Unveiling the North Korean Economy: A Roundtable Review

By | November 06, 2017 | No Comments

Image: Steven Denney/Sino-NK

Unveiling the North Korean Economy: A Roundtable Review

by Sino-NK

The loss they suffered at Stalingrad marked a turning point in ordinary German understandings of the Second World War, insofar as it got people back home thinking for the first time that they might actually lose.1)Robert Gellately, Backing Hitler: Consent and Coercion in Nazi Germany (Oxford: OUP, 2001), 225. In an aside in Unveiling the North Korean Economy: Collapse and Transition, Kim Byung-yeon notes that the November 30, 2009 currency reform and attendant measures — or, rather, the state’s comprehensive failure to make the policy stick — may have done something similar for ordinary North Koreans: showing them in stark terms how weak the DPRK as a state really is. 

Whether 2009 will actually go down as a turning point in North Korean history — as the beginning of the end — remains to be seen. For the time being, the vignette shows only how vitally important understanding the North Korean economy is for anyone seeking to understand the country more generally. In this roundtable review, three reviewers take a magnifying glass to Unveiling the North Korean Economy, to see whether the English language finally has the book on the North Korean economy that it needs. — Christopher Green, Senior Editor

Kim, Byung-yeon, Unveiling the North Korean Economy: Collapse and Transition. Cambridge: Cambridge University Press, 2017. 978-1107183797

by Sino-NK

Lots of Meat and Missed Opportunities

by Benjamin Katzeff Silberstein (University of Pennsylvania)

Unveiling the North Korean Economy delivers only partially on the promise of its title. The book is largely a synthesis and overview of studies of the North Korean economy since 2000. As an overview of the scholarly literature and empirical studies of the North Korean market economy, it is highly useful. University instructors will find it handy to assign specific chapters for classes. More seasoned students of the North Korean economy will plunge into the rich content of data printed in the book, twisting and turning the tables of survey results, pondering what they say about the bigger picture.

Ultimately, however, the book misses an opportunity to take the debate forward. Its narrative is often stuck in a time when the North Korean market economy itself was a novelty, and op-ed writers made bold predictions that the market’s impacts on the jangmadang generation would soon lead to the demise of the North Korean regime.

Indeed, Kim often seems to posit the state and the markets on opposing ringsides, depicting the state as only very reluctantly refraining from clamping down on the markets even in the 2000s. As Kim notes, there have been extensive debates amongst South Korean scholars of whether policy changes such as the July 1st Measures of 2002 constituted part of an economic policy transition toward greater overall market liberalization.

A counterpoint to Kim’s depiction of a state wary of market mechanisms is Philip H. Park’s Rebuilding North Korea’s Economy. Park argues that the North Korean regime has historically been much more prone to use market mechanisms in economic management than many claim. In Park’s rendition, the many market reforms of the 2000s were continuations of a long-standing trend of incorporating market mechanisms in the system, one going back as far as the mid-1980s.

Putting aside the debate itself, Kim’s assessment of the market system leaves room for several questions. It seems to take several well-established trends as novelties, while wholly missing others, giving the impression that North Korea’s market system is less mature than it seems to be by most indicators. For example, he notes that donju, North Korea’s group of large-scale, upper-middle-class traders and investors, “are believed to be financing the construction of flats”, giving the impression that this rather long-standing practice is new and unconfirmed (p. 64). He cites a 2012-study in claiming that “[m]ost of the consumer goods sold in North Korean markets are imported or smuggled from China” (p. 66), but the trend in the past few years has been in the opposite direction, of domestically produced goods gaining in quality and popularity. These are only two of several instances where the book’s descriptions of the market system seems somewhat outdated.

Most of the survey studies with resettled North Koreans in South Korea that the book relies on are rather old, ranging from 2006 to 2013. Another central source is a survey study on firms in China’s Dandong that conducts business with North Korea. While extensive, these survey studies are all at least four years old. Such surveys are difficult and expensive to conduct, but for a promising book by a scholar as prominent as Kim, it would not have been unreasonable to hope for data gathered at least within the two years before its publication.

The analysis of survey data also buries some of the most interesting findings deep inside the book’s sections. There is not enough space in this book review to go into detail on these, but to name only a couple: 1) The vast majority of firms surveyed in Dandong in 2013 said North Korea’s adherence to contracts had improved within the past five years (p. 153). 2) Firms controlled by Han-Chinese tend to be much more successful than ones controlled by Chinese ethnic Koreans (chosonjeok) (p. 141). 3) Firms controlled by ethnic Koreans tend to trade mostly with regional governments in North Korea as their counterparts, while Han-Chinese-controlled firms trade mostly with the North Korean army and state Party.

In sum, Unveiling the North Korean Economy is well-worth reading for anyone with an interest in the North Korean economy. Professor Kim does a great favor to the field of North Korean economic studies, but with a few adjustments, it could have been much bigger.

Using refugee survey samples to infer trends about the North Korean population is a controversial and methodologically tricky practice. | Image: Steven Denney

Methodological Hurdles and Refugee Surveys

by Steven Denney

Social scientists and learned observers are quick to dismiss defector-based research on North Korea as biased or unrepresentative of the population. This critical position is often overly dismissive, but it isn’t without merit. A bedrock assumption of inferential statistics is that the sample population is randomly selected from the actual population. Since a random selection of North Korean citizens isn’t currently possible, it stands to reason that insights and findings from those who defected from the country have little to no external validity. In other words: they do not represent the opinions or viewpoints of the North Korean population.

As an Oxford-trained economist now at Seoul National University, Kim Byung-yeon is certainly aware of this methodological critique, but he does not agree with it — if certain conditions are met. In Unveiling the North Korean Economy, Kim uses survey data from refugees who have resettled in South Korea to make inferential claims about the state of the North Korean economy. It is not the sole focus or contribution of the book, but it constitutes a significant portion of the second chapter, where Kim makes most of his empirical claims (pp. 91-122).

Reporting demographic and other relevant indicators from surveys administered in 2009 and 2011 (n=342) on economic life in North Korea (pp. 93-99), Kim underscores two important findings: 1) the attributes of the sample population are not significantly different from the actual population; and 2) stated reasons for defection vary. Comparing his survey findings to the 2008 DPR Korea Population Census, Kim notes that his samples only differ significantly in location and gender. There is an over-sampling of people from certain provinces, namely the two Hamkyung provinces (60.1 percent)2)Kim reports statistics for “Hamkyungdo,” which is actually two provinces: North Hamkyung and South Hamkyung. This is presumably intentional, although there is no explanation provided., and an under-sampling of males (38 percent). According to census data, only 23.1 percent of the population reside in Hamkyung and 49 percent of the population are male. These problems are not damning; weights can be added to correct for the over- or under-sampling.

Furthermore, nearly half of all respondents say they belonged to the top 40% of the population (“rich” or “very rich,” by North Korean standards), and — most notably — only 30.8 percent of the 2011 respondents indicate they left North Korea due to famine and economic hardship (they weren’t asked in 2009, but it is noted that surveys from 2014 and 2015 confirm the 2011 finding). This is a new and important development. Previous surveys indicate that, among pre-2000 refugees, 60 percent of respondents indicated economic hardship as the primary reason for leaving North Korea.

In sum, respondents are from backgrounds that, according to known population parameters, are more or less reflective of the actual population and their stated reasons for leaving North Korea vary. These findings lead Kim to conclude that “data from refugees can provide accurate information on the North Korean economy when surveys are properly designed and executed” (p. 99).3)Kim discovers, based on his 2009 and 2011 survey data, that there isn’t a significant difference in informal economy participation rates between those from Hamkyung provinces and those not. This leads him to conclude that “the sample selection bias that emerged from the dominance of refugees from Hamkyungdo may not be a serious issue in terms of the participation rate in the informal economy” (p. 101). This finding corroborates Kim’s claim that North Korean refugee surveys can be used to make inferences about the North Korean population. The broader implication is that the attitudes and opinions of those from the borderlands (where most refugees hail from) might not be significantly different from the rest of the country.

The conditions of a “properly designed and executed” survey are specified by Kim prior to reporting the survey findings (pp. 93-94). They can be read as a guide to doing surveys with North Korean refugees and summarized as follows: 1) Reduce memory error by sampling refugees who have spent little time in South Korea and little time between defection and arrival. 2) Control for market fluctuations (if doing research on economic activity) by surveying those from who defected in the same of similar years. 3) Reduce sampling error through the use of group surveys and structured questionnaires.

Is Kim right? Can properly collected survey data be used to infer about the market activities of North Korean households and possibly other kinds of activities and opinions? He is unlikely to convince methodological purists, but Kim makes a worthwhile case for the use of refugee surveys as a viable method for making inferences about the North Korean population.

Purists notwithstanding, some less stringent observers might be left unconvinced. The claim that refugees come from sufficiently diverse (and thus somewhat representative) backgrounds fails to take into account a few things. For instance, as pointed out by Peter Ward, people may defect from North Korea due to economic marginalization even if they don’t list that as their main reason for leaving. Additionally, 20.3 percent of all respondents say they left because of “Antipathy toward the North Korean regime.” One can reasonably assume that many if not most of the other respondents harbor some ill-will, even if it was not the main reasons for leaving; defection is in many cases a form of protest against the regime that not all North Koreans would otherwise express if given the chance. The implications of these potential shortcomings is that it undermines the logic of inference, because refugees constitute a subset of the North Koreans whose opinions are representative of this group and not the population as a whole.

Nevertheless, until a day arrives when research can be freely conducted among the people of northern Korea, we must make due. Kim defines a high(er) standard for quality refugee-based research using survey or other, similar methods.

“Let’s live in our own way!” True to its word, North Korea has a hybrid economy the like of which the world has never seen. | Image: Sino-NK/Destination Pyongyang

In the Space between Competing Imperatives

by Christopher Green

All writers of serious scholarly books about North Korea face the same basic dilemma. On the one hand, there is (or at least ought to be) the imperative not to simply reiterate prior research. In the absence of a brand new subject area or thrilling new archival release, ever-increasing detail and/or rigor must therefore be applied to an existing theme. But at the same time, the market for North Korea books is small, in many cases extremely so, and thus the pursuit of commercial viability left unchecked pushes the writer in the other direction: producing a general text in the hope that, even in its more esoteric moments, the result won’t put off the lay reader or compiler of university syllabi. Unveiling the North Korean Economy exists in the interstitial space between these two competing incentives.

As a consequence, the book is in parts excellent, but in others somewhat frustrating. To an extent this is surely because Unveiling the North Korean Economy emerged from Kim’s previous works in Korean. One chapter covers the development of the North Korean market economy that he wrote about with Yang Moon-soo in 2012, for instance, and another is based on the results of firm surveys conducted in Dandong and published in 2015. These are valuable interventions in any language, but they are bookended here by redundancy. Kim spends 34 early pages explaining the economics of socialist states and the socialist bloc, a wholly unnecessary exercise given how others have performed this function far better, and the book ends on little more than an extended op-ed about potential integration scenarios and the costs and benefits of unification.

There are also some methodological quibbles to take note of. The book deals with several different eras in the history of the North Korean economy from slightly different perspectives. It reaches conclusions about each by incorporating findings from a number of different surveys of resettled North Koreans, each employing a slightly different methodology. Given that the book is published by an academic publisher, Cambridge University Press, insufficient clarity on this point is surprising, even allowing for personal tastes. An appendix bringing together the design of the various surveys would have been appreciated.

Nevertheless, despite (or perhaps in some cases because of) its methodological shortcomings, there is plenty of gold. Kim sheds bold new light on old questions: In chapter two and parts of three, he illuminates the mechanisms of market activity in a great deal more detail than, for instance, Hazel Smith did in Markets and Military Rule. He answers the (economic) question of how North Korea survived the collapse of the Soviet Union by turning towards greater military involvement in politics (pp. 123-173). He proves the existence of military-first politics — Songun, the party’s Faustian bargain with the Korean People’s Army — in the all-important world of resource allocation, showing among other things that firms which dealt with military-linked North Korean partners tended to earn higher revenues than those that did not.4)Kim adds that Cabinet-linked firms did almost as well, but frustratingly doesn’t ask the obvious question of why this was the case, preferring instead to merely point to statistical insignificance and move on.

Equally vital is the way Kim explores the economic reasons why the North Korean state is comparatively stable as we speak, but rests on a permanent knife-edge. Collapsism (wherein the state is always already on the brink of collapse) and the counterclaim (that it is long-run stable) are almost never explored in such a way that transcends ideological predispositions. Proponents of one or the other proffer opinions rather than evidence. Here, Kim opts for evidence. He theorizes how Kim Jong-un (with the dictator’s brutality), his officials (with their expansive appetite for corruption), and market participants (who must oil the wheels of commerce) are in equilibrium “in the sense that all three actors do not want to change their behaviour significantly” (p. 199), then explains why the balance is fragile and prone to change, and what is liable to drive that change (pp. 200-201). Given that even today there are still serious scholars of North Korea who profess not to know how the country keeps going at all, this book may end up as required reading.

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1. Robert Gellately, Backing Hitler: Consent and Coercion in Nazi Germany (Oxford: OUP, 2001), 225.
2. Kim reports statistics for “Hamkyungdo,” which is actually two provinces: North Hamkyung and South Hamkyung. This is presumably intentional, although there is no explanation provided.
3. Kim discovers, based on his 2009 and 2011 survey data, that there isn’t a significant difference in informal economy participation rates between those from Hamkyung provinces and those not. This leads him to conclude that “the sample selection bias that emerged from the dominance of refugees from Hamkyungdo may not be a serious issue in terms of the participation rate in the informal economy” (p. 101). This finding corroborates Kim’s claim that North Korean refugee surveys can be used to make inferences about the North Korean population. The broader implication is that the attitudes and opinions of those from the borderlands (where most refugees hail from) might not be significantly different from the rest of the country.
4. Kim adds that Cabinet-linked firms did almost as well, but frustratingly doesn’t ask the obvious question of why this was the case, preferring instead to merely point to statistical insignificance and move on.