This paper is the fourth installment of the “Understanding Kim Jong Un’s Economic Policymaking” series. It tackles what has been the heart of Kim’s economic policy initiatives from the very start of his time in power—an effort to revive the North Korean economy by changing in both the enterprise and agricultural sectors the incentive and responsibility structures which had previously put enormous power in the hands of the central state and party bureaucracy.
Making these changes would not be easy, and Pyongyang faced numerous practical and ideological challenges along the way. Kim appears to have approached these policy initiatives carefully and systematically, though as is always the case, the fine details of implementation at the real operational levels had to be worked out as theory and plan met realities on the ground. The North’s two key economic journals—Kyo’ngje Yo’ngu and the Journal of Kim Il Sung University (Economics) (also known as Hakpo)—provide important insights into how this process evolved, and at least an indirect look at the various perspectives on what the policies meant and the difficulties they faced.
Background
Kim’s “report” at a party plenum in March 2013 is best remembered for his proclamation of the byungjin policy of simultaneous economic and nuclear-armed forces construction. But we often forget that it was at this meeting that Kim officially defined and offered broad guidelines on “economic management methods of our style,”—reforms intended to pick up and build on his father’s “July 1 [reform] measures” from 2002.The plenum also marked the first time Kim explicitly endorsed “socialist enterprise management methods,” which would later become known as the “socialist enterprise responsibility management system (SERMS),” the hallmark of Kim’s reform that gives individual enterprises greater latitude in planning, production, and management of resources and profits.
At that March plenum, Kim said:
“[We] should research and perfect economic management methods of our style in line with the demands of reality’s development. Economic management methods of our style that materialize the Juche idea should be socialist enterprise management methods that ensure the producer masses fulfill their roles and responsibilities as masters of production and management. [This should be done] by firmly adhering to the socialist ownership of the means of production, and with all enterprises carrying out their business activities independently and creatively under the state’s unified guidance.”
As early as March 2012—only months after Kim Jong Un had assumed power—North Korean state media started referring to “economic management methods of our style that materialize the Juche idea,” indicating that reform measures were already being researched and formulated under that rubric. In his New Year’s speech in 2013, Kim gave his first official nod to reform by mentioning the need to “steadily improve and perfect the methods of economic management.” The further guidelines he provided at the party plenum two months later laid the groundwork for the media and academic journals to disseminate and expound on the ideas and principles of the new reforms.
There is good evidence that economic reform was at the top of Kim’s agenda when he ascended to power. It seems likely that these ideas were being discussed even before Kim Jong Il died in December 2011. According to Pyongyang’s unofficial mouthpiece Choso’n Sinbo, Kim Jong Un presented guidelines on reform to economic officials and academics at the end of 2011, presumably right after Kim Jong Il’s funeral. The Cabinet, research institutions and economic sectors then went through a process of conducting research, holding discussions, proposing ideas and introducing viable proposals to farms and enterprises on a trial basis—and once they passed the test, implementing them on a national level. Accordingly, North Korea in 2012 started giving greater management rights to some plants, enterprises, and cooperative farms on a trial basis. By February 2014, Kim was ready to announce incentivized farming (detailed below under “Agriculture”). In a private talk with party, state and army officials on May 30, 2014, Kim formalized the three main pillars of “economic management methods of our style”: 1) the state’s unified guidance of the economy and strategic management, 2) correct implementation of SERMS within the parameters of the socialist economy, and 3) the party’s leadership over economic work.
North Korean academic journals launched a campaign on economic management in the summer of 2013, shortly after Kim’s March plenum report. In the beginning, the articles focused on explaining the basic principles of economic management methods, stressing the importance of researching and perfecting them. The articles then moved on to the three main points of the Kim Jong Un-led “economic management methods of our style.” SERMS was mentioned for the first time in a Hakpo article at the end of 2014, but it was not until the spring of 2018, after North Korea shifted from byungjin to a policy focusing on the economy and as the country was embarking on a path of diplomacy, that the journals started discussing SERMS and its specific aspects in earnest.
Read the full analysis on 38 North.
Understanding Kim Jong Un’s Economic Policymaking: Management System Discourse
By Robert Carlin • Rachel Minyoung Lee
Korean Peninsula
Originally published on 38 North.
This paper is the fourth installment of the “Understanding Kim Jong Un’s Economic Policymaking” series.1 Note: This paper uses a modified version of the McCune-Reischauer romanization system for North Korean text, with some proper nouns following internationally recognized spellings or North Korean transliterations instead. For an overview of the project and the project’s scope and methodology, see Rachel Minyoung Lee and Robert Carlin, “Understanding Kim Jong Un’s Economic Policymaking: Project Overview,” 38 North, May 28, 2021, https://www.38north.org/2021/05/understanding-kim-jong-uns-economic-policymaking-project-overview/. On the evolution of North Korea’s defense spending policy, see Lee and Carlin, “Understanding Kim Jong Un’s Economic Policymaking: Defense Versus Civilian Spending,” 38 North, September 22, 2021, https://www.38north.org/2021/09/understanding-kim-jong-uns-economic-policymaking-defense-versus-civilian-spending/. For North Korea’s banking policy, see Lee and Carlin, “Understanding Kim Jong Un’s Economic Policymaking: Pyongyang’s Views on Banking,” 38 North, December 22, 2021, https://www.38north.org/2021/12/understanding-kim-jong-uns-economic-policymaking-pyongyangs-views-on-banking/. It tackles what has been the heart of Kim’s economic policy initiatives from the very start of his time in power—an effort to revive the North Korean economy by changing in both the enterprise and agricultural sectors the incentive and responsibility structures which had previously put enormous power in the hands of the central state and party bureaucracy.
Making these changes would not be easy, and Pyongyang faced numerous practical and ideological challenges along the way. Kim appears to have approached these policy initiatives carefully and systematically, though as is always the case, the fine details of implementation at the real operational levels had to be worked out as theory and plan met realities on the ground. The North’s two key economic journals—Kyo’ngje Yo’ngu and the Journal of Kim Il Sung University (Economics) (also known as Hakpo)—provide important insights into how this process evolved, and at least an indirect look at the various perspectives on what the policies meant and the difficulties they faced.
Background
Kim’s “report” at a party plenum in March 2013 is best remembered for his proclamation of the byungjin policy of simultaneous economic and nuclear-armed forces construction. But we often forget that it was at this meeting that Kim officially defined and offered broad guidelines on “economic management methods of our style,”—reforms intended to pick up and build on his father’s “July 1 [reform] measures” from 2002.2 Note: For analysis of Kim Jong Il’s reform initiatives, see Sung-wook Nam, “Evaluation of the North Korean July 2002 Economic Reform,” North Korean Review 3, no. 1 (Spring 2007): 32-44, and Jong S. You,” Market Reforms in North Korea: Are They for Real?” North Korean Review 3, no. 2 (Fall 2007): 27-44. The plenum also marked the first time Kim explicitly endorsed “socialist enterprise management methods,” which would later become known as the “socialist enterprise responsibility management system (SERMS),” the hallmark of Kim’s reform that gives individual enterprises greater latitude in planning, production, and management of resources and profits.
At that March plenum, Kim said:
“[We] should research and perfect economic management methods of our style in line with the demands of reality’s development. Economic management methods of our style that materialize the Juche idea should be socialist enterprise management methods that ensure the producer masses fulfill their roles and responsibilities as masters of production and management. [This should be done] by firmly adhering to the socialist ownership of the means of production, and with all enterprises carrying out their business activities independently and creatively under the state’s unified guidance.”3 Note: Quote translated from “경애하는 김정은동지께서 조선로동당 중앙위원회 ２０１３년 ３월전원회의에서 하신 보고,” Rodong Sinmun, April, 2, 2013.
As early as March 2012—only months after Kim Jong Un had assumed power—North Korean state media started referring to “economic management methods of our style that materialize the Juche idea,” indicating that reform measures were already being researched and formulated under that rubric. In his New Year’s speech in 2013, Kim gave his first official nod to reform by mentioning the need to “steadily improve and perfect the methods of economic management.”4 Note: “New Year Address Made by Kim Jong Un,” KCNA, January 1, 2013. The further guidelines he provided at the party plenum two months later laid the groundwork for the media and academic journals to disseminate and expound on the ideas and principles of the new reforms.
There is good evidence that economic reform was at the top of Kim’s agenda when he ascended to power. It seems likely that these ideas were being discussed even before Kim Jong Il died in December 2011. According to Pyongyang’s unofficial mouthpiece Choso’n Sinbo, Kim Jong Un presented guidelines on reform to economic officials and academics at the end of 2011, presumably right after Kim Jong Il’s funeral.5 Note: [5] Kim Chi-yo’ng, “Economic Construction Based on Byungjin Line: ‘Changes on the Ground’ According to an Academy of Social Sciences Researcher,” Choso’n Sinbo, January 26, 2015. The Cabinet, research institutions and economic sectors then went through a process of conducting research, holding discussions, proposing ideas and introducing viable proposals to farms and enterprises on a trial basis—and once they passed the test, implementing them on a national level.6 Note: Ibid; Ri T’ae-ho, “Cabinet and Production Sites Closely Connected amid the Supreme Leader’s Interest,” Choso’n Sinbo, May 10, 2013; and Ri T’ae-ho, “For the Perfection of ‘Economic Management Methods of Our Style’: Interviews with Cabinet Officials Concerned,” Choso’n Sinbo, May 10, 2013.https://www.38north.org/cabinet-and-production-sites-closely-connected-amid-the-supreme-leaders-interest/ Accordingly, North Korea in 2012 started giving greater management rights to some plants, enterprises, and cooperative farms on a trial basis.7 Note: Ri T’ae-ho, “Cabinet and Production Sites Closely Connected amid the Supreme Leader’s Interest,” Choso’n Sinbo, May 10, 2013. By February 2014, Kim was ready to announce incentivized farming (detailed below under “Agriculture”). In a private talk with party, state and army officials on May 30, 2014, Kim formalized the three main pillars of “economic management methods of our style”: 1) the state’s unified guidance of the economy and strategic management, 2) correct implementation of SERMS within the parameters of the socialist economy, and 3) the party’s leadership over economic work.8 Note: North Korea’s veteran economist Ri Ki-so’ng in an interview with Choso’n Sinbo unveiled that these were the three main points of Kim Jong Un’s “economic management methods of our style.” See Kim Chi-yo’ng, “Economic Construction Based on Byungjin Line: ‘Changes on the Ground’ According to an Academy of Social Sciences Researcher,” Choso’n Sinbo, January 26, 2015. See also 김치관, “김정은 ‘5.30담화’와 내각 상무조,” 통일뉴스, January 6, 2015.
North Korean academic journals launched a campaign on economic management in the summer of 2013, shortly after Kim’s March plenum report. In the beginning, the articles focused on explaining the basic principles of economic management methods, stressing the importance of researching and perfecting them. The articles then moved on to the three main points of the Kim Jong Un-led “economic management methods of our style.” SERMS was mentioned for the first time in a Hakpo article at the end of 2014, but it was not until the spring of 2018, after North Korea shifted from byungjin to a policy focusing on the economy and as the country was embarking on a path of diplomacy, that the journals started discussing SERMS and its specific aspects in earnest.
Read the full analysis on 38 North.
Notes
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