The Rising Capitalists Changing North Korea


Behind the cartoonish depiction of a rogue Stalinist state, a subtle and possibly significant change is taking place, writes Megan Giles.

There’s not a lot of diversity proffered when conjuring an image of North Korea. Seas of endless military columns, poised with the most unshakeable obedience, and enormous bronze caricature-like statues of waving dictators.

North Korea is an almost mythical bastion in the minds of Western audiences – capitalism’s final frontier in the global economy. Anomalous, wayward, isolated. A source of media satire led by a farcical figurehead, its artificially smiling façade concealing an eerie sadness. Like some kind of abandoned carnival.

While North Korea might be some or all of these things, peddling a static view of the East Asian state as crazy, irrational, or plain stupid leads us to underestimate it. By doing so, we miss the changes that are transforming its social, economic and political landscape.

Dr. Benjamin Habib, Lecturer in International Relations and Politics at La Trobe University, has spent extended periods of time in North Korea witnessing the top-down interventions and grassroots changes happening across the country. He argues that the rogue state discourse and mainstream media reports have become repetitive, boring and inaccurate.

“There’s a tendency to interpret the actions of the North Korean state as the result of a single man’s decisions. Yes, North Korea was born as a Stalinist totalitarian regime, but a lot has changed since the 1950’s,” he stated. “This kind of view doesn’t recognise the complexity and the constraints that are placed on the leadership and the actors in the North Korean elite.”

Despite its commitment to a deployable nuclear capability, Dr. Habib argues that the North Korean state acts on premises that are “reasonably clear and consistent” for a regime that perceives threats to its prosperity and survival everywhere.

“If the North Korean leadership was stupid and irrational how could they have played such a weak hand so well over the last twenty years?” he asked.

While North Korea’s economic performance leaves much to be desired, this “weak hand” has enabled some modest growth in recent years and exploited trade opportunities with willing neighbours, namely China. In 2013 North Korea’s annual foreign trade reached over $6 billion and it was estimated that around $10 billion in foreign currency is annually circulated.

Other less optimistic reports are that North Korea’s dependence on China’s infrastructure-led boom from resource-intensive growth is unsustainable. If China transitions toward a service-led economy, where will that leave North Korea’s reliance on mineral exports? Despite new UN sanctions banning the importation of North Korean coal and iron ore, China’s imports have risen as the country has utilised loopholes in the sanctions clause.

Over the past decade and a half grassroots entrepreneurship has taken hold in North Korea, springing from the famine of the 1990s when the state’s distribution system broke down.

A mixture of poor weather, even poorer management, and the collapse of the Soviet Union led to an estimated 2.5 million people dying of starvation under Kim Jong Il’s regime. Food aid was obstructed from the worst-affected areas and rather than allowing aid to supplement commercial food imports, the state cut back on the import costs and used food aid as a substitution.

Reports of the regime’s exorbitant military expenditure at the height of the great famine are alarming.

Born out of necessity came the unplanned market responses as informal trading was conducted through roadside market stalls and small kitchen shops in private households. Over time some of these informal traders built huge amounts of private savings and are known today as the ‘donju’ or ‘money masters’ – a new, powerful class of North Korean capitalists.

“These people often had access to foreign currency, which was important particularly early on,” said Dr. Habib. “They may have had relatives living in Japan and had gotten the money that way or they may have been able to jump across the border to trade and work in China and come back.”

According to Dr. Habib, once enough private capital was amassed, the donju began investing in soup kitchens, billiard halls and karaoke rooms.

korea, new matilda
A building in Pyongyang. (IMAGE: (stephan), Flickr)

In 2009 the DPRK announced a decision to denominate its currency, the Won, in an effort to curb inflation and stamp out the growing private sector. Local merchants had to close shops after their currency became worthless and their savings were wiped.

Today, Dr. Habib says the donju have become sufficiently wealthy and important to the North Korean economy that the state has partnered with them to fund development projects like apartment buildings and factories.

Since taking leadership after the death of his father in late 2011, Kim Jong Un has overseen a dramatic acceleration of infrastructure projects. This includes the Munsu Water Park in east Pyongyang, opened in 2013, and the state-of-the-art dolphinarium at Runga theme park which was unveiled in 2012 – the same year flooding destroyed 65,000 hectares of croplands resulting in an influx of UN food aid.

Cafes, department stores, residential skyscrapers and cinemas are enjoyed by the donju class and their families, even while severe energy shortages often fail to power buildings in the capital.

While Pyongyang’s skyline skews a more complex reality, it’s an image that was unimaginable even a decade ago.

Inequality in North Korea is rising, despite approximately 70 per cent of merchants’ profits going to the state.

Outside Pyongyang, the countryside is also undergoing socioeconomic changes.

Food insecurity and malnutrition are still rife but new incentives to increase productivity led to agricultural reform in 2012, allowing farmers to consume or sell 30 to 60 per cent of their annual quotas.

Little arable land, poor weather conditions and lack of resources have so far prevented North Korea’s agricultural self-sufficiency but overall crop production increased in 2013 and 2014 due to more sustainable practices.

Dr. Habib thinks the growing influence of the donju could have implications for the DPRK leadership.

“It’s possible that they might start agitating for greater political clout to match their economic role,” he said. “They may also be restive if there’s an ill-conceived government intervention that threatens their position.”

Others point to more subtle processes that are altering the relationship between the people and their country. Cultural shifts from greater foreign exposure, material consumption, and private freedoms enjoyed away from the prying eyes of the state may empower North Korea’s youth to steer organic change from the inside.

The state has recently cracked down on individuals making international calls from Chinese imported handsets and SIM cards, but the country now has three million mobile phone subscribers.

It could take decades, but country may well be at an important juncture in its history, one that might catalyse the slow erosion of repressive rule and a brighter future for its people.

Megan Giles recently completed a Master of International Development at RMIT. She conducted her research thesis in India, which explores postcolonial tourism, critical pedagogy and how young people gain social and cultural capital through Third World travel. Her other interests include Indigenous rights, gender studies, global trade and sociology. Megan also has a communications degree with a major in journalism.