Markets and Famine in North Korea

Stephan Haggard (PIIE), Marcus Noland (PIIE) and Erik Weeks (Peterson Institute for International Economics)

Article in Global Asia, Vol. 3, No. 2

August 1, 2008

In the 1990s, as many as a million North Koreans died in one of the worst famines of the 20th century. Unlike the dramatic recent natural disasters in Burma and China, North Korea’s current food crisis, a product of self-destructive policies, bad weather, and global food price increases, has metastasized largely beyond public view, abetted by Pyongyang’s penchant for secrecy.

Permanent resolution of North Korea’s chronic food problems requires revitalization of its industrial economy. Genuine opening would enable the country to earn foreign exchange and import bulk grain on a commercially sustainable basis, just as South Korea, China, and Japan do. But the North Korean regime remains extraordinarily sensitive to the domestic political implications of liberalization; if anything, the government appears to have tacked away from reforms.

Although it is scant comfort, the crisis of 2008 is unlikely to approach the magnitude of the 1990s famine. In that earlier episode, the regime allowed the food situation to deteriorate for years virtually out of sight of the rest of the world. In contrast, the recent conclusion of a large food aid deal with the United States is likely to blunt the current calamity. However, it is highly unlikely that the US aid or the moderation of global food prices will entirely stave off hunger-related deaths, and the failure to secure adequate fertilizer during the spring planting season has set in motion a dynamic that will carry the crisis into 2009.

Food Balances

The roots of the current emergency lie in a series of reckless decisions undertaken by the North Korean government beginning in 2005. On the back of improved harvests and generous aid, primarily from South Korea and China, the state banned the private trade in grain. In doing so, the government effectively criminalized the primary mechanism through which most North Korean families secured food in the wake of the last great famine, namely, the market. The government also confiscated grain in the rural areas. Having disrupted both the consumer and producer sides of the food economy, the government also shut down the activities of the World Food Program and other relief agencies operating in the hinterland, neutering the outside world’s early warning system. Local harvests declined, victim to farmers’ coping behavior, fertilizer shortages, and floods in 2006 and 2007.

Following the missile and nuclear tests in 2006, the South Korean government of President Roh Moo-hyun suspended critical donations of fertilizer well before the election of conservative Lee Myung-bak in December 2007. China also responded strongly to the missile and nuclear tests, voting for UN sanctions and limiting bilateral assistance as well. The North responded to the election of Lee Myung-bak with vitriolic attacks on the new administration and a refusal to accept food aid, despite the government’s stated willingness to supply it on request.

Just as aid from these two important patrons began to dry up, global food prices began their relentless rise and the regime’s capacity to import grain commercially was attenuated.

There is real uncertainty about the extent of distress in North Korea. Basic information is treated as a state secret. At the simplest level, we do not know how many North Koreans there are—estimates range from 20 to 24 million— rendering all estimates of human consumption needs suspect. On the supply side, there is little accurate knowledge about local harvests: official pronouncements tend to exaggerate shortfalls when more assistance is needed. In March 2008, the Food and Agricultural Organization, diplomatically constrained to acknowledge politicized North Korean figures, revised its estimates of the last harvest downward by a whopping 25 percent. If the UN system’s figures are correct, North Korea is already experiencing famine.

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Stephan Haggard Senior Research Staff
Marcus Noland Senior Research Staff

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