THE POLITICAL ECONOMY OF NORTH KOREA: Domestic, Regional, and Global Dynamics | Edited by Min-Hua Chiang

When the second US-North Korean summit was held in Hanoi in February 2019, expectations were high among both North Korean economic experts and the general public in South Korea. Many believed North Korea might adopt the Vietnamese model of economic reform and open door polices, characterized by export-led strategies and attracting foreign direct investments (FDIs).  However, the summit ended without success, leaving these expectations unfulfilled. With the recent escalation in strategic competition between the US and China, and Vietnam emerging as a new production base amid the reorganization of East Asia’s supply chains, the Vietnamese model has once again gained attention as a potential alternative for North Korea’s economic future. Historically, there have been expectations of economic growth through North Korea’s reforms and opening up, but a thorough analysis of why these expectations have not been realized has been lacking. The Political Economy of North Korea, edited by Min-Hua Chiang, offers extensive research on this subject from domestic, regional, and global dimensions. The book convincingly suggests that a major factor is the “inconsistency between domestic policy and the regional and international environment” (234).

The first part of the book, “Domestic Dynamics,” reviews the economic policies throughout the three generations of the North Korean regime. It reveals that North Korea’s economic strategies are fraught with internal contradictions. The regime has historically proclaimed juche (self-reliance) ideology as its guiding principle. Yet, in practice, North Korea’s economy has relied heavily on aid from the Soviet Union and China since its establishment. This dependency became starkly evident when North Korea plunged into a severe recession, known as the “arduous march,” in the mid-1990s. Additionally, the book examines the regime’s ambivalent attitude toward economic reform, resulting in a repeated pattern of “go and reverse” (54). For example, the 2002 economic reforms focused on price liberalization. These reforms were later reversed in favour of anti-market policies justified by concerns over rising inequality, weakening state control, and the spread of capitalist influences, which culminated in significant currency reforms in 2009. Even in the early years of Kim Jong-un’s regime, when incentive reforms were introduced to enhance the autonomy of business and agricultural sectors, a return to the earlier go and reverse pattern has been observed. This is particularly evident in the expansion of the state-controlled retail network and foreign trade amidst international sanctions and the COVID-19 pandemic.

The second part, “Regional Dynamics,” discusses how North Korea’s economy has become overwhelmingly dependent on China, as it has severed economic ties with other neighbouring countries. The most significant constraints have been the UN sanctions imposed on North Korea in response to its nuclear program, as well as bilateral sanctions from individual countries. For instance, South Korea’s economic exchanges were effectively suspended following the sinking of the South Korean Cheonan warship in 2010, and Japan’s relations have been strained over the abduction issue. While the region’s economic engagement with North Korea has been limited, with the exception of China, the book highlights the potential for future economic cooperation. South Korea, it suggests, could play a crucial role in integrating North Korea into the international economy, perhaps by facilitating its accession to international organizations like the WTO. China, by increasing economic support, could encourage North Korea to adopt a Chinese-style economic reform model. Russia could participate in North Korea’s development through various infrastructure projects, if the international sanctions are lifted. Japan, after normalizing relations with South Korea, could become a major source of capital and technology for North Korea’s economic development, mirroring the role played by the reparation fund in South Korea’s economic growth in 1965.

Finally, “Global Dynamics” focuses on the relationship between US, European, and UN sanctions and the North Korean economy. The impact of US economic sanctions may be limited due to minimal direct economic exchanges, but financial sanctions, leveraging US dollar hegemony, pose significant challenges to North Korean trade. The book emphasizes the crucial role of better US-North Korea relations in this context, noting that participation in international markets is crucial for adopting the East Asian model of economic development. The EU can provide significant support to North Korea, particularly in humanitarian aid and capacity building, albeit at a lower level of economic exchange. Individual EU countries, such as Sweden, Germany, and Switzerland, have experience in training North Korean bureaucrats, entrepreneurs, technicians, and academics. The book suggests that training related to climate change and natural disaster prevention could be an effective starting point for re-engaging with North Korea, aligning with the country’s priorities. Despite stringent UN sanctions, the North Korean economy has managed to survive through formal and informal trade, investment, and people-to-people exchanges with China. This status quo is expected to continue for the foreseeable future, as China is unlikely to reduce its support for North Korea, particularly in the context of increasing geopolitical rivalry between the US and China.

In conclusion, Chiang accurately points out that the impediment to North Korea’s economic development is not solely its denuclearization process, but also the ongoing US-China cold war confrontation (238). The external situation has become more complex following the Ukrainian-Russian War in 2022. North Korea perceives the current global situation as a Cold War-esque conflict, with South Korea, the United States, and Japan on one side versus North Korea, China, and Russia on the other, and is seeking to navigate its survival within these dynamics. Should the economic bloc between North Korea and China and Russia intensify, it would not only jeopardize the possibility of denuclearization but also hinder the integration of the North Korean economy into the global economy. Amidst growing global uncertainties, The Political Economy of North Korea stands out as an essential reference. Its extensive coverage of North Korea’s internal and external relations offers researchers and analysts valuable insights into the potential future pathways of North Korea’s economic development.

Seungho Jung

Incheon National University, Incheon