EVENTS

Date:	Tuesday, April 17, 2007
Time:	5:00 PM -- 6:30 PM
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

April 2007

The North Korean Economy: Between Crisis and Catastrophe

North Korea presents a troubling paradox in modern development: it is one of the dwindling number of countries continually on the verge of famine, but it also the newest member of the select club of states to possess both nuclear weapons and long-range ballistic rocketry. This marriage of economic privation and military aggressiveness is not coincidental--to the contrary, argues AEI's Nicholas Eberstadt, it faithfully reflects the priorities and policies of North Korean leadership.

In his recently published book, The North Korean Economy: Between Crisis and Catastrophe (Transaction, 2007), Eberstadt contends that North Korea, to the great disadvantage of its own people and the countries of its region, has perfected a perverse political economy that seeks to achieve state survival through export of international insecurity in exchange for foreign assistance.

On April 17, AEI hosted a discussion on Eberstadt's new book with specialists on North Korean affairs.

Nicholas Eberstadt
AEI

The North Korean Economy: Between Crisis and Catastrophe traces the economic performance and political economy of the Democratic People's Republic of Korea (DPRK). It considers the first decade and a half following the end of the Cold War.

By 1990, a generation of sustained rapid growth in South Korea had left the North Korean economy lagging in an increasingly unequal competition. In the 1990s, the DPRK became the first urbanized, literate society in human history to suffer famine during peacetime. Yet even as the DPRK was descending into mass famine, Pyongyang was striving to distinguish itself through achievements in the field of nuclear technology. North Korea now ranks not only among the declining number of contemporary societies poised permanently on the brink of famine, but is also as a country whose government claims to possess nuclear weapons and long-range missiles.

The North Korean paradox is the entirely logical consequence of deliberate governmental policies and actions, faithfully reflecting leadership priorities and the carefully considered strategies that devolved from them. Any economic experimentation in the DPRK proceeds under strict and forbidding parameters.

Pyongyang finances its survival by building "a powerful and prosperous state" and adhering to "military-first politics." The precise meanings of these principles is that defense capabilities are a military guarantee of national political independence and a self-reliant economy, and that the nation can become prosperous only through military strength. Military-first politics elucidates Pyongyang's view that laying the foundations for a powerful, self-sustaining national defense industry will rejuvenate the economy and enhance quality of life. Such a scenario is only conceivable if a country's military expenditures are deployed so as to generate tangible economic dividends. In practice, this can only mean extracting resources from other countries. Though the international military extortion program that Pyongyang has been perfecting over the past decade and a half may increase the chance of regime survival, it offers most North Koreans only continuing penury and privation.

North Korea's post-Cold War survival strategy is a policy of international military extortion. Out of fear that liberalizing to revive the stricken economy would spell doom for their system, North Korea's rulers conclude that it is safer for them to finance the survival of the DPRK through exporting strategic insecurity and military menace. The North Korean economy has been carefully and intentionally positioned in a realm between crisis and catastrophe.

Andrei Lankov
Kookmin University

North Korea is an unusual state in an unusual time. It is more Stalinist than Stalinist Russia. North Korea does not produce any statistics at all, and it has a remarkably inefficient economy. Yet the regime has survived through careful consideration of official policy and practice. North Korean leaders have reason to think of themselves as winners.

North Korea is different from the Soviet Union and China because there is no opportunity for unified grassroots dissent in North Korea. The people of the DPRK honestly believe that they are incapable of achieving legitimate reform. The North Korean government is willing to sacrifice as many civilians as necessary to perpetuate the regime's power. In this regard, North Korean leaders do know what they are doing.

The only solution to the North Korean dilemma is to stop the inflow of money. It will be only a matter of time before the DPRK regime collapses under such conditions. Right now, the South Koreans and Chinese are subsidizing the North Korean regime's continued existence through tribute. North Korea continues to exist without anything legitimate to negotiate with, and yet they always win. It is the lesser of two evils to continue paying tribute.

Deok-Ryong Yoon
Korean Institute for International Economic Policy

The fundamental question is whether or not the DPRK can survive. The North Korean Economy: Between Crisis and Catastrophe gives a good account of the status of the North Korean economy and why it persists.

The first chapter in the book was written in 1993 and predicted the impending collapse of the North Korean regime. The author revisits this topic and seeks to understand why North Korea's regime still survives. The factors he identifies in the 1993 are reevaluated throughout the book, and are still relevant today. North Korea survives on aid from outside, threats, and counterfeiting. According to Eberstadt, North Korean reform measures are not serious enough.

Statistics on North Korea come mostly from defectors. Since the end of the Korean War, the number of defectors has been steadily increasing. The mindset of the people is already changing and many North Korean officials are beginning to change as well. Practices have not changed in North Korea, and the institutions supporting the regime remain a source of continued strength.

AEI intern Gregory Trum Jr. prepared this summary