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Well, we all know the three great lies: the check is in the mail; I’m from the government, and I’m here to help; and…uh, the third one probably isn't suitable for a family blog. Anyhow, today’s post is organized around three ongoing stories of people not doing what they’re supposed to.
I never promised you a rose garden, much less an apartment. According to the Daily NK, plans to build 100,000 apartment units in Pyongyang have been shelved. The plan was initially hatched in 2009 under Kim Jong-il as part of the Kim Il-sung centenary celebration. But the initiative received its first setback in the aftermath of the failed November 2009 currency reform, when the resulting disintermediation of the markets led to a drying up of the supply of cement. Now, according to an unnamed source, the state has thrown in the towel and has indicated that private individuals will be allowed to complete the project, keeping half of the proceeds from rentals or sales and giving the other half to the state. Concerns have understandably arisen as to the safety of some of the construction projects given the lack of a coherent regulatory framework and the incentive to cut corners created by the 50 percent tax rate.
We never confiscated Hyundai Asan. Dong-A Ilbo reports that according to Oh Eung Kil, general president of Wonsan district development company under the North’s external economy ministry, that business regarding the Mt. Kumgang project is all a misunderstanding: “[North Korea] never confiscated the South’s property. We did not confiscate Hyundai (Asan)’s asset.” Instead, South Korea backed out and “Because we cannot afford to continue waiting, blindly trusting the South, we will form ties with investors from various countries. Still, we are not excluding the South. The door is open.” I’d always thought that the North Koreans formally passed legislation in 2011 stripping Hyundai Asan of its property rights. Glad that misunderstanding has been cleared up.
And we never promised you a sharecropping deal, either. According to RFA , “North Korean farmers are outraged that the government of Kim Jong Un has failed to fulfill a pledge that allows them to keep nearly one-third of their grain harvest under a crop-distribution policy adopted two years ago” according to an unnamed source. As we have written for the last two years, the policy, which could be characterized as an attempt to strengthen material incentives and improve efficiency in the context of the existing socialist agricultural system, not a market oriented reform, has been plagued from the outset by problems of credibility, foot-dragging by collective farm managements, and lack of complementary policy changes. Indeed, the willingness of the state to establish fair targets and rules in past attempts to reform the agriculture sector has been an issue stretching all the way back to pilot projects undertaken in the 1990s, as Steph Haggard and I documented in our book on the famine.
Granted, no state fulfills all its promises. But the lack of accountability mechanisms means that the North Korean state acts in a particularly arbitrary and capricious manner. And this behavior comes at a cost: as Haggard and I have documented in a number of settings, the state’s lack of credibility with respect to fulfilling its commitments acts as a significant drag on the economy, discouraging investment, risk-taking and other forms of behavior that contribute to economic prosperity.
