North Korea at a crossroads: what will Kim give for an economic miracle?
- He will have to give up nuclear weapons and the current Juche ideology – political reform must precede economic reforms
- To encourage this, the world’s powers must offer compensation for denuclearisation, guarantee the survival of his regime, and provide at least 10 years of economic support
North Korea is at a crossroads and faces a serious challenge: it can either hope to survive as a nuclear weapon state or thrive by implementing market-oriented reforms, trading nuclear weapons for a bright future.
The record shows that every country that has adopted a socialist system has either collapsed or transformed into a market socialist economy. North Korea is confronted with the same fate.
To achieve this, Kim must overcome three challenges: First, he must make an unyielding commitment to achieve economic development by modernising the economic system, and to enhance the economic well-being of the entire population.
Second, he must revise the ruling Juche ideology in a paradigm shift, implementing market-oriented reforms and opening up the country so it can integrate with the global economy.
Third, the necessary market reforms and economic opening cannot be allowed to derail the regime, as Kim seeks to preserve its integrity at all costs.
To transform North Korea into a vibrant and dynamic economy, Kim must be able to work with the five stakeholder states of China, South Korea, the United States, Japan and Russia to devise a package deal. The package should ensure a genuinely better chance of survival for North Korea without weapons of mass destruction.
To ensure a genuine chance, the terms of the deal should more than compensate for the five attributes of nuclear weapons, which will be affected by denuclearisation.
The first attribute is, nuclear weapons are a credible deterrent against a US military invasion, real or imagined.
Second, the nuclear arsenal constitutes a cost-effective way to maintain military parity with South Korea, whose economy is 60 times bigger.
Third, nuclear weapons are one of the two pillars of the byungjin policy, which calls for the simultaneous development of military power and the economy.
Fourth, as the signature achievement of the Kim family, the arsenal helps provide legitimacy to the regime.
Fifth, nuclear weapons are a means to execute North Korea’s belligerent foreign policy to maintain internal solidarity.
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To compensate for the loss of these benefits, any package deal that includes forgoing the nuclear arsenal must entail two outcomes: the lifting of sanctions and threats, and the provision of security guarantees.
More specifically, all sanctions imposed on North Korea, either unilateral or endorsed by the United Nations Security Council, must be lifted, and political pressure and military threats must end.
At the same time, the following security guarantees must be provided: a peace treaty between North and South Korea; normalisation of diplomatic relations with and full recognition of North Korea by the US and Japan; and a reconfirmation of treaties with China and Russia.
While these conditions are necessary, they are not sufficient to ensure a genuine chance of North Korea’s survival as a non-nuclear weapon state. To assure the preservation of North Korea’s integrity by compensating for the loss of byungjin and legitimacy, North Korea has to achieve rapid, sustained economic development.
This requires the following three conditions to be fulfilled. First, Kim must implement market-oriented economic reforms and transform the economy into market socialism. The means of production, in the hands of the state, have to be transferred to private enterprises, state enterprises and joint ownership.
In addition, the political system should be transformed from totalitarianism to authoritarianism, maintaining the exclusive power of the communist party as a leading and guiding organisation, but allowing free economic activities. Political reform must precede economic reform.
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Second, to integrate into the world economy and attract foreign investments, Kim must change its belligerent foreign policy to an amicable one. This, as former Soviet foreign minister Eduard Shevardnadze pointed out, involves abandoning its class-struggle ideology.
Sustained economic development has to proceed with the modernisation of infrastructure: railways, roads, seaports, airports, electric power and lines of communication. Moreover, the plan should incorporate market-oriented institution-building – the introduction of a central bank, commercial banks, a viable educational system and a bureau of statistics – and the development of human resources.
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Finally, Kim must be able to establish a solid foundation for economic modernisation with an average of 10 per cent annual economic growth over the next 10 years. The attainment of a 10 per cent annual growth rate, which was achieved in places such as Taiwan, Singapore, South Korea and China during their economic peak, would provide renewed legitimacy to the Kim regime, prevent disintegration and a mass exodus.
The terms of the agreement should last a minimum of 10 years to give Kim time to lay the foundation for economic modernisation, so North Korea can achieve autonomous economic development without external financial assistance after that period.
Kim has a rare opportunity to not only lift the masses from poverty to prosperity, but also become a driving force for Northeast Asia’s economic prosperity, with the establishment of a permanent peace and stability.
Dr Chan Young Bang is the founder and president of KIMEP University, principal investigator at North Korea Strategic Research Centre, and a former economic adviser to the first president of Kazakhstan, Nursultan Nazarbayev
