North Korea’s Rich-Poor Divide

Even amid the grandeur of North Korea's Myohyang Mountain tourist area, where few Westerners have ever been allowed to visit, it's impossible not to gawk at him: a middle-aged North Korean sightseer decked out in a crisp Kim Jong Il-style suit, sunglasses and implausible upswept hairdo. But the most striking thing isn't his Dear Leader-wannabe getup; it's the device he's holding. In one of the most desperately poor countries on earth, it's worth half a year's pay for most of his fellow inhabitants: a sleek little Japanese digital video Handycam.

Everyone has heard that North Korea is a country that can't feed itself—as underlined earlier this year by the United Nations World Food Program, which warned once again of the danger of impending famine in the Hermit Kingdom. Less well known, though, is that some people in North Korea are actually getting rich. Reliable statistics are hard to come by, of course, given the obsessive secrecy of the North Korean state. Still, when a South Korean university polled 500 defectors from the North in 2005, 58 percent of them said that the biggest change in their home country over the previous three years was the widening gap between rich and poor; another 28 percent cited the increase in personal wealth. Last year the South Korean aid organization Good Friends, which boasts a broad range of sources in the North, published a revealing study of its own. It concluded that North Korea's wealthy now spend 10 times as much on food as those less privileged, live in homes equipped with modern conveniences like refrigerators and washing machines (largely unknown to their countrymen), and can even afford maids and private tutors for their children. "What you're seeing now on the one hand is more cars on the street and nice fruit being sold in Unification Market in [the capital city of] Pyongyang," notes Marcus Noland, an economist at the Peterson Institute for International Economics. "And yet many people still don't have food security."

The reasons for the growing divide go back a decade or more. Ever since the virtual collapse of the economy back in the mid-1990s, accompanied by a famine that is estimated to have killed some 1 million people, most North Koreans have been forced to resort to barter or under-the-table buying and selling to get by. In 2002 Kim's government passed a set of piecemeal reforms that grudgingly acknowledged the reality of private market forces in broad swaths of the economy. Pyongyang alone now has 38 private markets. At the same time the North has been opening itself up to trade with neighbor China and, to a lesser extent, South Korea as well. As a result, some North Korean managers have stripped their own factories of machinery to be sold as scrap metal to the resource-hungry Chinese, while cheap consumer goods have flooded into the North in return. According to Chinese customs statistics cited by the Tokyo think tank Radio Press, the number of video players exported from China to North Korea in 2002 was 71; last year it was 350,000. Chanel bags and SUVs are no longer exotic sights on the streets of Pyongyang.

Just take the testimony of 38-year-old defector Choi In Ho (not her real name), who left the North in October 2004. Once the 2002 reforms legalized private trading, she says, shrewd speculators spotted an opening. They reap huge profits by buying up grain at times of plenty and then throwing it back on the market during shortages. Others take advantage of the miserable transport system by quietly commandeering state-owned trucks and using them to bring products to areas where demand is greatest. "Through such trading, some people are becoming richer and richer, while others nearly starve," Choi says. "Because North Korea is a socialist country, everyone is supposed to be equal. In reality, the income gap is growing, and it's making people angry."

North Korea has always had a stark social divide. Reports on the lavish lifestyle of the country's ruling elite have trickled out for years. Kim Jong Il's personal sushi chef and pizza cook have regaled readers with accounts of the Dear Leader's rarefied taste in cognac and seafood. Last summer a Japanese TV station caught one of Kim's children following Eric Clapton on concert tour across Europe—the sort of luxury the vast majority of North Koreans could only dream of, assuming that any of them were in a position to learn about it. Earlier this year Kim's elder son, Kim Jong Nam, was apparently persuaded to give up his home in the Chinese territory of Macao when journalists there began trading details of his extravagant partying. Lately, it's said, he's been holed up somewhere on the mainland.

And yet something does appear to be changing. Economist Yoon Deok Ryong from the Korean Institute of Economic Policy notes that in the past North Koreans who wanted a better life simply joined the Communist Party, which assured them a certain level of privilege. These days, by contrast, they can achieve the same end by going into business. Hazel Smith, a professor at the University of Warwick in England, says the North Koreans she's surveyed once hoped their children would join the army as a way of getting ahead. Now, she says, the hope is that they'll go into private trade—ideally with a few hundred dollars in capital provided by their parents. North Korea is beginning to register the rise of homegrown business tycoons like Jon Sung Hun, head of Korea Pugang Corp., a conglomerate that exports pharmaceuticals, machinery and minerals in return for consumer and investment goods.

Jon is the son of a former North Korean ambassador to China—which shows, among other things, that it still helps to know the right people. Still, says Yoon, the new class of North Korean entrepreneurs can no longer count on the cash-strapped Communist Party to provide them with their livelihoods. Rampant corruption at virtually all levels of the North Korean state ensures that money increasingly trumps ideology—in ways that could potentially threaten the system. "From the standpoint of the state, people in the army and party are getting rich," says Noland. "On the other hand, they may be getting rich in ways you can't control." Experts caution that no one should expect North Korea's cautious flirtation with capitalism to topple the system overnight. By all appearances Kim retains iron control over the hearts and minds of ordinary North Koreans. And many of those getting rich—in the secret police or the army—are precisely the people he relies on to keep him in power.

The long-term problems, however, are obvious. Several foreigners with regular access to North Korea say the influx of consumer goods has brought with it a sharp increase in North Koreans' knowledge of the outside world. Meanwhile, says Yoon, the Kim regime's reluctance to commit itself to a comprehensive program of Chinese-style economic reform will create problems down the road. In South Korea in the 1960s, he points out, a rising economy afforded the underprivileged a justified hope that they too might one day be able to get rich—a sense of opportunity denied to ordinary North Koreans under present conditions. Among their other effects the 2002 reforms have also spurred hyperinflation, one more crushing blow to people who depend solely on salaries in the worthless North Korean won. (The wealthy, by contrast, enjoy access to the Chinese yuan, which circulates widely inside the North, or other foreign currencies.) Just to compound the problem, Yoon says, Kim's government has yet to provide a proper social safety net for its people. "The income gap itself is not a problem," he argues. "The problem is that the North Korean government doesn't have the capacity to save the people who are in the poorest class."

Socialism, anyone?

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