image

North Korea

‘Guns and butter’: the real revolution in North Korea may be the rise of consumer culture

The growing emphasis on locally produced consumer goods is partially an attempt to counter Beijing’s influence, as China accounts for nearly all of North Korea’s trade and fuel

PUBLISHED : Friday, 18 August, 2017, 12:53pm
UPDATED : Friday, 18 August, 2017, 1:07pm

Like all North Korean adults, Song Un-pyol wears the faces of leader Kim Jong-un’s father and grandfather pinned neatly to her left lapel, above her heart. But on her right glitters a diamond-and-gold brooch.

Song, who manages a state-run supermarket with freezers stocked full of pork and beef and rows of dairy, bakery and canned goods, is part of a paradigm shift within North Korea. Three generations into the Kim family’s ruling dynasty, markets have blossomed and a consumer culture is taking root. From 120 varieties of “May Day Stadium” brand ice cream to the widespread use of plastic to pay the bills, it’s a change visibly and irreversibly transforming her nation.

While Kim has in recent weeks gained attention for his threat to fire missiles near Guam, his trademark two-track policy focuses on the development of both nuclear weapons and the economy. But like nuclear weapons, a more consumer-friendly economy is a risky business.

Facing even more international sanctions and a flood of Chinese imports that has generated a huge trade imbalance, the North Korean economy may be in a bubble that could soon burst. Prices for petrol imports have soared more than 200 per cent in less than six months. The wealth brought by new markets could also come with political instability.

Kim Jong-un’s slogan of “Parallel Development” – guns and butter, so to speak – reflects an inescapable reality of his era. In the 1990s, reeling from floods, famine and the collapse of the Soviet Union, North Korea could no longer afford to provide its citizens with basic needs. North Koreans turned to grass roots barter and trade, which has swollen into today’s market economy.

Life in rural North Korea is still marked by far more hardship and scarcity than in its urban areas. Yet there is, surprisingly, a bustling, almost booming, feeling in much of the country.

In today’s North Korea there is a growing competition between the domestic companies themselves as they try to attract customers and establish reputable brands
Michael Spavor, a Canadian entrepreneur

North Korean factories are putting a new priority on making more and better everyday products. Managers, meanwhile, have more freedom to decide what to make, how much to pay workers and how to forge profitable partnerships.

Along the roads into virtually every city, street vendors, usually weather-beaten old women, sell fruits, vegetables and other food. In specialty shops, the latest “Pyongyang” model smartphones go for US$200, with apps like the popular Boy General role-playing game at US$2 a pop. Pyongyang’s premier brewery, Taedonggang, just added an eighth kind of beer to its product line.

Despite the ever tightening sanctions, foreign products are still available. A can of Pokka coffee from Japan costs about 80 cents. Buying a Mercedes-Benz Viano might require some connections, but is doable – for a US$63,000 sticker price.

Some blatant manifestations of commercialism remain taboo. There are only three billboards in Pyongyang, and no advertisements on television or in newspapers. But stores are under instructions to be more consumer-friendly.

“At first, we opened the store from 10 in the morning to 6 in the evening,” said Song. “But in 2015, our dear respected Marshal Kim Jong-un made sure that we serve from 10 in the morning to 8 in the evening so one can use late night at any given time, as many working people often used the shop during the evening after work.”

Stores commonly offer buy-two-get-one-free type sales. Posters for new medicines or sports drinks can be seen inside shops, and customers can sign up for “loyalty cards” to earn discounts.

“In today’s North Korea there is a growing competition between the domestic companies themselves as they try to attract customers and establish reputable brands,” said Michael Spavor, a Canadian entrepreneur who is one of the only Westerners to have ever met Kim Jong-un.

The emphasis on locally produced consumer goods is partially an attempt to counter China’s gravitational pull.

China’s energy exports to North Korea plummet – but it’s not because of sanctions

China accounts for nearly all of North Korea’s trade and fuel. The North did US$2 billion in business with China in the first five months of this year alone. Cutting off trade with China would be catastrophic for Pyongyang. But North Korean leaders, including Kim Jong-un himself, have also shown concern over what might happen if trade continues, or grows even larger.

North Korea imports from China far more than it exports, particularly because of its energy needs. That imbalance widened dramatically this year as China cut back on buying from the North. The new UN sanctions will further squeeze the North’s export income.

The result could be shortages and inflation. Right around April petrol prices started to soar. Many stations either closed their gates or restricted sales.

Georgetown University economist William Brown said the price of rice was also up nearly 20 per cent in July from May, and estimates the North is suffering an outflow of US$200 million in foreign exchange every month.

“This may represent the greatest near-term threat to the regime stability,” Brown said, although he also cautioned that North Korea often finds its way out of economic problems.

Sharp rise in Chinese food exports to North Korea as starving nation leans heavily on its only ally

The goods and trading opportunities spilling across the Chinese border are also spurring the growth of profitable enterprises, which has substantial financial benefits for well-connected individuals and, at least initially, the regime’s elite.

However, the same opportunities have widened the gap between the haves, who benefit disproportionately from the new economy, and the far larger number of have-nots living mostly outside the Pyongyang bubble of affluence.

The regime is not blind to what’s happening. Kang Chol-min, a researcher with the Economics Institute of the Academy of Social Science, said it is trying to produce more, and better, goods to woo consumers back to state-run businesses.

“The number of people relying on the state-run commercial networks is increasing,” he said.

But many outside experts believe state enterprises and farms are too inefficient to provide enough goods and services without the help of markets and private activities.

In the end, North Korea’s economic future might lie with stores like the new Miniso. It’s an international brand name – found in Hong Kong, Tokyo, Sydney – selling bargain-priced goods such as backpacks and consumer electronics. Its Pyongyang store just opened in April.

It’s the trendiest shop in town. It’s also a joint venture. With China.