[EAI ACADEMY Lecture 5] Kim Byung-yeon

YouTube Link: https://www.youtube.com/watch?v=Kg_VP6TvFAs

■ Kim Byung-yeon: Professor, Department of Economics, Seoul National University. Ph.D. in Economics, University of Oxford. He has served as a professor at the University of Essex, UK, and Sogang University. He has received the National Academy of Sciences Award of Korea (2018), Seoul National University Research Award (2018), Nier Foundation Research Award (2019), Korean Economic Association Cheongram Award (2005), and the Royal Economic Society T.S. Ashton Prize. His representative works include Unveiling the North Korean Economy (Cambridge University Press, 2017).

Video Transcript

Is the first couple you mentioned student Kim Geon-wi? Yes, the credibility of the Chosun Ilbo data is relatively high. Is North Korean data also reliable? As you mentioned, North Korea's trade data is not compiled by North Korea itself, but by its trading partners. Therefore, it is relatively reliable. Of course, there can be discrepancies depending on the country. For example, some countries may have reported more semiconductor exports to North Korea than they actually did, or vice versa. Therefore, we are compiling North Korean data by removing such errors and using only reliable figures.

Therefore, it is difficult to assess the degree of reliability and the extent of economic integration. Looking at the stages of North-South economic integration, the first step was the creation of a steel and iron economic community. Through this, a community was formed, and iron and steel, which are important minerals in Europe, were traded internationally. This served as a deterrent to war and, at the same time, as a stepping stone for integration. Then, as integration progressed, markets were opened for trade, with tariffs removed to facilitate trade. Subsequently, factors of production, such as capital movement, and then labor movement, were allowed. This process has been followed in stages.

North Korea should also consider referencing these stages and moving forward in a similar manner. North Korea's economic failures are not solely due to North Korea itself. The failures are due to the problems of the socialist system, and as I dare to say, North Korea's system is a hybrid of socialism and capitalism, as described by the term "socialism with North Korean characteristics." This creates gaps in the adjustment mechanism, which is why North Korea's economy has failed. Of course, these are secondary factors.

However, I believe that these secondary factors do not explain the fundamental problems. Why does the current system persist? Firstly, as mentioned earlier, the market economy is growing rapidly. The market is expanding, and this is a key factor. Ultimately, the market economy can conflict with the planned economy or lead to its collapse. In such a case, the North Korean economy will also decline.

However, as the market grows, the dictator's power also diminishes. The market, by its nature, seeks autonomy. This means that events beyond Kim Jong-un's control may occur, which is unfavorable for strengthening his power. Therefore, if Kim Jong-un wants to strengthen his power, he must either suppress the market or allow it to grow. If he allows the market to grow, it will expand. Consequently, in the long run, moving towards a market economy is inevitable, and a state of transition is difficult.

Therefore, the argument that funds for denuclearization can be directly used for economic development is not feasible. As I mentioned, sanctions are inevitable during the denuclearization process. In particular, by strengthening North Korea's nuclear capabilities, the North Korean leadership has effectively secured nuclear weapons. Thus, North Korea has become a de facto nuclear power. This is a burden for the international community, including South Korea. Similarly, external issues are also a concern. Therefore, I believe a strong regime is essential at this stage. While issues such as humanitarian aid to North Korea and support for North Korean residents are necessary on a humanitarian level, providing significant support for North Korea's economy beyond that would effectively legitimize its status as a nuclear power, even if it relinquishes its nuclear weapons.

The inability to open up the economy is a conflict with the current North Korean regime. As mentioned, reform and opening up would strengthen Kim Jong-un's power by more than half. If he were to relinquish some of his power, his authority would be significantly reduced. While this might be acceptable in some cases, dictators rarely voluntarily choose to weaken their power. China and Vietnam, for example, did not pursue political reform alongside economic reform and opening.

In China, Deng Xiaoping's absolute power was maintained. Deng Xiaoping believed that reform and opening up would benefit his power. Vietnam was similar. However, North Korea is different. Marketization, which would increase pressure on the North Korean regime, would lead to the expansion of the market. Combined with the issue of bureaucratic incentives, the possibility of voluntary reform and opening is very slim, although forced reform and opening might be possible.

Therefore, I believe this is the realistic direction for North Korea's economic reform. When will this happen? It is difficult to predict. However, the timing is likely related to North Korea's denuclearization. If North Korea abandons its nuclear weapons, its economy will develop and open up, which will garner support from the North Korean people. If denuclearization accelerates, economic reform will likely accelerate as well.

Student Sung Min-je, is capitalism superior to socialism in terms of human nature? Yes, as I mentioned in my book. It is based on observing human nature. Humans are driven by self-interest. Adam Smith argued that self-interest, when pursued within a framework of justice, leads to the common good. He argued that pursuing self-interest that harms others or their reputation is not good.

A fishmonger selling fish or a baker selling bread is not harming others by pursuing their own interests. This is called self-interest, and it is considered legitimate and promotes economic development. Adam Smith observed human nature as it is, while Marx observed a transformed human nature. The key difference is the change in social structure. Capitalism was expected to strengthen, and socialism to weaken, but in reality, the opposite occurred. In the Soviet Union, after the socialist revolution, Marx's ideal of eliminating private property and distributing resources according to need was attempted. However, this led to shortages of goods and starvation. From then on, the expectation that human nature would gradually change was abandoned. Therefore, the socialist revolution was based on an experiment with human nature, and its failure is evident in the mismatch between the experiment's outcome and the reality of socialism.

I believe this is the reason for the failure of socialism. There are many good questions. The defector community faces difficulties. However, as viewers may know, many of the defectors who have come to South Korea are from the middle class. The average income of defectors is higher than that of the general North Korean population. The proportion of those with higher education is also similar. Data from South Korean or North Korean census surveys show similar patterns. Therefore, the sample is not significantly different. Of course, this problem is not entirely resolved. Is the North Korean regime change the only solution? This question seems a bit ambiguous.

Based on my research, this point is very important. If North Korea undergoes reform and opening, and especially if North-South integration is successful, the living standards of North Korean residents will improve. This is very important, but there will be other factors as well. Regime change means transforming socialism into capitalism. The best scenario is to change the policymakers. This is ideal. However, if the situation deteriorates, conflict will arise. Based on the current situation, I believe the latter is more likely. Therefore, I cannot easily answer whether regime change is occurring separately.

The current limitations of North Korean society, even in the context of unification, will likely persist. Your values may change by your early twenties, but values are generally formed later in life. Therefore, I am concerned about whether values will change with age. This result is not only in South Korea but also in other economic research papers. For example, in the book "Goodbye Lenin," which analyzes the case of German unification, it is argued that East German residents' values persisted even after unification. They believed they would receive more welfare benefits than in the West and that the government would redistribute more wealth.

Therefore, there is a concern that these values will remain even after unification. Both that paper and my own research suggest that strong sanctions are necessary for denuclearization. Simultaneously, if North Korea is denuclearizing, it will seek security, economic development, and improved living standards. These two aspects are linked. Therefore, the establishment of a peace regime and the easing of sanctions and economic development should be pursued together. Some may dream of North Korea's collapse, but that is unrealistic. While collapse is a possibility, it is not something we should intentionally pursue. Collapse is a historical event.

Therefore, even if unification occurs, these values remain. There is a well that holds these values. Thus, both that paper and the book are similar in that they contain many strong sanctions. Carter also wrote a book. At the same time, if North Korea were to suddenly weaken, then ultimately their security, economic development, and then the development of their governmental structure would be at stake. These two aspects are linked together. Therefore, on one hand, there is the issue of establishing a peace regime, and on the other hand, there is the issue of regime stabilization and economic development. These are linked together. Furthermore, through sanctions, North Korea is told not to even dream of unification. Such a thing is impossible and unrealistic. Of course, the collapse of North Korea is a possibility at any time. However, it is not something we should intentionally pursue. The collapse of North Korea is a possibility, but it is a matter of time.

Humans cannot live without purpose. Therefore, while diligently imposing sanctions for denuclearization, we must also find ways to promote North Korea's development and ensure its regime's security. I believe there is a path forward. So far, the game has not been about denuclearization itself. I believe the real game will be between the US and North Korea. Once that occurs, there will be significant developments on the Korean Peninsula, including provocations and negotiations, leading to a higher level of tension than currently exists.

Student Kim Hae-jun asks about the role of inter-Korean exchange in international politics, specifically in the context of denuclearization. As mentioned earlier, the ultimate goal is denuclearization. Inter-Korean exchange, in some ways, may not be beneficial for North Korea at this stage. North Korea's priority is to be recognized as a nuclear power through negotiations with the United States. Inter-Korean exchange might not directly contribute to this goal. If North Korea receives significant aid and economic support, it might not feel the need to denuclearize. Therefore, North Korea may not see much benefit in inter-Korean exchange unless it is strategically beneficial, such as in securing maritime or air transport routes. Therefore, I believe that inter-Korean exchange will likely increase after denuclearization negotiations progress.

The issue of China is a major one. Due to time constraints, I will briefly explain. After the US-China summit, the relationship between the two countries began to drift apart, especially after the US-China trade war. China is using the North Korean issue as a bargaining chip in its conflict with the US. Therefore, it is beneficial for China to support the North Korean regime and provide it with assistance. Consequently, China appears to be easing sanctions to some extent.

Whether this will be effective in the future remains to be seen. Currently, due to the COVID-19 pandemic, North Korea has been forced to seal its borders and significantly reduce market activities. Therefore, future observations will focus on the interplay between the COVID-19 situation and the sanctions regime.