[On visits to North Korea since Kim Jong Un came to power, CanKor Brain Trust member Rudiger Frank has seen growing evidence of a more diverse and cash-based economy. These signs of creeping reform are evidence of North Korea’s desire for change, but achieving real transformation remains a long and delicate process. Rudiger Frank is Chair Professor of East Asian Economy and Society at the University of Vienna and Head of the Department of East Asian Studies. He has visited North Korea numerous times. This article appeared in Global Asia, a publication of the East Asia Foundation in Seoul, Vol. 8, No. 2, SUMMER 2013. The full article, as published, with numerous pictures may be accessed here: Rolling Reforms. --CanKor]
Painting a masterpiece and reforming North Korea have a surprising number of things in common. We know the necessary ingredients, tools and available techniques. There are numerous cases for comparison and a large body of literature to study. Still, few if any of us can create art to equal that of old masters such as Rembrandt or Kim Hong-do.
In theory, realizing North Korea’s potential seems easy. State socialist systems have been well researched and understood for decades. We possess a growing amount of empirical knowledge about North Korea. We can look at transformations in China, Vietnam and Eastern Europe for guidance. Incentives have to be set right, so that resources are allocated more efficiently. China has demonstrated that this does not require a fully-fledged Western-style democracy, just a stable currency, markets where demand and supply result in realistic prices, private ownership and an economy that can freely import and export goods, services, capital and technologies.
We know that North Korea has a food, energy and transportation problem. We know that it can, theoretically, produce more food with more inputs of fertilizer, electricity, fuel and machinery, but that, for the time being, importing food would better reflect the North’s comparative disadvantage in agricultural production. We know that North Korea has abundant natural resources, that these are a potential source of hard currency and that a smart strategy would be to process these resources before exporting them. Read the rest of this entry »