Comrades & Capitalists
Rigidly Communist North Korea is starting to allow just a bit of economic freedom
Semicapitalist enclaves have been established, the foremost an industrial park financed by South Korea's Hyundai Motor Co. at Kaesong, just miles from the mine-filled demilitarized zone. Using labor even cheaper (at $58 a month) than that from neighboring China, factories are now churning out cookware and semiconductor parts. Eventually, the project will employ 730,000 North Koreans in more than 1,000 factories, with road and rail links to both countries.
Many in the Bush administration yearned for Kim's regime to fall--or at least hoped the North's nuclear defiance would earn it economic isolation. But the reverse has happened, courtesy of China and South Korea. North Korea's economy has grown around 2 percent each of the past two years.
North Korea in most cases ended direct subsidies of state enterprises and granted them freedom to hire, fire, and make profits; allowed prices to rocket upward; permitted the use of foreign exchange; and encouraged small retail businesses and markets for consumer goods and food. Aid workers, diplomats, and other foreign visitors to Pyongyang soon noticed changes. Kiosks popped up, selling cigarettes, drinks, and other sundries. Traffic grew. Restaurants opened, some with expensive fare. Dull, gray Mao suits were closeted in favor of more colorful dress; many youngsters appeared healthier, some donning T-shirts and baseball caps, others styling their hair like South Korean soap opera or pop stars.
Dead factories. Younger North Koreans tapping regime or party connections or relatives overseas have seized on the opportunities to make money. So have farmers, who can now sell their surplus produce in markets; this year has seen groups of around 20 farmworkers authorized to band together in money-making collectives, keeping up to 70 percent of the profit. But many factory workers have been hit by rising unemployment and by wages that rose far less than the rate of inflation. The country's old industrial heartland is studded with abandoned factories, and with all the idle smokestacks, says recent visitor Nancy Lindborg, president of the aid group Mercy Corps, "the air quality is crystalline." The quality of life, however, is anything but. "If you're part of the old industrial proletariat," says Marcus Noland, who has studied the North Korean economy for the Institute for International Economics, "good luck."
The specter of famine has also returned. North Korea lost between 500,000 and 2 million to hunger between 1995 and 1997 amid floods and industrial collapse. Foreign food aid eventually flowed in, and the harvests improved. Yet food shortages remained, prompting the North Korean military to reduce its height requirement to accommodate malnourished recruits. Even today, the United Nations World Food Program (WFP) estimates, 37 percent of North Korean children suffer from malnutrition; 23 percent are underweight.
More shortages. A "very ominous" mix of factors may reignite famine, warns Gerald Bourke of the WFP in Beijing. Already this year, the WFP has had to slash food deliveries to most of its 6.5 million recipients, mostly children, pregnant women, and the elderly. Early this year, with food that used to enter the state's distribution system diverted into moneymaking markets, North Korea cut city dwellers' food rations. In May and June, students and urban workers planted rice in the paddies in a dramatic expansion of the annual mobilization to the countryside. Ordinary North Koreans try to cover the food shortfall with help from relatives on farms and by foraging for wild grasses, acorns, and mushrooms. Still, the price of rice tripled over the past year, and corn quadrupled.
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