Kim Jong-un: his first five years

Next month it will be five years since the sudden death of Kim Jong-il led to the second dynastic transition in North Korean history. Kim Jong-un’s reign is approaching the five-year mark, the length of a presidential term in many modern democracies, so it is probably a good time to say what we think of the young North Korean leader.

To an extent, we can see the directions that Kim Jong-un wants to take and the trajectory that he wants to steer his country toward. I would dare to describe Kim Jong-un as a modest, perhaps hyper-cautious, but rather determined reformer in economic matters. Unfortunately, his foreign policy is difficult to appraise in anything but a critical fashion: it is quite likely that, in the long run, his diplomatic blunders will be his undoing.

But let’s start with the good news. In the last five years the North Korean economy has grown faster than any time since the early 1980s. Economic statistics are murky, speculative and controversial, but the majority of inside observers (diplomatic staff in Pyongyang) tend to estimate growth as being 3 percent to 4 percent per annum. This is much better than anything North Korea has seen since the 1980s, if not the 1970s. The results of such growth are felt through the whole of society, though the results are highly unevenly distributed.

The major policy of Kim Jong-un that has remained largely unnoticed by non-specialist foreign observers is his soft approach to private business. Since the late 1990s, the private sector has been growing in North Korea. Today, it is believed to produce between 25 to 50 percent of the country’s GDP. Under Kim Jong-il, the government’s approach to private commerce oscillated between attempts to completely rid the country of the seeds of “evil” capitalism and halfhearted attempts at formalizing the private sector (and encouraging private enterprise). Kim Jong-un, unlike his father, has been quite consistent in the economic sphere, adopting a policy of benevolent neglect.

Since Kim Jong-un ascended to power, the young sovereign has issued virtually no regulations that would harm or risk the interests of private businesses. It is not surprising that many rich North Koreans often call this a Golden Age for private enterprise. Technically, the private economy remains 100 percent illegal, but officials have received clear-cut instructions that, in this area, old bans should be quietly ignored.

There have also been some other remarkable changes in the system beyond mere benign neglect. In 2012, Kim Jong-un initiated reforms in agriculture. According to the new policy, farmers are given a share in the new harvest, usually about one-third, rather than fixed rations. Predictably, the new incentives are working: farmers started to produce far more than they hitherto had. This resulted in great harvests, far better than anything that happened under Kim Jong-il, in spite of the occasional floods or draughts that could have easily triggered mass starvation a decade or two ago.

There have also been efforts since 2015 to change the industrial management system, giving more freedom to top managers. This has resulted in a significant increase in salaries, but it has yet to produce a corresponding rise in inflation.

However, all these policies may be undone by what appears to be an unnecessarily confrontational foreign policy and a chain of gross diplomatic misjudgments.

Simply put, North Korean reforms will only ultimately succeed if North Korea has a stable business environment and large amounts of foreign investment capital. Realistically, the latter is only going to come from China (at least for the time being). However, for most of his reign, North Korea’s hereditary ruler has been remarkably hostile to China, often without any comprehensible reason. This has led to a great deal of tension and made the Chinese government highly reluctant to encourage serious investment in the North Korean economy. The North Korean habit of cheating on investors and breaking contracts with remarkable shamelessness does not help matters.

Worse still, foreign policy has led to a significant rise in external pressure and tension, and resulted in a hitherto unprecedented sanctions regime. It remains to be seen what impact these sanctions will have on North Korea’s economic expansion, but there is no doubt that sanctions will become an additional obstacle on the road to prosperity.

Nonetheless, we should give Kim Jong-un his due. He might be ridiculed and dismissed overseas, but continues to enjoy support at home for good reason: under his watch, the vast majority of North Koreans live better if still poor lives.