North Korea is a secretive country – and, like most secretive countries, it is especially susceptible to cliche-ridden descriptions. Some such cliches are basically well-founded, while others are seriously misleading or outdated.
One of the most commonly cited cliches is that North Korea is a “destitute, starving country”. Once upon a time, such a description was all too sadly correct: In the late 1990s, North Korea suffered a major famine that, according to the most recent research, led to between 500,000 and 600,000 deaths. However, starvation has long since ceased to be a fact of life in North Korea.
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Admittedly, until quite recently, many major news outlets worldwide ran stories every autumn that cited international aid agencies saying that the country was on the brink of a massive famine once again. These perennially predicted famines never transpired, but the stories continued to be released at regular intervals, nonetheless.
In the last year or two, though, such predictions have disappeared. This year, North Korea enjoyed an exceptionally good harvest, which for the first time in more than two decades will be sufficient to feed the country’s entire population. Indeed, according to the recent documents of the FAO (Food and Agriculture Organisation of the United Nations), North Korea’s harvest totaled 5.03 million tonnes of grain this year, if converted to the cereal equivalent. To put things in perspective, in the famine years of the late 1990s, the average annual harvest was estimated (by the same FAO) to be below the 3 million tonne level.
However, this does not mean that North Korea is an affluent country. The CIA fact book estimates North Korea’s GDP per capita to be $1,800. Even this estimate is probably excessively optimistic. There is a good reason to believe that the actual per capita GDP of North Korea is in the region of $800-900. This means, of course, that North Korea is a seriously poor country. However, poverty does not equal starvation.
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The gradual improvement in the food situation is closely related to changes in other areas of North Korea’s economic life. Contrary to what a majority of lay people tend to believe, the last decade has been one of moderate economic growth north of the DMZ.
Not starving, but not well-nourished either
Since North Korea ceased publishing virtually all economic statistics more than 50 years ago, it is very difficult to estimate the true scale of this growth. The Bank of Korea – South Korea’s central bank, generally considered to be the most reliable source of information on North Korea’s economic situation – estimates that economic growth averaged 1.3 percent over the last 15 years in North Korea, though the rate has been known to fluctuate significantly from year to year. Ironically, it seems that North Korea’s economic expansion was sped in 2006-7 even as the country was subjected to a further round of international sanctions in the wake of missile and nuclear tests.
Anecdotal evidence, as well as observations made by foreigner visitors and residents in North Korea confirm a picture of steady, if slow and uneven economic improvements in North Korea. Still, these observations also leave no room for doubt that North Korea remains by far the poorest nation in East Asia.
In recent years, one can see a proliferation of expensive boutiques in the North Korean capital. The North Korean new rich – both corrupt officials and successful black market entrepreneurs – can easily buy world-renowned luxury brands for their friends and family.
There is more traffic than ever on the once notoriously empty avenues of the capital. Pyongyang, like some other cities in the country, is also experiencing a minor construction boom. While theoretically, trade in real estate is illegal, there is a growing property market in Pyongyang and other major cities, and this market cannot be described as anything but dynamic. A good apartment in Pyongyang, which would cost less $10,000 just 10 years ago would now set you back between $70,000 and $100,000.
Another standout of North Korean economic expansion is the growing private restaurant trade. These businesses are nominally owned and operated by the state. In practice, however, wealthy private individuals set up restaurants and register them with state agencies in order to disguise the business from the potentially dangerous local and central government. A good meal at such places can cost as much as $15-20 (sometimes more) – enough for an entire family in a countryside village to live for a week or two. Nonetheless, many such restaurants are doing a roaring trade.
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As already hinted above, one should not paint an excessively rosy picture of the situation. A significant part of the population is still malnourished, and the average North Korean family considers itself reasonably affluent if they can afford a new bicycle. So, North Korea is very, very poor indeed. Nonetheless, it is clearly not a starving country anymore.
Private economy expanding
Why is North Korea’s economy growing? It seems that the single most important factor is the gradual and seemingly unstoppable expansion of the semi-legal private economy. According to the most recent estimates, about 75 percent of North Korean household income now comes not from the state but from assorted private economic activities – activities that are now tacitly tolerated by the government. North Koreans today tend to their very own private plots, run their own food stalls, make clothes, footwear (and even counterfeited Chinese cigarettes) in unofficial workshops, and of course, they trade.
This private economy is massive. Strictly speaking, most of these activities remain illegal under North Korean law, but the North Korean government is unable (and perhaps unwilling) to enforce many of the outdated rules and regulations. Indeed, it may have no other choice since if these laws were enforced another round of starvation (and even a massive rebellion) might ensue.
North Korean government’s army of bureaucrats are not immune to the allure of the private sector either. Some are passive: They merely take bribes, leaching off the hard work of North Korea’s entrepreneurs and private workers. Many, though, utilise their government positions more creatively (and less parasitically) by becoming de-facto entrepreneurs, by using the capital, land, equipment and/or people under its control to make goods and services for profit.
Many government-appointed managers at North Korean state factories have basically become private entrepreneurs, and have made themselves rich (by this country’s very modest standards). In the process they have also contributed to their country’s slow-motion economic revival.
When it comes to the economy, the market works in North Korea as well as it does in many other parts of the world. It brings growth, but it also brings a large amount of income inequality and social tensions with it too. In spite of North Korea’s Stalinist rhetoric, North Korea is now a country in which there are rich and poor – and the gap between these two groups, already large, is widening quickly.
However, this does not mean that the rich are getting richer while the poor get poorer. It seems that the proverbial rising tide is lifting all boats, albeit at very different rates.
Andrei Lankov is professor of Korean Studies at Kookmin University, Seoul. He is the author of “The Real North Korea: Life and Politics in the Failed Stalinist Utopia”.