During my years of reporting on North Korea, the rise of the masters of money was plain to see. No one illustrated the trend better to me than the manager of the March 26 Electric Cable Factory in the center of Pyongyang.
When I first visited his factory in 2005, he was a skinny guy in the summer version of a Mao suit. Dark trousers hung off a gangly frame. He showed me around the pristine factory and told me about a new decentralization pilot program that had given a handful of factory managers, including him, more authority over hiring and business decisions. This was part of a regime effort to convince outsiders that the North Korean economy was on the up and up. The manager even had an “employee of the month” board on the wall to incentivize harder work, but I didn’t find his pitch very convincing.
When I went back to the factory in 2016, the manager was still there, running it. But he was almost twice as wide. By then he sported a double-breasted suit, and he had the ruddy flush of someone who was eating and drinking well. I could see large cartons of Canadian-made chemicals in his factory—despite the sanctions that should have stopped them—and wondered what other business ventures he was involved in, in addition to his official job. He was a good example of the conundrum that is North Korea: it was plain to see that he was flourishing inside the system, but how he was doing it remained a mystery.
I met another master of money in Dandong, the Chinese border city that acts as the commercial gateway to North Korea. Pak was the manager of several factories inside China that employed hundreds of North Korean workers to make manufactured goods, he told me. He was vague, fearing that being identified in any way could get him in serious trouble with the regime in Pyongyang. But he told me the goods his workers produced went into South Korean and Chinese products—all which found their way into the global trading system without anyone knowing they’d been made by North Korean hands.
Since taking over the running of the factory, Pak had instituted a number of changes aimed at making the workers more productive and the factory more profitable. The workers used to get a two-hour lunch break, during which time they’d eat simple food like dumplings. That meant output plummeted in the afternoon because they were too hungry to work.
“So I opened a cafeteria for them and said they could eat as much as they wanted for free, but they had only twenty minutes for lunch,” he told me as we tucked into plate after plate of Chinese food in a restaurant, with frequent exhortations of “pleased to meet you” in Korean as he raised his glass. “They loved it, and I got an extra hour and forty minutes of work time at much greater efficiency.”
After a few months in China, new arrivals from North Korea have a noticeably rosier skin tone because they’re eating properly. While starvation is no longer a threat in North Korea, malnutrition is. People there often struggle to get enough variety in their diet. “Now I feed them three meals a day, and the cost is nothing compared to the increased productivity and profits,” Pak said.
All the profits went back to Pyongyang, Pak told me, his Tissot watch glinting as he gesticulated. That seemed unlikely, but he wouldn’t confess to taking a cut for himself. Later, he showed me photos on his Samsung Galaxy smartphone—one of the best-selling products from South Korea.
Although we both knew he was telling me only part of the story of his dealings in China, the manager was emblematic of the economic freedoms that have developed since Kim Jong Un became leader.
Even state-run companies are increasingly operated according to market principles. Once charged with following orders from the top, managers can now hire and fire workers—previously unimaginable in the Communist nation—and run their operations in the way they think most profitable.
Pak flatly denied being a capitalist or making any money for himself, almost spitting out those words. But still, he was happy to talk about his corporate role models, like Microsoft founder Bill Gates and the leaders of South Korean conglomerates such as Samsung and Hyundai, the engines of the country’s rapid industrialization in the 1960s and ’70s. He’d learned a lot by studying how they ran their companies, he said.
“Perseverance, the need to diversify,” he cited as some of the lessons. “We’re living in a world where new things keep appearing. Who would have thought Nokia would have collapsed? Their mistake was sticking with the same product.”
But the only guidance we really needed came from the Great Successor. “Two years ago, Kim Jong Un promised prosperity, that we North Koreans would also live a very good life,” Pak said, being careful to loyally stay on message. “Now it’s been three years, and the harvest is getting better; economic growth is improving.”
While much of this is wishful thinking, it’s not entirely wrong, as the South Korean central bank figures attest. The single-digit growth rates are not much compared to other developing economies—China was well into the double digits during its heyday—but it’s enough to add a ring of truth to the regime’s insistence that life is getting better.
There is much more diversification and autonomy in this increasingly capitalist economy. Groups that are technically state-run are in fact controlled by masters of money and are in some ways turning into diversified conglomerates reminiscent of those in South Korea. Samsung started as a fruit and dried fish exporter but, in the space of a few decades, turned into one of the world’s biggest manufacturers of smartphones, televisions, and computer chips.
Air Koryo, North Korea’s national airline, now runs a taxi company, petrol stations, and a travel agency, as well as making Airline brand cigarettes and tinned food like mackerel and pheasant. The Masikryong group operates Kim Jong Un’s landmark ski resort near Wonsan as well as running bus lines and selling bottled water.
The North Korean company My Hometown began by making premium 7.27 cigarettes—named after the date when the armistice ending the Korean War was signed. This date is celebrated in North Korea as Victory Day and is associated with the regime (high-ranking officials travel in black Mercedes sedans with license plates bearing the number 7.27). These cigarettes sell for more than imported brands like Marlboro and Rothmans and are Kim Jong Un’s smoke of choice.
My Hometown also makes soju liquor as well as sporting goods including basketballs and soccer balls, soccer shoes, and sports clothing modeled on Adidas and Puma. The all-female North Korean cheering squads who went to the Winter Olympics in South Korea in 2018 were carrying My Hometown bags.
Grocery store shelves across the country are stocked with cans of North Korean–produced fish and peaches. This is partly because of Kim Jong Un’s promotion of domestic industry for its own sake, but it’s also because of his desire to fight against what he has called “import disease.” He likes to claim that North Korean products are better, but he is also trying to combat the impact of international sanctions, which have made it harder to get everything from missile parts to teapots. He may also be trying to regain some control over the economy by undercutting private traders. Having state enterprises make products that are cheaper than imports and then selling them in state outlets is a good way to put the competition in the markets out of business.
On a visit to a cosmetics factory in Sinuiju, on the border with China, Kim Jong Un even said that North Korean products should be as good as French brands and help bring about “the dream of the women who want to be more beautiful.”
The masters of money are also running the mines, selling coal and other minerals like iron ore to China for the regime—and taking a healthy cut for themselves along the way. Some who have escaped suggest the cut could be as much as one-third.
There’s now a booming transport industry in a country where, just a few years ago, people needed a travel permit to cross county lines. Now there are taxis and tour buses, courier services and private trucking companies, like the one Hyon started on the border.
There are even domestic tourism companies in a nation where people never had the money or opportunity to take a vacation before. From Sinuiju on the western border to Wonsan and Mount Ku
mgang in the east, North Koreans with fancy cameras can be seen going sightseeing and stopping for lunch in hotel restaurants.
These businesses operate as a kind of public-private partnership where masters of money are given license to expand state entities and cream off the profits, provided they pay a certain proportion back to the state.
For example, an entrepreneur might rent space in a state factory producing shoes. The factory manager and the Workers’ Party chairman affiliated with the factory pocket that rent and often additional payments that are called allowances for expenses but are in fact another form of bribery. The entrepreneur uses the space to operate his own business—hiring his own labor and buying his own raw goods to make much better shoes and keeping the profits. If he’s especially cozy with the cadres running the factory, and the profits are especially good, they might allow him to use state vehicles or other perks.2
Or a master of money might buy mining and mineral rights from the central government authorities and then take over mines that have been abandoned because of a lack of electricity and the equipment needed to bring out the minerals. They invest in the mine to get it up and running again. They hire workers who, unlike when working for the state, will receive a decent wage. They pay off ministry officials and buy protection from local party cadres and officials in the prosecutor’s office. Then they rake in the cash and pay a share of their profits—about 30 percent—to the regime as “loyalty funds.”3
The prospects for earning serious money this way has made going into business much more attractive than going into the Workers’ Party.
While I was in Dandong one time, I visited a factory where thirty North Korean women were making clothes for a Chinese company. This has been one of the main ways that Kim Jong Un has earned money for his regime. Experts estimate Kim Jong Un has sent about one hundred thousand people abroad, bringing in about $500 million for the regime each year.
The manager of the factory, a North Korean who gave his name as just Kim, showed me around the workshop, where the women were lined up in rows, sewing black men’s work trousers for a Japanese brand while North Korean radio blared through the factory.
Over a two-hour lunch washed down with a Chinese firewater that tasted slightly better than its name in English—Black Soil—Manager Kim talked about doing business in China and his plans for expansion.
But he became most animated when talking about his daughter back in Pyongyang, who was a teacher. He complained that she studied too much and always had her nose in a book. He wants her to become a Workers’ Party member so that she could become a trader like him and go out to make money. “That’s where the future is,” he told me.
Although party members have an advantage, the overlap between those with economic and political power is strong but not complete. Some have political connections and good social standing and parlay that into huge amounts of money. Others with political power use it to extract a share of the profits—in bribes or in kind—in return for protecting the entrepreneurs. Entrepreneurs without political influence simply buy it.
But it is a risky and fluid environment. Everyone is constantly jockeying to show his or her loyalty to the regime and amass more economic power. If a cadre member becomes jealous of the money a rival is making, he or she could report the rival and the entrepreneur to the authorities for corruption and other economic crimes.
That’s when money and networks really come into play—and why these players need connections in the security services. Many entrepreneurs make sure to bribe their local security officials as insurance against a business relationship gone bad. But there are times when even paying off officials and building a network can’t save a cadre fallen from grace. Just ask Uncle Jang.
While people like Ri flourished at the top of the regime, there were plenty of more independent agents at the grassroots level who were allowed to get rich and help stabilize the system by spreading that wealth around.
“I was selling crabs, shrimp, and mushrooms to China and Russia,” one of these self-made masters of money, Oh Yuna, told me one day after she’d escaped to South Korea. She sent out one-ton containers full of sought-after seafood, sometimes five containers at a time. “So I was rich,” she said.
North Korean crabs can fetch twenty dollars a pound in China, and one container can carry tens of thousands of pounds.
Oh was based in Rason, an area near the borders with China and Russia, where the warm-water ports of Rajin and Sonbong had been combined into a special economic zone. It was one of the most freewheeling parts of North Korea.
The SEZ was started by Kim Jong Un’s father in the 1990s but never took off. It has developed quickly, however, under the Great Successor. This cloistered zone gives local entrepreneurs more creative license and the proximity of the country’s two major trading partners supplying the demand, while its relative isolation within North Korea has enabled the regime to cordon it off and control the spread of capitalism.
Oh became a master of money by bribing the right cadres to let her trade goods in the markets. This way, she became rich the old-fashioned way—by having a good nose for it.
“I was very good at business,” she told me over lunch in an Italian restaurant near her home outside Seoul. “I made sure I put very good quality crabs and shrimp and fish in my boxes. Some people filled their boxes with inferior seafood then put a layer of top-quality seafood on the top. But I never did that.”
She hadn’t been out of North Korea long, but she looked every inch the South Korean high roller, with her stylishly ripped jeans and her expensive-looking fur-collared coat, her suspiciously sharp cheekbones, and her black, bejeweled manicure. After she escaped to South Korea, she’d bought a huge apartment and a Mercedes-Benz and was able to indulge her young daughter’s insistence on French brand clothes.
Oh used money she’d inherited from her mother’s trading business to buy three fishing boats and send them out. She’d take 60 percent of their catch, and they’d keep the rest.
She’d ply the local authorities with beer and top-notch crab. They’d also get bundles of Chinese yuan, as would the border guards and customs agents who allowed her shipments to cross into China. Everyone won.
She knew that the secret to business success in North Korea came by greasing palms—a lot of them. “You have to bribe everyone to be able to do this kind of business,” she told me in between answering calls from various business associates. In the South, Oh runs three factories and constantly has deals to forge or disputes to resolve.
But in the North, she had a different set of headaches: staying on the right side of the cadres and security services as she pursued her ventures.
Despite her bribes, Oh eventually ran afoul of the authorities. She spent a year in prison, where she was beaten, sexually assaulted, and told to have an abortion. She bribed her way out of prison after only a year by promising to buy motorbikes for the bosses of the local security apparatus.
Then she was back to work, and this time she was more tactical about who she bribed.
“I can’t pay everybody, but I made sure I was close to the security services so nobody can touch me,” she said. “A fortune-teller told me once that my mother was very talented and I was even more talented at business.”
Despite the money she was making, Oh was dismayed by the system. She remained the subject of suspicion. She knew that the state narrative was all lies and decided that she didn’t want her daughter—the one she’d had after refusing the abortion—to grow up in North Korea.
“They say North Korea is a socialist country, but when I gave birth, I had to bring the rubber gloves and the drip and the syringe and the meals for the doctor and everyone else on staff,” she said. “It’s not a socialist country. Everybody is working for the Kim regime.”
CHAPTER 10
MILLENNIALS AND MODERNITY
“The capital city of Pyongyang [is] an icon of cultural efflorescence.”
—Kim Jong Un visiting Mirae Science
Street, October 21, 2015
EVEN AMONG THE ELITE WHO KEPT HIM IN POWER, THERE WAS one specific subset that Kim Jong Un particularly wanted to coddle. They were the millennials, the people of his generation, who, if they felt they were flourishing under his leadership, could potentially keep him in power for decades to come.
So the self-declared Brilliant Comrade set out to re-create for them the privileged enclave he inhabited during those formative years spent in Europe. Today in North Korea, there are Italian restaurants and sushi bars, pubs selling craft beer and French fries, amusement parks with rollercoasters and other gut-churning rides, volleyball and tennis courts, and Rollerblading rinks by the river. There are taxis where the meter starts at a dollar—a quarter of the average monthly wage.
The privileged elite can go riding in the faux-Swiss equestrian club, complete with imitation wood fences around the track and statues in the rose gardens. They can ski at Masik Peak, east of Pyongyang, where Kim Jong Un built a resort complete with ten slopes, Austrian chairlifts, and Italian skis for rent. There’s a hotel with an interior decoration style that could be charitably described as Swiss chalet meets North Korean kitsch. It has a heated indoor swimming pool and a sauna area. There’s even a bar in an ice cave.
Today, Kim Jong Un’s cabal can shoot pool and sing karaoke. They can take yoga classes and drink cappuccinos with cute animal faces drawn into the foam. They can text on their smartphones and swing Christian Dior or Gucci purses.
“Some are fake, but some are real,” says Lee So-hyun, who is just a few years younger than Kim Jong Un and was part of this North Korean 0.1 percent.
So-hyun and her brother, Hyun-sung, were born into Pyongyang’s elite. Their father is Ri Jong Ho, who spent more than thirty years raising money for the Kim regime. (He still spells their surname the North Korean way, Ri, while the children use the South Korean version, Lee.)
The Great Successor Page 17
