Around the same time, exchanges between North Korea and China increased substantially as well. Beginning in 2001 the scale of commercial exchanges with China began to grow. There is good reason to believe that in 2001 Beijing decided that a North Korean collapse must be avoided and, to this end, began to allocate resources to keep the North Korean economy afloat. Bilateral trade volume more than tripled between 2000 and 2005, and it is likely that at least part of this growth was either subsidized or encouraged by the Chinese government. Simultaneously, Chinese aid to North Korea increased, although exact figures are not known. A recent report prepared after interviews with key Chinese scholars states:

Although the specifics of China’s external aid relationship with North Korea remain classified, Chinese specialists indicate that North Korea’s share of China’s rapidly growing global development assistance budget has continued to expand, from an estimated one third of China’s foreign assistance five years ago to approximately 40 per cent of China’s foreign assistance, according to current estimates. Given that China’s assistance to Africa and other Asian countries on China’s periphery has grown substantially, raising the total amount of China’s aid, this proportion likely reflects a considerable jump in Chinese foreign assistance to the DPRK.

Pyongyang, therefore, became less isolated than it had been-in spite of the nuclear crisis that erupted in 2002 over the country’s alleged uranium enrichment program. The scale of Chinese and South Korean aid was relatively moderate and clearly would not account for a dramatic revival of the North Korean economy (nor would such a revival be possible without considerable structural reform). Nonetheless, foreign aid brought considerable relief. The famine also abated, although the food situation still remains precarious at best.

The evidence of the last few years, therefore, testifies to the fact that the improvement in the economic situation and the relaxation of outside pressure has not pushed the North Korean leadership toward market-oriented reforms. On the contrary, relative economic stabilization formed a background for a backlash against the market-oriented institutions and activities that were grudgingly tolerated for a period.

The System in Its Madness: Domestic Logic

Given that the success of the Chinese and Vietnamese reforms is so clear, the behavior of the North Korean leadership seems irrational. In China the Communist oligarchy has managed to increase its power by presiding over an unprecedented economic growth while successfully maintaining domestic stability. This option is not, however, attractive to the North Korean elite, even though they are perfectly aware of the spectacular success of the Chinese experiment. The children of the North Korean elite often study overseas, including in China. Chinese leaders even arranged for Kim Jong-il to visit the Pudong area in Shanghai, a high-rise district that embodies the country’s economic success, and there have been rumors of other similar excursions. Though Kim Jong-il was said to be duly impressed, the visits have had no political consequences whatsoever.

Pyongyang’s seemingly irrational unwillingness to reform has one possible rational explanation. North Korean leaders perhaps resist reform not because the leadership is ideologically zealous or ignorant of the outside world but because it realizes that North Korea’s situation is dramatically different from that of China or Vietnam. It is the existence of rich and free South Korea that makes the decisive difference. The regime lives next to a country whose people speak the same language and are officially described as ‘members of our nation’ but who enjoy a per capita income at least 17 times (some claim even 50 times) higher than that of the North Korean people. If ordinary North Koreans become aware of the prosperity of their brethren only a mere hundred miles or so away, the regime’s legitimacy would suffer a major blow and, quite likely, would become untenable.

Admittedly, worries regarding the political implications of social reform are not unique to North Korea but are common to all Communist regimes considering dismantling command economies. In the case of North Korea, however, South Korea aggravates the situation. Rich South Korea’s existence means that an ‘East German scenario’ always remains a probability in Korea-a challenge that seems to be absent in the case of Vietnam or China. The prosperity of, for example, Japan or the United States is well known in China but is not seen by the Chinese as relevant-after all, those are different nations, with different histories. Neither Vietnam nor China has a rich ‘other’ with which to seek unification: Taiwan is too small to have a palpable impact on the average Chinese income in the event of unification, and South Vietnam ceased to exist in 1975.

Reform is impossible without a certain relaxation of the information blockade and daily surveillance. Foreign investment and technology are necessary preconditions for growth, and therefore if reform were to be instigated, a large number of North Koreans would be exposed to dangerous knowledge of the outside world and above all of South Korea. A considerable relaxation of the regime’s administrative control would be unavoidable as well: efficient market reforms cannot occur in a country where a business trip to the capital requires a month-long wait for the proper travel permit and where promotion is determined not so much by labor efficiency but by demonstrated political loyalty (including the ability to memorize the speeches of the ‘Dear Leader’). Relaxation would entail information flowing within the country, and the dissemination of this information, as well as of dangerous conclusions drawn from it, would become much easier and much more perilous.

If the populace were to learn just how desperate the country’s situation is, and also feel less intimidated by the police and ideology, why would North Koreans remain as docile as they have been for decades, quietly accepting an authoritarian ‘developmental dictatorship’? The most obvious solution for North Korea would be to remove the current regime and unify with South Korean in order to partake in that country’s prosperity.

Unlike their colleagues in the former USSR and Eastern Europe, North Korean elites will stand little chance of becoming successful capitalists if the system is overthrown and the peninsula united. All the important positions in the new economy will undoubtedly be taken by people from South Korea-people with capital, education, experience, and perhaps even political support. The North Korean elite seems to understand perfectly well that it has nothing to gain and everything to lose through unification with the South. It is not incidental that one of most frequent questions foreign visitors to North Korea must answer concerns the post-unification fate of East German bureaucrats.

If this analysis is correct, and such an outcome is indeed what the top North Korean leaders fear, what is the best policy choice for the regime? The best course of action appears to be a continuation of the policies the current leaders and their predecessors have followed for decades. Domestically, the regime’s policy aim has been to keep the North Korean population under control, terrified, compartmentalized, and isolated from the outside world. Internationally, the safest solution is an aid-maximizing strategy. Though probably not adequate to kick-start economic development, foreign aid may be sufficient to keep the economy afloat, prevent a major famine, and allow the country’s tiny elite to live a reasonably luxurious lifestyle. Judged from the point of view of leaders in Pyongyang, this policy has been a success: they remain in control and enjoy a privileged life even today, in 2009, while a majority of similar regimes have long been overthrown and are now remembered with disdain.

Why, however, did the counter-reforms only seriously begin around 2004, when the domestic situation had already improved? It seems that once the government had (or believed it had) enough food to restart the PDS, this was the most logical thing to do. The North Korean surveillance system operates on the assumption that every adult has a proper job with a state-run enterprise; thus, indoctrination and police surveillance are centered on the workplace. Although sending people back to the state-run factories and offices does not make much economic sense-given that workers largely remain idle in both places-this policy makes perfect political sense for the government. In order to achieve this goal, however, the new-born private economy that provides an attractive alternative for many people and also encourages a dangerous flow of information must be limited or, ideally, wiped out.

Finally, to what extent are the current efforts of the authorities likely to succeed? If these policies do succeed in the short term, could they survive in the long run? At the current time these questions cannot be answered with any certainty. In some cases, the government has achieved its intended goals: for example, the number of refugees in China has decreased dramatically, the PDS is functioning with reasonable efficiency, and younger women in some areas no longer engage in market trade. On the other hand, the state monopoly on the sale of grain seems to be a failure, and recent attempts to close down markets ended in naught. If the government’s efforts fail-a likely outcome due to the extreme economic inefficiency of the system the regime is trying to revive-the gradual slide toward a more permissive society will continue.

For now, however, this slide is set to be halted or even reversed. It is difficult to believe that any effort to reverse the tremendous social changes of the past fifteen years will be completely successful. Still, the period of largely unhindered de-Stalinization from below is over. North Korean authorities are working hard to re-Stalinize the country and to revive the old patterns of a centrally planned and heavily controlled state socialism.

This article first appeared in Nautilus and the rest can be read here [pdf].