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Can North Korea Change?
Pyongyang's new ruler-in-waiting has many hoping for Chinese-style reforms in the world's last Stalinist state.
But will the Kim family ever open up? We'd better hope so.

This week, Hyun In Taek, the South Korean minister in charge of planning for reunification with the North, urged his troublesome neighbors to get their economic acts together. "I am not saying North Korea should open up by all means possible," he told reporters. "I believe it would be right if North Korea could develop by opening up through at least a Chinese-style model."

The notion, coming amid escalating military provocations from Pyongyang -- and despite precious few signs that North Korea's deeply isolated leaders are capable of "opening up," let alone pursuing a serious reform agenda -- may seem fanciful at best. Most South Koreans long ago abandoned hope for the "Sunshine Policy" of engagement and economic aid, and now favor a tough response to Pyongyang's outrages. Last week, their conservative president, Lee Myung-bak, summed up the feeling of many in Seoul: "We had believed patience would ensure peace on this land, but that was not the case." He vowed a "merciless counterattack" if South Korean soil is assaulted again.

Yet Hyun may be on to something. Profound changes are underway that threaten to undermine the North Korean regime's grip on power far more than condemnations and confrontation will. While deterring and containing Pyongyang is prudent, it is only half a policy. The world is missing an opportunity to expand and exploit the economic shifts taking place in North Korea. Improving North Koreans' access to information and facilitating communications -- not merely issuing harsher sanctions or tough vows to meet steel with steel -- are the best ways to hasten the demise of one of the world's most odious regimes.

Cracks began to appear in North Korea's facade when the command economy erected in the 1950s suddenly collapsed with the end of Soviet largesse in the early 1990s. The public distribution system for food functioned in name only; hundreds of thousands starved. Out of the economic ashes, hundreds of markets sprouted up, with women selling private garden plot-grown vegetables, homemade foods, household items, and consumer products from China. The regime acknowledged this spontaneous marketization -- without fully embracing it -- with its July 2002 "economic adjustment measures," leading many observers to hope that major reforms would follow. Kim Jong Il, North Korea's paramount leader, has repeatedly praised China's economic transformation, including during a visit to the massive Shanghai-GM automobile factory in 2001 (Kim reportedly told his hosts that he would like to have one too). Jang Sung-taek, Kim's brother-in-law and power behind the throne, has accompanied him on most of his China visits.

Some North Korea watchers have speculated that Kim Jong-Un, who in September was introduced to the world as Kim Jong Il's heir, may pick up the mantle of economic reform. But as the North transitions to a third generation of Kim family misrule, the youngest Kim faces the same age-old dictator's dilemma as his father: Maintain an iron grip and watch the economy remain in a slow-motion death spiral, or at least tolerate individual initiative and innovation. Even kindred spirits like Burma's generals and the Castro brothers are reforming. Can North Korea?

Even at the official level, the regime readily acknowledges the necessity of change. Since the younger Kim's debut, half of his public appearances (always with his father) have been economic-related, ranging from newly automated factories (Kim Jong-Un has long been touted as an expert in a 1970s technology called "computer numeric control") to power plants under construction. The government's mouthpiece, the Worker's Newspaper, refers frequently to the need for "reform," "technology," and "expanding the production of consumer goods." One frequently seen billboard shows a mother and child standing in front of a department store and declares, "We have reached a turning point." The regime has clearly chosen guns over butter -- the military soaks up an estimated one-quarter of GDP -- but long-range missiles and nuclear capabilities are necessary but not sufficient for achieving the prosperity that the regime has promised by 2012, which will mark the 100th anniversary of the birth of founding father Kim Il Sung.

Unfortunately, we received our clearest indication yet of the regime's appetite for markets and reform in late 2009, when a sudden currency revaluation forced residents to exchange their money for a new currency with the same denominations and virtually identical images. But because North Koreans could exchange just $60 worth of their old bills, anyone holding large quantities of cash was wiped out. Anecdotal evidence suggests that many of the nascent outdoor markets were initially devastated. By late summer, however, images emerging from the country suggested the markets had recovered.

The same cannot be said for the North Korean economy more broadly. Notwithstanding on-the-spot guidance by the Dear Leader and the Young General, as North Korean propaganda has dubbed Kim Jong-Un, highly inefficient collective farms and dilapidated factories with intermittent access to electricity and inputs remain the rule.

At the same time, however, there are significant bright spots. North Koreans are more connected than ever before. Shortly before leaving on my first trip to Pyongyang in 2005 to guide a group of Western journalists, my host made clear what gift he expected to receive: "Please bring an MP3 player." When I gave it to him, he asked, "What did you put on it for me?" (These days, even a barbarian-handler in North Korea wants the latest high-tech media platform more than booze or cigarettes.) The change has only accelerated since then. Thanks to the Egyptian firm Orascom, the regime has allowed cell phones to sweep the country -- more than one in 50 adults, some 300,000 people, now owns one. (North Korea's previous cell phone network was mysteriously shut down in 2004.)

New media and information platforms have emerged. Elites in Pyongyang flaunt their MP3 players and a digital dictionary/mapping device became available last fall. DVDs and video CDs are flooding in from China and being sold at kiosks, with taboo South Korean dramas and American movies trading briskly under the table. USB memory sticks are being smuggled in and out with interviews and images of life in North Korea that appear in publications like Rimjingang. Even though low-tech short wave radios remain the most cost-effective way of reaching the average North Korean, there has also been a proliferation in the methods of exchanging information.

Technology is clearly a catalyst for change in North Korea, but it is also a double-edged sword that can harm both the regime and the world. No project better illustrates this dilemma than the Pyongyang University of Science and Technology, which opened quietly after many delays in October. Only 160 students are currently enrolled, but by next year, the master plan calls for 2,000 North Koreans to be taught by 250 foreign faculty members. One of the main obstacles to building the school, which was funded largely by South Korean evangelical Christians, was export restrictions on dual-use technology items such as high-performance computers. Given that the North is the prime suspect in several cyber attacks on the South, this concern is legitimate, but university officials counter that given Beijing's failure to enforce the trade restrictions, the bans have been rendered meaningless.

A less controversial and more far-reaching project to open North Korea has been the Kaesong Industrial Complex, which opened in December 2004. More than 100 South Korean companies currently operate factories there, making everything from cosmetics to shoes. On my two visits there, it was moving to see over 40,000 North Koreans working for hundreds of South Koreans. The complex is fenced off as if it were a quarantine zone, with checkpoints to allow authorized workers and visitors in. But I saw a glimpse of a more hopeful future: Could fully integrating the two economies, if not unification itself, be far behind? (One woman is rumored to have defected after falling in love with her southern boss -- to date he is the only South Korean to be detained and released by the North).

Despite Pyongyang's constant saber rattling and the deterioration in North-South relations, neither side is threatening to shut down the jointly run industrial park. Located just north of the Demilitarized Zone and close to a northern population center, the complex has actually expanded since Lee took office in 2008 (one South Korean Unification Ministry official described Kaesong to me as a "Trojan Horse" designed to spread capitalism to the North). Given that one in 200 North Korean workers is employed there and most of their wages go to the government, shutting it down would hit the North Korean economy hard and kill a $2 to $3 million-a-month cash cow for the government. Ultimately, the industrial complex both props up the regime and intertwines it with South Korea. Even after two northern attacks, the issue of whether to close the site is not even being publicly debated in Seoul -- it seems that nobody wants to kill the only remaining cooperation project.

Meanwhile, Beijing has stepped up efforts to make North Korea -- in the words of the South Korean media -- the "fourth northeast province" to meet China's insatiable demand for natural resources. Bilateral official trade and investment is estimated to have broken the $3 billion mark last year -- more than double that between the two Koreas (though still a far cry from the $140 billion in trade between China and South Korea). Over the past decade, dozens of Chinese companies have invested in North Korean iron and coal mines as well as factories, including a much-publicized "friendship glass factory" in Nampo. During his unprecedented two unofficial visits to China in 2010, Kim Jong-Il is said to have responded favorably to Beijing's entreaties. However, even if Pyongyang follows through on its pledges, economic reform and opening will be a very Chinese affair. This is a source of considerable angst for leaders in Seoul, who fear they are "losing North Korea."

The outcome of two long-rumored projects will speak volumes about Pyongyang's intentions. Beijing is believed to have signed a 50-year lease on port facilities that would give the landlocked provinces of Heilongjiang and Jilin much quicker access to the East Sea and beyond. For the past decade, however, the two sides have failed to move forward with a project to pave the road that connects the Chinese border with the port (my contacts at the border tell me the North Koreans got cold feet). Meanwhile, on North Korea's western border, there have been similar rumors of a planned industrial park next to Dandong, China, but the former Chinese head of the project, Yang Bin, was thrown in jail in 2002 for tax evasion, and no alternative plan has emerged. If either project moves forward, we will know that the North has become more serious about economic opening, at least with China.

Can North Korea's iron fist embrace the invisible hand? The chances of sweeping reforms are extremely slim, but market forces and technologies have been unleashed that will be almost impossible to stamp out. Unless we are ready to start a second Korean War, nurturing those forces remains the best way to induce change from within North Korea. Washington, Seoul, and other governments could be doing far more to make information and information platforms more accessible. For starters, they could sponsor North Koreans to study abroad, and instead of propaganda flyers, airdrop radios, VCDs, old MP3 players, and flash drives filled with South Korean news shows and dramas (even Hawaiians are hooked; see the hilarious "Ajumma, Are You Krazy?"). The North must be confronted and engaged simultaneously. Last summer, Pyongyang opened a Twitter account. Time will tell if it will one day be used to announce the overthrow of the regime.

Go to Beck on Foreign Policy.

Peter Beck is the Council on Foreign Relations-Hitachi Research Fellow at Keio University in Tokyo and the POSCO Visiting Research Fellow at the East-West Center in Honolulu.

See Beck's Jan. 2007 Article
"Meet an American Imperialist", April 28, 2007
"Expanding Korea's Soft-Power", May 26, 2007
"Leaving Seoul", July 11,2007
"Leaps of Faith", Sept. 2,2007
A Brewing Revolution, Oct. 2007
Talking-points for The Sejong Society, Feb. 2008
Every body should see the film, "The Crossing". May 31, 2008
Yonsei Univ. Syllabus, July 2008
When Bubbles Burst-Daewoo All Over Again, April 11, 2009
"Don't send Al". May 5, 2009
"Republic of suicides". June 1, 2009.
"Wall Street Journal Article". Jan. 4, 2010
"Annual articles to Encylopedia Britannica", Feb. 16, 2010.

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