The louder North Korea cries for talks, the more we should think about what they really want. For a deeper analysis of how the North gets the attention of the United States, please refer to an earlier essay about how North Korea and the U.S. interact.
This time, what Pyongyang wants is relief from the threat posed by annual South Korean-U.S. combined drills that are seen as practice for invading North Korea, but also relief from sanctions that apparently are starting to hurt a bit. The North will likely promise almost anything to get the U.S. to the negotiating table, though any deal that might be reached would likely be violated as soon as any sanctions are lifted.
An aim of the sanctions is to not needlessly affect the common North Korean citizen in an adverse way
Those sanctions seem to be working despite conflicting or confusing reports about whether goods to and from China are – or are not – making it past border inspections. One needs to recognize what types of goods are exempt as well as the intent of the sanctions. An aim of the sanctions is to not needlessly affect the common North Korean citizen in an adverse way. Toward that end, the import of general foodstuffs is not sanctioned.
SOME SANCTIONS REPORTS PROBLEMATIC
In view of the perplexing reportage about goods moving into North Korea, it is appropriate to explore what the sanctions may mean to the common North Korean citizen, rather than focusing only upon the elites, since they always come up smelling like roses anyway. It is also necessary to be clear on what cannot be exported from North Korea. Rare earth metals and coal are affected, as apparently are commercially prepared or harvested food items, since these items are sources of hard currency for the dictatorial regime. In any case, North Korea needs crops and harvests for its own people.
Most of the news regarding sanctions on Pyongyang has focused upon either violations or successes – banned goods that escaped detection in the case of the former, or those that were caught by border inspections in the case of the latter. The attention remains on inflicting pain. Nevertheless, there is another side of sanctions, one that apparently benefits the average citizen, even as they fail to bring the desired level of pain to the elites of North Korea.
A recent article briefly mentioned how cheaper coal and seafood, normally going to China, are now available in North Korean markets for purchase by the average citizen. With such goods destined for export from North Korea now being turned back at the Chinese border, those products had to go somewhere. The only remaining destination was of course the internal domestic North Korean market. North Korean citizens now have a chance to partake of what they up until now have been missing.
TO MARKET, TO MARKET
However, that is not the end of the story – and it could be just the beginning. This sudden accessibility to consumer goods bodes well for the common person, far beyond what one might expect, as I will explain below. As we get to that, consider: Once the average citizen gets a taste of export quality food and cheap fuel for cooking, heating and other uses, it will be difficult to turn off the spigot of such goods.
Pyongyang of course loses in the short term due to the decrease in hard currency earned from those now-banned or rejected exports. However, let us entertain the idea for the moment that, with a bit of patience, the regime could eventually recoup much of those losses through taxes on the sale of goods and use of facilities.
What, you haven’t heard that Kim Jong Un declared it is time for North Korea to have a formal tax system? Even though such a statement seems preposterous coming from whom it did, it nonetheless makes much sense. For the first time since 1974, and instead of a patchwork of schemes for generating state revenue by willy-nilly fees and seizures of goods, a codified revenue structure could mitigate what has been the cause of many complaints by the citizenry. Perhaps – just perhaps – the taxation mechanism would be implemented in a way such that graft and corruption would be reduced. In any event, it would be a more predictable and reliable – as well as a more legitimate – source of governmental revenue.
The donju – the newly wealthy money masters – are now functioning as capitalists and entrepreneurs who will continue to be responsible for a great deal of market development
As for the common North Korean, goods that have nowhere to go but to domestic consumers will foster even more growth in the private sector markets as they mitigate the failures of government to provide for the people. The donju – the newly wealthy money masters – are now functioning as capitalists and entrepreneurs who will continue to be responsible for a great deal of market development – unless Kim comes to believe that they pose a danger to his rule and severely hampers their operations.
AN OPPORTUNITY FOR IMPROVEMENT
However, suppose – just suppose – that Kim Jong Un, out of what seems to be a belated sense of enlightened self-interest, lets the donju freely invest and develop the necessary markets. Should that happen, the North’s private economy would flourish. Even with a formal tax system, the elites and others down the chain of command to the local level would likely still scam money out of the citizens – admittedly not a good thing. However, if a reliable and consistent source of revenue – a necessity of any government – were to meet the wants and needs the regime, then the donju would be able to profit as they continue their marketization of North Korea.
It is often said – for good reason – that the devil is in the details. That is particularly true for any expected or pending changes to the present North Korean economic system. Even so, it might be easier to grasp the effects of this transformation if the process is described as follows, even if in bare-bones terms:
(1) Sanctions result in
(2a) North Korean government losses of hard currency as
(2b) many non-exportable goods go to domestic markets
which result in
(3a) opportunities for donju to make profits just at the
time that (3b) a formal taxation system is implemented
which results in
(4a) non-elite citizens having more choices and cheaper goods
and (4b) the government having a more reliable revenue system
To be sure, this is a highly abridged hypothetical with indeterminate odds of occurring, and such an arrangement would still suffer exploitation at the hands of corrupt officials. Some readers will point out difficulties in implementation and tally expected continued abuses – before declaring that it could not be done. Rather than focusing upon the negative, it would be better, since this seems to be on the horizon, to concentrate on how it might be done.
Such a system – even with imperfections – would likely be an improvement over what exists currently. Might it then be said that sanctions have the potential to be a really good thing for the common North Korean, having the unexpected and beneficial effect of a more market-driven economy? It all depends upon whether Kim Jong Un allows the donju to capitalize (pun fully intended) on this opportunity.
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Featured Image: Black market in Pyongyang - North Korea by Eric Lafforgue on 2010-05-02 18:36:23