UPDATE 1 (2012-8-9): The Ministry of Unification is skeptical that the story below is true.
ORIGINAL POST (2012-8-8): Three good recent posts on economic changes in the DPRK can be found here, here, and here. They describe aspects of the recently discussed 6.28 policy as well as other economic events.
On August 8, Radio Free Asia published a story (in Korean) that claimed that economic changes will be much more “radical” than the “calibrarions” established under the 6.28 policy.
Fortunately, Chris Green translated the article and sent it to me:
North, Announces Discarding of Socialist Planned Economy
Moon Sung Hwee, RFA
It has emerged that North Korea has officially introduced its ‘new economic management
system’ and announced the abandonment of the planned economy and public distribution.
However, free education and healthcare will remain untouched as the authorities assert that
the ‘new economic management system’ is not the same as ‘reform and opening’.
Moon Sung Hwee in Seoul has the story.
So far only mentioned in information from domestic South Korean government sources, the
shape of North Korea’s economic reform is finally emerging. The North Korean authorities
have officially promulgated the implementation of a ‘new economic management system’
to labor organizations, people’s units and individual factory enterprises, according to inside
One such source from Yangkang [Ryanggang] Province said, “Starting on August 6th, there have been
lecture meetings in every worker’s organization, people’s unit and factory enterprise about
the ‘new economic management system’. In these meetings, they have been describing the
concrete facts about the ‘new economic management system’ and its implementation.”
According to the source, lecturers have been dispatched from the Central Party to each worker’s organization to organize the lectures on the ‘new economic management system’, and explanatory documents have been sent to the regional Party arms for dissemination in meetings in individual factory enterprises and people’s units.
The source said that the basic contents of the ‘new economic management system’ are that the state will not set the plan or say what items are to be produced; individual enterprises will produce what they wish and decide for themselves the price and by what means production is to be sold, meaning that North Korea is discarding the planned economy that has been the cornerstone of its socialist system.
Notably, production equipment and materials, fuel and energy issues are to be dealt with not by the state but through deals done between factories and coal mines, power stations etc; however, individuals may not establish their own factory enterprises and enterprise Party cadres are to still be employed and made unemployed by the Chosun Workers’ Party.
A source from North Hamkyung Province claimed, “According to the ‘new economic management system’, production, sale, income and distribution are to be decided by the factory enterprises themselves. The only ones who are to continue receiving state distribution are state administrators, educators, medical sector workers; the distribution system for everyone else is to be scrapped.”
In the agricultural sector the ‘new economic management system’ is to be introduced this autumn, with production divided 70-30 in favor of the state according to the plan and any over-fulfillment also going to the agricultural workers.
In terms of timeframe, North Korea has simply said “from now”, but the source personally understood this to mean as soon as each factory enterprise is prepared, with each facing a different situation.
This deliberate vagueness may also be related to the fact that declaring a concrete start date would have incited inflation in the jangmadang, causing widespread side effects. Therefore, the authorities have tried to minimize internal conflict and ensure smooth implementation of the plan.
Meanwhile, according to sources, the reason why lecturers emphasized the continuation of free education and health care was to point up the fact that the ‘new economic management system’ does not mean ‘reform and opening’ as suggested by the imperialist powers; rather, it means ‘our style socialist economic policy’.
The Korea Herald also reported on this story.
The claim that the state is giving up its role as economic planner, however, is certainly more radical than anything that has been announced before. On the surface it seems implausible that the Kim Jong-un regime, which is doing its best to remind the people of the “good old days” under Kim Il-sung, would scrap the economic model associated with the Great Leader. Additionally, the leadership would have to manage the transition costs of leveraged party cadres and cabinet technocrats who are responsible for the creation and enforcement of economic policies. Finally, since when has Pyongyang ever voluntarily given up authority to local and regional actors?
But maybe these costs are no so large? Maybe there are enough key North Koreans today who are happy to leave the Stalinist Kim Il-sung economy in the history books? After all, most up-and-coming cadres today will have been born after the “arduous march” and will have no first-hand memories of the Kim Il-sung era. Additionally, maybe the party cadres and bureaucrats who are responsible for economic policies are the very individuals who benefit from from the black- and grey-market activities that keep the official economy afloat? It is plausible (and I believe likely) that the black/unofficial market in the DPRK is larger (in value terms and numbers of employees) than the official economy. If this is the case, then ending the planning bureaucracy does not necessarily mean their incomes will disappear or even shrink.
Anyway, I am not sure what to make of any of these stories and since I am not in the prediction game, that is fine with me. As always, I look forward to seeing what the North Koreans are going to do with themselves.