Understanding Kim Jong Un’s Economic Policymaking: Defense Versus Civilian Spending
There is a generally accepted view that a large—perhaps the largest—portion of the DPRK economy in one way or another is devoted to the defense sector, thus starving the civilian economy.[1] This does not seem to be settled policy, however, and has not been for some time. Internal North Korean discussions on defense spending have been and continue to be key indicators of the range of leadership thinking on this central question, not merely in terms of allocation of resources, but in a larger sense, in terms of thinking about economic reform.
The Landscape
There has long been a tug-of-war in the North Korean leadership over military versus civilian spending. National priorities have almost always ended up favoring defense spending, not just for military hardware but also for priority access to talent and technology. To some extent, the debate surrounding those decisions has been conducted in full view. Contrary to the commonly accepted notion that there can be no dissent or inconsistencies in North Korean publications, North Korea’s primary economic journal Kyo’ngje Yo’ngu (Kyongje Yongu)—and to a lesser degree, Journal of Kim Il Sung University (Philosophy, Economy)—has served as a platform for voicing differing views on defense spending. Notionally, the journal is simply a platform for academics, but it is inconceivable that this level of disagreement over such a sensitive topic could be conducted without the concurrence, and more likely the active backing, of various elements in the leadership. In effect, the authors, some of whom are apparently on the leading edge of the discussions, are used to voice the contending views when a policy is under discussion within the leadership, sometimes inserting new ideas or even carefully voicing shades of opposition to the current line, again, almost certainly with high-level backing.
In that vein, over the past two decades, there have been frequent episodes where arguments have broken out in the journal over the value of defense spending, forcing those who favor giving defense industries such a large portion of the pie to justify that position in ways that went beyond simple traditional arguments about the need for strong armed forces. Simply put, there is an underlying argument that the more funds the regime allocates to national defense, the fewer resources can be spent to prop up and revitalize the civilian economy, leaving little room for reform-oriented ideas and measures to take root. In recent years, proponents of defense spending were forced to demonstrate how money in the defense sector is actually good for the economy, supports other non-defense sectors, and stimulates growth overall. The opponents, occasionally with unbelievable boldness, argued that defense spending was money down a rat hole, and actually undermined economic growth.
That debate was very evident in the period of 2001 to 2005, for example, when contending arguments appeared in the economic journal and the pages of the party daily Rodong Sinmun as Kim Jong Il’s efforts to introduce new, reform-oriented economic policies ebbed and flowed.[2]
There was a resurgence of articles in Kyo’ngje Yo’ngu beginning in 2008 again advocating a more balanced approach, and thus implicitly less emphasis on the defense sector. This was despite the North’s hardening line against cabinet-led economic reforms, which culminated in Kim Jong Il’s “June 18 talk” in 2008 with senior party and state economic officials that appeared to be rolling back these reforms.[3] Even after Kim’s stroke in August 2008, when the North seemed to swing toward a harder external line, most notably on the nuclear issue, arguments for more balanced economic policies continued to appear in the journal. There are many possible interpretations for that, but at one level, it suggests that Kim’s efforts to prepare for the eventual political succession consisted of two parts: a shield of toughness against external pressure, and a new look at ways to improve the economy to increase the chances of a smooth transfer of power.
Each year from 2007 to 2010, there were several articles in Kyo’ngje Yo’ngu that dealt primarily with or were exclusively dedicated to the defense industry and its correlation with other industries. These decreased sharply starting with the first volume of 2011, giving way to more articles on economic management—a theme which, as it developed, became increasingly linked with reforms. In other words, just four months after Kim Jong Un’s public debut in 2010, and nearly a year before his father’s death in December 2011, the economic journal was already reflecting a new focus on economic policies associated with reform and less on defense priorities.
The Debate: Three Areas of Focus
First Front. The easiest theme to identify in this overall debate is the clear cry of pain from those whose back is seemingly against the wall trying to defend the priority once granted automatically to defense industry spending.
In an article published in early 2010, proponents of a massive diversion of economic resources to the defense sector had to shift their ground. They argued, not very convincingly apparently, that spending on defense did not retard but actually helped stimulate the economy, and that arguments raised to the contrary were “one dimensional.” They said:
Conventional wisdom has it that it was the development of munitions production that delayed overall economic development. The basis for this is that munitions products cannot be inducted into the reproduction process again. This, however, is based on a one-dimensional understanding. The national defense industry of the military-first era plays the role of leading and vigorously promoting overall people’s economic development.[4]
This sort of reference to another side of an argument—in this case pushing back against a “one dimensional” viewpoint—is usually a sign of an underlying debate. Writings later in 2010 appeared to advance the other side. In typical fashion, these tiptoed into the argument. On the surface, they acknowledged the importance of the defense industry, but then argued, for example, that the defense industry was dependent on a prior development of heavy industry, implicitly rejecting the idea that by giving priority to the former, it would strengthen the latter. An article in the final volume in 2010, after a lengthy lead-in that ostensibly discussed the importance of the defense industry, shifted gears to argue the opposite. In effect, it argued that the country had already reached the level of a “militarily powerful state”—a flag around which the reformers had long rallied, and that:
At the present time, the urgent issue in our people’s struggle to build a powerful socialist state is to build our country into an economically powerful state with powerful economic capabilities.
Our country has already confidently stepped up to the position of a politically and ideologically powerful state and a militarily powerful state under the wise leadership of the great party.
Hence, the issue that needs to be resolved in our people’s struggle to build a powerful state at the present time is to place the country’s productivity development level to a position of an economically powerful state.
In order to decisively raise the level of the country’s productivity development, [we] must first give a boost to the leading sectors and basic industrial sectors of the people’s economy, which are in charge of the leading processes of social production and are the basic sectors of all industrial development, such as the machine industry.[5]
An article published in the Journal of Kim Il Sung University (Philosophy, Economy) in 2015 seemed an effort to straddle the two positions. It largely swept away an appeal to the economic efficacy of the national defense industry and reverted to an old-fashioned argument that was unusually harsh, given that Kim Jong Un’s key economic reforms had been tested and launched by the time the article was published. The article argued that military spending was crucial, first and foremost, to protect the country against “the imperialists,” citing Afghanistan and Iraq as examples that must be avoided at all costs. Nevertheless, the times apparently did not allow that argument to stand alone, and so the author was obliged to address the efficacy of defense spending for overall economic progress, in terms similar to what had been advanced in Kyo’ngje Yo’ngu several years before:
Strengthening national defense capabilities guarantees rapid economic advancements by rejuvenating the entire socialist economy through the priority development of the national defense industry…The development of the national defense industry is premised on the priority development of heavy industry. Therefore, if [we] advance the national defense industry, [we] end up promoting the priority development of heavy industry, and based on the priority development of heavy industry, [we] can also rapidly advance light industry and agriculture.[6]
In short, through this period, those arguing for special status for the national defense industry were being forced to make their case that “munitions production” was actually a productive investment, something that paid dividends, perhaps over time, in terms of overall economic progress.
Eight years later, in January 2018—almost certainly in anticipation of, and implicitly voicing some level of opposition to Kim Jong Un’s shift to the “new strategic line” of “concentrating all efforts” on the economy announced in April of that year—dueling articles appeared in the same issue of Kyo’ngje Yo’ngu. One, seemingly trying to head off the decision to shift to the new line, advocated the harder position that defense spending helped to stimulate the economy. The other suggested the need to shift emphasis away from the military. Although the former article noted that “considering the requirements of the times today, newly clarifying the position of the national defense industry arises as a particularly important issue,” it did not actually clarify anything new. Instead, it basically repeated the same argument from 2010:
According to existing notions, the effects of munitions production on civilian production have been regarded as being limited effects on the overall economic development and as delaying economic development. This was based on the grounds that munitions products cannot be inducted into the reproduction cycle again and that investment in munitions production is unproductive investment.[7]
This reference to “existing notions” is a window into how baldly the debate is being conducted beneath the surface, that however roundabout those who advocate easing off defense spending may sometimes make their arguments in the pages of Kyo’ngje Yo’ngu, the gloves are actually off. Someone is calling investment in munitions production “unproductive,” a devastating charge that no one would make without very high-level backing.
Second Front. In addition to the back-and-forth noted above, a second part of the debate revolves around the seemingly obscure issue of whether the defense industry is part of or separate from heavy industry. This is not simply academic angels dancing on the head of a pin. Within the context of the debate over the position of the defense industry’s place in the overall economic scheme, it deals with an important issue—whose share of the pie the defense industry is consuming, or by implication, it ought to consume. If the defense industry is viewed as part of heavy industry, then spending on the defense industry gets counted as contributing directly to the heavy industry sector performance. In that case, the defense industry cannot be accused of taking resources away from a vital sector since, by definition, it is actually part of that sector. In turn, that reinforces the argument that spending for the defense industry is a contribution to economic development. Those who argue to the contrary are, in effect, adopting the line referenced above—that investment in the munitions industry is unproductive; that is, it adds nothing and is actually a net loss for the economy.
The claim that “heavy industry is the national defense industry and the national defense industry is heavy industry” is sometimes justified by arguing that industries like machine, metal, and chemical fall in both the defense and heavy industry pots. One author left no doubt:
The national defense industry and heavy industry are closely intertwined so as to be inextricable. The national defense industry is founded on heavy industry, and the development of the national defense industry cannot be thought of apart from the development of heavy industry.[8]
This has apparently been a tough argument to oppose, and it is not unusual for writers to throw up a protective shield in the first part of their article by seeming to support the conservative (or safe) position, then to shift to something over the line by arguing the opposite. For example, in 2008, the first half of a Kyo’ngje Yo’ngu article emphasized in standard language the link between the defense industry and heavy industry, only to suddenly pivot to what appeared to be its real main point: heavy industry’s resources must support more than national defense and should extend to light industry and agriculture:
All of this shows that the development of heavy industry into heavy industry for the national defense industry serves as the basic direction of heavy industry construction in the military-first era.
Next, the basic direction of heavy industry construction in the military-first era is to build [heavy industry] into heavy industry that vigorously lends impetus to socialist economic construction…
From this point of view, building heavy industry into heavy industry that vigorously lends impetus to socialist economic construction means building heavy industry into heavy industry that actively lends impetus to the development of light industry and agriculture.[9]
Third front. Pyongyang’s discourse on accumulation (investment) and consumption is a third battleground inextricably, though not always explicitly, linked to the issue of defense spending.
Dueling narratives in North Korea on accumulation and consumption go back as far as the mid-1950s, when Kim Il Sung supported concentration in heavy industry and the defense industry, while those who opposed Kim’s policy accused him of neglecting the people’s livelihoods. The core of this debate has never gone away, though arguments on both sides have shifted over time.
Proponents of accumulation call for investing national resources in the people’s future happiness, namely by delaying consumption and strengthening, first of all, the defense shield, then the basic (heavy) industry necessary to produce machines and resources required for eventual use by light industry and consumer goods. They argue that consumption can grow only through a systematic increase in investment.
Supporters of consumption, on the other hand, place weight on satisfying the people’s more immediate material needs, in some cases arguing that if the people are expected to come to the defense of the nation, they need to have something to defend. They argue that excessive focus on either will adversely affect the other, as accumulation and consumption both use national income. They specifically warn against overspending on accumulation (and heavy industry goes into the accumulation basket), as it reduces the national resources available for satisfying the people’s immediate needs, such as workers’ salaries, thereby negatively impacting growth in production.
In the past, during periods of discussion or debate within the North Korean leadership over economic reform policies or when the North was looking to pivot away from reform, Kyo’ngje Yo’ngu published articles that emphasized accumulation to justify increased defense spending as investment in the people’s future happiness. For example, there was a resurgence of articles in the journal on the accumulation-consumption debate starting in 2004, in line with Kim Jong Il’s “economic construction line of the military-first era,” which called for advancing the defense industry first while rhetorically at least developing light industry and agriculture simultaneously.[10]
Kyo’ngje Yo’ngu articles on accumulation and consumption in Kim Jong Un’s time have generally emphasized equilibrium between accumulation and consumption, with some explicitly justifying such a course by painting in rosy terms the economic impact:
In a socialist society, the correlation between accumulation and consumption calls for consuming while accumulating, and accumulating while consuming without being partial to any specific one of these. In a socialist society, there can be no contradictions between accumulation and consumption—they both are geared toward promoting the well-being of the people…
When [we] firmly build socialist material and technical foundations by first directing more funds toward accumulation for strengthening the production foundations of the leading sectors of the people’s economy, the basic industrial sectors, light industry, and agriculture can [we] strengthen the country’s financial foundation, accelerate overall economic development with [our] own funds, and rapidly improve the people’s living standards.[11]
The Current Discourse
Despite Kim Jong Un’s avowal at the Eighth Party Congress in January to continue to develop new weapons and improve existing deterrence, there appear to be no signs yet of North Korea significantly backtracking on economic reforms to make room for more emphasis on defense industry. North Korean central media continue to espouse the socialist enterprise responsibility management system (SERMS) and the “plot responsibility system,” the country’s key reform measures in the industrial and agricultural sectors, respectively.
Even Kim Jong Un’s remark at a recent party Political Bureau meeting that “the mission of our economy is to meet the people’s material demand,” as he emphasized the importance of light industry, sounded like consumption over accumulation.[12]
Though Kyo’ngje Yo’ngu ceased publication as of the beginning of this year, we don’t expect an end to the long-running internal North Korean discussion or debate over whether defense spending is crucial to or a drag on the economy.
What’s Next?
The next installment will deal with North Korea’s banking policy based on articles published in academic journals on the role of banks and funds. “Bank,” much less “banking,” is almost never mentioned in North Korean central media in a policy context, apparently due to its sensitivities. North Korean academics, however, write on them regularly in journals, reflecting the regime’s awareness of the importance of banks for revitalizing the economy.
[DOWNLOAD PDF] Translator’s Note and Works Cited
- [1]
This paper is the second installment of the “Understanding Kim Jong Un’s Economic Policymaking” series made possible through generous support from the Korea Foundation and the Henry Luce Foundation. This paper also 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: https://www.38north.org/2021/05/understanding-kim-jong-uns-economic-policymaking-project-overview/.
- [2]
Robert L. Carlin and Joel S. Wit, “Preparation for Economic Reform,” The Adelphi Papers 46, no. 382 (2006): 27-52.
- [3]
For more on Kim Jong Il’s rolling back of economic reforms, his “June 18 talk,” and the anti-market measures that followed, see 한기범, 북한의 경제개혁과 관료정치 [Han Ki-beom, North Korea’s Economic Reform and Bureaucratic Politics] (Seoul: Daewon Publishing, 2020), 176-205.
- [4]
Quote translated from 리춘일, “선군시대 경제건설로선에서 국방공업의 위치와 역할,” [Ri Ch’un-il, “The Position and Role of National Defense Industry in the Economic Construction Line of the Military-First Era”] Kyo’ngje Yo’ngu 1, (January 2010).
- [5]
Quote translated from 박순철, “현시기 인민경제 선행부문, 기초공업부문을 추켜세울데 대한 우리 당 경제정책의 정당성,” [Pak Sun-ch’o’l, “The Legitimacy of Our Party’s Economic Policy on Giving a Boost to the Leading Sectors and the Basic Industrial Sectors of the People’s Economy at the Present Time”] Kyo’ngje Yo’ngu 4, (October 2010).
- [6]
Quote translated from 엄경철, “국방력강화는 국사중의 국사,” [O’m Kyo’ng-ch’o’l, “Strengthening National Defense Capabilities Is the State Affair of State Affairs”] Kim Il Sung Chonghaptaehakhakpo (Ch’o’rhak, Kyo’ngje) 3, (2015).
- [7]
Quote translated from 곽명철, “국방공업의 지위를 옳게 밝히는것은 사회주의경제건설에서 전략적의의를 가지는 중요한 문제,” [Kwak Myo’ng-ch’o’l, “Correctly Clarifying the Status of the National Defense Industry Is an Important Issue That Has Strategic Significance for the Construction of a Socialist Economy”] Kyo’ngje Yo’ngu 1, (January 2018).
- [8]
O’m Kyo’ng-ch’o’l, “Strengthening National Defense Capabilities Is the State Affair of State Affairs.”
- [9]
Quote translated from 류운출, “선군시대 중공업건설의 기본방향,” [Ryu Un-ch’ul, “Basic Direction of Heavy Industry Construction in the Military-First Era”] Kyo’ngje Yo’ngu 4, (October 2008).
- [10]
Han Ki-beom, 128-130.
- [11]
Quote translated from 박혁, “축적과 소비의 균형의 법칙을 정확히 구현하는것은 사회주의재정의 중요한 임무,” [Pak Hyo’k, “Accurately Materializing the Law of Balance Between Accumulation and Consumption Is an Important Duty of Socialist Finance”] Kyo’ngje Yo’ngu 1, (January 2016).
- [12]
“Third Enlarged Meeting of Political Bureau of 8th C.C., WPK Held,” Rodong Sinmun, September 3, 2021.