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North Korea Rolls Back Economic Reform

Kim Jong Un, the North Korean ruler, has reportedly ordered the removal of foreign products from his country’s markets. Said an official in North Hamgyong Province, “I was told by North Korea’s central authorities not to stop travelers from bringing in products from China through customs, but to strictly prohibit sales of the products in the market.”

The move at first looks like an attempt to target China, the source of many of the goods sold in the North, but Pyongyang could also be trying to implement a broad anti-reform agenda.

Kim, up to now, has been considered an economic reformer, authorizing a series of progressive measures since becoming the country’s supreme leader in December 2011. There have been, for instance, the “June 28th Instructions” from 2012, allowing farmers to keep up to 30 percent of harvested crops. “Working under the new system, North Korean farmers have produced more food than at any time in the last 25 years, bringing the country quite close to the goal of food self-sufficiency,” wrote Andrei Lankov, the famed Seoul-based Korea watcher, last month.

Then there are the even more important “May 30th Measures” adopted last year. Under this initiative, managers of selected state enterprises have far more latitude to run their operations according to business considerations. They can, for instance, sell products to maximize returns, no longer required to follow the dictates of meddlesome Pyongyang bureaucrats.

Just before Kim implemented these reforms and others, the country’s economy began to grow. On Friday, the Bank of Korea, the South Korean central bank, reported the North’s gross domestic product increased 1.0 percent last year, the fourth-straight year of expansion.

Moreover, analysts predict growth this year. GDP may not jump as much as Hyundai Research Institute predicts—a too-good-to-be-true 7.5 percent—but, apart from the effects of a severe drought, 2015 is shaping up to be a good year for the economy.

Growth, however, could stall if the regime backtracks on reform. Unfortunately, the May 30th Measures have not been extended to all enterprises, as many had hoped, and there is even talk that they have been rolled back. As Radio Free Asia notes, “Kim Jong Un’s instructions to drive out foreign-made goods” is essentially an order “eliminating private business because the government’s intention is to collect all money which is now circulating in the market.” As such, the prohibition looks more than just another anti-China measure.

Those trading in Chinese-made goods look like they will face restrictions in coming months, but they can be confident that the crackdown will not last long. Since the turn of the century, the Kim regime has been trying to take control of rural markets, where Chinese goods are offered for sale, but local traders have proved resilient and mostly impervious to government action.

This time should prove no different. For one thing, North Korean factories cannot replace all the Chinese goods in the stalls in rural areas, certainly not at the same low cost.

More important, traders there have become accustomed to the free flow of goods, and for them there is no going back to a centrally directed system. Reform, at least over the long term, is difficult to reverse in command economies where hardy citizens learn the power of money and local officials become accustomed to bribes that give them a good reason to look the other way.

Kim can issue orders about what people may buy or sell, but North Koreans, driven by the desire to better their lot, will eventually ignore his demands.

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