The Hidden People of North Korea (16 page)

The marketplaces are filled with mostly inexpensive Chinese-made goods, along with homemade products, farm produce, and scavenged scraps from dormant factories. The Kim regime has never looked kindly on these marketplaces, which stand as an indictment of the socialist ration system and compete with it. But markets must be tolerated because now that the PDS has collapsed, they are the only source of daily necessities for most people. In the markets, prices for formerly rationed staples, such as rice and cooking oil, are supposed to be controlled, but officials overseeing the markets can be bribed to look the other way.

In a society where people are supposed to live, work, and play under the watchful eye of the party, the markets provide a means of economic and social escape. Not only can people buy and sell what they want, but they can exchange information. Markets are also a school for capitalism. People learn about marketing, a woefully underdeveloped practice in socialist economies, where traditional consumer skills include discovering what stores have something to sell on a given day, how to bribe the store clerks, and how to combat the boredom of standing in line for hours. For all of these reasons, the Kim regime has tried to marginalize the markets. A Party Central Committee instruction sent out in October 2007 quotes Kim Jong-il as warning, “The market has degenerated into a place which eats away at the socialism of our own style … and [is] a birthplace of all sorts of non-socialist practices.”
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The July 1 economic measures officially recognized markets as necessary but tried to keep them within the controlled economy. More radical changes in the official view of markets took place in early 2003, when the government stopped referring to them as “farmers’ markets” and started calling them simply “markets,” an indication that items other than farm products could legally be sold. Shortly thereafter, the Democratic People’s Republic of Korea (DPRK) cabinet approved new regulations for the operation of markets.
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The regulations began with an assurance that Kim Jong-il himself had directed that markets be established in order to make the lives of citizens more “convenient.” The ministry of commerce was put in charge of authorizing markets and overseeing their operation. According to the new regulations, all markets should have a paved floor, a roof, and necessary storage and sanitation facilities. Their hours of operation should be set so that people could visit them in the evening after work. “Farm products, foodstuffs, daily necessities, and other commodities produced domestically or imported” could be sold, with the exception of certain “state-controlled items.” Ceiling prices would be set according to market conditions for such staples as rice, cooking oil, sugar, and seasonings. Sellers would pay fees for their stalls and be taxed on their earnings. “Illicit transactions” and “nonsocialist incidents” would be punished, although these terms were not defined, thus opening the way for market officials to levy fines and demand bribes at their own discretion.

With the government’s open recognition of markets, it was necessary to define them in a manner consistent with socialism. For example, the director of the State Planning Commission was quoted as saying that markets were “part of the socialist circulation of goods.”
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A vice director of the DPRK ministry of commerce explained that the use of markets was an “interim feature of a socialist society,” adding that the markets “do not at all mean that our socialist planned economy is being changed into a market economy or a free market economy.”
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Choson Sinbo
referred to the new economic measures as “practical socialism” and insisted that even though other countries might view these measures as an adoption of capitalism, there was a “stark difference” between the North Korean measures and capitalism, presumably the fact that the markets were run by the state.
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Readers were assured that “although they are taking an unknown path, they [the North Korean authorities] know what they are doing.”

The North Korean authorities have been reluctant to reveal much to foreigners about the hundreds of markets now operating in the cities, small towns, and countryside. Foreign visitors are rarely allowed to enter or photograph them, as if they are something shameful. The attempt to hide their existence is another irony, considering that the outside world views them as one of the most promising aspects of the North Korean economy. In 1999, after the markets had already expanded to include nonfarm products, the Korean Central News Agency (KCNA) labeled a Japanese news story about them “a wholly unfounded fabrication” and insisted that the only thing happening at the farmers’ markets was the sale of surplus agricultural products.
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Farming

Another economic adjustment made by the Kim regime around 2002 was a further move to abandon the socialist farming system. In 1946, even before the official founding of the North Korean state, the communists distributed much of the landowners’ holdings to the peasants. After the Korean War, as Kim Il-sung embarked on the nationalization of the economy, the land was taken away from farmers and given to agricultural collectives of up to five hundred families. Today, most farms are still collectives. Each is assigned a quota of farm products to be remitted to the state, and any surplus is to be distributed among the members of the collective, although in practice the party cadres help themselves to a disproportionate share. People are assigned to work on farms usually because their parents are farmers. State planners tell farms what crops to grow, and the government is supposed to supply seeds, fertilizer, and machinery free of charge. The farm managers, who are party cadres, assign teams of workers to specialized tasks, such as cultivating rice, repairing farm equipment, tending mulberry trees, and raising poultry. All workers receive food and other basic necessities from the collective rather than from the PDS. Each family is also permitted to cultivate a small garden plot of about one hundred square meters where table vegetables such as peppers can be grown.

In 1964, Kim Il-sung’s “Theses on the Rural Question” advocated converting collectives to state farms, where workers would be paid a basic wage, just as if they worked in a state-run factory. Interestingly, the opposite has happened, and for economic reasons the collectives have become more like large collections of private farms than like agricultural factories. The obvious problem with both collective and state farms is that farmers do not directly benefit from their labor. Hard-working farmers receive the same rations and pay as lazy farmers. Political connections, bribery, and party affiliation are the main determinants of reward. Under these circumstances, many farmers do as little work as possible in the fields, pilfer as much as they can, and devote their attention to their private plots or to working outside the farm.

To combat the problem of what psychologists call “social loafing,” managers have organized workers on collectives into ever smaller work teams. By this means performance can be more accurately measured and payments more equitably calibrated. These work teams originally comprised fifty to one hundred people, but in the 1990s, collectives introduced the concept of “sub–work teams,” which had a dozen members or fewer, often all members of one family. Each work team or sub–work team is given an output quota and may dispose of any surplus as its members wish. This devolution of responsibility is as far as the regime is willing to go toward decollectivizing the farms. However, as part of the July 1, 2002, economic measures, private farming was introduced on an experimental basis in a few places.
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Individuals and families are granted a plot of land and allowed to farm as they wish. Former North Koreans report that individual farms range in size from six hundred to thirteen hundred square meters (a sixth to a third of an acre), depending on the fertility of the land. The government takes a portion of the harvested crops to pay for seed, fertilizer, and fuel. In a complicated system of many gradations, land-use fees are assessed, but they are never referred to as taxes because the government has always boasted that North Korea is the only country in the world without taxation.

The life of the North Korean farmer has always been hard. Despite fifty years of government campaigns to improve the standard of living in rural areas, most people would prefer to live in the city if they had a choice. City dwellers may complain about shortages in housing, electricity, and clean water, but these are worse in the countryside, where North Koreans are living as South Koreans and Chinese did in the 1960s.

During planting and harvesting seasons, Koreans from all walks of life— office workers, soldiers, students—are sent to the countryside to assist the farmers for two months in the spring and two weeks in the fall. The party sends agitators to erect red flags in the fields to motivate the people engaged in this “rice-planting combat.” Even people who happen to be traveling in the countryside may be abducted by officials to help with the farmwork. The seasonal farmworkers live in farmers’ houses and village halls and are issued special ration cards for food, although more often than not they rely on the local farms for food. The North Korean media boast that representatives from foreign embassies and organizations volunteer to help in the countryside in a show of solidarity. But for all this effort, North Korea comes up short in food production almost every year.

Money and Banking

North Korea’s primitive banking system is one of the factors preventing the economy from making the kind of giant leap forward that the Kim regime dreams about. Before markets became popular, people had little to spend their money on, creating an “overhang” of savings that most people preferred to keep under their mattresses rather than deposit in a government bank under the scrutiny of party officials. Even state organizations have avoided using banks. A 2006 article in the party’s economic journal virtually implored government organizations to use banks, even quoting Kim Jong-il on the subject. Those who deposit their money in banks find that they are sometimes unable to withdraw their savings because the bank is short of cash, and in this case, since the government owns the bank, the depositors can do little to retrieve their savings. Now that people are forced to shop in the markets, where prices are far higher than in the PDS, some personal savings may have been soaked up, but people are understandably reluctant to disclose the amount of their savings for fear that government officials will confiscate some of it under one pretense or another. Instead of depositing money in banks and going there for loans, North Koreans who want to invest do so as part of small cooperative groups of friends and acquaintances (usually groups of housewives), which are also popular in South Korea.

One approach the government used in the past to get people to put their money in banks was to replace the currency periodically. People with the old currency had to bring it to a bank and exchange it for the new, often with a limit on how much could be exchanged. The limit was imposed based on the assumption that citizens of a socialist economy, where wages are low, have no legitimate means of amassing large amounts of cash.

The government can also soak up hidden cash by selling bonds. This method had previously only been employed during the Korean War, but in March 2003 it was announced that a new series of bonds would go on sale, despite the fact that communists have always denounced bond issues as an evil of capitalism that robs working people of their money. In an attempt to counter this argument, the vice president of the DPRK’s central bank gave the following nonsensical explanation of the new People’s Life Bonds on national television:

Generally speaking, capitalist countries issue bonds to take away what is in people’s pockets and use it to maintain and strengthen their oppressor institutions and wage wars of aggression. These capitalist countries pay back the bonds with taxes that they squeeze from people. Therefore, bonds in capitalist countries definitely are a further exploitation of the working popular masses. Contrary to this, bonds in socialist countries, in essence, are issued to temporarily mobilize and use people’s unused cash funds to develop the people’s economy and improve people’s lives. They are people-oriented because all the mobilized funds are returned to the people.
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The part about returning the funds to the people is difficult to verify in a society as secretive as North Korea’s. Bond purchasers are eligible to win lotteries. In the first two years (2003 and 2004), a lottery was held twice a year, with winners receiving prizes corresponding to the size of their bond investment. After that, drawings have presumably been held once a year. For example, among those holding 1,000-won bonds, one lucky winner is supposed to receive 50,000 won with other prizes of 25,000 won, 10,000 won, and 5,000, including the returned principal. Those who do not win the lottery began receiving their principal (but no interest) beginning in 2008 “on a phased basis,” with all money finally to be repaid by 2013.
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Purchase of the bonds was supposed to be entirely voluntary, but officials let it be known that purchasing bonds was the patriotic thing to do. For example, purchasers of 1-million-won bonds received a Letter of Commendation for Patriotic Deed and a state decoration. Local people’s committees in the neighborhood and workplace put considerable pressure on people to purchase these bonds because these committees had been given bond quotas to meet. Even so, bond sales, which apparently ended in December 2003, were sluggish. A Korean Central Television news report at the end of 2007 announced the winning numbers for the latest prizes but did not indicate who held the numbers or how large the prizes were.
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By then, most people had presumably forgotten about the bond scheme, considering it to be just another form of taxation rather than a legitimate financial investment.