The ‘Money Makers’ of North Korea

The ongoing battle between capitalist forces and the laws of socialism

Today, North Korea has come to resemble other capitalist economies in the way money is circulated in its markets. There is even a group of financial elite, who loan money to individuals at interest rates of higher than 30%. They are commonly referred to as “money-makers”;  their influence is spreading across North Korea, and it is not restricted to the economic sphere.

This privileged ‘financial elite’ of North Korea consist mainly of family members of the Jochongryon (the pro-Pyongyang federation of ethnic Koreans living in Japan), overseas agents or the children of Kim Jong-il’s confidants. In this way, “money-makers” aren’t simply people with money, but usually wield a significant amount of power and influence in other ways.

As market activities in North Korea have become more vibrant, the scope of business for money-makers has increased. Although there may be money-makers who hoard their earnings, this increases their risk of being accused as ‘anti-socialist’, which runs against state ideology. It is perhaps for this reason that their earnings exacerbate capitalist trends in the North Korean economy.

Money-makers understand the cyclic power of “making money with money.” Small businesses that lack operating funds – and even foreign-currency earning “trading companies” that fall under state auspices – take out loans from money-makers. The latter, however, are charged only an interest rate of 3-5%.

As North Korea is a state with weak financial institutions, money-makers are solidifying their position as practical capitalists, acting as financiers in the field of retail, trade, business and other capital-dependent activities.

Why are the North Korean authorities turning a blind eye to such private banking activities?

The money-makers of North Korea are spearheading an “economically practical ‘self-sufficiency‘”. Despite state attempts at regulation, even regional economies cannot function properly anymore without the intervening role of money-makers.

This is because one money-maker can provide a “money line” for thousands of people. This money line supports a considerable number of political elite. This leads to the illogical phenomenon whereby getting rid of illegal financial activities line is likely to lead to an economic disaster. On top of this, money-makers lobby the state, and this is not a small matter.

This doesn’t mean, however, that this financial elite are locked in a battle with the state. Among these capitalists are those who purchase large amounts of government bonds in order to secure a guarantee of safety. Others contribute to the state in the form of donations, even though there is no guaranteed return.

These acts are very much calculated. If a money-maker receive letters of appreciation or award certificates from the state, they can get away lightly when caught performing unlawful acts. In fact, there exists tough competition to receive such recognition from the state.

Nevertheless, transactions are never carried out directly, but through 5-6 brokers or middle men. The nature of this system makes it very difficult to detect the true business of money-makers, which is their intended strategy.

Money-makers are slowly acquiring more power and influence. The fact that increased collusion between the state and business sectors is emerging as a trend in this transitional period suggests that money-makers are here to stay. Already, they are outside the state’s scope of control, as the ‘winds of capitalism’ and the influence of money continue spreading at a speed the state cannot regulate. The North Korean state’s symbiotic relationship with its money-makers has come to be a force that cannot be stopped.

What does this mean? The North Korean economy can no longer be understood through the lens of socialism and its related laws. The state’s attempt to regulate the rise of the illegal markets (jangmadang) has already failed several times. And at the center of North Korea’s crumbling socialist pillar are the money-makers.

It will be interesting to observe whether North Korea chooses to abide by the forces of capitalism or the laws of socialism as they react to the rising influence of money-makers. Moreover, this will provide us with hints of the direction of future policy decisions. This development is an important one to watch.