Seek North Korea’s Future in Hong Kong and Africa

North Korea’s socialist planned economy is in a state of effective collapse. People are dying of starvation in rapid succession, and there is no end to those risking their lives to cross the border. Because a socialist planned economy alone cannot sustain the real economy, capitalism has gradually begun to seep into North Korea as well, and changes from the past are becoming visible.

Though limited, entertainment establishments targeting foreigners have been operated, and the number of North Korean residents accumulating private wealth through black-market transactions has increased. In effect, North Korea’s socialist principle of rejecting private property is breaking down.

What deserves particular attention recently is North Korea’s black market. Although it is not an official market recognized by the North Korean government, more and more people are secretly trading there to solve their personal economic problems. This phenomenon—however weak—of capitalist elements gradually expanding within North Korea, including the emergence of a new middle class accumulating private wealth, shows that there is a possibility of the North Korean system transitioning to a capitalist market economy.

Many socialist countries have sought economic growth by transitioning from a planned economy to a market economy. China, Vietnam, Eastern Europe, and the CIS52 accepted the market economy through systemic transition. In the cases of China and Vietnam, they transformed their economic systems by introducing a market economy while maintaining the ruling structure of the Communist Party regime.

In Eastern Europe and the CIS, by contrast, economic transition took place after the collapse of the Communist Party’s ruling system. East Germany, through reunification by absorption into West Germany, followed West Germany’s democracy and capitalism and was incorporated into the Western capitalist world.

Hong Kong is currently regarded as one of the freest economies in the world. Since the 1960s, Hong Kong has followed the principles of the market economy and thoroughly guaranteed economic freedom. It realized free trade by abolishing all tariffs, and by allowing the free movement of capital, it promoted both the attraction of foreign capital and overseas investment.

It also sharply lowered income taxes and abolished taxes on stock dividend income, interest income, property income, sales, and value-added taxes, thereby reducing the tax burden on economic actors and encouraging vigorous economic activity. At the same time, it removed protective regulations for businesses, industries, and employment stability, thereby creating a fully functioning market economy environment.

The results were astonishing. Hong Kong, once a poor region without even adequate farmland, nothing more than a small port at the edge of the Chinese mainland, achieved world-class economic development in less than half a century and succeeded in generating wealth with per capita income exceeding $30,000. Hong Kong’s success story—overcoming its limitations and achieving global prosperity through economic freedom—is precisely the decisive clue for resolving the economic backwardness of the North Korean region.

Recently, some African countries have achieved remarkable economic growth. Of the 10 fastest-growing economies in the world from 2001 to 2010, six were in Africa. Africa’s astonishing transformation, once the poorest and most underdeveloped region in the world, was driven by economic policies of capitalist market opening and foreign investment. In this dazzling economic growth of Africa, one can find the future growth potential of the North Korean region.

Sung-no Choi, President, Center for Free Enterprise (CFE)

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Original title: 北미래, 홍콩·아프리카서 찾아라

Author: Sung-no Choi

Date: 2017-07-12

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=27&idx=11092