Sino-NK

Misguided Kimist dedication to the cause of a socialist agricultural revolution. | Image: Scott LaFoy

It is the post-modern fashion to foreswear prescriptive solutions to the problems of others. However, this fashion for squirming to avoid value judgment is arguably somewhat misplaced, for while there is more than one way to skin a cat, some ways are obviously superior to others. As Marxist historian Eric Hobsbawm pointed out to the Central European University class of ’93, “For historians, even for the most militantly anti-positivist ones among us, the ability to distinguish between [fact and fiction] is absolutely fundamental […] Either Elvis Presley is dead or he isn’t.”

Perhaps surprisingly, there are noteworthy similarities between the North Korean agricultural system and the unseemly demise of Elvis. To put it another way: there is a reason why agricultural systems respond best when clear signaling mechanisms exist to promote wise investment decisions. Just like everywhere else, The King is also dead in North Korea.- Christopher Green, Co-editor.

Premonitions of a Disaster: Seeds of Ecological Collapse and Germination of Plans for Intensive Industrial Agriculture

by Yong Kwon

In the past few years, new literature focusing on agronomy and ecology has added valuable insight into how long-term environmental degradation affected North Korean food production in the 1990s.[1] Research by Meredith Woo-Cumings and Chong-ae Yu incorporate the consequences of energy shortages and climate anomalies into a more holistic narrative that details declining soil fertility and increasing dependence on external inputs. Exposing the fragility of the modern industrial agricultural system, the timeline takes us back to February 1964 when the Korean Workers’ Party adopted the “Theses on the Socialist Rural Question in Our Country,” thus intensifying mechanization and the application of petro-chemical fertilizers in order to increase domestic cereal output.

However, the innovations of 1964 were not conceived in a vacuum. They were institutional responses produced by price distortions and a lack of signaling mechanisms. There are parallels with conditions that continue to plague North Korea today. Therefore, understanding what led to the pivotal events of 1964 not only enhances our understanding of the origins of the food crisis; it also helps to conceptualize its resolution.

Ideas of Crisis: Key Implications | There is no doubt that chemicalization of agriculture, mechanization of labor, energy-dependent irrigation of the uplands, uninhibited expansion of cultivated lands, monocropping without fallow, and other aspects of North Korea’s modernization project were some of the weaknesses that contributed to the devastation of the 1990s. However, none of this explains how and why the North Korean leadership made the initial decision in 1964 to explicitly pursue this path.

Archival sources reveal that the very roots of these plans were hatched in the immediate aftermath of the Korean War, and then consolidated after misinterpretation of the causes of the country’s first food crisis during the winter of 1954-55. Instead of seeing food deficit as a consequence of collectivization and abolition of private grain trade, party leaders looked at lack of capital investment in the rural sector as the root cause of the problem. In essence, the seeds of North Korea’s agricultural woes were planted from the very beginning, during the reconstruction of the country under the Three Year Plan (1954-56) when political institutions embedded agronomical solutions without properly establishing complementary signaling devices to assist the socially optimal allocation of resources. Even when later plans attempted to rectify earlier problems, the perception that intensifying inputs would increase yields proved hard to shift.

On July 16, 1953, a few days before the signing of the Korean War armistice, the Polish embassy in Pyongyang reported that despite the devastation caused by the war, “the population of the DPRK no longer goes hungry.”[2] Although supplies of food (around 800g for someone who works “hard,” 600g for someone who works lightly, and 400g for those who do not work) remained insufficient, the report admitted that private markets, underground bazaars, and private cafeterias were playing a critical role in the distribution of foodstuffs to the people.

According to Romanian diplomats in North Korea, robust commercial activities continued to develop after the war, with Pyongyang boasting 3375 shops, 910 kiosks, and 718 restaurants by June 1954.[3] This seems to have had an effect on the price of consumer goods as well. Comparing the first six months of 1954 to the first six months of the year before, the price of rice in private markets had dropped by 45 percent despite increasing wages. In addition, sales of rice increased by 30 percent during the same time period. Perhaps the conclusion of the war had a more significant role to play in this than the free movement of goods, but whatever the impetus, increasing living standards in early 1954 stood in stark contrast to what occurred in the winter of 1954-55 and thereafter.

Another Tragedy of the Commons: Collectivization | Although the Three Year Plan (1954-56) was meant to facilitate post-war economic recovery and was not intended to establish a socialist economy, the importance of controlling food production for industrialization and the large concentration of people in rural areas made collectivization a politically desirable goal for Pyongyang. By 1954, the state was moving toward consolidating household farms into cooperatives. They were categorized into three types:

1. Voluntary cooperatives: peasants joined forces to work the land for a year, maintaining their rights over the land and agricultural tools.

2. The agricultural cooperative: similar to the first type, peasants worked collectively while still maintaining their rights over the land. Payments were made according to the number of hours worked and land contributed to the cooperative, but the revenue made according to the share of land could not exceed 20 percent of the entire profit.

3. “The most developed form of cooperation in Korea:” basic agricultural tools and draft animals were collectively owned.  Land was formally maintained as private property, but the owner of the land only receives payment according to the hours he worked. Romanian diplomats in North Korea at the time noted that the push towards combining household farms into the cooperatives occurred extremely rapidly towards the end of 1954.

According to the archives of the Romanian Ministry of Foreign Affairs, in September 1954 there were around 1000 cooperatives in North Korea, but by November there were already 7,400 (of the second and third type). By January 1955 there were 9,000.[4] These 9,000 cooperatives constituted 30 percent of the total number of rural households and 27 percent of the arable land in North Korea. The North Korean leadership looked to this rapid organization of the agricultural sector as the basis for achieving their ambitious goal of increasing rice production by 31 percent by 1956.

However, this change in the composition of the agricultural sector was accompanied by the abolition of private grain trading on November 1, 1954. And the country was immediately beset by a food crisis.

Abolishing Private Grain Trade: Abolishing Food Security | In January 1955, while cooperatives were still being formed, there were preliminary indicators that the country was entering a crisis. Wages for soldiers were reduced from 900g of rice and other grains to 580g of rice and 220g of millet.[5] At the same time, the state launched a campaign to convince industrial workers to renounce one daily ration card per month to make up for the shortfalls in the grain supply.[5] By February, the price of rice had increased to between 400 and 460 KPW (Korean People’s Won)/kg on the black market, rising above the average wage of a North Korean worker, which in June 1955 stood at 800-900 KPW/month.[6] Meanwhile, Pyongyang issued decree 24 which reiterated the prohibition of private grain trade and further curtailed black market activities. This resulted in the complete disappearance of rice from rural markets. The situation quickly became undisguisable and on April 26, Rodong Sinmun admitted to the existence of the food crisis for the first time.

In May, a Hungarian hospital in Sariwon reported 20 deaths by starvation and Soviet Central Committee members in North Korea were told that state procurement of grain from rural communities had created an environment where the peasants might start an uprising. [7] North Korean officials meeting with these Soviet representatives admitted that foodstuffs had disappeared from stores and that:

A considerable number of the urban population have been left without means of sustenance in connection with the abolition of private trade in grain products… About 90 percent of private Korean cafeterias and eateries have been closed.

By this point in time, ranking North Korean officials saw the food crisis as a massive entitlement failure. People who had been engaged in the trade of consumer goods were left without means to an income after the state monopoly of the grain trade obliterated the market. At the same time, farmers who otherwise might have had food from their farms had more than half of their harvest expropriated.

A month later, Pyongyang began to backtrack. Government Decree 58 rescinded the ban on private markets and Kim Il-sung finally decided to halt the creation of cooperatives unless “in exceptional cases when a newly-created cooperative [may actually have] the necessary economic base (draft animals, etc.) [to function].”[8] By July 1, farmers began selling their grain in the market without restriction, and in August the government made further efforts to revitalize the market by reducing workers’ income tax by 30 percent. The aggregate result of these efforts was that the price of rice declined to 190-200 KPW/kg, a drastic decline in prices compared to February (400-460 KPW/kg).

Food supplies and distribution in North Korea recovered in the summer of 1955 because briefly restored market institutions were providing signals to farmers and suppliers of agricultural inputs, yielding the more optimal movement of goods by allowing economic actors to anticipate prices.

Nothing will be possible without signaling mechanisms to enable market forces to effectively communicate needs within the economy. | Image: Scott LaFoy

Ignoring Signals: Kim Il-sung in Denial | Despite strong evidence correlating the food crisis in the winter of 1954-55 to government interventions in the market, Kim Il-sung asserted that the crisis had occurred due to a lack of capital investment in the agricultural sector. On June 21, the same day as the decree rescinding the ban on private markets, he noted the need to “expand the planted area by a minimum of 50,000 jeongbo (1 jeongbo is approximately 9917.36 sq m) before 1956… [and] bring the peasants’ supply of mineral fertilizers to 160,000 tons… through an increase of [domestic] production and deliveries from the Soviet Union.”[9] In addition, the government earmarked KPW 1 billion for the construction of irrigation systems and increasing production of chemical fertilizers. A further KPW 3.2 billion was set aside by the Central Committee plenum in December 1955 for capital investments in agriculture.

It was true that part of the reason why the cooperatives failed to produce the anticipated grain in 1954 and 1955 was because many units lacked the draught animals and tools needed for high-yield production. However, the misplaced belief that rectifying this alone would resolve North Korea’s food situation became well entrenched in the mind of the country’s leadership.

A key part of the problem was that mechanical or biological innovations could not be appropriately allocated due to distortion of prices and the disappearance of market signals. According to a study by Yujiro Hayami and Vernon Ruttan, market signals help spur public sector investment in mechanization when labor is scarce or, alternatively, biological innovation (such as fertilizers) when land is scarce.[10] By eliminating private ownership of farms and private trade in agricultural goods and inputs, the state perverted the substitutional relationship between fertilizer and labor and the complementary relationship between land and horsepower. The result was the massive horizontal expansion of farmland, leading to deforestation and soil erosion, and overexposure to chemical fertilizers.

In 1957, North Korea’s economic planners were focusing on producing mineral fertilizers, restoring chemicals works (like the one in Heungnam that had been destroyed during the Korean War), and mechanizing labor, all without appropriate indicators to guide the allocation of resources.[11] During the Chollima Movement, initiated after the 1958 Korean Workers’ Party National Conference with parallels to Mao’s Great Leap Forward, Pyongyang’s negotiations with Moscow were dominated by requests for chemical plant parts.[12] Irrigation was discussed as a way of becoming “independent of weather conditions” and maintaining stable harvests.[13] Mechanization of labor and the expansion of farmland were also discussed as pivotal tasks to produce higher yields.[14] Everything that the North Korean leaders discussed were agronomical fixes to problems brought on by systemic distortions and structural abuses of entitlements. As a result, the economy continued to suffer throughout the late 1950s from endemic food deficits despite increasing inputs into the agricultural sector.[15]

Chollima Speed: The Great Deceleration | The Chollima Movement intended to double 1958 output in 1959, closing the gap to Japanese per capita output. By mid 1959, however, the leadership was cognizant of the failure and set aside 1960 as a buffer year. Unlike the People’s Republic of China during the Great Leap Forward, continued grain imports from the Soviet Union, Burma, and Mongolia during this period helped North Korea avoid famine. Nonetheless, the state was still too deeply invested in its political objectives to allow pre-1954 market institutions to return.

Even though the 1964 “Theses on the Socialist Rural Question in Our Country” attempted to rectify many of the administrative issues observed during the Chollima Movement, the state plan still prescribed the intensified application of agro-chemicals, adoption of mechanized labor in the form of tractors, and irrigation of newly cultivated uplands without establishing channels for economic actors to signal inelasticity and relative scarcity. Peasants were still restricted from retaining more than 250 kg of grain per year and the production of fertilizers continued under largely arbitrary government fiat. The fundamental problems remained untouched.

Assessing the very origins of the policies that resulted in the collapse of both the country’s environmental assets and agricultural yield, the lessons from the 1950s suggest that future policy measures designed to alleviate the food deficit in North Korea should not simply focus on raising absolute quantities of food, but return to protecting and establishing entitlements for North Korean consumers. The consequences of 50 years of environmental degradation are a serious stumbling block to North Korea’s development, so finding sustainable agricultural practices is vital to the country’s future. However, nothing will be possible without signaling mechanisms to enable market forces to effectively communicate needs within the economy. In the end, while Pyongyang still has a role to play in the agricultural sector, it must do more to help the North Korean people help themselves.  

[3] “The Political, Economic and Social-Cultural Situation of the Democratic Popular Republic Of Korea, 1954” 1954, History and Public Policy Program Digital Archive, Archive of the Romanian Ministry of Foreign Affairs. Obtained and translated for NKIDP by Eliza Gheorghe.

[4] “Conditions in North Korea,” May 7, 1957, Central Intelligence Agency. Sanitized Copy Approved for Release 2010/05/14: CIA-RDP80T00246A034400330001-3. Acquired for DPRK Food Policy Blog by Scott LaFoy.

[5] Balazs Szalontai, Kim Il Sung in the Khrushchev Era (Washington, DC: Woodrow Wilson Center Press, 2005), Chapter 3, “Crisis and Confrontation.”

[6] “Record of Conversation with Deputy DPRK Minister of Culture and Propaganda Jeong Ryul,” June 20, 1955, History and Public Policy Program Digital Archive, RGANI fond 5, opis 28, delo 314.Translated for NKIDP by Gary Goldberg.

[7] “Report from B. Ponomarev and I. Shcherbakov to the CPSU Central Committee,” May 17, 1955, History and Public Policy Program Digital Archive, RGANI fond 5, opis 28, delo 314.Translated for NKIDP by Gary Goldberg.

[8] “Record of Conversation with Chairman of the Jagang Provincial People’s Committee Illarion Dmitriyevich Pak” June 21, 1955, History and Public Policy Program Digital Archive, RGANI fond 5, opis 28, delo 314.Translated for NKIDP by Gary Goldberg.

[9] “Record of Conversation with Chairman of the Jagang Provincial People’s Committee Illarion Dmitriyevich Pak,” June 21, 1955, History and Public Policy Program Digital Archive, RGANI fond 5, opis 28, delo 314.Translated for NKIDP by Gary Goldberg.

[10] Yujiro Hayami and Vernon W. Ruttan, “Induced innovation in agricultural development,” Department of Economics, University of Minnesota, Center for Economic Research Discussion Paper No. 3, May 1971.

[11] “Journal of Soviet Ambassador to the DPRK A.M. Puzanov for 11 April 1957,” April 11, 1957, History and Public Policy Program Digital Archive, AVPRF F. 0102, Op. 13, P. 72, Delo 5, Listy 1-15. Translated for NKIDP by Gary Goldberg.

[12] “Journal of Soviet Ambassador to the DPRK A.M. Puzanov for 8 June 1957,” June 08, 1957, History and Public Policy Program Digital Archive, AVPRF F. 0102, Op. 13, P. 72, Delo 5, Listy 114-130. Translated for NKIDP by Gary Goldberg.

[13] “Journal of Soviet Ambassador to the DPRK A.M. Puzanov for 9 December 1957,” December 09, 1957, History and Public Policy Program Digital Archive, AVPRF F. 0102, Op. 13, Delo 5. Translated for NKIDP by Gary Goldberg.

[14] “The Economic and Political Situation of the DPRK,” June 12, 1960, History and Public Policy Program Digital Archive, AVPRF fond 0102, opis 16, papka 87, delo 27. Translated for NKIDP by Gary Goldberg.

[15]”Food Situation in Pyongyang,” September 14, 1959, History and Public Policy Program Digital Archive, PolA AA, MfAA, A 6979. Translated for NKIDP by Bernd Schaefer.