Summary — Issue 01 / 2004 Peter Gey: North Korea: Soviet-Type Reform and Erosion of the State Economy
		The collapse of communism in Central and Eastern Europe has failed to reach the northern part of the Korean peninsula. In North Korea, history has allowed the communist regime some extra time, and the consequences have been disastrous for the bulk of the population. Since 1998, the North Korean leadership has been trying to reorganize institutions and to implement new economic rules in order to improve production and the supply of consumer goods. The most important reform measures are the enlargement of private plots on state farms and producers’ cooperatives; legalization of private commerce; and an attempt to reorient management decision making away from centrally fixed, quantitative production targets and towards economic criteria such as costs and profits, while maintaining state ownership and the system of administratively determined prices. This indicates that the North Korean leadership is following the principles of Soviet-type economic reform. For three and a half decades, communist state and party leaderships in Central and Eastern Europe tried to save their regimes by following more or less the same economic reform approach. Since they all failed for systemic reasons, will the North Korean leadership still have the option of switching to Chinese-style reforms once they recognize that they have chosen the wrong path? Three considerations point to a negative answer. First, the core of the Chinese reform project was the disintegration of the “People’s Communes” by contracting land out to individual households and handing over draft animals and farm equipment to the former members. Will Kim Jong-Il go that far? Second, land erosion and over-salted soils have undermined the basic conditions of agricultural production. In China, however, agriculture was the engine of economic progress from the beginning of the reforms in the late 1970s. Third, North Korean agriculture is far too small to lift the economy as a whole, in contrast to China. In the meantime, the erosion of the state economy continues. While production at state owned companies is almost stagnant, private markets are mushrooming all over the country, offering commodities produced in the so-called second or parallel economy or smuggled from China. The most striking outcome of the new economic policy so far, however, is skyrocketing prices. Hyperinflation on such a scale has never been experienced in any other socialist country. This puts an end to any illusions about “socialist” prices and has left an even larger proportion of the population at the mercy of starvation.
		<< Back to Summaries
	© Friedrich Ebert Stiftung   net edition: malte.michel | 06/2004   Top