The Tao of North Korea

Posted September 18, 2014

Categories: Articles, Featured, Korea

You’ve seen those nighttime satellite pictures of the Korean peninsula. The northern half is dark, while the southern half is a thousand points of light. You might think: hat’s off to those thrifty North Koreans who are helping save the planet by conserving electricity!

But of course, that’s not the message you’re supposed to take away with you. The nighttime map is supposed to be a visual representation of what we intuitively feel to be the political, economic, and social reality of this divided land. The people of North Korea live a benighted existence in a totalitarian environment, where the entire population experiences the “lights out” of a labor camp or a detention facility. The people of South Korea, meanwhile, are just like us, staying up all night to eat, drink, dance, and party. The North is Gulag style, while the South is Gangnam Style.

The reality of the Korean peninsula is, of course, vastly more complicated than these either-or contrasts. Stop thinking of the peninsula as two completely distinct halves, with barbed wire running down the middle. At the very least, think of Korea as the Taoist yin-yang symbol: two cupped apostrophes, one black and one white and each containing a dot of the other’s color. There’s a little yin in yang and a little yang in yin.

Yin and Yang

The part of North Korea that resides in the south is, of course, the population that fled: the defectors. There are now around 25,000 North Koreans living in the South. It’s a diverse community of successful restaurateurs, would-be rappers, and young graduate students, as well as the silent majority who are just scraping by, disappointed by life in a country where they often feel like second-class citizens. Some are so disappointed that they even contemplate defecting back to the North.

Meanwhile, up north, is an island of South Korean-style capitalism known as the Kaesong Industrial Complex. Located in the historic city of Kaesong, just a few miles north of the DMZ, the complex features over 100 South Korean companies employing more than 50,000 North Korean workers. The factories produce textiles, kitchenware, and electronics that are sold in South Korea and a few other markets. The zone is celebrating its 10th anniversary this year.

The Kaesong complex is the only remaining fruit of the engagement policies that transfixed the two Koreas—and the attention of the world—at the turn of the millennium.

At that time, South Korean leader Kim Dae Jung, followed by his successor Roh Moo-Hyun, met with North Korean leader Kim Jong Il to work out a vision of détente that extended from confidence-building measures in the security sphere and reunions of families divided by the Korean War to joint tourism projects and accelerated economic cooperation. Kaesong was supposed to be the first of many initiatives designed to gradually knit together the two halves of the peninsula.

A Deal Deferred

The engagement policies of Kim Dae Jung and Roh Moo Hyun—both of whom have since passed away—produced significant backlash in both north and south. Facing an uncertain security environment in the region and getting very little out of negotiations with the United States, Kim Jong Il embraced a “military-first” approach that prioritized the country’s nascent nuclear program and more developed missile program. Conservative sentiment in the south, on the other hand, propelled two hardliners into the presidency—first, a former powerhouse from Hyundai and now the daughter of South Korea’s most famous authoritarian leader, Park Chung Hee.

Relations between North and South sank to new lows. After North Korean guards shot and killed a South Korean tourist at a mountain resort in 2008, Hyundai shut down the venture that had brought more than a million South Koreans by boat to the spectacular Kumgang Mountains in the north. In 2010, South Korea accused North Korea of torpedoing its Cheonan warship. Also that year, the two sides exchanged artillery fire at the Yeonpyeong Islands near the disputed maritime boundary in the Yellow Sea.

The Kaesong complex eventually fell victim to the worsening climate of relations. In 2013, work there was suspended for five months as North Korea pulled out its workers amid complaints over international sanctions and military exercises. Several rounds of negotiations finally led to its reopening. Despite such hiccups in production, the complex has had steady growth, from about $15 million in 2005 to nearly $470 million in 2012.

But all is not well with this capitalist oasis. In the past, particularly during the negotiation of the Free Trade Agreement with South Korea, U.S. trade unions and hawkish opponents of anything North Korean criticized the working conditions and pay of the workers at Kaesong. Although it’s true that the North Korean government skims a rather hefty amount from the salaries of the workers there, average North Koreans covet the Kaesong jobs. The compensation and working conditions are not great compared to manufacturing jobs in many parts of the world—but they are a great improvement over factories elsewhere in the North.

Despite trade union concerns, the FTA—which went into effect in 2012—has not extended any benefits to Kaesong. The United States—along with the EU and Turkey—relies on a panel to determine if any products from Kaesong are eligible under the FTA. So far, the panel has nixed every product. Meanwhile, the steadily increasing wages at Kaesong have made the complex less competitive with low-wage manufacturing in Southeast Asia. And that cancels out the raison d’être of the enterprise, for Kaesong was to provide small and medium-sized enterprises in South Korea an edge over their Asian competitors.

Dollar Diplomacy

With the potential waning of South Korean interest, North Korea wants to induce other countries into investing in Kaesong. In June, the first non-Korean company, the German textile firm Groz-Beckert, opened an office in the zone. The Russian government, no doubt worried about the impact of U.S. and European sanctions on trade with the West, recently sent a trade delegation to Kaesong with an eye to invest.

Kaesong might also have some competition elsewhere inside North Korea. The free trade zone in Rason has been pulling in Chinese and Russian investors for a couple decades. In 2011, with great fanfare North Korea announced two island zones—Hwanggumpyong and Wiwha—in the river dividing China and North Korea. But the execution of Kim Jong Un’s uncle Jang Song Thaek, reportedly the chief promoter of economic cooperation between the two countries, has apparently put a damper on these development plans.

North Korea has also announced plans for 14 Special Economic Zones throughout the country. For these to take off, however, North Korea will have to find some new source of investment, and that’s not easy with the United States heading up a global regime of economic sanctions against the country.

One possibility is Japan. Negotiations between Tokyo and Pyongyang have started up again over abductees. If North Korea can produce more information about the dozen people it has admitted to abducting from Japan—Tokyo actually has a much larger list of 883 people that it suspects might have been abducted—then trade and investment may well start rolling again. Otherwise, international sanctions and a credit rating that can’t get very much lower make North Korea an unlikely place to send capital.

It would be misleading, however, to suggest that South Korea and capitalism are just a discrete dot of yin in the North Korean yang. For some years now, South Korean TV shows and films have been a popular, though illicit, pastime for North Koreans—not to mention music, comic books, and hairstyles. And capitalism, in the form of private enterprise and markets, has sprung up all around the country, offering an alternative livelihood for a new class of entrepreneurs.

Then there’s the transformation taking place at the elite level. Swiss businessman Felix Abt spent seven years North Korea managing a pharmaceutical company and setting up the Pyongyang Business School. In his recent book, he describes how capitalism has influenced the North Korean elite. A new young subset of bureaucrats is receiving the equivalent of MBAs. A software venture produced a top-selling iPhone game for the German market. The Pyongyang University of Science and Technology has taken up where Abt’s business school left off. Choson Exchange runs seminars on tech start-ups and other entrepreneurial activities around the country.

The North Korean government hasn’t quite embraced the philosophy of the Chinese of the 1980s, when Deng Xiaoping famously said that it doesn’t matter whether the cat is white or black as long as it catches mice. Some people in the North Korean government still see the world in black and white. But the country is clearly changing, even if most of that change is invisible to outsiders.

Golden Arches

Americans, for the most part, don’t know about the Kaesong Industrial Complex. They know even less about the spread of capitalist thinking that Abt describes in his book or that Choson Exchange is encouraging on the ground. If North Korea wants to turn around its image in the West, it needs to do something dramatic and symbolic. Giving up its nuclear program or closing its labor camps could certainly do the trick, but those are likely to be the last changes the country embraces, not the first ones.

Several years ago, I recommended that if North Korea really wanted to change the way the world thinks of the country, it would build a McDonalds in Pyongyang.

I don’t believe in Thomas Friedman’s discredited theory that countries that have Golden Arches don’t go to war with one another. Nor do I like Big Macs or the company’s low-wage policies. Ultimately I’d love to see McDonald’s go the way of Horn & Hardart (once the world’s largest restaurant chain).

But if the prime objective at this point is to break the ice between Washington and Pyongyang and change U.S. perceptions of North Korea, I can’t think of a better cultural ambassador than Ronald McDonald.

McDonald’s is, for most Americans, the first truly visible sign of transformation. “Gee,” they say, “the place can’t be all bad if you can get a Happy Meal there.” Thus did Americans reason when the Golden Arches showed up in Moscow and Beijing. A Singaporean firm has already set up a popular burger franchise in North Korea, so the demand is there.

The North Korean government has been holding three Americans—Kenneth Bae, Matthew Miller, and Jeffrey Fowle—and has so far turned up its nose at the emissaries that Washington has proposed for negotiating their release. The Obama administration is no doubt considering former ambassadors, former governors, or former presidents for the job. A much more interesting choice would be Don Thompson, the CEO of McDonald’s. In addition to negotiating the release of the Americans, Thompson could break ground on a new franchise in downtown Pyongyang.

Kaesong is a symbol of inter-Korean cooperation. McDonald’s could be a symbol of a new, non-military relationship between the United States and North Korea. There are problems, of course, in putting these economic models at the center of a rapprochement strategy—just as there were problems 20 years ago with using the light-water reactor of the Agreed Framework as the primary means of building peace between Washington and Pyongyang. But the goal today, as in the 1990s, should be to avoid a war in the region, so I’d rather be sending French fries to North Korea than drones.

It’s been 25 years since the Berlin Wall fell. North and South Korea could unite in a similar fashion, through a sudden tearing down of barriers. But more likely is what is already happening: a Taoist reunification in which the dots of yin and yang grow a little bigger and a little bigger until the two countries wake up one day and discover, to their amazement, that they’ve become, if not indistinguishable from one another, then at least as complementary and thoroughly intermingled as a pair of nested apostrophes.


World Beat, Foreign Policy In Focus, September 17, 2014


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