More smiles in North Korea?

Kim Jong Un and North Korea's Mysteries

Andrei Lankov is a professor of history at Kookmin University in Seoul and the author of "The Real North Korea: Life and Politics in the Failed Stalinist Utopia."
Read More.
a | A

The mysterious disappearance of North Korean leader Kim Jong Un has sparked a frenzy of speculation around the world. Depending on which wild rumor one believes, the Supreme Leader is either sick or dead, has been overthrown in a coup or is simply toying with the outside world yet again. The whole episode further underscores just how little we know about what's going on inside the Hermit Kingdom.

What little we think we know, in fact, is often wrong. When most people picture North Korea, they imagine a broken country, with skeletal citizens trudging along below slate-gray skies. Foreigners who make it to Pyongyang nowadays discover instead a city whose residents are poor but by no means destitute. While obesity remains a rare sight, so is starvation; indeed, restaurants are booming. Traffic jams are not infrequent, as both expats and regular visitors testify.

To understand North Korea today, one needs to admit that its economy, while grim, is nowhere near breakdown. In fact, from a nadir in the late 1990s -- when state-run industries collapsed and a famine killed an estimated 600,000 people -- the economy has grown slowly but steadily.

True, Pyongyang ceased publishing statistics a half century ago, so it's impossible to be precise about growth. But the Bank of Korea (South Korea, that is) estimates that over the last decade, North Korea's gross domestic product grew at an average rate of 1.3 percent. Privately, some observers believe that the actual figure might be a bit higher, perhaps close to 2 percent.

This is a modest figure, especially when compared with the much higher growth rates of virtually all of East Asia. (Last year, for example, South Korea grew by 3 percent.) Nonetheless, it suggests that North Korea is more vibrant than is commonly assumed.

The world barely noticed a remarkable achievement last year: For the first time in nearly three decades, North Korean farmers managed to produce enough food to meet the population's basic survival needs. In spite of a drought this spring, preliminary reports indicate that this year's harvest is likely to be good, too.

This success, such as it is, arose out of necessity. In the 1990s, industrial output in North Korea halved and an agricultural collapse led to famine. The vast majority of North Koreans survived by establishing an underground market economy. They had little choice: With the shelves of state-run shops empty of food, rationing coupons suddenly became worthless pieces of paper.

Most of these private enterprises started small. Farmers started growing their own food on mountainside plots. Workers began to use (or steal) equipment from state-owned factories to make their own products, which they then sold. Some people opened secret restaurants, others did informal tailoring. Markets, which the regime had barely tolerated, moved into the open.

As one might expect, some elements of North Korea's emerging entrepreneurial class became relatively rich and began to look for more lucrative opportunities. Private workshops, inns and eateries began to spring up.

Some outside observers, while admitting that conditions are improving, remain skeptical because they believe that economic growth is largely limited to Pyongyang. However, available evidence indicates that life is getting better in the countryside as well. Modest reforms that were quietly launched in 2012 have further transformed the agricultural sector. As in 1970s China, North Korean farmers are now allowed to register their families as workers and then keep a third of what they produce for themselves (the rest still goes to the state).

No doubt, Pyongyang has always been privileged, and its inhabitants enjoy what people in the countryside would consider unimaginable luxuries -- such as houses occasionally supplied with hot water. In the last decade, this gap has increased still further.

But this does not mean that the countryside has stood still, as real estate prices show. Theoretically, trading in real estate is banned in North Korea, but in practice it has become commonplace. Over the last 15 years, prices in Pyongyang have increased roughly tenfold, reflecting the growing purchasing power of the population; a good three-bedroom apartment now costs around $70,000. In the countryside, a similar apartment goes for around $15,000 -- still seven times more than in the early 2000s.

One might think that brighter economic conditions should buy the North Korean regime some time. For the moment at least, many citizens are spending more time worrying about getting ahead than merely getting by.

Yet revolutions seldom start when people are desperate; they are more likely to erupt when citizens come to believe that life could be significantly better under different leadership. Economic growth brings more knowledge of the (more successful) outside world. The changes also make people less fearful of the government, since they are no longer as dependent on the state for their livelihoods. A brighter future for North Koreans could well mean a darker one for the regime.

This is the first of three articles.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Andrei Lankov at andreilankov@gmail.com

To contact the editor on this story:
Nisid Hajari at nhajari@bloomberg.net