North Korea: Economy at the Crossroads

The “hermit country” is one of many apt descriptors for the Democratic People’s Republic of Korea (also known as North Korea). A recent string of iron fist moves by the new supreme leader, Kim Jong-Un –including the public execution of some eighty citizens (including his own uncle) and inveterate attempts for developing missiles and nuclear weapons – has reaffirmed its path towards isolation. There have been tantalizing signs, however, that this regent is considering something of an open-door policy. Since 2011, Chairman Kim has pursued the establishment of over a dozen of economic development zones, encouraged family-based farming, and invited in foreign investors by normalizing the exchange of foreign currency in private markets.

Such seemingly aberrant policies from the last remaining communist dynasty are in fact a recommencement of the economic reforms that were alight from 1999 to 2003. And to most people, it was already a decided fate due to the disintegration of the Eastern-bloc, a stronghold for the North’s industrial architect, and the clobbering by natural disasters that led to the de facto collapse of the North’s state-socialist economy.

Much remains unclear about how far North Korea wishes to walk the fine line between a market economy and a planned socialist economy. To some, the country has followed, or at least attempted to follow the classic equation of a market economy – decentralized resource allocation, price arbitration by supply and demand, free market entry, and competition. Throughout the varying stages of reform, the government restructured much of the administrative structure of state-owned enterprises (SOEs). The “socialist goods exchange market” was introduced to permit SOEs to independently decide the means of exchanging goods at the market price, the self-accounting system was enacted to warrant SOEs’ greater autonomy. As a result, SOEs are now evaluated based on their profits than the execution of state plans. Farmers’ markets, the centrifugal force to the country’s marketization, too, were legalized, and even unleashed the birth of other municipal markets. As previously mentioned, efforts to recruit foreign investors to generate vibrant economic environment are swirling as well.

On the other hand, the new administration still has not let go of certain desires that would put a serious halt to marketization. In 2009, the North Korean government introduced a new currency, allowing the people to exchange their old money for new at a rate of 100 to 1 as a deliberate attempt to revamp the state planned economy by collecting money from the non-national sector. Even more telling  is that the government budget takes up over 60% of the national GDP, and the Central Bank in charge of the supply and demand of money operates largely under the commanded plan.

Unsurprisingly,  the North has chosen to focus on export-oriented growth by employing its cheap, disciplined labor and rich natural resources for realizing a successful transition to a market economy. This requires strong international cooperation which the North probably cannot cultivate in the current political atmosphere. Its obstinate stance on nuclear weapon development has triggered international criticism and severe sanctions. China no longer serves as the North’s safe haven as China’s own standoff with the U.S.-Japan alliance has pushed China to pursue a friendly relation with South Korea. In a nutshell, despite Commander Kim’s currency reform and semi-free market formation to attract foreign capital, a political environment with high security risks and low incentives for investment is probably detrimental enough to shoo capital inflows.

One stroke of luck for North Korea lies in that it is located at an economically dynamic center, having China, South Korea, Russia and Japan as its neighbors. As the North has an economically and politically deficient position to start with, the reform will presumably come slowly and with much confusion, and thus in desperate need for external assistance. Amidst the ever intensifying political tension in East Asia, the North’s construction of a healthy economic system could build momentum for breaking this tension and building more cooperative relations. It is unclear what North Korea will choose to do at this crossroad. Its commitment to impartial economic reforms through relatively loose foreign policies could be a cornerstone for upending its infamous history, and realizing peace both at home and abroad.

Haven “Of the People, For the People, By the People”

It sounds reasonable to assume that a high crime rate correlates with political, economical, and social turbulence. But Nicaragua, a country lying in the center of Central America, defies this apparent logic. Despite its reputation as the second poorest country in the western hemisphere, Nicaragua has made remarkable strides in public security compared to its regional neighbors, the Northern Triangle– El Salvador, Guatemala, and Honduras. In 2012, the homicide rate in Nicaragua was 11.3 per 100,000 persons, less than one-third of the rates seen for its three northern neighbors.

From CentralAmericanPolitics

Nicaragua’s public safety profile is an even bigger surprise once you consider its economic, political, and geographical reality. As mentioned, Nicaragua’s living standard is one of the lowest among its regional neighbors with almost half the population in unemployment and homelessness. The wage rate for police officers, set at $120 a month, as well as their availability, 18 per 10,000 persons, is just as bad as the country’s poverty level. Politically, it has only been forty years since the revolutionary knock-over of the Somoza family dictatorship, and the foreign-intervened guerilla war against the subsequent authoritarian Sandinista regime. Such a short history of recovery is a fair enough excuse for Nicaragua to have security irregularities as past remains. What takes people aback the most is probably that Nicaragua has eschewed violence by drug traffickers and youth gangs like the MARAS or BARRIOS that have defined Central and South America for centuries. While Nicaragua shares a border with Honduras, a country pegged as one of the most dangerous areas in the world with the largest presence of the Maras, it has little identified indigenous terrorism and organized crimes.

It is neither stellar sociopolitical stability nor geographic prerogative that undergirds Nicaragua’s peace-mongering environment. Then, what? The most sounding answer lies in “preventive, proactive, community-oriented police model.”

Four decades of civil war the in Northern Triangle occurred at the end of the twentieth century, though they all differed in intensity, nature, and longevity. These conflicts caused these nations to develop national security policies that engagee the military in reactionary and repressive fashion. In contrast to their iron-fist policies, Nicaragua’s police system, while still retaining the pattern of military engagement in public security, proactively seeks to create a safe social environment. For example, the Nicaragua National Police (PNN) has created specialist bodies for youth violence and intra-family and sexual violence, which take up 20% of the national crime rate. These bodies carry out comprehensive three stage responses – transforming local environments, cooperating with local NGOs and health centers for victim support, and vocational training and education.

Even more telling of the country’s success, is the community-oriented aspect of the police model. A 1995 Constitutional Reform has given the PNN its own General Directorate and greater independence, which allows it freedom from political games. Under the centralized leadership, its operation is enrooted in a strong police-society partnership in a decentralized manner. There are usually broad channels of communication with local residents such as community assemblies and direct linkages with the people. In each district, there is a sector police chief, responsible for paying door-to-door visits to residents, building close ties with them, and inviting them for neighborhood watch activities. Among 100,000 volunteers nationwide assisting the PNN in both crime detection and victim support are some professionals like law and psychology students, as well as some experienced former gang members and victims of violence, and NGOs. The fact that Nicaragua has social culture of parochialism and small-township, resulting in close community ties, complements the picture.

Nicaragua is not completely spared from the threats of violence. There are still 25,000 or so youth gangs. They are small in scale and often do not have foreign connections. But it is a logical sequence that the Mara gangs, contained in the North for now, may move south and reach these youths, especially at the wake of the Central America border control agreement which allows free movement of citizens between Nicaragua, El Salvador, Guatemala, and Honduras. Threats from a Mexican Mob, the Zetas cannot be ignored, as well. The persistence of low income, high poverty level further “legitimizes” participation in cocaine smuggling and investments. Above all, fraud in 2008 municipal elections, and the Police Directorate’s neglect of the limit on a five-year term, a writ-large departure from democratic order, pose a greatest disturbance to the philosophy of the country’s legal system.

Nicaragua has done a fair job so far, fair enough for the neighboring countries to learn from, though not replicate, its police model. Whether it will continue to be exemplary depends first on the collective effort by its regional partners to contain and ultimately eradicate organized crime groups. What remains of greater importance is to strive to live by a pillar that ensures equality of all people both politically and economically.

Into the Twilight

An aging population can pose many challenges to both families and developing nations. In China where the dominance of traditional filial pieties have dictated social norms, manly elders fear having no warrant for filial support after retirement due to changing norms. At this juncture, a brilliant trend-spotter, Starcastle offers a promising alternative. Starcastle is a Shanghai-based joint venture company between a large Chinese conglomerate, Fosun Group, and an American hedge-fund giant, Fortress Investment Group, that caters to hospitable senior living communities for retired elders. A stereotypical life of quiet retirement is unheard of at Starcastle. Instead, classy, up-to-date activities like tai chi, calligraphy, dances, social media messaging, and gaming in open-air cafés invigorate the facility and the lives of its residents.

The vibrant scenes playing out in this “castle” reflect a prominent trend in China’s social service market. Attracted by the country’s aging population, major U.S. firms including Emeritus Corp., Life Care Services LLC, and John C. Erikson have broken into the Chinese market in a tight consultation with Chinese firms, developers, and government officials. Small-scale government sponsorship like tax incentives and direct financial support for private nursing institutions dates back to as early as the 1950s. The number of institutions established, however, was not even close to being enough to care for the country’s elderly population, and poor infrastructure, service quality, and prices never appealed to the Chinese people. Reflecting on its past failure to build up the senior services market, the Chinese government made some effort itself to increase participation by allocating a huge block of land in Beijing for senior housing, overtly relying on the private sector in developing senior care.

Services for the aging population in China do in fact need a serious overhaul. In 2000, China’s 60-year-and-older population reached approximately 10% of the total population. Chinese government officials project that one third of China’s population will be over retirement age by 2050. Many blame the demographic fallout on the 1979 One-Child Policy, which dramatically shifted population balance. Increasing life expectancy has also contributed to the problem. In 1980, life expectancy for both sexes was 64 years. In 2001, it rose to 78.1 years. When these numbers are tied together with the average retirement age – 55 for female and 60 for male – it turns out that the elderly have a significant portion of their lives left after retirement.

 

The developing senior care sector is also in response to another noteworthy demographic trend – the rise of the urban middle class. The increase in China’s middle class population has been extraordinary. By 2022, more than 45% of the population is expected to be categorized as middle income earners. Right now, the mass middle class accounts for more than half of that number, but many expect the upper middle class, who can pay a premium for quality products and discretionary services, to become the new mainstream. Senior care does not come cheap. Starcastle primarily targets wealthy business owners in Shanghai who are capable of paying high costs for independent-living apartments, nurse care, housekeeping, and healthy meals. Rising labor and service costs, prices for land-use rights, and costs involved in the overall process inevitably drive the industry to target the rich for profitability. Senior care communities are attainable only for the powerful middle class, at least for now.

Of course, current efforts by foreign firms and domestic developers are not enough to entirely fend off the burden of caring for the aging population. There is still a large chunk of the population, mostly in rural areas, who cannot take part in this upmarket industry. China’s remarkable economic growth may also stall, dragging down middle-class ambitions with it. Chinese government’s ambiguous guidelines on its censorship and regulations on private, especially foreign, firms may put a halt to the deluge of development efforts in elderly care, as well.

In most developed countries, social benefit programs along with the long-lived culture of planning for post-retirement have been a cornerstone for caring for the elderly. China’s unique social, economic, and cultural environments  requires a new or revised development model that suits China’s characteristics. Amidst many uncertainties, one thing seems to be clear though; greater government participation and subsidies beyond allowing foreigners to participate is needed, so that all can comfortably live out the twilight of their lives.

Liberty to the People, Fetters to the Government

China’s Non-Governmental Organization (NGO) sector has long been surveilled, regulated, and suppressed by the central government. But there is now a gleam of hope: the Third Plenum of the 18^th Congress Party adopted a reformist decision on November 12, 2013, signaling a possible willingness to extending the role of NGOs under the Xi Jinping administration. The Decision highlighted “social governance” to delineate the country’s governing order, acknowledging the significance of a mutual assistance between the government and the people.

In fact, the gesture of relaxed control over NGOs was looming even before this official pronouncement. In just the past 25 years, over 50,000 officially registered NGOs have emerged, and Karla Simon, an author of “Civil Society in China” expects this number to double in the next two years or so. Until 2011, NGOs were required to have a state sponsor to officially register with the government. Nonetheless, the government has eased this rule, and some even say that they encourage organizations to have a non-state sponsoring agency.In China, all NGOs must, by law, be registered with local governments, but the reality tells a different story. There are approximately 1.5 million unregistered NGOs, constantly mounting in number and influence. Although those that deal with overtly contentious or subversive political issues remain on local governments’ radar, the array of causes the government condones has significantly increased as well.

 

 

Behind this increasing tolerance is political and social decay that has almost coerced the government into allowing its people more participation in governance. Politically, it has become difficult for the Chinese Communist Party (CCP) to legitimatize its monopolistic rule. Since the erection of the People’s Republic of China (PRC) in 1949, the CCP’s legitimacy depended on its strict adherence to the socialist ideology, a consummation of Chinese culture. Since the party adopted a market economy which contradicted socialist roots during the 1989 reform, it has constantly refurbished its new economic framework as necessary ‘pragmatism.’ Yet, the party’s intensive reinforcement of a capitalist economy has inevitably breached on socialist tenets and jeopardized people’s trust in the government.

The CCP has also failed to provide its people the ‘iron rice bowl.’ China’s breakneck urbanization and dependence on global markets have led to many social problems including environmental pollution, land confiscation, food scarcity, and shortages of labor resources and public services. In response, inclusive and innovative ways to participate in governance have been introduced by a new middle class less confined by the socialist ideology. The government has little ground to push ahead with in its complete clampdown on Chinese civil society, and they also surprisingly believe in NGOs for their ideas, practical, hard-worn knowledge of social problems, and ability to gain local people’s trust. In short, the economic and social problems that have been limiting people’s lives are now, in the new front, a source of liberty to the people and fetters to the government.

There are still more restrictions and limitations than freedom and potentials. Of the 50,000 official NGOs, most are still quasi-government organizations affiliated with government agencies. Organizations committed to politically subversive subjects cannot be officially recognized. In regards to the government’s intentional oversight over unofficial grassroots NGOs, some argue that there are hidden rules of “no recognition, no banning, no intervention” that implicitly manipulate and restrict organizations’ operations. NGOs are largely seen as a temporary tool for the CCP to realize its ends.

The Third Plenum’s edict does mean a thumbs-up for reforms that have been going on in the NGO sector. With no specific blueprint on how the 18^th National Congress will implement laws and regulations, however, the  future of Chinese civil society still remains a question in the long-run.