North Korea has long been the subject of fascination and fear in the West and for many of its Western-aligned neighbours. Every few years, somebody will point fingers at a recent development that slips through the heavily guarded borders and start shouting that the whole country is about to collapse. The current economic troubles that have led North Korea to close diplomatic missions to countries such as Angola are just a recent example of this. Is something going seriously wrong with North Korea's economy? Has the regime been doomed to fail since its inception, or is the situation there down to the mistakes of the current leadership? Are the mountains about to come crashing down over the people's heads?
Sanctions plague the North Korean economy. However, these sanctions are by no means universal – Russia, China and Iran are just some examples of states that disobey American hegemony and trade with North Korea. In many ways, these states are the backbone of the North Korean economy. A tiny and frozen state must rely on imports and partnerships for survival. Food, machinery and raw materials which cannot be found in the mountains that dominate the country's landscape are all vitally important and scarce in North Korea. This reliance presents a serious problem for its productivity and development. But recently, some of these states, notably Russia, have faced their own difficulties. In many cases, leadership in the countries that the North Korean economy relies on are beginning to question whether they can afford to prop up a state just to cause trouble.
As a state with little to nothing of export value, it has relied on exporting that which sanctions never touch: crime. Almost since cybercrime became viable, North Korea has prided itself on its military-grade army of hackers and has used them for far more than mischief. While it is usually the troublemakers and ideological warnings, such as the Sony hack, which make headlines, far more critical for the function of North Korea are the virtual heists, such as the infamous attack by the Lazarus group on the Bangladeshi central bank, which came within inches of stealing over a billion dollars to finance the regime's dangerous ballistic missiles programme. It was sheer luck that the attack failed, but failure is a strong word to use when $81-million disappears into the pockets of Kim Jong Un. Sanctions can't touch criminal activity shrouded in secrecy.
North Korea's other primary export is counterfeit goods – again, one of the only major specialisms of the North Korean economy. Everything from cash to Viagra seeps through the cracks in sanctions and into Western economies, usually passing through countries which buck the trend, such as China, as a road into the West. Of course, the price of criminality is typically high, and counterfeiting has always been a lucrative trade, but can such a volatile market ever be stable enough to support an entire nation?
Plenty of economies rely on one specialism, which is often a lucrative but relatively volatile market in terms of price or demand. Take Russia, for example, whose overreliance on oil and gas exports became their most significant source of income and their primary economic bargaining chip. The difference between these two states (before 2022) is that everyone needs energy. Russia has been feared because it wields power through petrochemical export control and a nuclear arsenal. By contrast, states do not require counterfeit Viagra to function. While North Korea's nuclear programme is terrifying to many in the West, it has been sidelined by much closer threats such as China in recent years – problematic for a state which relies on perceptions of strength and power to maintain its international position and economic health.
Corruption is endemic in North Korea, and it has become impossible for the regime to change its economic prospects. This is not restricted to financial embezzlement and theft either – officials drunk on power believe that they cannot be faulted. Therefore, ill-informed officials make catastrophic decisions, such as Kim Il-Sung's order to log the forests on the mountainsides and plant crops to avoid famine. At the time, it seemed like a solution – but when the rain came, mudslides destroyed the mountainside crops and the crop's valleys, too. The people starved.
In many ways, this looks like North Korea's current predicament. The orders of one man to fight against his enemies in the West and to harvest other countries' money through cybercrime and counterfeiting to support his beloved weapons are causing the mud to slip over this neglected state. Crops are dying, and state officials are starting to panic. Even in times of famine, North Korea has kept its expensive diplomatic missions abroad because they are a reminder to its enemies that it is still relevant.
The carefully cultivated show of strength, power, and the stubbornness to remain that has troubled the West for so long is beginning to slip away. While it is by no means a certainty that the state will fall, there is one certain thing: ordinary people in North Korea will die.
Is the economic failure of North Korea the West's fault because of their sanctions, or Kim's for his financial mismanagement? This may be unsatisfactory, but the answer is 'both'. This can't go on forever; at some point, it will collapse under its own weight. People are starving, impoverished and suffering, and this will continue until the unreformable state is reformed.
Image: John Pavelka
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