North Koreans Embrace (Black) Market Socialism as Foreign Imports Remain in High Demand

The DPRK (North Korea) might still be under UN sanctions but this has not stopped locals from embracing elements of a market socialist economy that has seen the popularity of luxury imports skyrocket in recent years. Under Kim Jong-un, modest elements of a domestic market socialist economy have been introduced with much of the world seemingly unaware of the economic growth this has produced in a state whose economy was in truly dire straits as recently as the 1990s. While the onset of more recent sanctions have see growth down from a substantial high in 2016, goods that are technically imported on a black market but sold legally in the DPRK are seeing record popularity.

Pyongyang is home to at least two luxury import retailers known colloquially as “Singapore shops”, as many of the goods are thought to arrive from Singapore. A detailed report from the AP describes the Singapore shops in the following way:

“Formally known as the Potonggang Ryugyong Shop and the Bugsae Shop, the stores are a fixture of the upscale shopping scene in Pyongyang, catering to the capital’s elites, Chinese businessmen and members of the diplomatic corps. Purchases can be made in dollars, euros and Chinese yuan. The price in each is displayed digitally on the cash register.

Both stores have been substantially renovated since last summer.

The Ryugyong store now has a coffee shop behind the imported shoe section on its second floor. The Bugsae shop has installed dark wood paneling and glass casing for its wines and spirits corner, which was recently dominated by vodkas from the Ukraine. It has separate display areas for snacks and soft drinks from Japan, Malaysia and China, a row dedicated to fancy shampoos, and a section in the rear for imported electronic appliances and household goods.

The well-stocked shelves belie the hit supplies must have taken with the arrest of their former Singaporean trading partner.

Ng Kheng Wah, 56, faces 80 charges of violating United Nations sanctions for allegedly supplying $6 million worth of luxury goods to the Bugsae Shop from 2010 to 2017. This includes watches “clad with a precious metal,” jewelry, musical instruments and wine. While OCN is not mentioned, the charges accuse Ng of trying to defraud banks through another of his companies, T Specialist International”.

The popularity of the luxury import shops gives a clear indication that if sanctions were dropped and formal imports of luxury goods were allowed into the DPRK, there is clearly an existing market for such goods while Kim Jong-un’s current and desired economic reforms make it likely that the DPRK could go from a “hermit state” to an Asian tiger economy in short order.

At present, the South Korean government, a majority of the South Korean people, as well as Russia and China are all in favour of relaxing sanctions on Pyongyang in the near future. Because of this, the US may actually find itself isolated from a potential North Korean cash cow if it refuses to agree to a moderating of sanctions at the level of the UN Security Council. In any case, the general economic trajectory of the DPRK shows that the country is on the road to transforming its economy through many of the market socialist techniques pioneered by China’s great reformer Deng Xiaoping.

There are many counter-intuitive advantages to a nation with an educated and vibrant workforce modernising its industry later than many other nations of a similar size. By the late 19th and early 20th century, German industry was in many respects far more advanced than its British, French or Belgian counterparts in spite of Germany only becoming a united nation long after the industrial revolutions in the aforementioned nations.

In the 20th century, Japan, China and South Korea’s industrial revolution reaped the benefits of learning from the mistakes of others and avoiding them when working on the full-scale modernisation of their respective economies. Today, while the DPRK (North Korea) has had a domestically significant industrial base for decades, much of its technology lags behind its neighbours. This short term disadvantage could however be turned into a long term benefit depending on the steps the government takes to modernise the nation’s industrial infrastructure.

Under the leadership of Kim Jong-un, the DPRK’s generally under-reported economic expansion, infrastructural boom and improvements to social infrastructure have made it clear that the country’s young leader has pursued reformist measures in the domestic sphere even before embarking on an historic peace process with South Korea and the United States. In spite of sanctions, the DPRK economy has widely expanded in recent years and the medium term goal of lifting sanctions in-line with the peace process has lead to Kim thinking about the next steps that should be taken to improve the material condition of the people.

One of the biggest breakthroughs in industry in the last decade has been the increased automation of factories through the use of robotics informed by artificial intelligence (AI). China is fast becoming a pioneer in both as the Made in China 2025 drive along with President Xi Jinping’s desire to pivot the country’s industrial base towards AI and away from manual labour looks to open up new avenues of entrepreneurialism as part of the wider Created in China project.

Crucially, unlike in neo-liberal economic systems where an increase in robotics tends to lead to unemployment in otherwise well paid industrial workforces, under the Chinese market-socialist model, the profits generated by the human hand or by a robotic hand will ultimately be re-invested into the same sources, namely public infrastructure, housing, education, health, culture and further industrial research and development.

In this respect, the Chinese model is well-equipped not only to effectively manage the coming AI/robotics revolution in industry but it is able to rapidly take advantage of this by opening up new opportunities for a workforce whose future vocations will be aided by the profits generated by machines. As Kim Jong-un has already introduced some rudimentary economic reforms which hint at an early stage pivot towards a Juche version of the Chinese Market Socialist model, it is only natural that Kim should look to the robotics/AI revolution as a means of modernising the DPRK’s industrial infrastructure and in so doing, pave the way for a radically different economic future for his nation.

During a tour of a factory in Sinuiju near the Chinese border earlier this year, Kim Jong-un stated,

“It is important to completely eliminate manual labour and modernise production processes”

The clear implication behind this statement is that Kim looks to emulate China’s forward looking automated drive and duplicated it in his own nation. Seeing as the DPRK has a much smaller population than China, it is now conceivable that over the next decade, the DPRK’s industrial economy could become among the most highly automated in the world.

Without having to gradually modernise the country’s industrial infrastructure, the leadership in Pyongyang can instead set an agenda for a wholesale change in the country’s industrial development, one which aims at fully automating all existing and future factories based on the latest, most sustainable technologies. As a revitalised partnership with China looks set to expand as the current peace process continues, there is every possibility that the use of Chinese technology combined with home-grown research could help to make the DPRK a future economic pioneer – thus representing a radical departure from the current state of affairs where North Korean industry tends to lack the technological innovations present in South Korea, China and Japan.

The transformation of the DPRK’s economy will certainly not happen overnight, but by indicating a forward looking policy of modernisation through total automation, the DPRK can in the medium term, reap the benefits of being catapulted into the economic future through bypassing the stages of industrial development in which it has been left behind in the last several decades. By taking a proverbial great leap forward in respect of automation and artificial intelligence, the DPRK may soon be at the cusp of a new industrial revolution that will not only equal but potentially surpass that of nations which are today at the forefront of industrial technology and innovation.

With Deng Xiaoping’s reforms as a self-evident model for the young leader Kim Jong-un, it is clear that Pyongyang is positioning itself to embrace full economic openness as China did at the end of the 1970s. It is now a question of “when” rather than “if” when it comes to historic economic reforms taking hold in the DPRK. The popularity of imported goods among Pyongyang’s equivalent of a middle class, is demonstrative of an appetite for economic change just waiting to be fed.

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