Korea Economic Institute Publication Date: December 2004 Hardcover ISBN: 0974714127

April 2005
A New International Engagement Framework for North Korea?
Edited by Ahn Choon-yong, Nicholas Eberstadt, and Lee Young-sun

 This book summary is also available here as an Adobe Acrobat PDF. 

As the United States seeks diplomatic solutions to North Korea’s nuclear program, A New International Engagement Framework for North Korea? Contending Perspectives considers the possibility of reforming North Korea’s economy and how the international community could build a new engagement framework to encourage such reform. The contributors consider the political economy of North Korea, the preconditions and rationale for international economic support of North Korea, possible forms of international cooperation and assistance, and the particular role that South Korea can play.

Ahn Choong-yong is the president of the Korea Institute for International Economic Policy. Nicholas Eberstadt is the Henry Wendt Scholar in Political Economy at AEI and the co-editor of Korea’s Future and the Great Powers (University of Washington Press, 2002). Lee Young-sun is the dean of the Graduate School for International Studies and professor of economics at Yonsei University.

Can the economic system of the Democratic People’s Republic of Korea (DPRK, or North Korea) be successfully reformed? That is to say: is it possible for contemporary North Korea, with its autarkic, hypermilitarized, and ostensibly centrally planned economic structure (institutions and arrangements, one must note, whose post–Cold War performance has been so woeful that the nation suffered peacetime famine in the middle and late 1990s), to move toward and eventually embody an economic regimen akin to the ones that have permitted so much material progress in East Asia’s two exemplars of “reform socialism”—China and Vietnam—over the past generation?

Could the rulers of the North Korean state maintain control if the economy under their command evolved from the current variant of “socialism with Korean characteristics” into something with a more peaceable, pragmatic, market-friendly, and internationally open orientation? Can North Korea’s highest authorities seriously entertain the notion of inculcating a comprehensive, far-reaching refashioning of what they formally and officially extol as “our own way of socialism” [urisik sahoejuii]? Do they entertain such notions today?

If North Korean authorities did determine to undertake such a transformation, would they be expected to possess the know-how necessary for such a venture? Are there resources—intellectual, institutional, financial—that outside parties could provide that might improve the odds of success for an incipient North Korean economic reform? And, if so, under what conditions—and conditionalities—might those resources most prudently be offered?

This volume attempts to examine these questions in a detailed, rigorous, and systematic manner. Its chapters address the status and outlook for the North Korean political economy; the likelihood of an official DPRK shift toward economic pragmatism, and the practical pitfalls any such move would encounter; the record and lessons of economic liberalization in socialist and post-socialist economies and development assistance initiatives in such locales; the identification and analysis of key sectors of the North Korean economy, whose revitalization might be abetted through outside efforts; the prospects for an international mobilization of private and public capital in the service of North Korean economic reconstruction; and the role that particular external stakeholders might be expected to play in such a venture. Each of the chapters in this book addresses one aspect or another of the North Korea economic reform problematik; taken together, they present an in-depth perspective on the issues that would have to be faced if the international community were to resolve to support the economic reform process in North Korea through comprehensive—but also selective—commitments and investments.

As readers will quickly see, the contributors—all authorities in their respective fields and areas—do not speak with a single voice about the prospects for North Korean economic reform or the odds that such reform could be bolstered through an external framework for international cooperation. On many critical points, our authors take issue with each other; at more than a few points, the reader will encounter powerfully argued but strikingly discrepant judgments about the questions we pose at the outset of our introduction.

We do not believe this well-informed controversy is a bad thing. Quite the contrary: in our view, it is precisely on such an elevated and varying intellectual terrain that the quest to understand the possibilities and pitfalls of encouraging North Korean economic reform may be more fruitfully pursued.

While it may be the case that none of the basic questions we pose about North Korean economic reform can as yet be said to have a clear and definitive answer, it is also clearly the case that attempting to get the answers to each of these questions right—or close to right—is more than an abstract academic exercise. These days, in fact, the actual, real-world answers to those several questions qualify as high-stakes propositions for a great many interested parties, including the people of the Korean peninsula, the neighboring regions of Northeast Asia, and a number of peoples and places more geographically removed from the locus of such inquiries but nevertheless still directly affected by the dramas these inquiries reflect. Indeed, the reformability of the North Korean economic system is now an issue absolutely central to the future security and prosperity of Northeast Asia.

Potential for Economic Transition

Ever since the end of the Cold War, the DPRK has emerged as the central locus of instability and tension within the Northeast Asian region. Whether it was the threats to turn Seoul into a “sea of fire” in 1994, the indications that the DPRK state might collapse in the mid-1990s, or the off-and-on nuclear crisis that started in the early 1990s and is now again very much “on,” it is North Korea that is generating the most immediate and acute challenges to the security of this increasingly important economic neighborhood. And all of the solutions to the “North Korean problem” would seem to require a successful economic transition within North Korea itself.

The specter of mass hunger in that unhappy land would be exorcized once and for all through the embrace of sounder economic institutions and implementation of more productive economic policies. With a more economically rational regimen, genuine financial self-reliance—as opposed to the false, foreign-aid-focused, “self-reliance” of juche in practice—will be possible for North Korea, and the threat of state collapse will be to that degree correspondingly mitigated. No less important, if the North Korean government develops its commercial exports through a more open economic orientation, it would be in a position—unlike its situation today—in which international military extortion would no longer have to figure centrally in the state’s finances. And, needless to say, economic reform and reform-based development in the North would greatly ease the ultimate burdens that would have to be shouldered by an eventual peaceful and voluntary reunification of the two halves of a too-long-divided Korean peninsula.

We should remind some readers of what others are already well aware: namely, that the notion of promoting and reinforcing from outside those tendencies for economic reform that exist within North Korea itself—addressed and evaluated by every chapter in this volume—is no mere blackboard exercise nowadays. Rather, with whatever measure of success, this objective has been enshrined as a top priority of government in the Republic of Korea under two successive governments, the administration of President Kim Dae-jung (1998–2003), and President Roh Moo-hyun (in office as this is written). Although the name for the policy has undergone changes—Sunshine, Engagement, Peace and Prosperity—the constant mission defining it has been the conviction that Pyongyang can be enticed, through external incentives and commitments, to change gradually but also deliberately into a more economically open and less militarily menacing polity.

International Economic Engagement

In greater or lesser measure, additional governments and international institutions have revealed themselves to be sometime adherents to variations of the same theory. In the United States, for example, the Clinton administration subscribed to a similar viewpoint with its “Perry process” of engagement during 1999 and 2000, but the George W. Bush administration has adopted a decidedly more skeptical posture toward the potentialities of this theory. Other sometime adherents have included the governments of Japan, China, and Russia (albeit sotto voce in these cases), parts of the European Union, organizations within the United Nations family, and many nongovernmental organizations around the globe. With this background, a “new international engagement framework for North Korea” for promoting and reinforcing economic reform in the DPRK—the concept bruited in the title of our volume—would entail not so much a breaking of new ground as a revitalizing and intensifying of preexisting interests and activities.

Proponents of existing or expanded engagement frameworks for North Korea argue that genuine economic reform is already under way in the DPRK. The evidence they adduce includes the package of new economic measures promulgated by Pyongyang in July 2002, the attempted (but aborted) opening of a special autonomous region around the city of Sinuiju in September 2002, and the ongoing preparations (conjointly with South Korean firms) for a massive Kaesong industrial complex just north of the demilitarized zone, the gradual opening of private markets throughout the country, the advent of heretofore unthinkable private advertising and billboards, and other signs of market-consistent change. Skeptics, of course, interpret differently such evidence of incipient stirrings of economic reform in North Korea and question the practicability of manipulating any reform tendencies from a long distance and through the blunt and limited instruments at the disposal of the international community.

Proponents of continuing and intensifying engagement with Pyongyang believe theirs is the compelling and, ultimately, the overwhelmingly persuasive case. For many of the unconvinced, however, the case for a new international engagement framework for North Korea sounds strangely ahistorical. Despite its ambitious objectives, they counter, there is scant evidence that such engagement has ever before been successful elsewhere.

It is interesting that most of the “engagement optimists” in our volume happen to be Korean; the non-Korean authors tend generally to be decidedly more pessimistic about the difficulties that a new international engagement framework would confront and the probability that these difficulties would be surmounted. We suspect this cleavage is more than purely coincidental.

Nationalistic pride still runs deep on the Korean peninsula; the conviction that Koreans are an extraordinary people, not bound by ordinary rules or constraints of history, can be readily identified on both sides of the demilitarized zone today. Such attitudes may have been reinforced by South Korea’s remarkable economic accomplishments over the past two generations, for Korean policy circles tend to be not only acutely aware that the outside world is deeply impressed by the progress they have managed to achieve but also entirely unforgetting of the fact that foreign voices doubted the viability of the Republic of Korea’s path to national affluence at almost every critical step of that long ascent.

Might that same Korean confidence come into positive play through a new international engagement framework for North Korean economic reform, making such a venture workable despite its daunting and manifold challenges? This is another question that as yet cannot be answered. It is our sincere hope, however, that readers will find in our volume some grounding for responding to it—and for dealing more capably with other profound and as yet still obscure aspects of the future of reform and international cooperation for North Korea.

This summary was adapted from the editors’ introduction.