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Marketization of the North Korean Economy 2 June 2018 Mar ketization of the North Korean Economy A Virtual Think Tank (ViTTa)® Report Deeper Analyses Produced in support of the Clarifying Insights Strategic Multilayer Assessment (SMA) Office Better Decisions (Joint Staff, J39) www.NSIteam.com Marketization of the North Korean Economy 2 Author George Popp Please direct inquiries to George Popp at [email protected] What is ViTTa®? NSI’s Virtual Think Tank (ViTTa®) provides rapid response to critical information needs by pulsing a global network of subject matter experts (SMEs) to generate a wide range of expert insight. For this Strategic Multilayer Assessment (SMA) Strategic Outcomes on the Korean Peninsula project, ViTTa was used to address eight key questions provided by the Joint Staff project sponsors. The ViTTa team received written response submissions from 50 subject matter experts from academia, government, military, and industry. Each Korea Strategic Outcomes ViTTa report presents 1) a summary overview of the expert contributor response to the ViTTa question of focus and 2) the full corpus of expert contributor responses received for the ViTTa question of focus. Biographies for all expert contributors are also included in each report. RESEARCH ▪ INNOVATIONNSI ▪ EXCELLENCE Marketization of the North Korean Economy 3 TaBle of Contents VITTA QUESTION .............................................................................................................................................................. 4 SUBJECT MATTER EXPERT CONTRIBUTORS ............................................................................................................. 4 SUMMARY RESPONSE ...................................................................................................................................................... 4 KEY DRIVERS OF NORTH KOREAN MARKETIZATION EFFORTS .........................................................................................................4 KEY FACTORS INHIBITING BROADER NORTH KOREAN MARKETIZATION EFFORTS ........................................................................7 SUBJECT MATTER EXPERT RESPONSE SUBMISSIONS ........................................................................................... 10 DR. BRUCE BENNETT ......................................................................................................................................................................... 10 DEAN CHENG ...................................................................................................................................................................................... 10 DR. RICHARD CRONIN ........................................................................................................................................................................ 11 KEN GAUSE ......................................................................................................................................................................................... 11 SHIHOKO GOTO ................................................................................................................................................................................... 11 DR. JAMES HOARE .............................................................................................................................................................................. 12 DR. GREGORY KULACKI ...................................................................................................................................................................... 12 SOOJIN PARK ....................................................................................................................................................................................... 13 DR. JAMES PLATTE ............................................................................................................................................................................. 14 ANTHONY RINNA ................................................................................................................................................................................ 15 BRIG GEN ROB SPALDING .................................................................................................................................................................. 15 YUN SUN .............................................................................................................................................................................................. 16 SUBJECT MATTER EXPERT BIOGRAPHIES ............................................................................................................... 17 DR. BRUCE BENNETT ......................................................................................................................................................................... 17 DEAN CHENG ...................................................................................................................................................................................... 17 DR. RICHARD CRONIN ........................................................................................................................................................................ 18 KEN GAUSE ......................................................................................................................................................................................... 18 SHIHOKO GOTO ................................................................................................................................................................................... 19 DR. JAMES HOARE .............................................................................................................................................................................. 19 DR. GREGORY KULACKI ...................................................................................................................................................................... 19 SOOJIN PARK ....................................................................................................................................................................................... 20 DR. JAMES PLATTE ............................................................................................................................................................................. 20 ANTHONY RINNA ................................................................................................................................................................................ 20 BRIG GEN ROB SPALDING .................................................................................................................................................................. 21 YUN SUN .............................................................................................................................................................................................. 21 RESEARCH ▪ INNOVATIONNSI ▪ EXCELLENCE Marketization of the North Korean Economy 4 ViTTa Question [Q7] Many analysts indicate that due to the partial marketization of the North Korean economy, the economy has stabilized somewhat. What were the key reasons the regime made the decision to marketize? What factors inhibit a broader marketization of the economy? SuBject Matter Expert ContriButors Dr. Bruce Bennett, RAND; Dean Cheng, Heritage Foundation; Dr. Richard Cronin, Stimson Center; Ken Gause, CNA; Shihoko Goto, Wilson Center; Dr. James Hoare, Chatham House; Dr. Gregory Kulacki, Union of Concerned Scientists; Soojin Park, Wilson Center; Dr. James Platte, United States Air Force Center for Strategic Deterrence Studies; Anthony Rinna, Sino-NK; Brig Gen Rob Spalding, United States Air Force; Yun Sun, Stimson Center Summary Response This report summarizes the input of 12 insightful responses from the Korea Strategic Outcomes Virtual Think Tank (ViTTa) expert contributors. While this summary response presents an overview of the key expert contributor insights, the summary alone cannot fully convey the fine detail of the contributor inputs provided, each of which is worth reading in its entirety. The expert contributors identify factors that explain the apparent condoning of controlled marketization in North Korea, as well as factors that appear to be inhibiting broader marketization in the country. This summary first discusses the key drivers of North Korean marketization and then considers the primary inhibitors to broader North Korean marketization efforts. Key Drivers of North Korean Marketization Efforts Four key reasons emerge from the expert contributor responses as primary drivers of North Korean marketization efforts. • The economic downturn and famine that engulfed North Korea and eventually led to the collapse of the country’s Public Distribution System in the 1990s. • The rising expectations and aspirations of North Koreans that have started acclimating to marketization. • The emergence of Kim Jong Un and new economic development policy. • The reassuring precedent from China integrating itself into the international system in a way that promotes significant economic growth and development while preserving the security and legitimacy of its political system and regime. Economic Downturn, Famine, and the Collapse of the PuBlic DistriBution System The reason most frequently cited by the contributors to explain marketization in North Korea is the significant economic downturn and famine
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