WASHINGTON - By all accounts, North Korea’s cash-strapped economy is flagging under crippling international sanctions and the slowdown means the traditional elite and a rising merchant class may be feeling pinched, experts say.
“The elites in Pyongyang are really feeling it,” said Joshua Stanton, a Washington attorney who helped draft the North Korean Sanctions Enforcement Act in 2016.
“They’re having a very tough time right now. I think they’re losing their wealth rapidly. And they’re concerned about the government’s policies and directions, and the failure to get sanctions lifted in Hanoi,” he continued.
The most privileged government and military officials, considered , are estimated to number about 2,000 people. Born into families who backed the country’s founder, Kim Il Sung in the 1940s and 1950s, they are fiercely loyal to the Kim dynasty, said William Brown, former CIA analyst and a North Korea economy expert.
Despite their fealty to current leader Kim Jong Un, this top echelon of what is supposed to be a classless society is losing money. The state-run enterprises they control in the centrally planned socialist economy — heavy industries such as mining and light industries such as textile and clothing factories — have been hit hard by the sanctions that President Donald Trump refused to lift at the Hanoi summit earlier this year, demanding that North Korea agree to full denuclearization as a precondition for relief.
These families share their profits from state enterprises with a newer privileged class, the merchants called donju, who help the aristocrats by facilitating the now that sanctions make overseas trade difficult, Brown, the economy expert, said.
Similar to oligarchs or private entrepreneurs and capitalists by the Western standards, the donju emerged from the market economy, which grew out of the country’s worst famine in the 1990s as workers, paid by the state in food rations, started trading whatever they could find for food on black markets. The markets established in a time of shortages were legitimized, then encouraged under Kim. Today, the donju partner with the elite families, providing funds for construction projects such as building apartments in Pyongyang while the families provide labor, usually workers they re-assign from state-owned enterprises.
“The donju touch on about just everything, everything from construction to manufacturing to things happening in the markets to transportation issues,” said Ken Gause, director of the International Affairs Group at the Center for Naval Analyses.
“Right now, they’re under increasing pressure in terms of … getting the hard currency that they need in order to continue to do various projects that they do inside North Korea, which allows them to maintain their influence that they have within the regime and on the society,” he added.
?
Unlike ordinary North Koreans, members of these privileged classes enjoy a luxurious lifestyle. Some drive imported cars. Some occasionally travel abroad. Others send their children to the country’s prestigious .
But as the government runs ever shorter on hard currency, it’s confiscating their wealth.
“[The] North Korean government has always historically used a lot of its money to keep those people happy,” said Stanton, listing gifts of luxury goods, apartments and “access to … material wealth.”
But that’s changing, Stanton said, “because the government is running out of money, it’s doing a lot of anti-corruption investigations and inspections. It’s trying to find their money, their savings, any cash that they have stored away, any bank accounts that they have in China, any wealth that they’ve accumulated.”
The overall lack of cash and the government’s confiscation of what it finds among the elite are creating discontent but not so much as to trigger organized unrest.
“They could put pressure on Kim definitely,” Brown said. “But [as] more of a loyal opposition rather than a radical opposition. I think … the most likely unrest would come from workers, state enterprise laborers, miners, people who are working for the state and who are barely being paid at all, and have to go into the marketplace to make a living.”
?
In October 2006, the U.N. Security Council (UNSC) imposed sanctions on North Korea in response to Pyongyang’s first nuclear weapons test. They were designed to pressure North Korea into ending its nuclear ambitions by banning sales to Pyongyang of heavy weaponry, missile technology and material, and select luxury goods, according to a . In March 2016, the UNSC sanctioned sales of aviation fuel to North Korea after its fourth nuclear test.