In international press reports, the North Korean leadership is often
described as irrational, even mad. Such characterizations are both
inattentive and inaccurate: they fail to discern the deep logic of a
system whose precepts and starting premises happen to differ sharply
from our own. It would be similarly misguided to dismiss North
Korea's approach to unification as a crazy scheme.

Pyongyang's plan for unification-by-conquest was, rather, a careful,
calculating, high-risk venture. Like many other high-risk ventures,
it ultimately proved to be unsuccessful. But unlike most strategists
and entrepreneurs who operate successfully in high-risk environments,
Pyongyang had no "fall-back" plan. The DPRK's own chosen unification
strategy, furthermore, happened to be strongly "path dependent": in
doggedly pursuing it, the leadership ineluctably closed off other
important options and progressively narrowed its own freedom of
maneuver. With the failure of its unification strategy, North Korea
was thus caught in a bind of its own devising.

In response to the increasingly menacing fundamentals in its contest
against the South, North Korea made a tactical decision in the 1980s
to lean heavily on the Soviet Union. But far from stabilizing the
"correlation of forces" in North Korea's favor, that ill-fated move
actually precipitated the country's slide toward disaster. The
break-up of the Soviet empire and the collapse of the Union of Soviet
Socialist Republics exposed North Korea to a more perilous balance of
international power than it had ever dealt with before. As well, the
collapse of the USSR meant the end of military aid and subsidized
trade from the Soviet bloc. By the late 1980s North Korea was heavily
dependent on those quantities; their consequent sudden and virtually
complete termination sent the North Korean system into a steep
downward spiral. Pyongyang has, as yet, been unable to arrest that
spiral, and the grand vision of reuniting Korea under its socialist
banner has given way to a desperate focus on day-to-day survival.

The Economic Race

The failure of its unification strategy, we should remember, did not
presuppose North Korea's economic failure. North Korea would have
lost the economic race against the South--and thus eventually the
opportunity to overpower it--even if it had maintained a steady and
fairly respectable pace of growth. During its long contest against
the South, however, the DPRK was unable even to sustain positive
rates of economic growth. After apparently rapid progress in the two
decades immediately following the Korean War, its economic growth
seemed to slow markedly in the 1970s. By the 1980s the North Korean
economy was stagnant; and in the 1990s it entered into a severe and
as yet unremitting decline.

Although the precise dimensions of that decline are extremely
difficult to estimate, the South Korean government is probably
correct in asserting, as it recently did, that 1998 marked the ninth
straight year of negative economic growth for the DPRK. Indicative of
the dimensions of that decline are North Korea's trade trends:
between 1990 and 1998, according to reports by its trading partners,
the DPRK's international purchases and sales of merchandise fell by
more than half. The severity of the decline is underscored by the
hunger crisis it has provoked. While the precise dimensions of the
crisis cannot yet be quantified, they are, at the very least,
suggested by the simple fact that the North Korean call for emergency
food aid from abroad is now entering its fifth year. Thus, even
against the criterion of providing sustenance for the survival of the
local populace--the most minimal standard for economic
performance--the North Korean economy qualifies as a failure.

Initially, it might seem puzzling that the North Korean leadership
has been incapable of arresting this prolonged economic tailspin. The
country's dire condition, after all, is very largely the predictable
consequence of the relentless enforcement of economic policies that
range from the manifestly wasteful to the positively disastrous.
Moderating that self-punishing regimen could be expected to bring an
almost immediate measure of relief to the North's beleaguered economy.

The sorts of measures that might spark a revitalization of the North
Korean economy are hardly secret. The path to renewal and resumed
growth runs squarely through the international economy. For North
Korea, as for every other country, international markets in goods,
services and capital offer opportunities for reducing costs,
improving productivity and promoting dynamism. In East Asia, the
strategies of "outward orientation" and greater integration with the
world economy--expanding trade, attracting foreign investment and
encouraging technology transfers--have been common to all countries
that have achieved impressive rates of long-term economic growth.
Significantly, those ranks today include both China and
Vietnam--Asia's two other avowedly socialist states.

Why, then, has the DPRK leadership not seized those obvious options
for remedying the economic catastrophe that so plainly confronts it?
It is surely not for lack of calculation: North Korea's rulers, as
already mentioned, appear to be quite rational in evaluating the
alternatives before them--and, often, strikingly shrewd in seizing
opportunities for gain.

It is true that North Korea's ruling circles appear at times to be
amazingly naive about economic affairs. (As recently as 1998, a
visiting World Bank official was startled by a request from officials
of the DPRK's central bank to explain the difference between
macroeconomics and microeconomics.) But Pyongyang's continued
reticence about embarking on a more pragmatic course cannot be
attributed to economic innocence alone. Rather, it appears to be a
deliberate and considered decision, one reflecting the DPRK
leadership's assessment and understanding of its own political system.

North Korea's leaders appear to be convinced that programs for
economic revival that are regarded as entirely unexceptional in the
rest of the world would actually pose an extreme--possibly
mortal--peril to their own system. Ruinous as North Korea's
uninterrupted economic slide has proved for what DPRK officials call
"our own style of socialism", the ostensible cures for the country's
economic maladies are judged to be even more dangerous.
Unfortunately, their assessment of their own predicament is on the
mark, which means that they have little room for maneuver and few
viable options at their disposal.

From Pyongyang's vantage point, the most compelling argument against
moving in new economic directions is that those more "practical"
policies would ultimately undermine the integrity and the stability
of the socialist state. As it sees things, the fruits of "reform
communism" are indicated by the fates of the Soviet and East European
governments. Not surprisingly, North Korean authorities closely
analyzed the final crisis and downfall of Soviet-bloc socialism. In
their understanding--and who can dispute it--economic pragmatism and
economic reform are antithetical to socialism, and any socialist
government toying with such measures is in effect experimenting with
its own political defeat. Kim Jong Il's 1992 comments on the Soviet
dénouement would seem to offer a definitive official North Korean
view of the event:

"One-step concessions and retreat from socialist principles have
resulted in ten and a hundred step concessions and retreat, and,
finally, invited grave consequences of ruining the working class
parties themselves."

The implicit corollary to that assessment, of course, is that the
ordinary, unpoliced workings of the market--responding to incentives
and all the rest--are inherently counterrevolutionary and
fundamentally subversive of the socialist project. Kim Jong Il did
not shrink from those implications; instead, as early as 1993 he
spelled them out clearly and carefully:

"The basic driving force of development of a socialist society lies
in . . . [the people's] ideological consciousness. . . . [In the
past] there were tendencies to rouse people's enthusiasm for
production by means of such material levers as economic incentives. .
. . In those societies which gave up education in socialist ideology
and encouraged egoism, the building of the socialist economy became
stagnant . . . they went so far as denying the leadership of the
working-class party and state over the socialist economy."

Since Kim Jong Il's formal accession as head of both party and state,
North Korea's media have vociferously echoed and elaborated on that
aspect of the "Dear Leader's" teachings. In September 1998--just days
after the Supreme People's Assembly session that officially elevated
Kim Jong Il to the state's "highest position"--the party's daily
newspaper and its theoretical journal jointly ran this pronouncement
on "economic reform", "economic opening" and "economic integration":

"It is a foolish daydream to try to revive the economy by introducing
foreign capital, not relying on one's own strength. If one wants the
prosperity of the national economy, he should thoroughly reject the
idea of dependence on outside forces, the idea that he cannot live
without foreign capital. . . .

Ours is an independent economic structure equipped with all the
economic sectors in good harmony and with its own strong heavy
industry at the core. It is incomparably better than the
export-oriented economic structure dependent on other countries. . . .

We must heighten vigilance against the imperialists' moves to induce
us to 'reform' and 'opening to the outside world.' 'Reform' and
'opening' on their lips are a honey-coated poison."

Economic "reform" and "integration" would inevitably impel the North
Korean state to relinquish its claim to absolute control over "the
people's economy." But even worse, reform and opening would be
vectors for what the North Korean authorities call "ideological and
cultural infiltration."