Despite North Korean hostility towards a market economy, the country has become more and more dependent on it. Surveys of refugees in China and South Korea indicate that over 80 percent of North Korean buy or sell (or do both) in the free markets and most North Koreans now conduct half their economic activity via the markets. The introduction of some market economy (mainly in the form of legal markets) in the last decade has made more goods available, to those who could afford them. Thousands of new "middle class" entrepreneurs have been created. This was the first time, since 1945, you had non-criminal North Koreans with wealth who did not work for the government. For example, foreign smart phone manufacturers indicate that over two million relatively low end (under $200 each) smart phones have been sold inside North Korea in the last year. Someone up there has money and is willing to spend it. You also have more corruption up north as there are always government officials willing to get things done (including things they were supposed to get done) for an additional fee. Now there were more people with more money willing to pay larger bribes to officials willing to take greater risks. While many North Korea officials saw these new entrepreneurs as a threat to the power of the police state, the real threat came from the growing corruption and unreliability of the security services up north. Kim Jong Un sees this corruption as a threat to his rule and he is right. But getting rid of the corruption risks harming the markets and the wealth they bring to an economy that desperately needs it. These surveys also indicate that the state controlled rationing system in the north is collapsing and that about half the people up there no longer get any food or other handouts from the government. These people are on their own and survive only because of the growing market economy.
China has now really turned up the heat on its unstable and increasingly troublesome neighbor. China does not want an irrational nuclear power on its border and is cutting off various forms of aid in an effort to get North Korea to reform its economy and get rid of its nukes. China is also furious about public defiance from North Korea and is going public with its criticism and threats. The death of Kim Jong Il in 2011 made Chinese style economic reforms more acceptable, but not in a big way. Continued famine in the north prompted China to send more and more troops to the border to keep hungry North Koreas out. China continues to pressure the north to implement Chinese style economic reforms. The North Korean government is split into reform and conservative factions, making change difficult to achieve. The recent executions and harsh actions by the secret police is seen by China as a North Korean repudiation of Chinese style economic reforms. This, to China, makes it more likely that North Korea will fall apart. China has made it clear to the world that North Korea is a Chinese responsibility and if the North Korean government collapses China, not South Korea, will pick up the pieces. South Korea does not agree with that, and this could be a big problem in the future. Growing unrest, corruption and privation continue to weaken the iron control that has long kept the north peaceful and the Kim family in control. North Korea wants to maintain armed forces capable of attacking (if not invading) South Korea and maintaining its own population in bondage. This is becoming more difficult. North Korean military power declines, as lack of money for maintenance or training causes growing rot. There have since been a lot more changes in the military high command in the last year as Kim Jong Un is replaced many stubborn, elderly or corrupt senior officials. These is more and more fear in the north, in addition to the shortages of food, electricity and heat. South Koreans are growing tired of the madness that still reigns in the north, and have, for the first time in over half a century, promised retaliation if the north fires again. This could lead to war, especially since North Korea sees this threat as, well, a threat.
Apparently the 67 year old aunt of Kim Jong Un is dead. Kim Kyong Hui was the only sister of Kim Jong Un’s predecessor Kim Jong Il. She has been a widow since the December 12th execution of her husband Jang Sung Taek and was not happy about that situation. Kim Kyong Hui was not mentioned during the public denunciations of Jang Sung Taek and there was an announcement that she had been appointed to a senior (but largely honorary) post. Kim Kyong Hui had not been seen in public since last September and the rumor was that she had suffered a heart attack. She was known to be still depressed about the suicide of her daughter in 2006 and that she drank a lot. Thus she probably died of natural causes but no one is sure when. It might have been before the execution of Jang Sung Taek. All this is very entertaining for many East Asians, not just Koreans. This sort of dynastic soap opera was very common during the thousands of years of East Asian history. China, after all, is still ruled by what amounts to a hereditary aristocracy. In both China and North Korea the public follows the lives of their aristocrats avidly. In both countries the state controlled media plays down scandalous behavior, but because of cell phones and the Internet, the more entertaining stuff gets into circulation. But while China has a competent aristocracy (based on economic performance in the last three decades), North Korea does not and keeps sliding towards chaos and collapse.
In the last few weeks media inside North Korea was all about Kim urging troops to be combat ready because war could break out without warning. Kim is paying a lot more attention to the troops because things are not going well in the military. Over the last few years the military has been forced to cut the amount of food soldiers receive and this has resulted in more troops sneaking out at night and stealing corn or rice from nearby farms when it is near harvest time.
In South Korea there is less and less anxiety over another big war with the north. For example, over the last decade South Korea has been cutting the hours its combat pilots flew each year. By 2009 many South Korean pilots were down to 120 hours a year, which was the same level as the hundred or so North Korean MiG-29 and modernized MiG-21 pilots got. Many of the other North Korean pilots are lucky to get a few hours a month. But the Americans were upset because if there was a war the better trained U.S. pilots would end up doing more of the work. The South Koreans believed that the situation was so bad up north that the North Korean air force won't even be able to get many of their 500 combat aircraft off the ground much less cause problems when they do. And those that aircraft that do get into the air would be operated by very inexperienced pilots. This attitude has existed in the south for some time. Back in 2005 South Korea cut its pilots back from 139 to 134 hours, and then to 131. In the 1990s, South Korean pilots were getting 150-200 hours. That's what German and Japanese pilots still g0t until recently. At the same time some European nations had their pilots in the air less than South Korea. Then again, the South Koreans are being practical about this, because their most likely foe, North Korea, has its pilots flying much less, on average.
South Korea wants to keep its defense costs down, and believes that the deteriorating situation up north makes that possible. One of the economies is buying second-hand military equipment. An example of this is a South Korean deal to buy 14 American CH-47D transport helicopters. Actually South Korea wants to buy 14 American CH-47Ds that are stationed in South Korea, along with all their spare parts and maintenance equipment. South Korea would pay $10.8 million per helicopter and would get them starting in 2014 as new CH-47Fs arrive to replace the older models in the U.S. Army transportation unit in South Korea. It would cost the U.S. about a million dollars to transport each of the older CH-47Ds back to the U.S., or about the same amount to scrap them. It’s a good deal for the South Koreans because the used CH-47Ds have been well maintained and are obviously acclimated to operations in South Korea.
One benefit of the decades of heavy defense spending in the south is the development of a large domestic military manufacturing industry. It’s not weapons, but also aircraft and electronics. One of the best examples of this South Korean efforts to be a major player in the market for Internet-based military and commercial communications. This is not unexpected as South Korea has long been one of the most wired nations on the planet. That’s because South Korea was an early pioneer in making high-speed Internet access available inexpensively and on a wide scale. In 2000 40 percent of South Koreas had Internet access and ten years later that had risen to 81 percent. Thus by 2005 over 95 percent of South Korean mobile phones had Internet access and by 2006 over half of home Internet users had high-speed access. Now all South Korean Internet users have high speed access and the speeds are the highest in the world. Although an American firm (Apple) invented the modern smart phone in 2005, it was a South Korean firm (Samsung) that went on to become the world’s largest producer of smart phones. Samsung went on to develop encryption for its phones, a feature many commercial and military users insist on. Samsung also makes available versions of their smart phones and tablets that meet the encryption and security requirements for South Korean and American armed forces. Smart phones equipped in this way are being used by the South Korean military and offered to the armed forces of allies (especially the United States). The U.S. Army has already tested Samsung smart phones and tablets and found that they get the job done on the battlefield.
All this use of the Internet and consumer electronics has had a dark side. Video games in particular have caused many unexpected problems, and opportunities and this is especially true in East Asia. Adolescents and young men find them addictive and this often interferes their studies, work or family life. South Korea has been the worst hit, because of their rapid economic growth and quick acceptance of cheap and widely available high-speed Internet access. It’s gotten so bad that South Korean politicians are trying to change the law to regulate video games as other addictive activities (gambling and some drugs, like alcohol) currently are. There are already some laws regulating video games, like a 2011 rule that prohibits anyone under 16 from playing video games between midnight and dawn. Research has shown that about two percent of the population (125,000 people) are addicted to video games and there are sufficient extreme cases to keep the media going on slow news days.
January 1, 2014: In the north Kim Jong Un gave his annual New Year’s Day speech and said nice things about South Korea and referred to his recently executed uncle as part of the “factionist filth” that was being eliminated. Kim has a problem here as he has to denounce Jang in such a way that he does not do a lot more damage to what little faith people still have in the government. Most North Koreans are dismayed that such a senior official could be so corrupt that he was publically humiliated and then shot. Stories circulating in North Korea are that Jang had mismanaged Kim’s orders to take economic enterprises from military control and have the national government run them. This was very unpopular with the generals because enterprises like seafood (clams and crabs) and coal are mainly for export and some of the foreign currency is stolen. Now Jang had control of that cash. Jang also diverted rice intended for the military (to feed increasingly hungry troops) to sell on the markets and pocket much of the profits. Kim was not pleased with how Jang handled economic affairs, especially those involving the military. The investigation into Jang’s misdeeds took several months but most of the details, including how Jang dealt with it, are still unknown to the public. However within the government it was apparent that Jang had created bad feelings among the generals and Kim realized he had to choose sides. Showing impressive decisiveness and ruthlessness Kim sided with the generals and had Jang and those who assisted him in removing the assets from army control shot. It’s unclear if the army got back control of these lucrative assets, but at least the men who treated the military so badly paid for it. Public events since Jang’s execution show Kim surrounded more by generals, especially ones he has promoted in the last year. These new generals have reciprocated with public pledges of loyalty. The troops have followed suit, although they have little choice. All this appears to signal the completion of the transfer of power from the late Kim Jong Il to his youngest son, Kim Jong Un. It took two years and not a lot of firing squad activity. The king is dead, long live the king.
Hundreds of Jang’s kin and those of his executed aides have been rounded up and sent to special prison camps. There they will have to convince Kim’s inquisitors that they are loyal Kim and not Jang and his henchmen. This is a process that could take years. Meanwhile the entire families who disappeared from their luxurious homes overnight are leaving the neighbors a valuable lesson in loyalty. The markets also reflected the acceptance of the purge of Jang and his cronies. Prices remained stable since the execution and there has not been a rush to stock up for whatever.
There is fear that the additional government release of food last year, to markets and as free distribution for those believed most loyal, was largely taken from military reserves and thus a measure of desperation. Despite what Kim Jong Un may think of economic reform, most North Koreans, including government officials, believe the Chinese way is the only way. There is hope that the government will stop screwing around with the economy and adopt Chinese reforms.
December 31, 2013: Despite most foreign manufacturers of ski lifts and associated equipment refusing to sell to North Korea because of the embargo, the north managed to obtain the equipment and broadcast video of Kim Jong Un riding it at the new ski resort he has championed. This resort is in the northeast (at Masikryeong near Wonsan). Building it has been difficult. In Early 2013 landslides wiped out a lot of the work already completed. The landslides were caused by earlier cutting down a lot of trees on slopes for the ski runs. That effort removed all vegetation that held soil together and when the monsoon rains arrived in mid-July they were heavier than usual and the denuded slopes turned to mud and then slid down the side of the mountain. Outside observers estimated that repairing all this damage would take up to a year and delay the planned opening of the resort. The mudslide also did a lot of damage to farms down in the valley and more soldiers have been called in to help with that. Leader Kim Jong Un considers this one of his pet projects and demanded that it be ready by the end of the year. It was, at least enough to get some video of basic elements (lifts and snow covered slopes) working. For most of 2013 the government maintained tight security in the area and tried to keep information about the extent of the damage from getting out. The large number of students and soldiers drafted to help with repairs has made that difficult. Kim has ordered that the resort be opened before the end of the snow season. The ski slope area has heavy snow from November to March and the completed ski resort is meant for foreigners as well as North Koreans who can afford it (senior officials and the wealthier entrepreneurs). The Masikryeong resort has been getting a lot of play in state media, as an example of how hip new leader Kim Jong Un is. The resort is also meant to be another perk for the ruling class, and a way to extract more cash from tourists and North Korean entrepreneurs. All this attention means a lot of North Koreans are curious about what goes on up there. There are already some ski runs in North Korea, but these were built for military training or to help athletes prepare for international competitions. The big competition will be with their South Korean counterparts during the 2018 Winter Olympics that will be held in South Korea (which already has lots of ski resorts and many medals from the Winter Olympics).
December 30, 2013: China expressed displeasure with this crackdown, especially its anti-Chinese spin and is meetings with South Korean officials on December 30th to discuss how to handle a collapse in North Korea. This is another example of Chinese flexibility and pragmatism. China and South Korea may be at each other’s throats over who owns some uninhabited islands in offshore waters, but that does not interfere with growing trade and mutual concern over a North Korea collapse. North Korea is in effect another territorial dispute between the two countries. South Korea wants to unite Korea and if North Korea collapses the opportunity will be there. China does not want a united, democratic Korea on its border. Neither country wants to start World War III over the dispute so they will try to negotiate some sort of compromise. The U.S. has agreed to accept whatever decision South Korea makes, although America advises avoiding any actions that could lead to a major war. Meanwhile China is equally pragmatic with North Korea and continues to round up North Korean refugees and send them back. Those who are wealthy enough or useful enough (as in senior North Korean officials fleeing possible execution
December 17, 2013: Many elaborate ceremonies were held in the north to commemorate the second anniversary of the death of Kim Jong Il. The security forces, especially the secret police, were very visible in the weeks before today, making sure nothing would go wrong during the ceremonies. Nothing untoward happened and the security forces seemed to relax.
December 15, 2013: The latest international corruption rankings put Somalia, Afghanistan and North Korea at the bottom of the list, as the most corrupt countries on the planet.