by Stephan Haggard, University of California, San Diego
and Marcus Noland, Peterson Institute for International Economics
and Erik Weeks, Peterson Institute
Op-ed published in VoxEU.org
June 7, 2008
North Korea is once again facing a humanitarian emergency. The current crisis is unlikely to reach the magnitude of the famine of the 1990s, when between 600,000 and 1 million people, or roughly 3 to 5 percent of the precrisis population, died.1 During that earlier episode, the North Korean government dithered for years until a full-blown famine was under way before appealing for aid, but this time the global community is more aware of North Korea's vulnerability. The North Korean economy, even in its degraded state, is simply better able to respond than it was then, and one would hope that the leadership in Pyongyang is more sensitive to the plight of its citizenry as well. Yet hunger-related deaths are virtually inevitable if not already occurring (as suggested by unconfirmed reports leaking out through a variety of channels), and a dynamic is being set in motion that will carry the emergency into 2009.
The mercerization that the North Korean economy has experienced over the last fifteen years is the product of a largely unintended process borne out of state failure. During the 1990s famine, small-scale social units—households, work units, local government and party offices, and even small-scale military units—adopted entrepreneurial coping strategies to secure food and survive. The state's stance toward this mercerization from below has been ambivalent, at times decriminalizing technically illegal coping behavior while at others attempting to channel or even reverse the development of markets.2
The famine continues to cast a long shadow. One of the most striking findings of research based on a recent survey of more than 1,300 North Korean refugees in China is that famine-related traumas—perceptions of unfairness in the distribution of relief and deaths of family members due to hunger—were more highly correlated with the respondent's psychological health and assessment of the North Korean regime than other experiences—even prior incarceration in the gulag.3
The origins of the present emergency can be located in reckless policies, adverse weather, and unfavorable developments in world grain markets. Roughly two-thirds of the grain consumed in North Korea is produced locally, with aid accounting for most of the rest. Local production is highly dependent on fertilizer, much of which is donated by South Korea. In 2005, on the back of improving harvests and generous outside aid, North Korea attempted to ban the private trade in grain, criminalizing the primary mechanism through which most North Korean families obtained food, and seized grain in the rural areas in contravention of existing rules. Having disrupted both the consumer and producer sides of the food economy, the government shut down the offices of the World Food Program (WFP) outside the privileged capital, Pyongyang, in effect removing the canary from the mineshaft.
The following year, in response to the North's missile and nuclear tests, South Korea suspended fertilizer shipments. Local grain production predictably fell, aid dried up, and with global food prices rising, the regime's capacity to import grain waned.
There is real uncertainty about the extent of distress. We can make inferences using both quantity and price evidence. The former is highly uncertain. At the most fundamental level, no one knows for sure how many North Koreans there are (estimates range from 20 million to 24 million), rendering all estimates of human demand suspect. On the basis of historical consumption data and considering nongrain sources of food in the North Korean diet, it appears that the Food and Agriculture Organization (FAO) and the WFP may have overestimated per capita grain consumption by around 20 percent.4 On the supply side, the FAO is diplomatically constrained to acknowledge North Korea's politicized official figures on grain output, which tend to overstate supply in good times and understate it when the North Korean government decides to seek aid. Recently, the FAO revised its estimate of last year's harvest downward by a whopping 25 percent.
The upshot is that, year in and year out, UN agencies have produced estimates of large grain shortfalls, which, taken at face value, would imply that famine was already occurring (figure 1). The UN agencies have unwittingly contributed to the current crisis by repeatedly crying wolf. Yet our preferred figures, which adjust human consumption needs for the UN agencies' possible overestimate and use less politicized US or South Korean estimates for North Korean harvests, indicate that the wolf may really be at the door: North Korea's comfort margin between minimum grain needs and available supply is down to 100,000 metric tons (MT) of grain, equivalent to less than two weeks of minimum human consumption needs.5
Figure 1 North Korea's grain balance
This quantity evidence is reinforced by fragmentary and imperfectly observed data on prices, which imply that grain prices are rising faster than both other prices in the North Korean economy and world grain prices (figure 2) and that the price of less-preferred corn is rising faster than that of more-preferred rice (figure 3)—all signaling tightening conditions. The most recent data suggest that a typical monthly salary can purchase little more than 2 kilos of rice or 3 kilos of corn; anecdotal reports suggest that skyrocketing food bills are crowding out other items in household expenditures.
Figure 2 Nominal grain prices
Source: Haggard, Noland, and Weeks (2008).
Figure 3 Average corn : rice price ratio
The United States recently announced a large food aid package for North Korea of up to 500,000 MT. But American rules governing food aid require that it be American grain, shipped in American ships, and that there be improved monitoring of food delivery. The first 50,000 MT tranche, equivalent to about six days of minimum human needs, has already been shipped, but it could be the end of June before it arrives. As a consequence, the behavior of South Korea, China, and Japan—three neighbors capable of delivering food, fertilizer, and other inputs quickly—is critical.
In the short run, the single most important action would be for China to remove its export taxes and quotas on food shipped to North Korea, so that the market could begin functioning again. After some initial confusion, the new South Korean government began signaling its willingness to supply food—though not fertilizer—but its relations with North Korea are poor. North Korea also has poor political relations with Japan, which is sitting on 1.5 million MT of imported rice. At the July G8 summit in Tokyo, the Japanese government is expected to announce a new policy of using its reserves to combat world hunger. One possibility is that this rice could be used directly for relief, which would be facilitated if rumored progress on resolving the dispute over Japanese citizens abducted by the North Korean government proves true. But even if this Japanese rice is not used directly for relief, it could have a beneficial, indirect impact by depressing global prices as it becomes apparent that this source of supply is being tapped.
Even if the diplomatic impediments are overcome, aid amounts only to a bandage. The long-run solution to the country's chronic food problems lies in the revitalization of industry, which would enable the country to export industrial products and import bulk grains on a commercially sustainable basis—just as its neighbors do. But a prerequisite is significant progress on the nuclear issue, which would facilitate more successful integration into world markets than the country has achieved to date.6
In the short run, the country needs food and fertilizer. Without a timely infusion of the latter, this summer's harvest will be down, setting the stage for renewed distress next year. The regime is likely to weather this challenge by ratcheting up repression, scrambling for foreign assistance, and prioritizing allocations to core supporters in the army, security apparatus, and party. This outcome, while perhaps avoiding famine and maintaining stability, portends continuing misery for North Korea's non-privileged masses.
1. Goodkind, Daniel, and Lorraine West. 2001. "The North Korean Famine and Its Demographic Impact," Population and Development Review 27, no. 2: 219-38; Lee, Suk. 2003. Food Shortages and Economic Institutions in the Democratic People's Republic of Korea. Unpublished doctoral dissertation, Department of Economics, University of Warwick, Coventry, UK.
3. Chang, Yoonok, Stephan Haggard, and Marcus Noland. 2008a. "Exit Polls: Refugee Assessments of North Korea's Transition," Working Paper 08-1, Washington: Peterson Institute; Chang, Yoonok, Stephan Haggard, and Marcus Noland. 2008b. "Migration Experiences of North Korean Refugees: Evidence from China," Working Paper 08-4, Washington: Peterson Institute.
6. Haggard, Stephan, and Marcus Noland. 2008. "A Security and Peace Mechanism for Northeast Asia: the Economic Dimension," Policy Brief 08-4. Washington: Peterson Institute.
Book: Witness to Transformation: Refugee Insights into North Korea January 2011
Peterson Perspective: North Korea's Immunity to Outside Pressure: Part I December 12, 2012
Policy Brief 10-1: The Winter of Their Discontent: Pyongyang Attacks the Market January 2010
Working Paper 10-2: Economic Crime and Punishment in North Korea March 2010
Paper: FTAs and the Future of US-Korean Trade Relations November 2009
Paper: Implementing the KORUS FTA: Key Challenges and Policy Proposals February 2008
Policy Brief 08-6: North Korea on the Precipice of Famine May 2008
Policy Brief 07-7: The Korea-US Free Trade Agreement: A Summary Assessment August 2007
Policy Brief 06-4: Negotiating the Korea–United States Free Trade Agreement June 2006
Working Paper 07-7: North Korea’s External Economic Relations August 2007
Book: Avoiding the Apocalypse: The Future of the Two Koreas June 2000
Book: Free Trade Between Korea and the United States? April 2001
Working Paper 08-4: Migration Experiences of North Korean Refugees: Survey Evidence from China March 2008