides the much needed deterrence. But international society demands first that North Korea give it up then get their support. However, this is the dilemma. Zhang believes that its South Korea’s collective responsibility to protect the north so they can change. This discussion was then followed by a questions and answers session.

An important question regarding the reliability of North Korea came from William Newcomb, member of the UN panel of experts for sanctions on North Korea. According to Newcomb there was very little chance for North Korea to rise up as a fully reformed nation given the fact that it has never even once carried out a successful economic initiative. This question was addressed to all of the discussants. One discussant reminded the audience that in 1970 the North Korea n economy on a per capita basis was probably more productive than the South Korean economy. that was what the KCIA estimate concluded. that was what the CIA estimate concluded of the time. what we have of North Korea is a catastrophic case of relative and in some sense absolute retrogression and the relative and absolute retrogression has to be explained. We can probably explain a lot of this catastrophic retrogression by looking at institutions and polices.