In late December 2019, Kim Jong Un gave a speech at a Korean Workers’ Party Central Committee plenum session, which laid out a number of economic policy priorities, such as raising industrial and agricultural production. He mainly focused, however, on strengthening the state’s overall authority and management capacities in the economic realm. Close to one year later, it appears that economic policy has generally followed these priorities, although the pandemic and continued sanctions hampered production. Bolstering the state control and governance of the economy will likely be a central theme in the new five-year plan to be announced in January.
Stronger State Control and Improved Economic Management
For some time, Kim has sought to increase the state’s authority over the economy. In his plenum speech, he outlined several problems with economic policy management and implementation. The North Korean leader complained, in particular, that “no visible progress” had been made on enhancing “the role of the state as the organizer of the economic work” he also derided the Cabinet for failing to strengthen state finances and properly undertake “economic planning.”
In fact, the North Korean economy is badly fractured. Virtually all de facto private economic activity remains technically illegal, though much of it is so common as to be permitted in practice. Private entrepreneurs usually contract—under the table—with state-owned enterprises, sometimes to use their factories and other equipment but often only their name in order to operate with some level of government permission. Because this activity is usually done in secret, the state likely has little centralized information about what firms actually operate in the country.
Thus, Kim’s plenum speech was partially an order to officials to make the state take stronger command of economic operations—if not the details then, at least, the general direction. His condemnation of “anti-socialist and non-socialist practices” was also at least partially targeted at semi-private enterprises and against corruption in general, even though corruption is, in fact, essential for most private economic activity.
There are several other indications that stronger capacity to implement economic policy has remained a high priority throughout the year. Recently, the North Korean won has strengthened suddenly against US dollars and Chinese renminbi on the country’s markets. This suggests that the state may be trying to bring the market value of its currency closer to wages and prices that will be fixed in the five-year plan. Moreover, in preparation of the plan, officials from the Cabinet and other agencies with responsibility for economic oversight have reportedly been dispatched to enterprises and factories around the country to review their proposals and production goals to gain a better understanding of the state of the economy.
According to another report, the government is restructuring the management of the country’s markets to increase Central Committee oversight of the civilian economy. In addition, the North’s Korean Central News Agency (KCNA) reported on November 5 that the Supreme People’s Assembly had adopted a bill to revise the country’s enterprise law, which could have potentially significant repercussions.
A subsequent but unconfirmed report by Daily NK claimed that the new law would fully incorporate semi-private small businesses contracting with state-owned foreign trade companies into the larger state-owned enterprises they are affiliated with, and place them under Workers’ Party control. The purpose of this measure is presumably to ensure that all revenues from these semi-private operations are properly accounted for and that the central government receives a larger share of the proceeds.
Moreover, according to a KCNA report, the Politburo signaled further emphasis on direction at a meeting on November 30, where it resolved to “strengthen the field of the Party ideological work” and improve “the Party guidance over economic work.”
Because the system is so fragmented, it is only natural that the government wants to increase economic oversight. There is, however, a great risk that economic activity would be significantly hampered by stronger control in the absence of simultaneous liberalization—and there are currently no signs of this. At the same time, potentially harmful economic measures are sometimes announced but quickly laid to rest, as appears to have been the case with the public bonds program reported earlier this year.
Personnel Shifts and Criticism of Officials
Personnel, as the saying goes, is policy. Therefore, it is not surprising that throughout the year, the commitment to improved economic management and governance resulted in personnel shifts and continued criticism of public officials. This phenomenon is not entirely new; ever since Kim came to power in 2011, he has regularly criticized various people for poor performance; however, he has recently dialed up this method as a tool for policymaking. For example, the past six months have seen a much larger number of senior-level meetings in party organs such as the Politburo where Kim has lashed out against numerous officials whom he considers incompetent.
Indeed, the past year has seen several demotions and personnel shifts related to economic performance. Notably, Kim Jae Ryong served as Cabinet premier for only 16 months, suggesting that Kim Jong Un felt that the Cabinet had failed to sufficiently address the issues raised at the December plenum. In addition, Kim fired the chairman of the South Hamgyong Provincial Party Committee after inspecting flood recovery efforts in his district in August. The state has also continued to purge officials accused of corruption, another theme in the plenum speech. For example, in late February, Ri Man Gon and Pak Thae Dok were stripped of their Central Committee vice chairman titles.
Kim likely seeks to build up officials’ sense of personal responsibility and accountability, and to have it trickle down through the lower levels of state management as well. Through criticisms and demotions, Kim can deflect blame for poor economic performance on others. At the same time, he has been much more forthcoming than his father in assuming personal responsibility for the lack of economic progress. By issuing public apologies and regrets over the hardships of the people, he has signaled that if the supreme leader can be held to account, so can all lower-level officials.
During the year, North Korean economic policy has largely followed the path set out in the December 2019 plenum speech. For example, there apparently were significant improvements in disaster management relief. At the same time, Kim’s s efforts to enhance economic performance by strengthening the accountability of public officials have shown few identifiable results. The government’s efforts to assert greater state control over the economy should not itself be construed as an ambition to rid the economy of private actors and market mechanisms, though it may eventually move in that direction. Rather, the leadership’s current aim is to manage and incorporate private enterprise into the official economy. If this results in a general crackdown on markets and private economic actors—which is not a rare occurrence in North Korean history but has not been seen during Kim’s tenure—the consequences may be dire for economic activity as a whole.
The post A Glass Half-Empty: Kim Jong Un’s Economic Policies One Year After the 2019 Plenum Speech appeared first on 38 North.
Source: 38 North
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