In North Korea the end of the year is when foreigners can visit the capital (one of the few places foreigners can visit freely) and see how the economy is doing. This is the time of the year when the new entrepreneur class (called donju) come to the capital city to spend some of their money on luxury living and paying bribes to officials whose cooperation is necessary in the coming year. This is all informal of course because it is illegal to bribe officials. The wealthy donju are in touch with one another about which officials need attention (and how much). These mega donju then return home and dispense favors to the many lesser donju back in the provinces. There one can see more restaurants, hard currency stores (containing foreign goods), luxury bathhouses and beauty salons for donju who can afford it. South Korean analysts believe the donju class now includes at least a million people (four percent of the population up north) and growing fast. The donju have already surpassed the North Korean ruling class in terms of buying power and the government officials don’t mind as long as they get a cut.
Students of Western history (Kim Jong Un was educated in the West) know this is how the Western monarchies lost their power. But Kim also knows how to get a large share of the new wealth for himself. He demands a cut of the bribes and this is delivered by more frequent calls for “loyalty gifts” from officials. This increasingly causes unrest because many officials will get the money from people they have power over rather than from their own personal resources (recently received bribes). This causes popular unrest and unless Kim does something about it he will eventually have to answer for it.
This sort of thing is much less of a problem in China because China brought more of their entrepreneurs into the government and was much less of an obstacle to economic growth provided by entrepreneurs. Adopting Chinese all methods is still unpopular with the North Korean leadership and China keeps reminding North Korea that ignoring the obvious will not end well. Those foreigners who get to the capital regularly (and many more do, to make deals with donju) note the spectacular growth of luxury restaurants and stories. These places are jammed at the end of the year and 2015 is no different. Despite the potential threats from the growing donju class the current Kim (Kim Jong Un) has encouraged market economy activity if it directly benefits his government. Thus the economy (GDP) is now growing, especially if you include the illegal (and difficult to count) economic activity. As welcome as this is to most North Koreans there is still the problem with comparisons with South Korea, where the average citizen makes at least fifteen times more than the average northerner.
Yet without any public comment at all North Korea has quietly accepted much of the Chinese advice on economic reforms. Many North Korean leaders are still nervous about what threat, if any, this poses to their power. China advises keeping the donju happy and keeping them close. That has worked for China and it should work for North Korea. So far it seems to be.
While many northerners are still poorly fed, the government policy of giving farmers more freedom has been good, and bad. On the positive side food production is up. The catch is that nearly all the gain is from the newly legal private plots. Most farmland is still worked by state owned farming enterprises and the output here is declining. This is what happened in communist China and Russia (when it was the Soviet Union) and should be no surprise to the North Korean leaders. One cost of feeding the people better is more disillusionment with the police state that runs the country. While most northerners are still loyal, a growing number, especially and young and the donju, are having doubts. The government cannot back away from this new farm policy because in 2013 Kim Jong Un made loud and frequent promises that the new agricultural policies would mean people would no longer be hungry. That is working and to reverse those policies would cost Kim a lot of loyalty. While the government has not withdrawn the new farming freedoms they have hit back at farmers who have not helped state owned farms to be more productive and not allowed some farmers to keep the new (and larger) portion of their crop the new policies specified. It is unclear if this is an official policy or local officials getting greedy. Both are likely in North Korea.
There is some useful Chinese advice that North Korea has not get followed enthusiastically. For example China has urged North Korea to do something about the corruption that cripples the economy and much else in North Korea. China points to its own recent success in this area. Since 2013 China has increased prosecution and punishment of government officials fourfold. China points out that while these prosecutions do hurt morale among senior officials it also encourages others to back away from corruption and operate more efficiently. The Chinese offer amnesty deals for those who come forward, admit their guilt and make restitution. China can offer proof that this approach works. The Transparency International ranking of corruption in nations show that in 2014 China moved up four places (to 100) in the rankings of 177 countries. In 2013 China moved up 20 places. Number one (Denmark) is the least corrupt and 175 (Somalia and North Korea in a tie) is the most. North Korea knows it has a big corruption problem and China is offering a workable solution that few in the northern leadership are willing to impose.
China also points out that corruption takes an enormous toll on the armed forces. North Korea has long ignored this but now, with the United States and South Korea openly discussing how poverty and corruption combined to cripple the North Korean military, attacking corruption is the most affordable way for North Korea to reverse the rot. North Korea cannot continue starving the economy to keep the massive military going and it is no secret inside North Korea that the military is now as powerful as it used to be.
China and South Korea are both quite uneasy about the prospect of the North Korean government collapsing. China is closer to the situation because for decades Chinese citizens have been allowed to live and do business in North Korea. These Chinese are usually merchants or run Chinese financed businesses. These Chinese can bring their families with them and freely visit China and return. These foreigners were rarely bothered, until now. North Korea apparently suspects many of these Chinese are part of the Chinese espionage effort in North Korea and hundreds have been arrested and questioned recently. North Korean diplomats and businessmen with lots of Chinese experience warn the government that this crackdown could do a lot of damage to relations with China. So far those warnings do not seem to have had any impact. Apparently even Chinese diplomats, including the Chinese ambassador, have been put under surveillance by the secret police. The government has also made it more difficult for these Chinese to return to China. China denies that this is going on but sources inside North Korea insist that it is.
What is not going on in North Korea is a lot of progress on developing nuclear weapons and long-range (ICBM) ballistic missiles to carry them. There are continuing preparations for another nuclear test but not a lot of apparent urgency in the effort. Same with ballistic missile development. More worrisome is the fact the North Korea seems to realize that its longest range missile, the KN-08 with a 9,000 kilometer reach, is not all is needs to be. This missile is being redesigned to make it more reliable and that is expensive and a sign that the government is still quite serious about this project. The KN-08 is meant to threaten the United States while the North Korean nukes threaten all the neighbors.
Without much fanfare in 2015 Russia replaced China as the largest food donor to North Korea. China has been cutting aid in an increasingly desperate effort to halt the North Korean nuclear weapons program. Russia does not care about that and has been making more economic deals with North Korea than ever before. The latest agreements allow Russia to set up chains of stores, fast-food outlets and local taxi services. This is an obvious effort to appease the Russians and please the new donju class at the same time.
In the last two months Japanese coast guard patrols have found sixteen North Korean fishing boats drifting off the coast, most of them containing decomposing bodies. These are all coastal craft (about 12 meters/38 feet long) which cannot operate effectively on the high seas. It remains a mystery as to what is going on here. The most likely theory is that the boats are of fishermen who, desperate to fill new quotas, went out too far, ran out of fuel and were unable to call for rescue. These boats did not contain radio or GPS and lack of such gear is common aboard North Korean fishing boats. The other theory is that these were defectors who underestimated how much fuel it would take to reach Japan or suffered engine failure. The truth may be a combination of both theories. What is certain is that for many North Koreans life is getting worse and these people are desperate to escape.
December 22, 2015: North Korea has apparently dispatched diplomats to China to apologize for the sudden cancellation of the Moranbong Band performance ten days ago. Kim created this all-girl pop band in 2012 and it is his favorite. The band was to give a concert for Chinese Communist Party officials so the cancellation was seen as particularly insulting.
December 12, 2015: North Korean leader Kim Jong Un unexpectedly ordered the Moranbong Band to cancel a Chinese concert and return home immediately. While many Chinese were surprised at this move most North Koreans were not. Their supreme leader (and his two predecessors) were prone to unexpected moves like this. In addition over a hundred North Korean officials in China on business (or pleasure disguised as business) were also ordered home. This is scary to the officials involved because sometimes they return to accusations of treason followed by imprisonment or execution. That apparently did not happen this time. The only comment Kim Jong Un made during all this was that North Korea had developed a hydrogen (fusion) bomb. Foreign experts openly expressed skepticism given that North Korea didn’t really have a reliable fission type nuclear bomb yet. You need an efficient fission bomb to trigger the fusion reaction that makes the “H-Bomb” so much more destructive than a fission bomb of the same weight and size.
December 8, 2015: A South Korea patrol boat fired warning shots at a Chinese patrol boat that had crossed two kilometers into South Korean waters and had ignored six radioed warnings to leave. State controlled Chinese media complained but that was as far as it went.