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The Peninsula

Prospects for North Korean Economic Reform and Unification, a KEI Q&A with Andrei Lankov - Part 1

Published June 20, 2012

KEI’s Chad 0’Carroll recently interviewed Dr. Andrei Lankov of Kookmin University on the prospects for economic reform in North Korea and reunification. Dr. Lankov is scholar of Asia and a specialist in North Korea. Part 1 of the interview focuses on the likelihood that the new regime in Pyongyang will undertake economic reforms. Part 2, to be published next week, focuses on the prospects for reunification.

KEI (Korea Economic Institute): You say that North Korea can never really implement reforms if this means admitting that the South Korean economic model was a success. Why is this the case?

AL (Andrei Lankov): Because North Korea is part of a divided country. In China, reforms are possible because there is no South China. Yes, there is a Taiwan –but it is a tiny island, which doesn’t make much difference. If the North Korean government starts reforming itself, the North Korean people will immediately learn how far behind South Korea they are lagging. It’s not an issue in China. Of course, the Chinese are perfectly aware of the gap between China and the US or Japan. However, both the US and Japan are foreign countries with different histories, and their success is not damaging to the credibility or legitimacy of the Chinese elite. This will not be the case in North Korea. Reforming North Korea is going to be inherently unstable. It might continue for a while, but it will always be under the threat of sudden and probably violent collapse. Kim Jong-il understood this perfectly well. It remains to be seen whether his son will understand it as well.

KEI: But wouldn’t you say that North Koreans are already aware of how affluent South Korea is?

AL: No. They are well aware that they are lagging behind South Korea; they are aware that South Koreans are doing much better. But most of the North Koreans have no clue how huge the gap has become. So they know they are lagging behind, but they don’t understand how much behind.

KEI: There was a recent statistic that 50% of North Koreans have now seen DVDs of dramas.

AL: If you are talking about the recent report by InterMedia – 75%. Well, they see it, but they don’t necessarily take it as face value. Plus, there is another dimension. Reforms imply a significant level of domestic political relaxation. So reforming North Korea will become unstable not only due to the spread of graphic pictures of South Korean affluence, but also because it becomes less repressive. In order to remain stable, the North Korean state has to keep its subjects terrified.

KEI: You say the reform has to go hand in hand with some loosening of the political system. Why couldn’t North Korea implement a system in a way that Iran has? While there is political opposition, there is a free economic system, but the mullahs quash any rebellion.

AL: Although I am not a specialist on Iran, but from what I know, Iran is much vilified by the U.S. media. From what I know, it appears to be a relatively mild authoritarian regime, which just happens to produce a serious ideological allergy in the U.S., both in the government and the opposition. Having said that, the problem is that such policy probably would not work in the peculiar case of North Korea. It works perfectly well in China and in Vietnam. It would work in a North Korea if it were not a divided country, because once North Korea becomes more free, the North Koreans will be under the illusion that they can solve their problems immediately by unifying with South Korea. Indeed, why should they do what the Chinese are doing? Why should they wait for a few decades to enjoy the lifestyle similar to what South Koreans are enjoying now, if they believe that they can get the same results by unifying with the South immediately?

KEI: I’d like to ask you about economic reform in North Korea that we have seen so far. Why do you think when reforms were made in 2009 and 2002, compared to the Soviet Union, the North Korean national media made so little fanfare about them as they were being implemented?

AL: If you are talking about the 2002 so called “reforms”, they were overemphasized by the foreign media. Not least because many people so badly wanted North Korea to start reforming, so they were willing to misinterpret any signs of change as a sign that reform had finally begun. The so called “reforms” of 2002 largely meant the official recognition of the situation which has existed anyway and which government knew it could not change. The North Korean government grudgingly accepted the markets in 2002, but by that time the markets had flourished for nearly a decade. They first tried to eradicate the markets, and then realized they could not do it. So they gave in. In 2009 they tried to do away with the markets. They wanted to wipe out the private capital through a currency reform, and again it ended in failure. So neither reform had any significant impact – one was, essentially, a belated admission or recognition of the system which had existed by that time for 5-7 years, and the other reform was a completely disastrous attempt to eradicate the very same system. Compared to the Soviet Union, the major difference is that the North Korean government cannot make themselves admit that the markets exist, because it goes so much against official ideology and they will try to do anything to maintain this ideology, because they believe that stability means survival.

KEI: Do you think that North Korean elite would not be able to maintain stability through economic reform the way that other authoritarian dictatorships have done in the past through nationalism?

AL: I would like to repeat that the existence of South Korea makes use of any kind of political tricks including nationalism extremely difficult, because if they start emphasizing that North Korea is the real Korea while South Korea is polluted – well, it’s not going to be very persuasive and very plausible to their own audience. Once again, had North Korea not been part of a divided nation, they would have probably started reforms before China, because Kim Il-sung was not Mao. Mao was a slightly crazy ideologue. He believed what he said. Kim Il-sung was a pragmatic politician. He wanted a powerful state, and that was all. Nonetheless, talking about your main question, whether they can balance or not, it remains to be seen. I will be somewhat surprised if they can, but who knows? At any rate, so far they have not been willing to take risks, because it’s very good for us to speculate about it, sitting in comfortable chairs in air conditioned rooms. For them, if things go badly, and things are likely to go badly, they will go to prison, if not to the lampposts, and they know it. So far they have been very reluctant to take risks. It might change with a new leader, but if new leaders attempt reforms, it does not mean that reforms are not risky. I would put my bets largely on collapse soon after the beginning of reforms.

KEI: Is there not also a risk of not reforming? The Arab Spring has demonstrated that the assumptions a regime makes may not accurately reflect the situation on the ground. How does the regime balance the risks that could come from reform with the risks that failure to reform could ultimately precipitate the dangers they seek to avoid?

AL: Yes. They are doomed in the long run anyway, since they are in “damned-if-you-do, damned-if-you-do-not” situation. However, not reforming still makes more sense. As a colleague put it nicely: “Poor North Korean leaders… If they do not start reform, they will wait for their demise. But if they start reform, they will speed up their demise”.

Photo from KEI’s Abraham Kim.

Part two of the interview to be published on the theme of unification.

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