By Georgy Toloraya
20 October 2016
While the North Korean nuclear problem has long been at the center of discourse concerning the Korean peninsula, the recent growth of its nuclear and missile programs has prompted a new concern: North Korea could soon directly threaten US territory, giving it a deterrent capability it had never had before. This looming threat underscores an uncomfortable truth: Kim Jong Un has outmaneuvered the international sanctions regime with his “byungjin” policy of simultaneous nuclear and economic development, and the world must now find a strategy to curtail the country’s nuclear program.
An Outdated Response
The North Korean nuclear dilemma has evolved far beyond the issue that sanctions originally sought to counter. While Pyongyang has achieved unprecedented nuclear and missile advances during US President Barack Obama’s administration, the basis for that leap forward was established during Kim Jong Il’s rule. The former leader was far more moderate and inclined toward compromise than his son; he preferred not to provoke his opponents with excessive nuclear and missile demonstrations and only presided over two nuclear tests and a handful of missile tests—quantities inadequate for the deployment of operational weapons. Kim Jong Il appeared to restrain the North’s nuclear development in hopes that diplomacy would finally work, and reasonable members of the US establishment would overrule US and South Korean conservatives with a strategic decision to recognize and coexist with North Korea.
That decision never came during Kim Jong Il’s lifetime, and the less patient Kim Jong Un seems to have adopted none of his father’s limits on pressuring the United States and South Korea. Still, the Obama administration did not initially anticipate the level of progress Pyongyang has achieved under its guiding principle of “strategic patience,” which relies on the false assumption that the regime is nearing collapse. In line with this thinking, Washington has answered North Korea’s nuclear and missile tests by trying to increase the North’s economic and political isolation.
But despite a decade of sanctions and related international steps, North Korea has succeeded in acquiring a significant new nuclear potential while still achieving modest economic growth. Rather than prompting calls for a new method to deal with the North’s nuclear program, experts are now rationalizing that the restrictions were never tough enough.
In the absence of alternate approaches, the failure of sanctions to stop North Korea’s nuclear and missile development has dire implications. The prospect of US territory becoming vulnerable to North Korean attack is uncomfortable for Washington, and in the wake of the North’s fifth nuclear test, US policymakers see an urgent need to act. Meanwhile, other countries fear that a continued unchecked increase in Pyongyang’s nuclear and missile capabilities will trigger countermeasures, such as the recently announced plan to deploy the US-built Terminal High-Altitude Area Defense (THAAD) system in South Korea. Such developments—particularly those that increase US military capabilities in the region—will prompt military reactions by China and Russia, initiating a spiraling arms race in Northeast Asia that could spread globally.
After this year’s flurry of nuclear and missile tests, the United States continues to apply the old logic of sanctions to a new, totally different situation. What Washington and Seoul want to see from the international community are stronger and more far-reaching sanctions, including a ban on Air Koryo flights, a measure to bar ships that have visited North Korean ports from docking in other countries, the closure of loopholes on mineral shipments across DPRK borders, a ban on textile and sea products exports, a crackdown on cash flows (including those for the North’s international workforce) and denial of access to the international banking infrastructure.
Could more severe sanctions change the situation qualitatively? It would be naïve at best to believe that simply “punishing” the leadership in Pyongyang further will prompt Kim Jong Un to denounce nuclear weapons. Similarly, it would be ridiculous to expect that some new daily inconveniences could push the elite to give up a nuclear deterrent they now see as their only guarantor of security, as well as their nation’s major source of pride and basis of power.
If sanctions cannot persuade the regime to change its behavior, can they limit North Korea’s access to crucial technologies, materials and sources of income? While life for North Korean traders is now harder as a result of sanctions, the actual effect of the measures is limited: numerous loopholes cannot be closed, and the nature of global business means that new ones appear constantly. This situation cannot be remedied, except perhaps by surrounding North Korea with an iron wall and suspending all cross-border traffic. Even then, this would not eliminate the nuclear and missile capabilities North Korea has already developed.
Alternately, could the sanctions aim to make life for North Koreans so hard that they are spurred to rebel against their leaders and overthrow the regime? Cynical as it is, such an effort would have a slim chance of succeeding in a different country—but not in North Korea. Believing this could work disregards the dynamics and laws of totalitarian societies, much less the extreme case of the North. With such a highly stratified social structure, the upper classes would rather let a large part of the population perish (as what happened in the 1990s) than permit actions that could foment an uprising.
The policy of strategic patience is thus a dangerous delusion. It gives the semblance of action, while North Korea continues to grow its nuclear and missile programs.
Byungjin’s Latest Win
Despite all the mockery, North Korea’s byungjin policy seems to have proven more effective than foreign critics expected. This is evidenced by empirical data I have collected during recent visits to North Korea.
Estimates put North Korea’s per capita GNP over $1,000 for the first time since the 1980s. Likewise, the average middle-class standard of living, at least in Pyongyang, is incomparably higher than in the 1980s, and rural are also faring better as well. The energy supply is comparatively normal (even in the countryside, where new technologies like solar cells have been widely adopted). Food, at least in Pyongyang, is plentiful and diverse, and a growing part of it is produced within the country. Business is brisk (both in the markets and throughout the economy in general), the national currency is stable and construction is booming. Social and territorial differentiation has become much more pronounced, but this is a usual price of development.
What are the sources of this growth? One explanation might be that less is now spent on the conventional military sector, while nuclear development at this stage is cheaper—it may only cost 2 to 3 percent of GNP, according to some estimates. Theoretically, byungjin is more “economy friendly” than the previous “songun” or military-first policy which supposedly concentrated resources on the military. At the same time, Kim Jong Un appears to tolerate an amount of private entrepreneurship, an approach his father would have frowned upon and his grandfather would have opposed even more.
Internal reasons for the North’s economic growth include an increase in agricultural production and in general business activity, developments resulting from a more lenient market-oriented economic policy and government investment in the demand-oriented industrial production sector. Some facilities use investment from abroad—mostly China. These activities reflect a change in both the structure of the economy—which is becoming more market-oriented—and in its technological level, further boosting economic growth.
External sources of income have also not suffered much. In fact, exports are actually growing, largely thanks to China. After temporarily abiding by recently-imposed UN sanctions, China appears to have returned to “business as usual” by exploiting the UN resolution’s “humanitarian clause,” resulting in benefits to North Korean manufacturing. North Korea and China have developed a mutually beneficial arrangement, with North Korea serving as both a supplier of raw materials and a market for Chinese goods. Given China’s concern over the deployment of THAAD, Beijing is unlikely to push forward on sanctions implementation that would undermine such a division of labor.
North Korea also seems to have created new business channels, maybe through offshore firms and other business techniques that enable it to procure products from Japan and elsewhere.
Through my conversations in Pyongyang, I got the impression that the economic planners are seeking a new paradigm of development. This approach does not appear to be based on restoring its outdated heavy industrial potential, but rather on “jumping over” the re-industrialization phase to a more knowledge-based economy. This concept demands educational capabilities that North Korean engineers have already demonstrated with the country’s indigenous nuclear and missile achievements. “Construction of a powerful civilized state” with an emphasis on science and technology now seems to be the focus of all government policies.
In light of byungjin’s success, international policymakers would be unwise to base plans on presumptions of the North Korean regime’s imminent collapse. Sanctions and isolation alone won’t be enough to solve the North Korean nuclear problem. My high-level counterparts in Pyongyang openly told me that they are not particularly interested in taking a first step, and that US will have to do it. In other words, the North Koreans are exercising a “strategic patience” of their own.
What does this mean for a new US administration? Washington is free to recognize the failure of former policies, but it cannot look to war as a viable alternative. It must instead devise a strategy aimed at finding a new balance of interests and reconciling desirable outcomes with what is possible. A restart of the diplomatic process—ideally in a multilateral format that would enable all interested actors to benefit—could at least bring about a freeze on further North Korean nuclear and missile development. Little hope is left for North Korean capitulation, and a new search for compromise should start—the sooner, the better.
 “ВВП на душу населения в КНДР впервые с 1980-х превысил $1 тысячу,” ИНТЕРФАКС Interfax, September 29, 2016, http://www.interfax.ru/business/530494.
 Author’s estimates based on experts’ calculations in a case study of the USSR.
 The adoption of byungjin shrank the military’s role in shaping economic policy and its ability to influence it.
 Interview with locally-based experts and Korean businessmen.
 Peter Ward and Andrei Lankov, “China and North Korea’s economic future,” NKNews.org, February 16, 2016, https://www.nknews.org/2016/02/china-and-north-koreas-economic-future.
 Leo Byrne, “North Korea exports record coal in August despite UN, Chinese legislation,” NKNews.org, September 29, 2016, https://www.nknews.org/pro/north-korea-exports-record-coal-in-august-despite-un-chinese-legislation/.
 For instance, the Korea International Trade Association (KITA) reported that North Korea’s export of fish products reached $110 million from January to August. The amount was up 70 percent from the same period last year. KITA said the amount of fish sold to Russia in the January-March period alone was worth $2.8 million, increasing from $1.6 million over the whole of 2015. See Yi Whan-woo, “North Korea earning currency through fish sales,” The Korea Times, October 19, 2016, https://www.koreatimes.co.kr/www/news/nation/2016/10/485_216394.html.
 Observations of the author and locally-based experts.
 North Korea still has considerable capacity to rebuild heavy industry.