1 / 44

The Political Economy of North Korea

The Political Economy of North Korea. Stephan Haggard April 19, 2011. Yŏngbyŏn Nuclear Research Center. 2. Kwangmyŏngsŏng-1 Trajectory (1998). 3. Proliferation Concerns (Hwasŏng or KN-01; Syrian reactor). 4. The Sinking of the Cheonan. The shelling of Yeonpyeong-do.

kedem
Download Presentation

The Political Economy of North Korea

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Political Economy of North Korea Stephan Haggard April 19, 2011

  2. Yŏngbyŏn Nuclear Research Center 2

  3. Kwangmyŏngsŏng-1 Trajectory(1998) 3

  4. Proliferation Concerns (Hwasŏng or KN-01; Syrian reactor) 4

  5. The Sinking of the Cheonan

  6. The shelling of Yeonpyeong-do

  7. The Security Questions • How do we get the Six Party Talks back on track following the missile and nuclear tests of 2009? • How do we address proliferation concerns? • How do we address the sinking of the Cheonan and shelling of Yeonpyeong-do and re-establish deterrent?

  8. The Behind-the-Headline Issues • Abandonment: the collapse of the Cold War order • The first succession, famine and “arduous march” • The de facto reform process or “marketization from below,” including increasing integration with China. • The political consequences of the second nuclear crisis.

  9. Sources: More Evidence Than You Think • Reconstruction of the food economy • Famine in North Korea: Markets, Aid and Reform (2007) • Reconstruction of the balance of payments, trade relations and effects of sanctions • Surveys of Chinese and South Korean firms operating in North Korea • Refugee surveys • China, 2004-05, 1,300+ • South Korea, November 2008, 300 respondents • Witness to Transformation: Refugee Insights into North Korea (2011)

  10. Follow the blog at http://www.piie.com/blogs/nk

  11. Famine and secular economic decline

  12. Declining reliance on the PDS

  13. Household Response to Famine

  14. The economy marketized in response to state failure… • Households pursue coping strategies • Food—including food aid—is diverted to the market • The external dimension • The Chinese border opens during the famine • Trade subsequently takes off, feeding the market with consumer goods… • …including cultural products (CDs, DVDs and players; even cellphones)

  15. …fueled in part by aid diversion.

  16. Coping Strategies

  17. “Partial” Reforms Associated with an Increase in Corruption, Inequality and Disaffection

  18. Changing Pathways to Advancement

  19. The Penal System: Squashing Reform

  20. Adding in the Politics • Kim Il Sung dies in 1994, just as famine is taking off • Kim Jong Il • Relies even less on the party (no KWP party congresses from 1980 until September 2010) • Turns to the military to survive, later unveiling the idea of songun or “military first politics”

  21. Politics II: The Sprigs of Reform • The diplomatic openings • Rapprochement with China from 1998 • The North-South summit of 2000 • Secretary of State Albright in Pyongyang • The Koizumi summit of 2002 • The Constitutional Reform of 1998 • The economic reform package of 2002

  22. Foreign Ministry Statement, October 25, 2002 New dramatic changes have taken place in the situation on the Korean Peninsula... Inter-Korean relations and the DPRK's relations with Russia, China and Japan have entered a new important phase... The DPRK has taken a series of new steps in economic management and adopted one measure after another to reenergize the economy, including the establishment of a special economic region... These developments practically contribute to peace in Asia and the rest of the world. Almost all the countries except for the United States, therefore, welcomed and hailed them, a great encouragement to the DPRK.

  23. The Crisis Breaks • The Bush administration • ABC, Anything But Clinton • 9/11 • The “Axis of Evil” and asserted right to pre-empt • The Kelly visit to Pyongyang October 2002 • The limited script • The decision to suspend HFO shipments • The example of Iraq

  24. Divergent Views of the Six Party Talks • The US view • A vehicle for bringing pressure to bear: 5 vs. 1 • Complete resistance to bilateral talks • The South Korean, Chinese and Russian views • A vehicle for influencing the US • A means for providing cover for bilateral negotiations

  25. The Coordination Problem: the Limits of Sanctions • Sanctions require coordination • US efforts undercut by Chinese and South Korean (through 2007) interests in deep engagement • Dynamic coordination problems: sanctions shift North Korea’s foreign economic relations

  26. Where Are We Now? • The Six Party Talks broke down in 2008 over the issue of verification • Kim Jong Il’s stroke (August 2008) • The Obama administration promises a new engagement course… • …but is met by • Missile (satellite) test of April 5 2009 • Strong UNSC presidential statement • Nuclear test of May 25 2009

  27. The New Sanctions Regime of UNSCR 1874 • Much tougher than anticipated • Not commercial embargo, but targeting arms exports (WMD-related and major systems) • Multilateralizes the Proliferation Security Initiative • Permits financial sanctions against entities engaged in proscribed activities; the Banco Delta Asia case (2005) • North Korea: more vulnerable than ever?

  28. Reform in Reverse: 2005-2010 • An unanticipated effect of the crisis • The assault on markets • Trying to revive the Public Distribution System • Restricting trading activities: moving people back into the state sector • Controlling the border • “150 day campaigns”

  29. The Currency Conversion of 2009: the Great Confiscation • Unlike conventional case • Motivation: undercut market, rebuild socialism • Confiscatory—wiped out savings, working capital • Markets freeze, with implications for food and other consumer goods • Forced, but ad hoc adjustments (re-opening markets, allowing foreign exchange holdings)

  30. Evidence I: Quantities

  31. Evidence III: Qualitative • Direct observation documents 2008 reemergence of famine-era pathologies

  32. Again, Secular Economic Decline

  33. How Sanctions Work—and Don’t • “Squeeze until they cry uncle” model • In fact, sanctions may have perverse effects • Authoritarian regimes simply impose the costs • Politically, they favor hardliners and strategies designed to show resolve • The shift in external economic relations and increasing reliance on China

  34. The Succession Problem • Successions increase uncertainty, but favor core supporters and a common line • The ascent of Kim Jong Un in short-run will probably mean conservative response by North • No apparent interest in reform at the moment

  35. Some Conclusions • On sanctions • Some signaling and defensive value, but not effective in producing denuclearization • China’s (troubled) support appears to continue • Major parties need “exit strategies”: a way back to the Six Party Talks

  36. Conclusions II • Limits of engagement • Regime highly insecure with respect to the domestic political implications of economic change • Some forms of engagement are anathema (the IMF vs. the IAEA) • Humanitarian issues are grave; aid as an opening

  37. Conclusions III • The wisdom of “strategic patience” • Make the offer… • …but ultimately, Pyongyang must make the strategic decision

More Related