As much as the rocket launch was a political success, it represented a defeat for economic and diplomatic rationality. North Korea's missile and nuclear programmes are a massive misallocation of resources. According to the South Korean government, the missile programme has cost about $3 billion since 1998, enough to feed the country for three years. The nuclear programme is said to have cost $6.5bn. After the space launch, Kim Jong-un claimed that North Korea needed more satellites to boost the economy. However, the economy seems most unlikely to benefit. In fact, by going ahead with the launch, Kim Jong-un ensured that North Korea will remain isolated and bereft of the economic assistance and investment that would flow from rapprochement. The United States will instead tighten sanctions on North Korea, if not through the UN then surely unilaterally, as it did in 2005 by effectively freezing DPRK assets in the Macao-based Banco Delta Asia.
Through its actions, North Korea has effectively rejected the call by US President Barack Obama at a speech at Yangon University in Myanmar last month for North Korea to follow the Myanmar model and escape the 'prisons of the past'. If Pyongyang abandoned its nuclear weapons, he said, it would 'find an extended hand from the United States of America'.
The Myanmar model is relevant in that the formerly isolated, autocratic and paranoid military regime in Naypyidaw has given way to an ostensibly civilian government intent on rebuilding ties with the West so as to escape Chinese dominance. The Myanmar model is imperfect, however, and not just with regard to political reforms. Though Myanmar's president declared an intention to accept intrusive IAEA inspections and its defence minister declared earlier this year that military ties with North Korea had been cut, the flow of military shipments from North Korea, which are prohibited by the UNSC, has not yet dried up. In August, Japan interdicted metal pipes and specialised aluminium-alloy bars en route to Myanmar from North Korea that could be connected with missile or even nuclear programmes. (In May, South Korea similarly seized a shipment of North Korean ballistic-missile parts bound for Syria.)
Economy
The opportunity costs incurred by the Unha-3 launch may have been easier for Kim Jong-un to ignore in light of positive economic signs. Although reliable figures are hard to come by (the Kim regime releases no economic data), North Korea's estimated per capita income stands at less than 1/20th of that of South Korea. Pictures of malnourished young people and soldiers reflect the nation's desolation. Yet the economic downslide was reversed last year, according to the Bank of Korea in Seoul, and things look far better in the capital, as is typically the case with authoritarian countries. As described by North Korea-watcher Ruediger Frank, the widening gap between Pyongyang and the countryside reflects a two-speed economy. On a visit this autumn, he reported a blossoming of stores, kiosks and taxis. A growing segment of the urban population was clearly enjoying discretional income. An Egyptian cell phone joint venture in February recorded one million subscribers after three years in the market.
For Pyongyang's elite, life is not dreary. The ebullient Kim Jong-un has promoted funfairs, pop music and stylish fashions popularised by new first lady Ri Sol-ju. So far, however, these changes in leadership style have not heralded changes in substance. There is little evidence that minor agricultural reforms formulated on 28 June have been implemented in practice. Collective farms were to have been broken into family-sized plots (though they would still be state-owned) and farmers were to have been allowed to keep a portion of what they chose to grow. To the surprise of North Korea-watchers, the Supreme People's Assembly, which had been expected to rubber-stamp the measures, did not endorse them. According to one report, the reforms have been postponed until next year. This is not the first time that North Korea has announced economic reforms, only to reverse them later. Such was the case with reforms of 1 July 2002 that legalised private markets. Three years later, market activities were constrained and the public distribution system reinstated, although markets continue to flourish with a quasi-legal status.
Kim Jong-un's pledge in his debut speech in April that the North Korean people should never have to 'tighten their belts again' might prove to hold true for the classes upon whom he depends for survival. Yet fundamental contradictions in an economy that cannot provide for the rural destitute and a society that increasingly runs on corruption rather than ideology look likely to deepen fissures. Meanwhile, North Korea's isolation will become more pronounced if, following the pattern of 2006 and 2009, it reacts to UN Security Council censure of its missile launches by conducting another nuclear test. If so, Kim Jong-un will further destroy any hope of attracting the foreign aid and investment that will be required to turn the economy around. Popular though he appears to be at home, Kim Jong-un is winning no friends in the rest of the world.
