Why are Kim Jeong-il and his boys still around?

When Nicholas Eberstadt talks about the Norks, I listen. While he is not officially a Korean 'expert' (his specialty is economics), he knows his stuff.

For anyone interested in studying Korean affairs who hasn't heard of Eberstadt (there must still be one or two), he is most famous for his 1999 book The End of North Korea. It is five years later and the Norks are still kicking (there people into the dirt). So what gives? The problem with Eberstadt's analysis is just what you might expect when an expert on economics tackles a economic-political topic: He nails the economics and misses a bit on the politics. This was talked about way back in 2000 in a review by Carmel Davis of the University of Pennsylvania:

Can North Korean politics survive economic disintegration? This is a major question, because U.S. and South Korean policies seem to assume that the problem needs to be managed only until North Korea’s imminent political collapse. Unfortunately, on this subject Eberstadt waffles, implying in the first five chapters that economic collapse does not necessarily cause political collapse but suggesting in the last chapter that it does. True, Eberstadt cannot consider reunification without presupposing collapse; however, without explicitly grappling with this question, he cannot address the title of his book. If states can endure economic collapse, Eberstadt has not made the case that the end of North Korea is in sight. Rather, we might expect that so long as the praetorians remain loyal, the economy will continue to muddle through, people will die of starvation, and the regime will remain in power. Failing a Gorbachev-like miscalculation about political and economic reform by Kim Jong Il or his successors, North Korea may be exporting insecurity and importing tribute for years to come. Contrary to the title, the end of North Korea may not yet be at hand.

Well, Eberstadt has a new article out in Policy Review that talks about the persistence of the North Korean regime:

It is perhaps especially fitting, then, that having imagined the odds of the dprk’s post-Soviet survival to be very low, I should be charged with explaining just how the North Korean system has managed to survive these past 13 or 14 years — and to speculate about the possibility of sustainable pathways that might permit regime, state, and system to endure that far, or further, into the future.

Read on, dear friends.

Eberstadt starts the article like he started his book, with an example from history. In this case it was how near the Ottoman Empire was to collapse during the early phases of the Gallipoli campaign in World War One only to be grated a reprieve by a premature withdraw of British naval forces.

Then he turns his attention to the North Koreans. Because of the difficulty in obtaining reliable data on North Korea, Eberstadt makes extensive use of mirror statistics:

Available data do, however, cast light on one aspect of the dprk’s struggle to avoid collapse in the wake of the Soviet bloc’s demise. These are the international data on North Korean trade patterns as reported by the dprk’s trade partners —“mirror statistics,” as they are known by their users. Mirror statistics cannot tell us how close North Korea may have come to collapse in recent years, but they can help us explain how North Korea has managed to finance state survival.

In other words, we can get an idea of what North Korea is doing based on what they trade with other nations or beg from them.

While taking a few paragraphs to go over the collapse of North Korea's economy, he does what I think is a bit of back-tracking from his position in 1999:

In discussing “economic collapse,” of course, I was not venturing guesses about the possibility of some dramatic political event that might bring the North Korean regime to an end — a coup at the top, say, or a revolt from below. (Then, as now, the sorts of information that might permit such a judgment were unavailable to outside observers — especially those with no access to confidential sources of intelligence.)

So, now Eberstadt says that a regime can survive despite a peacetime economic collapse. That is certainly not what I got out of the 1999 book. I guess I'll have to go back and read it again.

In fact, the North Korean economy has shown some signs of recovery over the last few years. Or has it? Here is where Eberstadt's use of mirror statistics starts to come into play (time for a long quote):

Whether or not the North Korean economy has enjoyed actual growth since 1998 — a question that remains a matter of some contention — it is clear that the economic situation has in some meaningful sense stabilized and improved since the grim days of the “Arduous March.” But how was this accomplished? Mirror statistics provide some clues.....

After 1998, however, North Korea’s imports rebounded markedly. By 2001, the reported level exceeded $2 billion — and it appears to have risen through 2003. To go by these numbers, North Korea was obtaining just about twice as much in the way of goods from abroad in 2003 as in 1998. In the year 2003, in fact, the current dollar volume of North Korean merchandise imports was at the highest level registered since the collapse of the Soviet Union.

And how did North Korea pay for this upsurge in imports? To judge by the mirror statistics, it did so not through any corresponding jump in reported export revenues. Between 1990 and 1998, North Korea’s reported merchandise exports collapsed, plummeting from about $2 billion to under $600 million. By 2003, these had recovered somewhat, to a reported level of just under $1 billion. Nevertheless, by any absolute measure, the dprk’s reported export level remained remarkably low in 2003 — less than half as high as it had been in 1990 and even lower than it had been in the bitter “Arduous March” year of 1997 (see Figure 2).

In a purely arithmetic sense, North Korea succeeded in effecting a substantial increase in merchandise imports by managing to increase its reported balance of trade deficit appreciably (see Figure 3). In the “Arduous March” period — the famine years of 1995-98 — North Korea’s reported surfeit of imports over exports averaged under $600 million a year. By contrast, in the years 2000-03 — the Kangsong Taeguk era — the dprk’s reported trade deficit averaged about $1.2 billion annually.

But how was this reported trade deficit financed? After all, North Korea is a state with a commercial creditworthiness rating of approximately zero, having maintained for a generation its posture of defiant de facto default on the Western loans it contracted in the 1970s.

(I don't know about you but I smell a money shot coming up. And no, I haven't read the end of the report yet. I'm, uh, live blogging it.)

Eberstadt brings up the possibility that Chinese subsidies have helped the North Koreans maintain their life-supporting trade deficit but quickly dismisses it. He points out that Chinese direct and indirect subsidies to Pyeongyang have actually decreased over the last several years. He then talks about some other well-know factors keeping North Korea's system afloat:

And how was this jump in non-Chinese net imports financed? Unfortunately, we cannot be precise about this, since many of the sources of funds involve illicit transactions. North Korea’s international counterfeiting, drug trafficking, weapons, and weapon technology sales all figure here, although the sums raised from those activities are a matter of some dispute.

Nor do we yet know exactly how much of the South Korean taxpayers’ money was furtively channeled from Seoul to Pyongyang during this period. One set of prosecutorial investigations has convicted former President Kim Dae Jung’s national security adviser and several other aides of illegally transferring up to $500 million to Kim Jong Il’s “Bureau 39” (a unit of the ruling party specially charged with funding Kim’s royal court) on the eve of the historic June 2000 Pyongyang summit. The possibility of other unreported official Seoul-to-Pyongyang payoffs during the 1998-2003 period cannot be ruled out — nor, of course, can the potential volume of any such attendant funds be determined.

Yes, you too can buy your own Nobel Peace Prize for the low, low price of $500,000,000! Get them now, while supplies last!

That was not the money shot. Almost the money shot. Not the money shot. The Nork's criminal activities are well known. Also, while Kim Dae-jung's financing of Pyeongyang was deplorable, it is also old news. But I think we are getting close to heart of the matter.

Broadly speaking, however, we can explain the timing and the magnitude of the 1998-2003 upswing in North Korea’s non-Chinese net imports by looking at policies that were embraced during those years by the United States and her Northeast Asian allies. The year 1998 heralded the inauguration of rok President Kim Dae Jung and the advent of South Korea’s “Sunshine Policy” for détente and reconciliation with the North. In 1999, the U.S. followed suit, unveiling the “Perry Process” (former U.S. Defense Secretary William J. Perry’s “grand bargain” approach to settling outstanding disputes with the dprk). Japan and the eu both joined in the pursuit of “engagement” with North Korea during these years as well, although in differing degrees.

Closer, closer....

In their strict performance specifications — their defining actions, as opposed to their official rationales or stated intentions — “Sunshine Policy” and “engagement policy” effectively meant organized activity by Western governments to mobilize transfers of public resources to the North Korean state.

Boom! I knew this was coming. Frankly, this is old news also and more than one IKK blogger has talked about how we have propped up the Norks, but it is still good to read this coming from someone respectable.

Eberstadt then spends several paragraphs (with graphs and charts) giving supporting evidence that it was foreign aid (primarily American and South Korean) that kept the North Korean economy going during its darkest hours before restating his money shot:

What thus seems beyond dispute is that the upsurge of Western aid for the dprk under “Sunshine” and “engagement” policy played a role — possibly an instrumental role — in reducing the risk of economic collapse and increasing the odds of survival for the North Korean state.

I've only gotten through half of the article and Eberstadt goes on to cover a couple of other areas of interest. But I've gotten the money shot that I've come for so you are on your own for the rest.

Happy reading.

Comments

[kimchipig]

There are lots of reasons that the Dear Leader is still in charge. First, he is a brilliant politician. He knows exactly how to manipulate the democratically elected leaders around him into propping his regime up and none so better than South Korea.

Second, for all the dogma and propaganda that spews from the US administration, there is nothing in North Korea that would benefit America economically. America has never intervened anywhere it was not directly in its economic interest. All the talk about "removing dictators and installing democracy" is just talk; the world full of nasty thugs oppressing their people and the USA does nothing about that because there is nothing to their benefit in doing so. Syria and Congo immediately come to mind. Boukassa was one of the worst thugs in history and America supported his regieme for its entire span. Conversely, America is in Iraq for its oil rescources and Afghanistan for a gas pipeline. This is why the USA has planned the largest base complex outside the USA in Iraq. About 70% of the world's oil reserves are around the place. Hardly a coincidence, me thinks.

Finally, the Dear Leader can fight back. Most Americans cannot find North Korea on a map and would hardly welcome thousands of dead American soldiers in an attack on a place with no economic value. Nor would they care if hundreds of thousands of Korean civilians were killed. That is called "collateral damage."

[MagnumPI]

I think Eberstadt's book was right in a way - North Korea has collapsed... economically.

All the reports from defectors corroborate his book's conclusion that North Koreas industrial base has rusted to bits or been stolen piecemeal and sold for scrap metal by hungry workers. This is almost certainly true.

And North Korea's "economic reforms" are probably the result of the central government losing control as it moved into a starvation-racked "post-industrial" economy. As many defectors have pointed out, people started growing crops on their own private land, as well as ANY OTHER AVAILABLE LAND (ie, not their own). This is a big sin in communism because it defies the communist spirit of collective farming. The fact that North Korea's govt turned a blind eye to this and then later let all the petty capitalist shops, markets, etc sprout up is evidence that NK's "reforms" are probably just a recognition of the reality that the gov't cant shoot everyone in the country for trying not to starve.

I add to this, in my own opinion, that Kim Jong-il has NO LEGITIMACY to rule in North Korea because:
1) he's never done anything of note in his debauched life, while there are still cadres left alive who actually can claim to have fought the Japanese, Americans, etc.
2) his mishandling of the economy is totally evident to the people in NK.
3) he's had several (4-5?) close-call assasination attempts.

Kim Jong-Il and North Korea's communist system don't have much time left and THEY KNOW THIS. In order to survive, they need money. They can't produce money without giving up power. Where can they get money? From the outside world. The only reason Kim Jong Il is still running the place is that the other communist cadres have decided to wait and see if his nuclear blackmail will produce a billion dollar windfall. This is Kim Jong Il's ONLY possible claim to legitimacy - that he can craftily scare the USA, ROK, or Japan into paying North Korea billions.

If America and its allies REFUSE TO PAY, I really believe Kim Jong Il will be exposed as a total failure, he'll be killed and the country would probably collapse. (Unless of course, NK sells nuclear bombs, but I doubt theyd do this because it would risk nuclear annihilation from the USA).

[jtb-in-texas]

All of you are assuming KJI and his top brass are less unhinged than Hitler, Stalin, and/or Saddam...

IMHO, that's a bad assumption...

Alternate solution... Stephen Spielberg opens a new studio to make only films about KJI (Juche Studios?), hires all the DPRK leaders as "Executive Producers", sets them up on a ranch in Hollywood, on the condition that the rest of the country goes back to being just "Korea", governed by the ROK, and no reprisals are ever taken against former DPRK citizens for actions before Uni... You could give KJI the Nobel Prize by himself and make him a celeb overnight...

Heck, Hollywood as it is today would love it!!

[lirelou]

Kimchipig,

Me thinks you confuse Jean Bokassa of the former Central African Empire for Joseph Mobutu of Zaire (now once again one of the Congos). No, the Americans did not support Bokassa. That honour goes to the French, who finally removed him. Yes, those rotten Americans did support Mobutu for various reasons. And the subsequent history of that former Belgian colony should clarify why. And yes, those rotten Americans do not do anything unless they perceive it to be in their interests to do so, economic or otherwise. (Vietnam is a classic example of where perceived political interests were paramount, and the economic interests of small value.) But your comment on American casualties as a measuring rule for determining self-interest is totally correct. George W. did not invent this idea. Bismarck was said to always frame Germany's interests in the light of any potential armed conflict as: Is this worth the bones of one Pomeranian Grenadier?

If it was not, he did not act.A North Korea armed with nuclear weapons, capable of hitting the United States, might just pass the Pomeranian Grenadier bones test, or whatever its Texas equivalent happens to be.

[Cameron Nelson]

My comment is for the first report, on his "money shot" on why the DPRK although collapsed economically is still able to stand up. In Eberstadt's 1999 book he talks about the economic failures of North Korea and I agree with your point on how he did miss the political resiliance of the North Korean regime as I believe most scholars could not have predicted, especially, looking at the past of Kim Jong Il and questions of his ability to control North Korea after the Great Leaders death. My agreeance with you takes a turning point when you imply consistent aid from the U.S. government as well as the South Korean government. It is true that the DPRK has 'enjoyed' a trade deficit of over 1.2 billion dollars over the past 5 years, but to imply that a deplorable check from the Kim dae jung's south korean government and a hawkish bush policy towards north Korea propped up North Korea from 2000 on fails to take in considerations that you may not have found yet in Eberstadts and others research. You said that you hadn't finished reading his reports before posting, well maybe you ought to before you do next time. Also the mention of what Bureau 39 is was incomplete, it is far more than just funding of Kim Jong Il's DPRK court, it is the wing of the worker's party that controls licit and ILLICIT activities of the DPRK. As for the trade deficit, round it off to a billion. The DPRK counterfeits 15 million dollars of US currency a year with its special intaglio press, add that to its methamphetamine production which yields estimates of 500 million and then its heroin production, third in the world at 600 to 1 billion dollars a year and you have covered your trade deficit. Now I do believe that China does play a role of propping up the country, as do every SK tourist that visits Kumkangsan, the Kaesong project and other special economic zones, but to assume that it is a US government with such a harsh stance agains the US coupled with a south Korean tax payers is taking perhaps taking out of context what Eberstadts full story is and the full story of the DPRK.
thanks
Cameron Nelson