B00BY4HXME EBOK (15 page)

By the early 2000s some wholesalers had large sums at their disposal; they sometimes invested in new types of enterprise—eateries, storage facilities, semi-legal transportation companies. Indeed, the growth of the market that was initially centered around small-scale retail activities soon produced many kinds of associated private ventures.

The restaurant industry is illustrative in this regard. Between 1996 and 1997 the state-run restaurant industry collapsed everywhere except for a few major cities. Private capital, however, almost immediately revived it, and most North Korean restaurants are now run by private entrepreneurs. Officially, they are not supposed to exist, and such eateries are technically state-owned. According to official papers, an eatery is owned by the state and managed by the relevant department of the municipal government. However, this is a legal fiction. A private investor makes an informal deal with municipal officials, promising them a kickback, and he/she then hires workers and buys equipment. It is assumed that a certain amount of the earnings will be transferred to the state budget. In return the private owner runs a business at his/her discretion, investing or pocketing profits. A 2009 study came to the conclusion that some 58.5 percent of all restaurants in North Korea are de facto privately owned.
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Similar trends exist in the retail industry. While the fiction of state ownership is maintained, many shops are, essentially, private. The manager-cum-owner buys merchandise from wholesalers as well as (technically) state-owned suppliers, and then sells it at a profit. The earnings are partially transferred to the state, but largely pocketed by the owner himself (or rather, herself). The above-mentioned study estimated that in 2009 some 51.3 percent of shops were actually private retail operations.
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Transportation underwent similar changes. A large number of trucks and buses that traverse the dangerous dirty roads of North Korea are owned privately. Private investors discovered that grossly inadequate transportation facilities were a major bottleneck the emerging North Korean merchant class had to deal with. Investors began to buy used trucks and buses in China and bring these vehicles to the North. In the North, the vehicle would be registered as the property of a government company or agency. The actual owner would pay the manager of this
agency an agreed amount of money, usually on a monthly basis. Interestingly, the amount of money is contingent on the agency/company type. The registration of one’s truck with a military unit or a secret police department is most expensive, while some humble civilian agency (like, say, a tractor repair workshop) would charge the least. Owners sometimes prefer to pay more, however, because military registration plates might sometimes come in handy with the police.

Large transportation companies have developed: I met a person who owned seven trucks in North Korea. He used these trucks to move salt from salt farms on the coast to wholesale markets (incidentally, salt farms are private as well). This man also augmented his income by moving large sacks of cement that were stolen by workers from the few cement plants continuing to function in post-1994 North Korea. It was a nice income but he expressed his surprise at the ingenuity of workers who managed to somehow steal such a large amount of cement.

Indeed, one of the major problems for the state has been the growth of criminal and semi-criminal activities. Workers and managers steal from their factories everything that can be sold on the private market. The large-scale looting of archeological sites from the Koryo (10th–14th century
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) and Choson (14th–19th century
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) periods became a problem in spite of all efforts to stop it. People responsible for antique smuggling or equipment sale often faced severe penalties; there were even rumors about public executions of such people. Nonetheless, the temptation was far too large.

Drug production started to boom around 2005. In earlier days, drugs were produced for clandestine export by government agencies, but private business also discovered the great money-making potential of addictive substances—and officials are not too eager to enforce the bans and regulations (they usually get a slice of the profits). Private production usually concentrated on what is known as “ice,” that is, methamphetamines. Drugs were marketed domestically and also exported to China, where authorities had to step up border control. “Ice” became surprisingly popular among younger North Koreans, so much so that in 2010, foreign visitors spotted antidrug posters in Pyongyang colleges. Incidentally, around the same time,
the old state-sponsored drug production program was scaled down. Frankly, the entire project obviously did the regime more harm than good, damaging its international reputation while bringing only small payoffs.
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China features prominently in the unofficial North Korean economy (and in the official economy as well, as we will see below). Nearly all trade links either begin or end in China. Part of this trade is completely unofficial, while other transactions are entirely legal. North Korean merchants mainly import consumption goods from China—garments, shoes, TV sets, and so on. Food also constitutes a significant part of North Korean imports from China.

Paradoxically, thanks to this, the years of crisis became a time when the average North Korean began to dress well—or, at least, better than in earlier times. In Kim Il Sung’s days most people were clad in badly tailored Mao suits or military uniforms; now, even in the countryside, people you see on the street are dressed colorfully, usually in cheap Chinese imported clothes.

To balance the trade account, North Korean merchants export to China that which can be sold there. Apart from minerals, which are still usually handled by the state, they sell seafood, traditional delicacies, and Chinese medical herbs as well as quite exotic items—like, for instance, “frog oil,” a fatty substance extracted from live frogs of certain species that have to be harvested under special conditions.

China’s ubiquity in the Northern economy has resulted in the “Yuanization” of the market: large-scale payments in postfamine North Korea are normally made in foreign currency. Dollars, yen, and euros are not unknown, but it is the Chinese yuan that reigns supreme. This situation has led to the emergence of money dealers who trade in foreign currencies, and are also sometimes known as “loan sharks,” providing loans at the annual interest rate of 100 percent or more.

A special role in the new economy is played by a particular form of entrepreneurial activity that is neither private nor state—the so-called foreign currency earning enterprise (FCEE). Such enterprises have existed since Kim Il Sung’s era but greatly increased in number, size, and reach from the late 1990s.

Unlike the Soviet Union, in North Korea, foreign trade was never under the exclusive control of a single state agency. In accordance with the “spirit of self-reliance,” large North Korean companies and influential state agencies were allowed to sell anything that could be sold on the international market. They would then use the earned foreign currency to import what couldn’t be produced domestically. This practice was greatly expanded in the late 1990s when provinces, ministries, and even the military and police began to set up their own FCEEs. These enterprises did not usually limit themselves to what was produced in-house, but looked for anything that could be sold for a profit.

Technically, the FCEEs are owned by the state, but they hire adventurous and entrepreneurial people whose job is to use the company’s official clout and connections to earn as much money as possible. It is implicitly understood that these people pocket a large share of their earnings, but as long as they know their limit and provide their supervisors with sufficient kickbacks, profiteering is tolerated.

The collapse of the state-run economy had far-reaching political and social consequences. In order to function properly, Kim Il Sung’s system required a small army of enforcers and indoctrinators. A considerable workforce was necessary to ensure that every North Korean slept in a home where he or she was registered, did not travel to another city without a proper permit, and did not skip a self-criticism session. In the early 1990s the government discovered that it did not have the resources to reward the zeal of these overseers and indoctrinators. Of course, the regime did what it could to keep police officers and party officials on the payroll and issued them rations even in the middle of famine. Nonetheless, there were too many such people to be taken care of properly. Thus, in the mid-1990s, a police sergeant, a clerk in the local government office, or a low-level indoctrinator faced a real threat of starvation. Like the average factory worker or schoolteacher, these small cogs of the bureaucratic machine depended on
PDS rations for their food. When the PDS shrank dramatically, they were not considered important enough to remain on a new, much shorter, list of distribution targets.

A number of my North Korean interlocutors state that in the famine years between 1996 and 1999, people who had the highest chances of dying were honest officials and clerks: those who did not take bribes, did not abuse their official position, and took the regime’s promises seriously. However, most petty bureaucrats made a rational choice and adjusted their behavior to the new situation. They began to turn a blind eye to illegal activities. In many cases they had to be bribed to adopt such an attitude, but in other instances they did so out of sympathy for the common people or because they saw no use in enforcing obviously pointless regulations.

One of the best examples is the near complete loss of control over domestic travel. Theoretically, up to the time of writing, North Koreans are expected to apply for a travel permit if they plan an overnight trip outside the borders of their county or city. Starting from around 1996 to 1997, however, these controls became easy to circumvent. Nowadays one can bribe a police official and obtain a permit for a relatively small fee, the equivalent of $2–3. Alternatively, one can choose a cheaper but more troublesome option, and depart without any travel permit. For that, one must be ready to bribe policemen at checkpoints and in trains. Only the city of Pyongyang has not been touched by this relaxation, remaining off-limits to people from the countryside who do not have proper papers—and such papers are still difficult to get.

Sometimes, North Koreans could and can get away with what used to be seen as political crimes. For example, possession of a tunable radio set has been a political crime for decades. This still technically remains the case, but nowadays a bribe of roughly $100 can buy a way out of punishment for someone unlucky enough to have been caught while listening to such a radio (police would probably even give the offending radio set back to the culprit). Of course, $100 is by no means a trivial amount of money for the average North Korean, since the average monthly salary in 1995–2010 fluctuated around the $2–3 mark (the actual monthly pay,
however, was and is significantly higher—some $15–20 a month—since a majority of the North Koreans make most of their income in the unofficial economy).

Another result of the new situation was the near collapse of control over the Sino—North Korean border. Smugglers have taken advantage of the situation, paying bribes to ensure that border guards always look the other way when necessary. For a large-scale smuggler, a bribe might be as high as a few hundred dollars, but for this amount he or she would be able to move sacks of valuable merchandise across the border (even being helped by the border guards themselves). Apart from smuggling, the government has relaxed its attitude toward official cross-border trips, which are usually justified by the need to visit relatives in China but often are of a commercial nature. From 2003, for the first time in North Korean history, the authorities began to issue passports to North Koreans who went overseas as private citizens—provided they have the right connections, good family backgrounds, and the resources to pay the necessary bribe.

Some regulations (often truly absurd) are safely ignored by the very people who are supposed to enforce them. For example, theoretically, North Korean women in cities are not allowed to wear slacks because such attire is considered to not befit a woman and “goes against the good habits and beautiful traditions of Korea.” Women are also theoretically forbidden to ride bicycles in the city. There are even bans of some “subversive” types of haircuts. Police have occasionally enforced these nonsensical bans in the past, but from around the mid-1990s, became increasingly uninterested. From time to time, ideological authorities will remind people of the moral harm that might be caused by a woman clad shamelessly in slacks, prompting police to levy fines on violators of the ban for a few weeks. These kinds of campaigns never last long, however, and seldom bear fruit.

Most of the above-mentioned changes are spontaneous in nature, being driven primarily by greed/need as well as by a loss of ideological fervor on the part of those who upheld the status quo. In some cases, however, the relaxation has been initiated by the authorities. For example, around 1996, an illegal border crossing into China, hitherto a serious crime, was reclassified
as a relatively minor offense. Around the same time, the Kim Il Sung—era family responsibility principle was relaxed. In the past, if a North Korean was arrested for political crimes, his or her entire family would have to be shipped to a prison camp. Now, such measures are used selectively, only in cases of crimes considered especially dangerous.

The general relaxation is quite palpable for somebody who has been dealing with North Korea for decades. Nowadays, North Koreans are less afraid of foreigners and more willing to discuss potentially dangerous matters. It doesn’t usually mean that they will deviate from the official line too openly, but the limits of what is permissible have clearly widened in the last 15 to 20 years. North Korean refugees also admit that in Kim Jong Il’s North Korea, one often could do or say with impunity something that would get you imprisoned or killed in Kim Il Sung’s era.