DPRK cont.

Sam Pawlett rsp at uniserve.com
Wed Apr 26 12:19:14 PDT 2000

>From *Korea's Placein the Sun. A Modern History* Bruce

The three-year plan that began at the end of the Korean War and the five-year plan that succeeded it (1957-61) both stressed the reconstruction and development of major industries devastated by the war, with consumer goods left at the bottom of the regime's priorities. This bias toward major industries, combined with unprecedentedly large amounts of aid from the Soviet bloc, however, pushed the economy forward at world-beating growth rates in the 1950s and 1960s. DPRK industry grew at 25 percent per annum in the decade after the Korean War, accordingto external observers, and about 14 percent from 1965-78. Official figures put the average annual growth rate in industry at 41.7 percent for the three-year plan (1953-56) and 36.6 percent during the subsequent five-year plan. The First Seven-Year Plan (1961-67) projected an average rate of 18 percent, but stoppages of aid from the Soviet Union in the early 1960s (owing to DPRK support for China in the Sino-Soviet dispute) caused the plan to be extended for three years. Still, for two decades after the Korean War the North's growth far outdistanced the South's, striking fear into the hearts of American officials, who wondered if Seoul would ever get off the mark.

By the early 1970s the DPRK clearly had exhausted the extensive development of its industry based on its own or prewar Japanese or new Soviet technologies, and it therefore turned to the West and Japan to purchase turnkey plants. These included a French petrochemical complex in 1971, a cement plant in 1973, and in 1977 a request that Japan sell an integrated steel mill to P'y6ngyang (which was denied). Even a complete panty hose factory was imported, suggesting more attention to consumer items. Ultimately these purchases caused North Korea to run into problems in servicing its external debt, which in the past twenty years has been estimated at between $2 billion and $3 billion. Later seven- and ten-year plans have failed to reach projected growth rates; still, a CIA study published in 1978 put the DPRK's per capita GNP at the same level as the ROK's in 1976, and another study estimated that the respective per capita rates were the same up until 1986. DPRK per capita GNP probably kept pace at least through 1983, in part because of South Korea's 6 percent loss of GNP in 1980. The North's total production of electricity, coal, fertilizer, machine tools, and steel was comparable to or higher than South Korean totals in the early 1980s, even though its population was half that of the South. Such figures, however, do not indicate the quality of production in the North, where labor productivity is much lower and energy is routinely wasted. Still, one critic of the DPRK's economic performance puts its annual average industrial growth rate for 1978-84 at 12.2 percent, while noting how far North Korea fell short of its own planning targets .

The South's economy revived by the mid-1980s and has forged well ahead of the North since then, although not as far ahead as its backers claim. Seoul's urban middle class does much better than all but a tiny elite in North Korea, but the living standards of the mass of South Korean citizens, while better, do not tower over those of average North Koreans. In 1979 Kim 11 Sung claimed a per capita income of $1,900, and in the late 1980s the DPRK put the figure at more than $2,500; but it is not known if the figure is accurate, or how it was arrived at; furthermore, it has fallen in the 1990s. Published CIA figures in recent years place North Korea at around $1,000 in per capita income. For the past two decades the North has clearly fallen behind South Korea in what it wants to do namely, race neck and neck or beat the South in industrial development. Transportation bottlenecks and fuel resource problems have plagued the economy, but above all it has missed out on the technological revolution of recent years.

The North does not do badly in goods of the second industrial revolution: steel, chemicals, hydroelectric power, internal-combustion engines, locomotives, motorcycles, various sorts of machine-building items. But it lags far behind in the "communications" technologies of the third industrial revolution: electronics, computers, semiconducter chips, telecommunications. (North Korea manufactures a Paektusan computer, probably with early 1980s technology; the state also imports the latest computers it can buy on the international market, while sharply limiting personal computers for individual or home use.)

There are departures and successes, however, that the "basket-case" scenario never talks about. Officials with the World Health Organization and other UN agencies praise the delivery of basic health services; North Korean children are better vaccinated against disease by far than are American children. United Nations data show that life expectancy in this small and poor country is 70.7 years (compared with 70.4 in the ROK), not much less than the American figure. Infant mortality is 25 per 1,000 live births, compared with 21 in the South. About 74 percent of North Koreans live in cities, compared with 78 percent in the South (again according to UN data), meaning that both are quite urbanized and industrialized by world standards.

Agronomists from the UN determined that the North used miracle rice seeds by 1980 and had mostly replaced human manure (still in wide use then in the South) with chemical fertilizers in the fields. The delivery of goods and services is often decentralized to the neighborhood or village level, and several provinces are said to be self-reliant in food and consumer goods and restaurants; foreign visitors see few long lines at stores and restaurants although resident diplomats say little is available in the stores. Clearly,the morale of the population is better than in the former Soviet Union, and both the cities and the factories give an appearance of efficiency and hard work. I stayed for several days in a W6nsan hotel in 1981 and was awakened all too often by construction going on around the clock in a big building across the street.

The North's dogged pursuit of relative autarky in a world of interdependence and mostly free trade has hampered its industrial growth, sacrificing economies of scale and closing the country off to the more developed capitalist economies (although it should be remembered that the United States mounted an economic blockade against North Korea from 1950 to 1995, when it was partially lifted for all but strategic and high-technology items.) But one unqualified success for self-reliance is DPRK energy policy, which has one of the lowest world rates for dependence on petroleum. It has substituted hydroelectric power and coal for oil, using petroleum products primarily for its military. About 10 percent of the energy North Korea consumed came from imports in the early 1990s, according to South Korean figures, yet per capita energy use was about the same in both countries. In an interview in 1978 Kim 11 Sung told a Japan Socialist Party delegation that in the late 1960s some Korean scientists wanted to start up a petrochemical industry for refining petroleum (probably because Park Chung Hee had similar plans). However, Kim said, "our country does not produce oil," and the United States influenced the world oil regime: ergo "we are not yet in a position to depend on imports.... [To do so] means allowing a stranglehold on our jugular." Much of the extensive rail system is now electrified, as are city buses and subways, and the use of automobiles is minimal. In the 1990s per capita energy usage is still estimated to be nearly as high as the South's, although consumers use a much higher total quantity of energy compared with the North, where most of it goes to industry.

The collapse of the socialist bloc deprived P'y6ngyang of major markets, leading to several years of declining GNP in the early 1990s. South Korean figures put these declines in the 2 to 5 percent range, and American government analysts thought that the worst was over for the North Korean economy by the end of 1993. But it was a general crisis for the leadership, to the degree that P'y6ngyang for the first time publicly acknowledged "big losses in our economic construction" and "a most complex and acute internal and external situation" at the Twenty-first Plenum of the Workers' Party, in December 1993. Most of the blame was attributed not to North Korea's ponderous socialist system but to "the collapse of socialist countries and the socialist market of the world," which "shattered" many of P'y6ngyang's trade partners andagreements.

This crisis forced North Korea to think seriously about the future of its autarkic system, resulting in a host of new laws on foreign investment, relations with capitalist firms, and new zones of free trade. Many newbanking, labor, and investment laws were promulgated .

Foreign businessmen have seen these new laws, at least on paper, as among the most liberal in East Asia in welcoming foreign investment, profit remissions, and ownership regulations. A relative of Kim 11 Sung named Kim Jong U became head of the Najin-S6nbong free economic and trade zone in the northeast corner of the country and assiduously courted foreign investment in the early and mid-1990s. Several firms in Hong Kong, Japan, France, and South Korea have made commitments to open manufacturing facilities in the DPRK, and a consortium headed by a former executive from the Bechtel Corporation in the United States is leading the efforts to improve the transportation and communications infrastructure at Najin-S6nbong. The Shell Oil Corporation also invested in this zone in 1995.

If East Asian development in recent decades has demonstrated anything, it is that rapid capitalist growth is not incompatible with strong central state power. Thus it was quite predictable that Kim Jong U told reporters that P'y6ngyang "would like to take Singapore as a model"; it combines, in his view, "great freedom in business activities" with "good order, discipline and observation of laws. It is conceivable that by the year 2000 North Korean coastal cities will be involved in world trade and the economy will again be growing rapidly. Most of all, the deep interest of many South Korean firms in cheap but intelligent and disciplined North Korean labor may help South Korea recoup comparative advantages in the world market, while moving both Koreas slowly toward reunification. But as of this writing strained political relations between Seoul and P'y6ngyang have blocked new business deals, and the DPRK still has a long way to go to match the epochal outward-looking reforms in China or Vietnam.

North Korea's Hermit Kingdom policies of self-reliance were a response to a prolonged twentieth-century crisis in the country. Put in place to insulate the nation against the disasters of colonization, depression, and war, they seem irrelevant now. But one can imagine Kim i1 Sung looking at his Politburo friends in 1989 when the Berlin wall fell, or in 1991 when the USSR collapsed, and asking them where North Korea would be if it had integrated with the Soviet bloc and participatedin the international division of labor that Moscow fostered in Eastern Europe.

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