The Military as an Economic Institution: The Korean People`s Army
(KPA) as a case study
Prepared by: CM Weston
Introduction
The use of the word “institution” above is driven by its traditional sense rather than that employed by
Douglass North whose context is that of “formal” and “informal” rules as well as their enforcement1.
By “traditional”, it is understood to mean that of an entity which is highly respected, of some
continuity and longevity, and viewed by society as retaining values, beliefs, that are shared by a
significant segment (or proportion) of the population. It also embodies a concept of being both a
symbol of the nation as well as a national symbol. As Huntington noted2: “An institution is an
organization which is valued for its own sake by its members and others”. It thus attracts, deservedly
or otherwise, notions of respect, perhaps even awe, and thereby enjoys a positive reputation and
image. In addition, they also constitute an integral part of the ruling structure(s) of a nation – the
concept of “pillars of society” through which power and influence are exercised. In the UK, we might
call such bodies as the monarchy, the Church of England, parliament and the armed forces,
institutions. To return to North, such institutions also encompass his definitional context – the
monarchy embodies formal rules, such as male primogeniture (or at least until recently) in terms of
royal succession; in the absence of a formal constitution, parliament often functions through informal
rules; while the armed forces, security services and constabulary constitute enforcement.
This paper looks at the armed forces, (or in this context, the army) as an economic institution which
therefore combines the attributes above with that of engaging in economic activities. All armed forces,
to an extent, engage in economic activities by virtue of their employment of erstwhile members of the
working population and through purchases of arms, technology, uniforms, supplies and provisions etc
and this is mediated, usually but not exclusively, by the governments3 through means of defence
budgets, official or otherwise.
Examples of armed forces which engage in significant economic and commercial activities over and
above the defence budget are:





The Egyptian army with its involvement in real estate and tourism.
The Pakistan military`s extensive business and commercial activities conducted through
Milibus.
The Islamic Revolutionary Guard Corp (or Pasdaran)`s ownership of a significant swathe of
the Iranian economy.
The Chinese People`s Liberation Army (PLA)`s involvement in infrastructure, construction,
technology and other commercial activities4.
The Cuban military`s involvement in the country`s tourism industry.
One could also add to the above that of the Turkish armed forces as well as perhaps the Brazilian
military`s investment in the aircraft sector, which culminated in Embraer civilian passenger plane5.
1
DC North, Institutions, Institutional Change & Economic Performance, Cambridge University Press, USA, 2009 (originally
1990), p3
2
SP Huntington, Political Order in Changing Societies, Yale University Press, USA, 1968, p249
3
The paper is limited to “state actors” but we should not exclude from consideration groups such as, for example, the
Lebanese Hezbollah which also combines ideology, commercial activities, politics and Violence Capacity. See Bibliography
re M Levitt, Hezbollah: The Global Footprint of Lebanon`s Party of God.
4
See, in particular, TM Cheung, China`s Entrepreneurial Army, Oxford University Press, UK, 2001
5
For perhaps a more enhanced comparison, one could also consider why it was that the Russian Armed Forces, post 1991,
did not achieve a more resilient Economic Organisation and Political Organisation capacity, although it might well have
appeared to have enjoyed significant strengths. Why it did not but the successors to the KGB did is surely worthy of
consideration but unfortunately falls outside the scope of this paper.
This paper seeks to explore the essential role of the military (the Korean People`s Army or “KPA”)
within North Korean society and specifically its economy. It has been argued that the entire nation is,
in fact, built around the armed forces, - which is the world`s fifth largest. However, it is more than a
military organization, it is the country`s largest employer, purchaser and consumer. A significant
proportion of the country`s industrial and technical infrastructure as well as distribution system is
devoted to military production and support. An ongoing conflict with the US has led, it is
estimated, to spend upto 20-30% of annual GDP on defence. Together with its culture (Korean
exceptionalism) and its ideology/leadership - as exemplified by the Kim Dynasty through “iconology”,
it is both the central unifying structure and the source of the regime`s power. According to one
North Korean: “The People`s Army is the pillar and main force of the revolution and of the
military, the party, the state and the people”6.
The paper will proceed through a literature review as well as consideration of the framework
provided by North in his two most recent works concerning Limited Access Orders7 in terms
of compiling an appropriate institutional and economic analysis. Thereafter, we will look at
the KPA as a case study in how a military body, which is also a key cornerstone of the political
structure of North Korea (also known as the Democratic People`s Republic of Korea or the “DPRK”)
has also come to wield considerable economic influence and power through its commercial and other
activities.
Literature review
Historical Institutionalism
The approach to this subject embodies historical institutionalism which employs “institutions” in order
to ascertain sequences of social, political, economic behaviour and change across time. It is, to borrow
from Charles Tilly, a comparative method apt for measuring “big structures, large processes and
(making) huge comparisons”8.
Historically, the approach adopted was highly normative and therefore prescriptive. For example, in
his work, Weber discussed the professionalization of the bureaucracy. Historical institutionalism seeks
to avoid prescription and examines the diversity of, and diverseness of, different paths that a
revolution or a significant social/economic/political event can take given different groups participate
in each case. We can see this outlined in works by Huntington, Barrington Moore and Skocpol, as well
as more recently by Fukuyama9. In particular, Skocpol is of interest in view of its attention to Russia
and China – given not only North Korea`s close relationship with both post revolutionary states (and,
in China`s case, during its revolution) but also the influence of both countries on the development of
the KPA.
Other works embracing the historical institutionalism approach include those by Evans, Levi,
Rueschmeyer and Steimo10.
6
Cited at head of chapter 5, Oh K & Hassig RC, North Korea: Through the Looking Glass, Brookings, USA, 2000
D North et al, Violence and Social Orders, USA, CUP, 2009 and In the Shadow of Violence, USA, CUP, 2012
8
C Tilly, Big Structures, Large Processes, Huge Comparisons, Russell Sage, USA, 1984.
9
SP Huntington, op cit, 1968; JR Barrington Moore, Social origins of Dictatorship and Democracy, Penguin, UK, 1977 edn;
T Skocpol, States & Social Revolutions:A Comparative Analysis of France, Russia & China, CUP, USA, 1979; F Fukuyama,
The Origin of Political Order, Profile Books, UK, 2011.
10
PB Evans, Embedded Autonomy; M Levi, Consent, Dissent and Patriotism; D Rueschmeyer, Capitalist Development and
Democracy; S Steimo, Taxation and Democracy. See Bibliography for details.
7
Tilly`s work has addressed the centrality of coercion (through Violence Capacity organizations) in
state formation. Indeed, in the context of North Korea, this is particularly pertinent both in the
circumstances of the establishment of the DPRK as a state – the formation of the KPA actually
preceded this event, and the KPA`s centrality to the maintenance of the DPRK as a viable state.
A basic concept of historical institutionalism is that of path dependency, which encapsulates the idea
that once a course of action has been adopted, it is very difficult to reverse course. As Groenewegen et
al comment11: “…an outcome in the present is the result of a specific sequence of events in the past
that led to a current limited set of possibilities from which to choose. This choice can be made
optimally, given these possibilities, and thereby becomes part of the `path`. Initial conditions and the
sequence of events that sprang from it then form the path that was followed”. Arthur Hinchcombe has
highlighted the term of “historical causation” in which “dynamics triggered by an event or process at
one point in time reproduce themselves, even in the absence of the recurrence of the original event or
process”12. There is an element of both definitions reflected in the development of the DPRK to date
but not only. As will be noted, there are other factors and forces at work; among them: ideology and
belief systems of the ruling elite, the demands of the KPA in claiming resources for its needs (and the
interaction of the two) as well as cultural antipathy to the influence of external powers in the affairs of
the country whether arising from the colonial occupation, US involvement in the Korean War and the
southern part of the Korean peninsula and even with its allies, China and the Soviet Union.
Indeed, we will note in this paper that history has significantly influenced the course of the DPRK
whether arising from the above or even the endowment of resources and industrial assets, which have
also played a role in the trajectory of its development. Therefore, history matters! For the purposes of
the approach, as will be noted, I have placed reliance on a number of works on North Korea to portray
what I view as the most applicable events in order to demonstrate how DPRK has developed and what
has been the KPA role therein, particularly in the economy of the country as well as its centrality in
the nexus of leadership-ideology.
To this end, I have also employed the Northian framework, which I will outline in more detail later
below. Suffice to say, at this juncture, it might be argued that the framework sheds a light on the
mechanism for understanding the KPA as embodying characteristics of being an Economic
Organisation as well as Violence Capacity organization in addition to it being a Political Organisation.
North`s approach as set out in his latest book has been employed to look at a number of countries
including South Korea. Based on the relevant chapter in North`s book13, it is even more important that
in such an analysis that we seek to include all relevant facts such that we can come to a conclusion
based on the storyline the writer has compiled. Based on works by Brun & Hersh, Gittings and
Hamm14 which cover South Korea in addition to North Korea, it might be argued that the story
provided appeared incomplete and the writer has not adequately explained how South Korea was able
to convert from a dictatorship (or Limited Access Order) to a democracy (or Open Access Order)
11
J Groenewegen et al, Institutional Economics: An Introduction, 2010, Palgrave Macmillan, UK, p146-7
Cited in P Pierson et al, Historical Institutionalism in Contemporary Political Science, 2002
13
See chapter 9, D North et al, In the Shadow of Violence, USA, CUP, 2012. Chapter 7 on Mexico is also particularly
pertinent to this discussion. Despite the drugs war claiming 34,000 lives in four years; the murder of 2,500 public officials; an
illegal drugs trade being viewed as Mexico`s second largest export earner; a leading gang comprised of former Mexican
Special Forces members - surely all “grist to the mill” for considering violence capacity, rents and economic development,
the author in North`s book barely mentions these events if at all. See I Grillo, El Narco, Bloomsbury, UK, 2011 particularly
its historical sections for a more rigorous exposition of Mexico`s blighted past; and also G Grayson et al, The Executioner`s
Men: Los Zetas, Rogue Soldiers, Criminal Entrepreneurs and the Shadow State they created, Transaction Publishers, USA,
2012 for a detailed analysis of an “unofficial” VC phenomenon. One fascinating fact revealed is that desertions from the
Mexican armed forces amounted to almost 100,000 in a five year period in the 2000s – another telling example of issues
arising in the state`s VC organisation.
14
See Bibliography section at end.
12
based on the facts presented and as compared with North Korea. Indeed, conversely, a number of
works critical of North Korea, particularly Cha, highlight weaknesses such as reliance on aid, where
South Korea was even more heavily dependent on the USA for such assistance15.
Historical analysis is therefore fundamental to ensuring that we obtain a full understanding of the facts
and events which serve as the baseline for an evaluation and drawing appropriate conclusions
therefrom.
Sociology of the Military
Herbert Spencer16 introduced a polar, dichotomous typology of societies which distinguished between
a “military society” and an “industrial society”. With respect to the former, the dominating activity is
defence (and conquest) of territory, rather than the latter`s peaceful production and exchange of goods
and services. He also noted the dominant values of a “military society”, namely: courage, discipline,
obedience, loyalty and patriotism – all attributes that would be exemplified in the society`s
military/Violence Capacity organization, and the KPA, in particular.
Durkheim in his work17, De la division du travail social, has set out another dichotomous typology:
“mechanical solidarity” rooted in the similarity of undifferentiated functions and tasks; and “organic
solidarity”, centred around complementarity, co operation and mutual indispensability of highly
diversified roles and occupations. Finer has argued that, in the military`s case, “organic” must be
supplemented by “mechanical solidaity” in order to realize the army`s esprit de corps, an essential
ingredient in winning battles, whereby an army must be “animated by consciousness of its martial
purpose and inspired by a corporate spirit of unity and solidarity”. He further noted that this may be
grounded on service to a cause or to the nation. In the KPA`s context, it is to both as the nation is
commensurate with, and in point of fact, the realization of, the ideology of Kimilsungism, as will be
demonstrated.
Finer18 has noted that the principal features of an army are:
(i)
(ii)
(iii)
(iv)
(v)
Centralised command
Hierarchy
Discipline
Intercommunications
Esprit
The army, he continued, “is a pyramid of authority”. It is highly stratified with each echelon “owing
explicit and peremptory obedience to the orders of its superior”. (Note the compatibility with the
Leninist concept of “top-down” “democratic centralism”).
The military`s social practices include the depersonalization of authority – owed to the rank, and not to
the individual, and prescribing a social distance between the superior and inferior ranks.
In his work19, Gaetano Mosca defined modern elites in terms of organizational skills, which are
invaluable in securing political power in a modern society. He notes the presence in society of the
15
See CK Armstrong, Tyranny of the Weak, North Korea and the World 1950-1992, Cornell University, USA, 2013, p58-9:
“By the early 1960s, according to American officials, South Korea appeared to be a `black hole` for aid assistance, while the
North had impressively industrialized”.
16
P Sztompka, The Sociology of Social Change, Blackwell, USA, 1993, p103-4
17
Sztompka, op cit, 1993, p104; and also SE Finer, The Man on Horseback: The Role of the Military in Politics, Penguin,
UK, 1976, p7
18
Finer, op cit, 1976, p6-7
“adventurer” – “give him a job and he becomes a soldier and a general”. He also notes the standing
army as “a device automatically arrived at…for disciplining, canalizing and making socially
productive the combative elements in the peoples”. He also notes that accordingly it is officered by
elements of the ruling classes. His views on the standing army are of interest given the predominance
of the KPA in nonmilitary activities although in Mosca`ss conception, the elites are not hereditary,
whereas in North Korea, they are.
In his chapter on “Charismatic Authority”, Weber20 has noted its principal characteristics as follows:
“The corporate group which is subject to charismatic authority is based on an emotional form of
communal relationship…The genuine prophet, like the genuine military leader…preaches, creates or
demands new obligations…Recognition is a duty… Charismatic authority is thus specifically outside
the realization of everyday routine and the preference sphere…This lasts only so long as the belief in
charismatic inspiration remains”. Of relevance is the charisma of the Kim family and the KPA
operating at one with each continuing to feed off the other, or alternatively, “bathing in each other`s
reflection”. For the leadership, this is to emphasise its origins as the victorious commander of the
heroic Partisans fighting in Manchuria (of which the KPA is the latent form) against the Japanese
oppressors. For the KPA itself, the Manchurian campaign in the 1930s is translated into a key element
of its esprit de corps – a highly important event in its glorious past.
Weber further noted: “Pure charisma is specifically foreign to economic considerations…It is anti
economic”. We will see in the paper that, as far as the leadership and the KPA is concerned: ideology
and national defence (- the two are essentially “joined at the hip” in the DPRK) “trump” economics21 –
whether it is the diversion of resources to the defence sector, declining to join Comecon or, more
recently, the enforced closure of the Kaesong Industrial Complex. That said, Weber draws attention to
the fact that “In the pure type, it disdains and repudiates economic exploitation of the gifts of grace as
a source of income, though to be sure, this often remains more an ideal than a fact”. The recent moves
to reopen the Kaesong Industrial Complex would appear to confirm Weber`s all too pertinent
observation.
Finally, Weber highlights that the costs of military and prophetic charisma are met by “booty,
contributions, gifts and hospitality”. These are all highly relevant to both the regime and the KPA,
whether it be the transfer of assets and businesses to the KPA as a source of income; the diversion of
humanitarian aid from the late 1990s; or even to the provision of imported luxury items for senior
officers of the KPA22.
Huntington23 has examined the rise of the military profession from the eighteenth century and noted
that the military has evolved into “servants of the statesman”.
Wright Mills24 has noted that power in the US had become nationalized and, as a result, had also
become interconnected, via its political and financial classes, with the military sector which had once
19
G Mosca, The Ruling Class, McGraw-Hill Book Company, Inc., USA, 1939, p xxiii-xxiv, also chapter IX.
M Weber, The Theory of Social and Economic Change, Mantino Publishing, USA, 2012, p360-3
21
That said, see CK Armstrong, op cit, 2013, p60. After the Korean War, Kim elected to relocate a number of major factories
that had been configured pre 1945 for convenience of transporting goods to Japan but far from sources of raw materials. The
relocation served to bring factories closer to such sources to better meet DPRK`s own domestic needs and of course away
from the coast that had been heavily bombarded by US naval forces. In this instance, national defence and economic reasons
might be said to have been appropriately aligned.
22
Top leadership visits to military units also include provision of gifts to troops such as binoculars or other such “prestige”
items. Such visits are noted later.
23
See chapter 4, SP Huntington, The Soldier and the State, Harvard University Press, USA, 1957. Towards end of chapter,
there is also a discussion of promilitary ideology, military political power and military professionalism.
24
C Wright Mills, The Power Elite, OUP, USA, 2000 edn, p365. Also see chapters 8 & 9.
20
been “only uneasy poor relations within the American elite; now they are first cousins; soon they may
become elder brothers”. Wright Mills views might be viewed as having entered the mainstream of the
modern day view of the military when President Eisenhower later commented in his farewell speech
on the rise of the “military-industrial complex”.
North has tended to not define what is meant by the “elite” (or “dominant coalition”) in his latter
works when considering Limited Access Orders. In the transition to Open Access Order status, he
merely notes that the military comes under “civilian control” without critically examining what that
means in the context of power relations25. For example, General Eisenhower shed his military uniform
to become a civilian President of the USA, as democratically elected. General Musharaff shed his
uniform to become President of Pakistan but was still viewed as holding the reins of power by virtue
of his status in the Pakistan Army.
Thus, the above view the military as constituting a warrior caste or an integral (and increasingly
important) part of the elite, but as a class? Djilas26 has argued that the “Communist army is a party
army…More precisely, Communists tend to treat the army and the state as their exclusive weapons.
The exclusive, if unwritten, law that only party members can become policemen, officers…or that
only they can exercise actual authority, creates a special privileged group of bureaucrats”. The army
thus constitutes, in his view, an element of the “New Class”.
Tullock in his work27 on rent seeking – which is principally discussed below under “The Northian
Framework”, notes the officer corps as representing a “very important special interest group” together
with the Defense Department`s civil servants.
Marxist-Leninist concepts of the Military
In his “Civil War in France”28, Marx had argued that the State was not to be taken over or utilized by
the socialists. Indeed, the instruments of coercion of the old state were not to be used to put down the
challenges of hostile classes nor was its machinery to be used to centralize the forces of production in
the hands of the proletariat. On the contrary, state power was to be smashed. Marx referred to
“separate bodies of armed men”, by which he meant separate from the mass of the unarmed populace.
In Lenin`s view29, “only organizations of the masses themselves, organizations such as the workers`
militia and workers` & peasants` soviets” could be the agency of regeneration given the imperialist
state rested on the coercive apparatus of a standing army.
In his “State and Revolution”30, Lenin wrote extensively on the nature of the army once the imperialist
state had been replaced by a “Commune state”. He cites Engel regarding the establishment of “public
power” and the question of the relationship between “special” bodies of armed men and the “self
acting armed organization of the population”. He additionally draws on Marx`s “Eighteenth Brumaire
of Louis Bonaparte” when he describes the standing army as a “parasite on the body of bourgeois
society”.
25
Huntington, op cit, 1957, makes a similar point on p80-1
M Djilas, The New Class, Harvest, USA, 1957
27
G Tullock, The Rent Seeking Society, Liberty Fund, Inc, USA, 2005
28
See K Marx, The First International and After, Vol 3, Penguin, UK, 1992 edn, p236-68
29
N Harding, Lenin`s Political Thought Vol 2: Theory and Practice in the Soviet Revolution, Haymarket Books, USA, 1978,
p111
29
See K Marx, The First International and After, Vol 3, Penguin, UK, 1992 edn, p236-68
29
N Harding, Lenin`s Political Thought Vol 2: Theory and Practice in the Soviet Revolution, Haymarket Books, USA, 1978,
p111
30
RC Tucker, The Lenin Anthology, WW Norton & Company, USA, 1975, p311-98
26
Lenin was to look to workers, particularly the urban proletariat, to be capable of forming a workers`
militia that would eventually embrace the whole population, and that the vanguard of the working
class would then be responsible for military defence. Finally, in his “Theses on Soviet power”31,
written several months after the November 1917 Revolution had brought the Bolsheviks to power, he
sought: “the creation of armed forces of workers and peasants, one least divorced from the people.
Organised character of nationwide army of the people, as one of the first steps towards arming the
whole people”.
A further facet of the ideas of the time in post revolutionary Russia was the “Trade Union debate”, of
interest later in this paper, in which Trotsky pushed for the “militarization of labour” - a form of
permanent mobilization of the workforce. Such ideas would be pursued by, of all people, Stalin in the
dash for industrialization in the late 1920s and 1930s, and have constituted a permanent characteristic
of the DPRK`s own industrial and military policy.
As noted beforehand, Mao`s ideas32 on the army would also influence the KPA in its role in the
DPRK. While the Chinese Peoples` Liberation Army was an “armed body for carrying out the political
tasks of the revolution” and to “stand firmly with the Chinese people and to serve them wholeheartedly”, it was not just an “army for fighting” but also an “army of labour”.
As Mao noted: “In our circumstances, production by the army for its own support, though backward or
retrogressive in form, is progressive in substance. Formally speaking, we are violating the principle of
the division of labour. However, in our circumstances,…what we are doing is progressive” (my italics
added for emphasis). He further notes the advantages, from his perspective of such an arrangement:
“production by the army for its own support has not only improved the army`s living conditions (but
also lightened the burden on the people”). We shall observe how production “for its support” in the
context of the KPA has expanded to an increasing involvement in many sectors of the economy and to
a significant magnitude thereof.
Lenin would note that the Red Army should serve as a template for learning from the use of
specialists33. In Mao`s view, the specialist would be supplanted by the PLA serving as generalists able
to operate in any capacity required by the demands placed upon it: “The army is not only a fighting
force, it is mainly a working force. All army cadres should learn how to…be good at managing
industry and commerce,…and solving the problems of food, coal and other daily necessities and good
at handling monetary and financial problems…The time has come for us to set ourselves the task of
turning the army into a working force” (my italics added for emphasis). Again, we shall observe the
particular relevance of the above – particularly in the areas of food and coal, as well as “handling
monetary and financial problems” in the context of the KPA.
Huntington also carries out a “compare and contrast” of the Marxist military ethic with other forms
and their differing views on the army.
The Military and the Economy
Following on from Tilly noted above, we might also consider the work of Werner Sombart34 of the
interconnection between inter European wars and the growth of capitalism – particularly with
31
Harding, op cit, 1978, p182
See Bibliography section for information on works of Mao.
33
M Desai, Lenin`s Economic Writings, Lawrence and Wishart, UK, 1989, p335
34
P Custers, Globalised Militarism: Nuclear and Military Production and Critical Economic Theory, Merlin Press, UK,
2006, p168-73
32
reference to the production of arms and military procurement, and the effects of these on various
branches of production eg the production process in the state`s arsenal.
Indeed, Stalin in one of his speeches in 1928 commented35: “When Peter the Great, having to deal with
the more highly developed countries of the West, feverishly built mills and factories to supply the
army and strengthen the country`s defences, that was in its way an attempt to break out of the grip of
this backwardness.”
Sen36 has also highlighted the catalytic impact of military needs on industry through the following
transmission mechanisms:
(i)
(ii)
(iii)
Demand – importantly for iron (later steel) and textiles
Technology – inventions and interchangeable parts
Organisation – co ordination of transport, supply, production, the broad division of labour
between infantry, artillery and armour etc.
Interestingly, with respect to “Organisation”, Fukuyama & Shulsky37 reverse the process from industry
to the military in their work on the “virtual organization” in which delayering in industry and the
removal of management layers is to be reflected in the army of the 21st century.
Technology and its impact on military institutions has also been fully considered by Hacker in his
works38.
We shall observe how that North Korean leadership and ideology would opt for heavy industry to
enhance the national defence of the DPRK and the policy of “military first” would lead to industry
being oriented around the needs of the KPA.
A further facet of the military and the economy also warrants attention. While a number of writers
including, inter alia, Arias39, have commented on the parallel development of the fiscal state together
with the military state, particularly from the XV-XVI centuries in the case of England, it can be argued
that such a process commenced even earlier in history. For example, Graeber40 has noted in his work
the centrality in history of violence with the earliest economies. Indeed the author states that coinage
may well have originated with the State remunerating a standing army in ancient times: “Bullion
predominates (over debt) above all, in periods of generalized violence”. Indeed, in contrast to Arias,
Graeber has noted that in the ancient world, free citizens did not usually pay taxes and tribute was
levied on conquered populations. Examples cited include: Athens, the Persian Empire and also, for a
considerable period of time, the Roman Empire – possessor of one of the most formidable standing
armies of all time.
Graeber also notes the following: “most ancient rulers spent a great deal of time thinking about the
relationship between mines, soldiers, taxes and food. Most concluded that the creation of markets of
this sort was not just convenient for feeding soldiers, but useful in all sorts of ways, since it meant
officials no longer had to requisition everything they needed directly from the populace” (my italics
added for emphasis). In the course of the paper, we will observe how markets have developed
35
JV Stalin, Selected Works, University Press of the Pacific, USA, 2002, p306
G Sen, The Military Origins of Industrialisation and International Trade Rivalry, Pinter, UK, 1984, p104-112
37
F Fukuyama & AN Shulsky, The “Virtual Corporation” and Army Organization, RAND, USA, 1997
38
See Bibliography for details.
39
LM Arias, A Collective Action Theory of Fiscal-Military State Building, 2013
40
D Graeber, Debt: The First 5,000 Years, Melville House, USA, 2012. Re taxes – see p63. For next paragraph quote, see
p49-50.
36
considerably in the light of the famine that struck North Korea in the 1990s and the collapse of the
Public Distribution System and how the KPA has been, unwittingly or otherwise, both a key
participant and beneficiary of such a move.
Comparative forms of military involvement in domestic affairs
Finer has examined the role of the military in politics and their disposition motive, mood and
opportunity to intervene in the domestic politics of their respective countries as well as the levels and
modes of such interventions.
With respect to civil-military relations and the propensity to intervene in politics, writer such as Cox
and Siollin have dealt with particular countries in Africa while Fitch, Rouquie and Stepan have
considered South America. Ulus has looked at Turkey and Ansar in Pakistan while Odon has reviewed
the Soviet military up to the collapse of the Soviet Union41.
Collier42 has examined the appearance of the military in the “bottom billion” in Africa running a
“protection racket on a grand scale” whereby the greater risk of a coup induces more money for the
military in the form of military spending. He has estimated that around 40% of military spending was
inadvertently financed by aid from overseas donors.
We will observe in the case of North Korea in the light of the famine and drought of the 1990s that a
significant share of the aid provided by foreign donors was similarly diverted for the benefit of the
KPA.
A number of writers have also considered the economic role of the militaries. Brenes et al 43 have
looked at the economic activities of Central America`s militaries. Cheung has briefly considered a
number of countries, principally in Asia, when summing up on the entrepreneurial activities of the
Chinese PLA. As noted beforehand, the Chinese PLA is of particular interest given its influence in
DPRK and the relationship with the KPA. Cheung44 discusses that militaries have become involved in
commercial activities due to a number of factors, inter alia, as follows:
i)
ii)
iii)
iv)
v)
Enjoying strong political influence and autonomy
Suffering from inadequate defence budgets
Their standards of military professionalism are low.
Do not face pressing external security concerns
Have a tradition of economic self-subsistence.
All of the above are of relevance in the case of the KPA, particularly i) and v). Point ii) might be
debateable given the relatively high rates of defence spending throughout the KPA`s existence
although the greater involvement in commercial activities did appear at a time when budgets were
being trimmed. Point iii) will be contentious in KPA`s case although it might be argued that its policy
of “arming the nation”, as well as its commercial activities in construction and agriculture, are likely
to, at least, dilute standards of military professionalism. Point iv) is surely in “the eye of the beholder”
with a question mark over the use of the word “pressing” – militaries tend to prepare for “worse case”
scenarios and the Korean War as well as other factors have left an indelible mark on the North Korean
regime.
41
See Bibliography for referenced works.
P Collier, The Bottom Billion, OUP, USA, 2007, p133-4
43
A Brenes et al, Soldiers as Businessmen: The Economic Activities of Central America`s Militaries, COSUDE, 1998
44
TM Cheung, China`s Entrepreneurial Army, Oxford University Press, UK, 2001, p271-2
42
The Northian Framework
According to North, developing societies limit violence through manipulation of economic
interests by the political system in order to create rents so that powerful groups or individuals
find it in their self interest to refrain from using violence. Creation of rents, through limiting
access to valuable resources ie land, labour or capital, or access to and control of valuable
activities ie trade, provides, in North`s words, “the glue” that holds the dominant
coalition/elites together.
By rents, we mean the difference between total benefits and total costs, where costs are
defined as opportunity costs. This definition is wider than that recently employed in the field
of public choice whereby individuals will incur costs to gain rents for themselves – rent
seeking eg lobbying costs for or against a new tariff, bribery and corruption to obtain a major
contract or asset. Such costs are viewed as directly unproductive since no value is created for
society as a whole. The framework below encompasses the wider definition as well as the
more narrower form. In addition, this paper employs a slightly wider version than even North
has deployed by also including the allocation of government revenues 45 ie taxes, to selected
groups, primarily, but not only, in the area of Violent Capacity eg defence and the security
services, to contain violence or for the purposes of coercion.
The creation and structuring of rents are viewed as critical to coordinating powerful members
of the dominant coalition as rents should ensure predictable behaviour. The cessation of
violence (peace) is not achieved when violence specialists put down their arms, but when the
violent devise arrangements (explicit or implicit) that reduce the level of violence, and
thereby both sides may enjoy their rents. That said, such rents derived from local monopolies
and restrictions on economic entry can hinder competitive markets and longterm economic
growth46. Thus there can arise an inherent conflict between the need for establishing a state of
non violence by ensuring the availability of rents but that stability might not be sustainable if
longterm economic growth is not ensured. The risk to the dominant coalition is that with no
economic growth, rents become difficult to generate. Furthermore, efforts to remove
institutions and policies that support unproductive rent creation and corruption require finesse
otherwise affected parties can engage in violence and conflict can ensue. In extreme cases, eg
the Congo, rents may actually create incentives to engage in violence.
The following sets out the type of Limited Access Orders (LAOs, or social arrangement
discouraging violence, sometimes called “Natural states”) together with characteristics of
Economic/Political and Violent Capacity organizations.
45
See RD Congleton, Rent-Extraction, Liberalism, and Economic Development, Center for Study of Public Choice, George
Mason University, April 2010
46
See M Khan, Rents, Rent-seeking & Economic Development: Theory & Evidence in Asia, CUP, UK, 2000 for a look at
South Korea, Thailand & others.
As can be seen from the table47 above:



47
Fragile – examples of which can be seen in Sub Saharan Africa, such as Somalia, or
Afghanistan.
Basic – see below. We can observe the lack of categorical dividing lines between
Economic Organisation/Political Organisation/Violence Capacity.
Mature – where dividing lines are more categorical between these organizations –
EO/PO/VC. North specifically cites China as an example thereof.
North et al, op cit, 2012, p14, as amended

Open Access Order. North cites South Korea as one of those countries which have
made the successful transition to OAO.
But North`s framework might be looked at not just vertically ie ascending or descending the
hierarchy but also horizontally in terms of the dividing lines between Economic
Organisation/Political Organisation/Violence Capacity. Under “Basic”, we might view the
dividing lines as being not wholly categorical but often merging between the different
organizational types. Thus Violence Capacity organizations may wield considerable political
influence and through both this and their coercion capability may also parlay those attributes
into wielding economic influence in order to capture rents. Examples of this might include the
Pasdaran in Iran48 and the KPA in North Korea. Therefore, the nature of the distinction
between the various categories of such organizations in the context of North Korea is the
substantive essence of this paper and its implications are considered for the Northian
framework.
A crucial element of the Northian framework is how the various organizations interact with
each other and evolve, sometimes with external social forces and conflicts, to further
differentiate or the boundaries become more definitive – for example, the professionalization
of the armed forces; or even to merge into one another such that they appear to share
characteristics of EO/PO/VC. Even in an OAO, as noted above, in contradistinction to
North`s clear delineation, there can exist a subtle shading between them than appears at first
glance. To take an example, the UK in its present form is viewed by North as an obvious
OAO. There is a constitutional monarchy in place: in form, the Queen is Head of State but in
substance her powers are circumscribed by parliament; she is also the Supreme Head of the
Church of England; in form she is the Head of the Armed Forces (note: officers receive Her
Majesty`s commission and it is Her Majesty`s Armed Forces) although in substance they are
run by the government of the day; the Queen is also one of the wealthiest individuals in the
UK in both form and substance with considerable landholdings and other assets. The
combination of “soldier-priest” (see later) in the UK is brought into focus with the position vis
a vis the armed forces and the Church of England function – the latter also serving as the
rallying call against “Rome and foreign powers” arising from the 16th century thereafter but
also as a pretext for nationalizing the Roman Catholic Church`s property and wealth through
the dissolution of the monasteries to enhance monarch`s wealth and finance the royal court.
Thus, even in the UK, we can still observe traces of the nexus and interactions between
military, ideology and economics which can be clearly observed in LAOs such as the DPRK,
Iran and other states. This should be borne in mind in looking at the KPA`s role. We will also
see in the context of the paper how issues of both “form” and “substance” interact in the
context of the military/political/economic conditions of the DPRK and the KPA.
To sum up, Northian framework encompasses the following:
48
See E Ottolenghi, The Pasdaran: Inside Iran`s Revolutionary Guard Corps, FDD, USA, 2011; and F Wehrey et al, The
Rise of the Pasdaran, RAND, USA, 2009




The centrality of violence.
Centrality of organizations in structuring relationships both within and between polity,
economy and the wider society.
Rents.
Dynamics of society – constant changes.
Following on from the above, we can observe the outline of the interaction between the above
elements, namely: the ways and means by which society is structured such that the elite
obtains rents and distributes it according to some preconceived ideal. In a number of his
works, Marx49 outlined his concept of “superstructure” which, in essence, described where a
ruling elite established laws, beliefs and institutions to perpetuate a period of rule in order to
extract rents50. On this basis, the VC organization is to protect and enforce this set of social
relations. But there can arise circumstances, through means of the principal-agent problem,
which bring to the fore the expression of “Quis custodiet ipsos custodies?” (or “who will
guard the watch-guards?”) Indeed, by virtue of being a VC organization, as authors have
noted from time immemorial eg Gibbins in Roman times on the Praetorian Guard and as
demonstrated by coups over the last twenty to thirty years in Africa and elsewhere, the guards
can take over the reins of power and enjoy the rents themselves! Conversely, military in
power may also engage in a subtle tradeoff whereby they forfeit the obvious display of power
but still retain residual political rights of varying importance, partially through exercising
economic power and thereby retaining access to rents. Examples of this can be seen in Poland
post 198951; the Turkish Army through the constitution52; and Pakistan both post Zia and post
Musharaff.
This can be demonstrated by reference to the following. In his work, A Contribution to the
Critique of Political Economy, Marx also refers to rents as follows53: “The conqueror, the official, the
landlord, the monk or the levite, who respectively live on tribute, taxes, rent, alms and the tithe all
receive (a part) of the social product”. As a proxy, we can see how the “priest” and the “soldier”
extract such rents throughout history in the first diagram.
49
See K Marx, A Contribution to the Critique of Political Economy, General Books, USA, 2009 edn˛(oddly the Preface is
absent from this version but can be found on internet version as well as in Capital Volume 1, Penguin, UK, 1970 edition, note
35, p175); and his Eighteenth Brumaire of Louis Napoleon, Surveys of Exile vol 2, 1977 edn, Penguin, UK, p173
50
See CK Armstrong, The North Korean Revolution, 1945-50, Cornell University, USA, 2003, p157: “For orthodox
Marxists, the political and cultural superstructure of a society was supposed to develop out of the economic base. [In North
Korea,] Kim [Il Sung] argued exactly the opposite”.
51
See M Los & A Zybertowicz, Privatizing the Police-State: The Case of Poland, 2000, Macmillan, UK. Their premise is
that the Polish military & intelligence services arranged a peaceful transition in the late 1980s so that they could hold onto
business assets & wealth. They therefore did a “deal” in 1989 with Solidarity and the opposition to retain wealth in return for
ceding power. Another modern day example might be Myanmar.
52
The armed forces has a legal pretext under article 35 of the Internal Service Law to intervene in the running of the country,
which it employed as a basis for its coup in 1980 and had also intervened to assist in the removal of the first openly Islamist
Prime Minister Erbakan in 1997.
53
K Marx, op cit, 2009 edn, p120
The second diagram shows how this is later achieved through the means of the state but in this
instance, the “priest” may be viewed as the elite operating through a political organization, as per the
Northian framework above. As Fukuyama noted54, tribal societies saw the emergence of a separate
caste of warriors and getting rich was a motive for making war in tribal societies. It was only with the
rise of the bourgeois class in 17th and 18th century Europe that the warrior ethic was replaced by an
ethic that placed gain and economic calculation above honour as the “mark of a virtuous individual”.
54
F Fukuyama, The Origin of Political Order, Profile Books, UK, 2011, p75
As noted in the North Korean context, ideology and the military55 coexist in a symbiotic relationship
in order to extract rents. In the course of the paper, we will examine how this is central to the
maintenance of the regime in place.
The Leadership: the Ideology – “Iconology” – Military Nexus
The central figure in the development of North Korea post 1945 was Kim Il Sung56, the
grandfather of the present incumbent head of state. Kim was born in 1912 near Pyongyang
and his family emigrated to Manchuria in around 1920. In the early 1930s, Kim joined the
Anti Japanese movement in China and served with the Chinese communist forces fighting the
Japanese. Due to a severe crackdown by the Japanese military, Kim was forced to cross the
border into the Soviet Union in 1940 where he later enrolled in the Soviet Red Army and
served until the end of the Second World War. For the purposes of the later Kim legend,
notwithstanding his heroism in serving in the Anti Japanese campaign in China, neither his
membership of the Chinese Communist Party (from 1932) or the fact that became a Captain in
the Soviet Red Army, was made public in the DPRK. This legend building also extended to
his son, Kim Jong Il, who had been born in the USSR rather than in Korea itself.
Kim returned to the then Soviet occupied north of the peninsula in October 1945 where the
Red Army command was keen to see him occupy a senior role in the new regime. It would be
too trite to call Kim “Moscow`s man” but clearly due to his service with the Red Army and
his prior experience with the Chinese, he would certainly have been viewed as an
“acceptable” addition to the then considerably depleted ranks of the then Korean communist
movement.
Following the Korean War of 1953, the Southern faction, ie those communists who had been
in the southern part of Korea under Japanese and later US occupation, of the Korean Workers
Party (KWP) was discredited and its leading members executed57. Kim was still only “first
among equals” but his skilful manoeuvring had established a measure of advantage over the
other party factions, closely linked to the USSR (“the Soviet Koreans”) and the Chinese (“the
Yanan faction”).
Kim was to use the period of the 1950s to establish a “national Korean” identity. At first, he
pitched this message in terms of defining the identity by virtue of opposition to the hated
Japanese occupiers of days past but also more recent enemies, the US and South Koreans.
In 1955, Kim set out in a speech58 “On eliminating dogmatism and formalism and establishing
Juche in ideological work” the first kernels of what later became KimIlsungism. Within the
speech are what might be viewed as none too subtle digs against the USSR`s and China
perceived interference in Korea but there were also elements of the speech regarding the
North Korea`s Peoples Army (“KPA”) – of which the most pertinent were those referring to
55
Or to borrow from Odom, op cit, 1998, p223, “a military-ideological complex”.
See A Lankov, From Stalin to Kim Il Sung: The Formation of North Korea 1945 – 50, Hurst, UK, 2002, chapter 2; also DS Suh, Kim Il Sung, Columbia UP, USA, 1988
57
For a study of the factionalism and Kim led consolidation, see K-W Nam, The North Korean Communist Leadership, 1945
to1965, University of Alabama, USA, 1974
58
K-I Sung, The Selected Works, Prism, USA, 2011, p27-53
56
individuals who had served with Kim in the 1930s and 1940s, gaining increased prominence
in the ranks. The speech was therefore as much an attempt to set out a national based
ideological stall as appealing to the bedrock of Kim`s (military) supporters – his former
partisan comrades from the Anti Japanese campaign in Manchuria.
The post Stalinist thaw and Khrushchev`s “Secret Speech” in 1956 would result in a number
of consequences in Korea. Firstly, despite an attempt by the Soviet Korean and Chinese
Yanan factions (supported by the USSR and China) to take on Kim in the August KWP
plenum, they were outmaneouvered by Kim and his supporters59. The ostensible case for
opposing Kim had been his supposed disregard for light industry in favour of heavy industry60
– an argument not without some merit in view of the concentration of resources on rebuilding
the war shattered heavy industry, but more ominous for Kim was a reference by his
opponents, supported by the Soviet Union, for the KWP to rediscover the “Leninist principles
of collective leadership” – a clear allusion to Kim`s penchant for creating a “cult of
personality”. It should be noted that this incident may also have served to convince Kim of the
wisdom to transfer power to his son, Kim Jong Il; a trusted son would be unlikely to
undermine his image after his death or pursue new policies that would damage his legacy.
There is another aspect arising from the expression: “Blood is the best security” – the
importance of trust in a structure as operated in the DPRK.
A pursuit of heavy industry constituted not only a means of establishing a defence production
capability to ward off external enemies (and avoid undue reliance on the less than consistent
support from allies61) and realising an ideological preference along Stalinist political
economy, but also a means of cultivating a political base through development of the
proletarian working class62 but more relevant in the DPRK case, also the military as a major
beneficiary of the arms sector.
Kim and his military supporters moved to purge the KWP of both of these factions. Relations
with the USSR cooled in the late 1950s/early1960s while Korean industry experienced some
difficulty with Soviet advisors departing the country63. Soviet and Eastern European aid, in
the form of direct grants, had amounted to almost US$ 1 billion upto 1960.
Despite a defence treaty with the USSR signed in July 1961, the DPRK failed to elicit any
military assistance despite a high ranking visit to Moscow in November 1962. Suh64 also
notes the altercation with USSR leading to an extension of the 7 year plan in 1965. As a
consequence, a Fifth Plenum of the Central Committee was called on 10 December 1962 and
a new “military line” for the party was agreed:
59
See A Lankov, Crisis in North Korea: The Failure of De-Stalinization, 1956, 2005, University of Hawaii Press, USA
Note this was also Kim`s ideological standpoint as well. As per speech cited above: “Heavy industry is the foundation of
the national economy...is a basis for national independence...to pursue self reliant development of national economy and to
defend ourselves”, op cit, 2011, p33. North Korea had inherited a not insignificant endowment of an industrial base
constructed by the Japanese in the 1930s/40s so Kim may also have made an “ideological virtue out of an economic
necessity”.
61
See CO Chung, Pyongyang between Peking and Moscow, University of Alabama, USA, 1978.
62
A Callinicos, The Revenge of History, Polity Press, UK, 2004 edn, p30-35. That said, in the context of the DPRK, there
was also agrarian reform which also provided important mass support for the KWP.
63
See A Lankov, From Stalin to Kim Il Sung: The Formation of North Korea 1945 – 50, Hurst, UK,, 2002, p66 – withdrawal
of Soviet aid “brought industry to collapse” and also p135.
64
Suh, op cit, 1988, p190
60
(i)
(ii)
(iii)
(iv)
Modernise the military equipment
Make a cadre out of every soldier by training him ideologically and in military
technology
Arm the entire people: “an arm in one hand, and a hammer & sickle in another
hand”65.
Turn the whole nation into an impenetrable fortress even if it constrains economic
development.
An element of this new “people`s defence” strategy was to replace the conventional “big
forces” military doctrine inherited from the USSR. This led to build up of Worker-Peasant
Red Guards comprising men & women of between 17 to 45, which constituted an unit of
500,000 (1.5 million as per Suh plus Red Young Guards with 700,000 members) in addition
to a regular force of over 350,000.
Thus 1962 saw the DPRK`s economic resources devoted to the development of machine
industry to enable a domestic arms industry. Only in 1965 did the USSR renew supplies of its
advanced modern weapons to the DPRK.
1966 would see a “high watermark” of the political influence of the KPA (and, in particular,
the Partisan generals (all former comrades in arms of Kim Il Sung in Manchuria), with active
& retired military personnel occupying 6 out of the 15 positions on the Political Committee
(or Politburo) as well as 4 out of the 9 candidate members66. As Hamm noted at the time of
the Second Conference of the KWP: “The strategic shift from defence, import substituting
military buildup and mass mobilisation was facilitated not only by Pyongyang`s perception of
the external threat [ie the 1962 military coup in the ROK and the increased US involvement in
Vietnam, as well as developments in both China and the USSR] but by the growing influence
of the military in the party”.
As a result of a failed military incursion into the ROK in the autumn of 1968 and the Pueblo
incident as well as ill-judged intervention by senior military leaders into domestic political
matters outside their remit, ten of the Partisan generals, including: Vice Premier Kim Kwanghyop, Kim Ch`ang-bong (also Politburo member and Defence Minister), Ch`oe Kwang
(candidate Politburo member and Army Chief of Staff) and Ho Pong-hak (candidate Politburo
member and Director of Liaison Bureau) and Sok San, Minister of Public Security, were
dismissed67. Interestingly, four senior party officials had been forced out in early 1967 for
opposing the hawkish policy adopted towards South Korea.
Kim sought to place the KPA under tighter surveillance and control of the KPA. Accordingly,
Choe Hyon, a close friend of Kim, served as Defence Minister until 1976. Buzo has noted68
the decline of the military`s influence in party affairs during the 1980s particularly in the
Politburo – its representation fell from eleven to three between 1980-85. Kim Jong Il set about
65
See Armstrong, op cit, 2013, p131. He states that slogan “arming whole people” was in common use in April 1962 and that
the KPA was on permanent military alert from middle of the year. On p147, note 25: “East European observers often took a
cynical view of North Korea`s buildup, seeing it as a tool for Kim Il Sung to strengthen his hold over the country rather than
a response to any objective change in the region”. The motive was to elicit more aid from fraternal countries and the KPA
was a vital tool in securing such aid.
66
T-Y Hamm, Arming the Two Koreas: State, Capital and Military Power, Routledge, UK, 1999, p142. Suh, op cit, p172
notes 80% of the KWP Central Committee as being former Partisan comrades or with ties to.
67
Armstrong, op cit, 2013, p213 refers to speculation that Kim Jong Il may have been involved in purge to strengthen his
position in the leadership.
68
A Buzo, The Guerilla Dynasty: Politics and Leadership in North Korea, IB Taurus, UK, 1999, p54-56
reversing this decline during the 1990s with the mass promotion of 800 generals between
December 1991 and 1995. In October 1995, he appointed 3 Marshals (including himself) and
8 Vice Marshals69. The KPA was therefore to be a key source of power and influence for Kim
Jong Il as he sought to extend his remit over the activities of the KWP to other important
institutions through his promotion of “Military first” policies. In August 1998, an official
party organ introduced idea to “build the DPRK into a militarily strong and economically
prosperous state (Kangsong Taesuk)”. The order of “militarily strong” followed by
“economically prosperous” is intentional: firstly as a rebuke to the former socialist countries
in transition ranging from central Europe to the former USSR but also China & Vietnam
seeking a path of “market socialism”; and also a view that, particularly in the USSR, the
Communist party had failed to keep control of the Army as a leading (party dominant)
institution; indeed Gorbachev had sought to downplay the military`s role through arms
control, exiting Afghanistan, depoliticisation of the armed forces as well as its subsequent
disintegration in August 1991 following the abortive coup.
As we have seen above, the military holds a near sacred place in the state`s ideological and
national narrative70: “Without the army, there exists no people, no state and no party”, and
also enjoys strong links to the Kim family. This has ranged from its centrality in Kim Il Sung
and the “anti Japanese guerrilla tradition” to the expansion of the concept of “military first”
under his successor, Kim Jong Il. It is also noteworthy that Kim Jong Un has spent a
considerable amount of the time since December 2011, when he came to power, cultivating
the KPA and attending regular site visits – the KPA has become his political bedrock as
well71.
Of particular importance is the legend building as extended by Kim Il Sung to the KPA in
respect of its role. Indeed, the legends of both have been purposely entertwined to ensure the
legitimacy of both. It should be noted that towards the end of 1950 after the KPA invasion of
South Korea had been reversed, it was the Chinese PLA that had substantially fought the war
and, in fact, had negotiated the cessation of hostilities largely over the heads of the North
Koreans. Chinese involvement in the Korean War was thus significantly downplayed by the
DPRK in the coming decades. Also despite the fact that the KPA had been officially
established on 8 February 1948 (prior to the government itself on 9 September 1948 and the
Korean Workers Party in June 1949), there were increased references to the KPA being
established in 1932 which coincided with Kim Il Sung`s involvement in the Anti Japanese
Manchurian campaign noted above.
69
Bermudez, op cit, 2001 p21-22
S-C Kim, North Korea under Kim Jong Il: From Consolidation to Systemic Dissonance, 2006, State University of New
York Press, p91
71
I receive on a daily basis an e – mail “NorthKoreaLeadershipWatch” and while not performing a proper count, I would
state that the vast majority of Kim Jong Un`s reported activities involve visits to military units. The Premier tends to conduct
ordinary industry visits etc. Re choice of word “bedrock”, note Lankov, op cit, 2002, p60: “Armed forces were his (ie Kim Il
Sung`s) major power-base”. Also see P Mceachern, Inside the Red Box: North Korea`s Post Totalitarian Politics, 2010,
Columbia UP, USA, p87. He also notes that the KWP is no longer preeminent on p85.
70
The Key Organs of the KPA`s Command and Control
The key command & control organs of the DPRK and the KPA`s place therein are set out in
the diagram72. At the onset, it should be noted that through its inherent simplification, the
organisation chart may not wholly demonstrate the considerable overlapping of both
personnel and responsibilities that exist, as well as the real lines of communication and
control between the organs.
The key tool of control is the National Defence Commission (NDC), which up to 1990 had
operated as a subcommittee of the Central People`s Committee, then became an independent
commission, to which was transferred the Ministry of the People`s Armed Forces - which is
responsible for the KPA. (The State Security Department was also transferred to the
responsibility of the NDC in September 1998). Kim Jong Il became Chairman of the NDC in
1993. Prior to this Kim Jong Il had been appointed the Supreme Commander of the KPA in
1991 which violated the 1972 constitution as the then State Chairman, Kim Il Sung, should
have assumed such a role. This anomaly was corrected in 1992 to revise the concurrent
holding of state president and supreme command. Thus, in 1992, the DPRK Constitution
was amended and again in 1998 such that the NDC became the most powerful organisation
within the DPRK. Its Chairman controls “all of the political, military and economic
capabilities” of the DPRK.
72
This is based on Bermudez, op cit, 2001, p21, 24, 28, & 48
Notwithstanding the importance given to the NDC, the Korean Workers Party (“KWP”) still
remains a substantially important “pillar” of the DPRK. By Article 11 of the Constitution, it is
stated that the “DPRK shall conduct all activities under the leadership of the Workers Party of
Korea” (bold emphasis added). We thus encounter one of the many facets that pervade the
workings of the DPRK – the unclear distinction between “form” and substance” where
different organizations (or perceived as being such) coexist on differing bases. While one
entity may have a singular constitutional basis, as defined in law, another may operate over
and above any such constitutional basis on the back of the wishes of the Supreme Leader.
Indeed, Kim Jong Il became General Secretary in 1997 not by selection by the Central
Committee, as per party regulations, but by means of a “recommendation” from the Central
Committee and the Central Military Committee of the KWP.
According to Buzo73: “Both the Party and the military operate separate economic systems,
and the NDC, in particular, exercises substantial power through the control of production and
exports of weapons and other military supplies”.
The Second Economic Committee is subordinate to the NDC but we again encounter the
above point of “form” versus “substance”. While it is formally under the responsibility of the
NDC, whose Chairman is the incumbent Kim Jong Un, the substance is that this entity is very
much under the control of the Kim family itself. This entity is dealt with in the next section
given its importance to the military-economy as well as highlighting the fact that KPA is not
entirely “monolithic” in its control over this sector of the economy.
Under the constitutional changes in 1998, as noted above, the Cabinet is responsible for all
economic programmes and the administration of the nation. The Ministry of Public Security
acts as a national police forces and civil defence unity, but also has surveillance functions,
which are co ordinated with the State Security Department. Thus there is some overlap
between these entities in the activities undertaken.
Mceachern has noted that the KPA, KWP, and the Cabinet have assumed a lead institutional
role in various policy issues over the period 1998-200974. This is also central to understanding
the diagram above and the organizational structures of the DPRK, and, in particular, the top
box entitled “Kim” – representing the Kim family. Kim Jong Il, his successor, Kim Jong Un
(and, for that matter, the first Kim – Kim Il Sung) appoint and remove all the key individuals
in the relevant “pillars”, including the KPA, of which Kim is the head by virtue of being a
marshal (by rank), the NDC Chairman and their ideological head through being General
Secretary of the KPW ie “the Party controls the gun”. Over and above this, there is the iconic
status enjoyed as being the descendants of Kim Il Sung, the founder of the KPA. By virtue of
his background as the “party centre” in the 1970s and 1980s, and his service in the KPW`s
Organisation and Guidance Department (which inter alia, also supervises the activities of the
security services) and ideology75, Kim Jong Il had served to combine the “priest” function
together with that of the “soldier” – a key cornerstone of the two key “institutional pillars”.
73
Buzo, op cit, 1999, p40
P Mceachern, Inside the Red Box: North Korea`s Post Totalitarian Politics, Columbia UP, USA, 2010, p 220-223
75
Kim Jong Il was also heavily involved in film, arts and culture. He was therefore a key instrument in constructing the
“theatre state” with its images, symbols and beliefs transmitted to the populace.
74
All lines of communication proceed to Kim and all commands are ultimately controlled by
him.
It might thus be argued that the institutions noted above ie KPA, KWP and the Cabinet, to
borrow a metaphor, constitute “horses for courses” with the KPA performing a key role in the
aftermath of the disastrous floods of the mid to late 1990s in terms of preventing a collapse of
order and for arranging the distribution of foodstuffs through its functioning logistics
capability as well as the standoff with the USA over the nuclear issue in 1992-94 and also the
Second Nuclear crisis in October 2002; and as part of the Kim Jong Un transition during
2011/12 and, more recently, the third nuclear crisis of early 2013; the Cabinet for devising
economic reform measures in the 2000s; and the KWP for tightening up on the lax ideological
stance and reintroducing the Public Distribution System in 2006-7 once the worst effects of
the economic crisis had passed. Perhaps a more appropriate equestrian metaphor is that of a
chariot with the KPA, KWP, and the Cabinet run in tandem by the sole charioteer, Kim. A
flick of the reins by him on one horse gives that one their “head” with the others brought
along in turn by the harness that binds them all together. None of the horses have “blinkers”
per se, as they ultimately take their lead from the one horse which has received the latest
command.
North76 has noted the concept of the “adaptive efficiency” of institutions whereby they evolve
to address the circumstances they face – a “survival of the fittest” weeds out those institutions
unable to cope or adapt. North cites specifically the collapse of the Soviet Union as a counter
example of a failure to adapt. But, in contradistinction to the USSR, the DPRK has continued
to survive despite many claims to the contrary together with its “pillars” broadly intact and, in
particular, the KPA has adapted to fulfill other requirements, ranging, inter alia, from
“employer of last resort”, hard currency earner to exercising a form of protection for the new
market entrepreneurs, through which rents are derived for it and other high ranking interests.
The Second Economic Committee (SEC)
The SEC, while subordinate to the NDC, also enjoys coordination and oversight with the
KWP through a department of the Central Military Committee which, in turn, is subordinate
to the Central Committee. According to Kim, the military industries have been under the tight
control of the Kim family and Chon Pyong-ho, the party secretary in charge of military
industries.
The SEC, through its seven bureaux, is believed to control 134 factories, which manufacture
small arms, tanks, missiles, artillery, NBC (nuclear, biological and chemical) weapons, ships
and aircraft. In addition, the SEC exercises a degree of control over the activities of a number
of other factories which ostensibly are the remit of the Cabinet`s Light Industry and Metal &
Machine Industry Ministries. In the event of war, the SEC would assume control of all
factories capable of defence production.
76
DC North, Understanding the Process of Economic Change, Princeton University Press, USA, 2005, p154
The External Economic Affairs Bureau is responsible for foreign military arms sales and the
procurement of foreign military equipment. This bureau has been responsible for selling
missile and related technologies to Iran and Syria, as well as the No-dong missiles to Pakistan
and Iran. Financing for these sales was carried out by the Changgwang Sinyong Corporation
(the North Korean Mining Development Trading Corporation)77.
Following economic constraints of its own, the USSR began to reduce its aid and support to
the DPRK from the beginning of 1987. This also included the termination of technology
transfer which had benefitted North Korea through its export of arms based on Soviet designs
had constituted an important source of foreign exchange.
Indeed, the DPRK had enjoyed a windfall from arms exports in the 1980s to both Iran and
Iraq. According to Bermudez, the DPRK had run out of funds to pursue a missile
development programme. Iran agreed to finance this programme and assist in procuring
relevant parts and equipment as part of an illegal purchasing network. In June 1987, the
DPRK and Iran agreed that the former would supply between 90-100 Scud – B type missiles
for oil worth US$ 500 million. The DPRK also agreed to build a ballistic missile plant in
Isfahan. The Iran-Iraq war concluded in 1988 although Iran has continued to remain a major
customer of the DPRK.
The onset of the 1990s saw increased competition as countries in the former Soviet bloc
proceeded to empty their armouries and the termination of technology transfer arrangements
with the old USSR led to increasingly obsolescent arms designs. Indeed, the DPRK supplied
missiles to the United Arab Emirates for US$ 160 million in 1989 which were viewed as
being of poor quality by the customer.
The bureau was also involved in the procurement of NBC and missile technologies from a
number of countries in the 1990s. For example, in 1994-5, DPRK provided No-Dong
missiles, produced by the 4th Machine Industry Bureau, to Pakistan in return for uranium
enrichment technology.
In addition to Iran and Pakistan, Cuba, Egypt, Libya, Sudan, Syria, Tanzania, Uganda and
Yemen (as well as allegedly, Myanmar) have also been linked to the DPRK in arms
transactions78.
The importance of arms export sales as a foreign currency earner for the DPRK is subject to
dispute. US sources of estimated sales of over US$ 500 million per annum have been
contradicted by the ROK, who estimate missile exports amounted to US$ 30 million in 1999,
US$ 20 million in 2001 and US$ 60 million in 2002. Other ROK sources estimate even in the
“golden years” of the 1980s that export sales to the Middle East amounted to US$ 580 million
between 1987-92, or just around US$ 100 million per annum79. Rather than earning hard
77
Following UN sanctions in 2009 against this entity and others, Green Pine Conglomerate and Korea Heungjin Trading
Company took over such functions. They were separately blacklisted in May 2012 and undoubtedly there are/ will be further
“successor” commercial entities “filling their shoes”.
78
I have a recollection that the KPA trained Zimbabwe`s 5 th Brigade which was used to brutally put down an uprising against
President Mugabe in Matabeleland in the early 1980s.
79
See SIPRI, 2012, Appendix 12D, p545-6
foreign currency, we can observe, in the case of Iran and Pakistan, barter arrangements
involving swaps of technologies or missiles for oil, and even co-investment and co-production
deals.
It has been estimated that there are over 150 trading companies subordinate to the MPAF,
KWP and Ministry of Public Security involved in foreign currency earning operations. A
number of these have been cited in UN sanctions lists in connection with nuclear weapons
procurement activities and arms trading. Also note that KPA controls a dozen or more
conglomerates based on the chaebol model. We can observe an example of how such
conglomerates have operated and been supervised is the Tae`pung Investment Group.
Tae`pung Investment Group as a case example80
Tae`pung Investment Group was established as an energy provider selling oil and gas (via
Sinu'iju) to the KPA and KWP’s Central Committee. Its leading executive was Pak Chol Su,
a Korean resident in China. Through his sales of energy supplies to the party and army, Pak
eventually developed close ties with senior KPA and KWP officials. In 2006 Taep'ung was
formally organized as one of the country's direct foreign investment entities.
In early 2010, Taep'ung was designated as a key investment entity of the DPRK through authorization
by Kim Jong Il and the National Defense Commission. On 20 January 2010, the Korea Taep'ung
International Investment Group was formally incorporated and held a meeting of its 7 member board
of directors in Pyongyang. KWP Secretary Kim Yang Gon was appointed director-general of the
board in his capacity as Chairman of the Asia-Pacific Peace Committee with Pak Chol Su appointed a
deputy director-general of the board. It was understood that Taepu'ng was organized under the
auspices of the DPRK National Defense Commission, the DPRK Cabinet and Ministry of Finance and
the Korea Asia-Pacific Peace Committee – another example of the overlapping type of supervision and
control prevalent in the DPRK . Incorporated and organized alongside Taepu'ng's expansion was the
State Development Bank, which would be led by Jon Il Chun, a proxy for the National Defense
Commission and a close aide to the late leader Kim Jong Il, as well as being involved in DPRK`s
external trading activities for forty years. Jon, also (and currently) a deputy director of the KWP
Finance and Accounting Department81 – yet another key function of the KWP`s financial interests
which manages the KWP`s finances and the “party economy”, was appointed head of the State
Development Bank at the same time he was appointed to manage the powerful DPRK conglomerate,
the Taeso'ng Group as well as being the key head of Office #3982, - all important entities earning
foreign currency for the DPRK`s top leadership.
80
This is based on an article by NK LeadershipWatch dated 1 February 2013 and own research.
My view is that rather than representing a “bookkeeping” and audit entity, the Finance and Accounting Department plus
Office#39 are, in fact, the mechanism for collecting rents from all relevant organs, ie KPA, MPS, etc and directing them to
reward the KWP membership for their loyalty. Note that the KWP is a mass party organization accounting for 25% of adult
population.
82
The No. 39 Department (or Office#39) has (allegedly) 17 overseas branches, 100 trading companies and banks under its
auspices. It has operated through Daesung Bank and its affiliate, Gold Star Bank (Geumbyeol Bank). They generate foreign
currency through loyalty funds collected from each agency and management of hotels and foreign currency stores. Also, the
office trades in the country’s natural resources including pine mushrooms, gold and silver. See
http://www.dailynk.com/english/read.php?cataId=nk00400&num=6750.
81
Despite several attempts, including the internal transfer of several state-owned enterprises, and a high
profile trip by Jon Il Chun at the head of a large delegation of executives under the auspices of
Taepu'ng, the company attained little to no foreign direct investment. The closeness of its relationship
to the NDC, which is subject to both UN and other ie US, sanctions arising from the nuclear
programme et al, did not assist in realizing its purpose. According to one report, Taep'ung "oversaw
the now-suspended joint tourist program in Mount Kumgang on the eastern coast of North Korea" and
was later wound up and its activities transferred to the Joint Venture and Investment Commission,
which is under the direction of Ri Ryong Nam (Minister of Foreign Trade) and Ri Chol, Vice
Chairman of the DPRK’s Committee of Investment and Joint Ventures and an important KWP
functionary, along with Jang Song Taek, Vice Chairman of the NDC, a general and uncle of Kim
Jong Un.
Other conglomerates include entities such as: Chongjin Trading Company – linked to the
KPA`s General Staff Division; Kookjaeyeonhap Trading Company – linked to the KPA`s
Joint Chiefs of Staff Division; Economic Division 2 – linked to the KPA`s Logistics
Mobilisation Bureau; and Cheongwoonsan Trading Company – linked to the KPA`s Military
Unit 963 tasked with overseeing the security of the Kim family.
Defence expenditures
This section should be introduced with a reminder that the figures noted therein should be viewed with
extreme caution. The DPRK, in line with other command economies, adopted a stance of revealing as
little as possible about its economy and even more so in respect of its defence expenditures and
military-economy. Experience has shown, eg in the case of the USSR83, that “headline” figures for
defence spending were never the entire story and, in this vein, the DPRK`s figures should also be
treated similarly. That said, in his book, Hamm has performed a valuable service in investigating the
levels of defence expenditures on both sides of the 38th parallel in the Korean peninsula. He has
established a methodology and a set of assumptions, which he has sought to benchmark with other
yardsticks, to bring some sense of clarity to this subject, albeit not without some limitations. Overall
he views the DPRK`s expenditures of the early 1960s to have been underestimated – indeed he cites
the 1st Deputy Premier Kim Ihl as stating in 1970 that net defence expenditures were actually 19%
rather than the 3.1% previously stated. That said, Hamm also views later expenditures to have been
overstated by observers.
83
See A Nove, An Economic History of the USSR 1917-91, 1992 edn, Penguin, UK, p389 where he states: “In and after 1989
it was admitted that the published defence expenditures were far below the true ones, that the real figure was four times
higher”.
The following gives an estimate by various commentators over the level of defence expenditures as a
% of total national expenditures per annum. The first column is according to Nam84, while those set
out in the final column in bold were derived from Hamm85, which are viewed as highly pertinent for
reasons outlined above.
Hamm
86
1960-6 avge
5.6% (Suh - 2.6% (1961), 5.8%(1964), 10%(1966)
19 – 19.8%
1967
30.2%
30.4%
1968
30.9%
1967 – 70 avge
31.2% (Gittings87 – 30% pa 1967 – 71)
(1967- 71)
30.7%
1970
29.2%
1972-74 avge
15-17%
1971 – 76
18 %
1975
16.4 – 24.6%
1980
14.6 – 21.9%
1985
14.4 – 21.6%
1990
12 – 18 %
Furthermore, Buzo quotes Chung stating that the level of defence expenditures as a % of total
national expenditures per annum was 4.6% during 1956-66 rising to 31.2% for 1967-70; and
that military production accounted for ½ of country`s total industrial output during the
1970s88.
We have already noted earlier the reasons for the increased expenditures in the 1960s arising
from the “Military First” policy adopted and an about turn after tensions had escalated
unacceptably in the 1968-9 period. There was also mounting concerns at the top leadership
level of the increasing defence burden.
In particular, in November 1970, Kim stated at the Fifth Party Congress89: “Our national
defence was accomplished with very heavy and costly prices. Frankly speaking, our defence
expenditures became too big a burden considering the smallness of our population. Had we
diverted even a small portion from the national defence allotment to economic construction,
our people`s economy would have grown even faster and their living standard must have been
much higher”.
According to Hamm90, as a result of the defence budget cuts in the early 1970s, the MPAF was
allowed, as well as forced, to rely on self funding. The KPA accordingly became more engaged in
large scale construction projects and farming (see later). Extra budgetary funds were also made
possible by the provision of some enterprises, including several mines as well as the Yongaksan and
Maebong trading companies. The former evolved into the External Affairs Bureau of the Second
Economic Committee – see above, and was involved in foreign military sales; while the latter served
under the KPA General Staff and was involved in trading with, inter alia, China in second hand
cars, medicinal herbs, silk cocoons and seafood. These trading entities would become
increasingly important to the regime given the seriousness of the economic problems faced in
the 1990s arising from the collapse of trade with the USSR and Eastern Europe, as well as the
need to generate foreign currency. Such trading would be integral to the survival of the
regime in terms of financing imports as well as circulating rents to the higher leadership.
84
K-W Nam, The North Korean Communist Leadership, 1945 to1965, University of Alabama, USA, 1974, p145-6
Hamm, op cit, 1999, p100
86
Suh, op cit, 1988, p219-220
87
J Gittings et al, Crisis in North Korea, Spokesman Books, UK, 1977, p168
88
Buzo, op cit, 1999, p259, note 17 and p103
89
Nam, op cit, 1974, p188, note 14.
90
Hamm, op cit, 1999, p145
85
It should be further noted that the KPA was not alone in pursuing such activities. In a sense all
the relevant DPRK institutions were to become likewise involved. In particular, the Taesung
Trading company (see above) was linked to the aforementioned KWP office 39.
Following on from this, we can also observe considerable problems arising in whether
defence expenditures represent the “full picture”. Defence expenditures constitute only a part
(albeit an important one) of the total involvement by the KPA in the economy. We encounter
issues of measurement in terms of understanding whether the defence expenditures
incorporate all relevant costs such as research & development; the costs of the nuclear and
missile programmes (which may have been co financed or barter arrangements); the issue of
the KPA`s first call on all resources, ranging from switching from civilian to military
production in respect of nitrogen based products ie fertiliser as explosives; as well as the
impact of the trading entities.
Buzo91 citing a study by Trigubenko states that the military economy in the 1980s accounted
for 30% of aggregate social product compared with 8% in the USSR at its height.
Oh/Hassig92 cite a figure of the military constituting 25% of GNP; also noting in turn that by
the mid 1990s, as economic problems mounted in the DPRK, the only factories operating
near capacity were military ones, which suggests that the KPA`s share of the DPRK`s
economy increased further, all things being equal.
The Issue of KPA`s manpower
A further puzzle alongside reconciling the impact of defence expenditures lies in analysing
the increases in KPA`s manpower. Based on Hamm93, the following represents a table of the
KPA`s force levels compared with the ROK, which has twice the population of the DPRK.
Year
1961
1966
1971
1976
1981
1986
1991
1996
2011
ROK manpower (000s)
600
608
638+
610+
606+
604+
655
690
650
KPA manpower (000s)(est)
398
411
467
567
768
838
995
1,055
1,106 (2010)
While the ROK armed forces remained reasonably constant over the period 1961-1986, we ca
see that there was an increase in the KPA manpower between 1961 and 1971 of just under
70,000 in line with the announcement of the “Military First” policy as well as increased
defence expenditures noted above. But of interest is the significant increases in the KPA`s
manpower from 1971 when ostensibly defence spending had been reduced. To put the
91
Buzo, op cit, 1999, p259, note 17
K Oh & RC Hassig, North Korea: Through the Looking Glass, Brookings, USA, 2000, p60
93
Hamm, op cit, 1999, p109
92
manpower figures in context, during the 1970s and 1980s, 12% of the total male population,
and one-fifth of working age males, were engaged in military service. Between 1971 and
1976, its manpower increased by 100,000 and a further 200,000 between 1976 and 1981,
which coincided with KPA`s new commercial activities as well as an arms build up, noted
above. One possibility is that the KPA`s involvement in both construction and agriculture –
both highly labour intensive activities, may also have played a role.
A further curious facet of the abovementioned build up is the increase in manpower combined
with a burgeoning nuclear programme. As was demonstrated by the USA, USSR and the UK,
the increasing reliance on nuclear weapons in the late 1940s/50s was generally undertaken
while effecting a reduction in the manpower of the armed forces. This has not been the case in
the DPRK.
Between 1957 and 1970, North Korea had experienced annual industrial growth of 19.1 %
and, in several areas, had reached a level comparable to highly industrialized countries.
According to Breidenstein94, “in 1970, South Korea`s economic output per person was less
than one-third of North Korea`s.” However, from the mid 1970s onwards, the DPRK`s
economy had started to experience significant difficulties.
Kim Il Sung had complained even in 1978 that 25% of the workforce in local industries was
surplus to requirements. One could therefore imagine that the KPA could serve as an option to
ensure a significant proportion of the male workforce was gainfully employed rather than
accepting widespread un/under employment creating instability95. Individuals are required to
serve up to 10 years in the KPA before being subject to other military reserve requirements.
The KPA would serve as an essential tool of the state`s “mobilisation and organisation”
capacity96 to prevent widespread unemployment arising. Furthermore, given the KPA serving
as a key “pillar of society”, it would tie a proportion of the working population to a respected
institution where there would be both discipline and significant ideological indoctrination, as
well as military level wages. As Weber noted97: “The discipline of the army gives forth to all
disciplines. The large-scale economic organisation is the second great agency which trains
men for discipline”.
Hamm98 noted that “the ever expanding manpower of the KPA since the mid 1970s reflects
not only labour – intensive arms buildups but an effort to prevent unemployment since North
Korea had progressed from a labour – intensive growth state (actually North Korea did not
extend the stage with labour – intensive export industries such as textiles)”.
Hamm further estimated that between one-third and one-half of the KPA is allocated to non
military projects and activities. Smith99 has estimated that one-half of the KPA is engaged in
94
G Breidenstein & W Rosenberg, Economic Comparison of North and South Korea, Journal of Contemporary Asia, 1975
Hamm, op cit, 1999, p151 notes that South Korea maintained high troop levels in the mid/late 1950s to minimise high
youth unemployment (and attract US military aid). An expanded education sector thereafter served thereafter to “take the
strain”. With respect to DPRK, we can perhaps also glimpse a realisation of Trotsky`s concept of “the militarisation of
labour” with recourse to “speed campaigns” to achieve completion of industrial (rather than military) objectives.
96
Huntington, op cit, 1968, p338-40
97
M Weber, Essays in Sociology, ed by HH Gerth & C Wright Mills, Routledge, UK, 1991 edn, p261
98
Hamm, op cit, 1999, p28
99
H Smith, Hungry for Peace, US Institute of Peace, USA, 2005, p153
95
non military production activities. Back in 1987, the ROK and the USA had rejected an offer
by the DPRK to reduce the KPA by 100,000, tied to a complete US military withdrawal by
1992, on the grounds that it was unlikely to alter the KPA`s military strength as large numbers
of KPA troops were already surplus to requirements and involved in non military construction
work.
By engaging in the use of the KPA as a “reserve army of labour”, it might be argued that, in
fact, the regime had served to “alienate” its soldiers from the “tools of war” with consequent
effects on the levels of training and professionalism. It also served however to bind the KPA
closer to the DPRK economy & society.
Market economy
During the 1990s, the DPRK was subject to a number of economic shocks:



With its insistence on a cash payment basis from 1990-1, the DPRK could no longer
avoid to import one million tons of oil per annum that had been previously provided
for free by the USSR or the spare parts necessary for Soviet built factories that
accounted for 40% of DPRK`s industrial products100. Bilateral trade with the USSR
fell from US $ 2.56 billion in 1990 to US $ 0.14 billion in 1994. Or put another way,
trade with the USSR had accounted for 50% of North Korea`s trade volume but in the
1990s, this fell to just 3%101.
A second “shock” ensued in 1994 when Kim Il Sung died which led to three years of
official mourning and a period of stasis as Kim Jong Il consolidated his leadership
position.
A further shock (or subset of shocks) took place between 1995 and 1997 when
extreme weather in the form of devastating floods and drought struck the country in
quick succession. Many people died in the ensuing famine as the grain supply fell by a
half – the exact number of victims is not known but some estimates place the numbers
in several hundred thousand; other estimates place the victims at over a million. A
further consequence of the famine was the breakdown in the Public Distribution
System – the state run rationing scheme which assured the population of a minimum
subsistence level.
Being a socialist economy, land, buildings, major productive tools, livestock, vehicles etc are
either owned by the State or social organisations. Kim102 has noted the development of
informal property relations in the mid 1990s whereby funding squads register their equipment
with patron organisations, generally powerful state-party apparatuses, in return for profit
sharing arrangements.
100
K Oh & RC Hassig , op cit, 2000, p155
JL Fuqua, Korean Unification: Inevitable Challenges, Potomac Books, USA, 2011, p55
102
S-C Kim, op cit, 2006, p154-5 & p157
101
Lankov103 has stated that private entrepreneurs can register business assets and property with state
institutions, including the KPA and it therefore benefits, ie extracts rents, from providing protection to
such entrepreneurs.
The mid/late 1990s also witnessed the re emergence in North Korea of loan sharking which would
charge borrowers 30% per month. As per Kim104, such loan sharks operate with the backing of public
officials from the KPA, KWP and the MPS and therefore “never fail to collect their principal and
interest”.
The funding squads may also overlap with foreign currency earners which may involve illegal
transactions of products such as artefacts, natural resources such as iron ore, gold, mercury, zinc and
copper, as well as agricultural and fishery products.
According to Thompson105, a Chinese entrepreneur, in order to protect his North Korean zinc business,
entered into a partnership with the Light Industry Bureau, which is part of the KWP. This bureau,
which oversees all mining interests in the DPRK, is controlled by Kim Jong Il`s sister, Kim Kyonghui, who is also a four-star general in the KPA. The same individual also invested in a seaweed and
kelp harvesting and processing business together with the LIB. As the business prepared to farm the
kelp, the KPA announced they were holding a military exercise in the area and declared it off limits.
During the exercise, they proceeded to harvest the kelp for their own needs106!
The KPA, in addition to extending its reach into the informal private sector through proffering “safe
havens” and private protection arrangements for entrepreneurs/funding squads in return for rents,
would also expand into new production activities. For example, in March 2013, Kim Jong Un visited
KPA unit #1501 which produces playground equipment. The KPA unit was also engaged in the
construction of a Taedonggang restaurant boat!
The KPA in construction
In the course of the Korean War, a number of arms and manufacturing facilities avoided
destruction by being relocated in tunnels underground – the commencement of such activity
that would lead to almost 500 km107 of such tunnels being constructed by North Korea and the
KPA`s “soldier-builders”.
According to Armstrong108, following the completion of the Korean War, the dividing line
between the army and civilian reconstruction workforce became increasingly blurred in this
period as KPA draftees were retained in factory work rather than being sent for military
service and active KPA troops were utilised, often in conjunction with Chinese PLA soldiers,
in civilian reconstruction work.
The Military Construction Bureau (or Unit 583) has been engaged in a number of other
defence related projects including underground arms, tank, missile and even shipyard
103
A Lankov, The Real North Korea: Life and Politics in the Failed Stalinist Utopia, OUP, UK, 2013, p86; also see note 63
above.
104
S-C Kim, op cit, 2006, p154 & note 44, p139; see also Haggard & Nolan, op cit, 2007, note 16, page 277.
105
D Thompson, Silent Partners: Chinese Joint Ventures in North Korea, February 2011, p64-66.
106
See H Kwon & B-H Chung B, North Korea: Beyond Charismatic Politics, Rowman & Littlefield, USA, 2012, p170. They
cite a military unit seizing the output of a local collective farm & suggest it was not an isolated occurrence.
107
K Oh & RC Hassig, op cit, 2000, p108. It is not clear whether the KPA has sold its expertise in this area to foreign parties
ie Iran, Pakistan.
108
Armstrong, op cit, 2013, p59.
facilities. It has also cooperated with construction units linked to the MPS on building the
Pyongyang-Wonsan expressway.
During the 1980s, the DPRK was engaged in a number of large size, high profile projects:



Tideland reclamation to create 300,000 hectares of land on the west coast – the
Western Sea Lock Gate outside Nampo harbour, at a project cost of US$ 4 billion.
Only 20,000 hectares was completed by 1994 and an accompanying project of US$
1.177 billion to build the world`s largest dam was abandoned. KPA troops were
heavily involved in this project with other construction workers.
A second generation synthetic fibre Sunchon Vinylon Complex, which was to
produce 100,000 tons of vinylon, became redundant when the DPRK failed to
perfect the new technology for producing ammonia and Soviet funding ran out. 250
plants and 52,000 tons of equipment at a cost of US$ 5 billion were scrapped. Kim Il
Sung specifically highlighted the contribution of “soldier-builders” and other
builders in its construction.
In 1989, North Korea chose to hold the World Festival of Youth & Students, which
required spending of around US$ 4.5 billion. Oh et al cite109 a report from a former
KPA construction battalion commander that an estimated 180,000 workers (of which
80,000 were soldiers) were employed in Pyongyang between 1985-89 on preparing
for these games with construction of sports and housing facilities. (According to
Park110, the DPRK further sought to establish trading companies, particularly among
the KPA, to generate foreign currency to meet the significant debts incurred from
holding this event).
The KPA were also involved in the construction of the Kwangbok apartment complex
between 1986 to 1988 – a project supervised by the abovementioned Jang Song Taek. An
announcement in September 1986 referred to at least 150,000 troops involved in “peace
related construction”.
In the 1990s, the KPA was involved in the construction of Kim Il Sung`s tomb. Other
activities also include the construction of power plants and other energy related investments,
including the Huichon hydroelectric dam & power station, completed in 2012 and aimed at
supplying a major proportion of Pyongyang`s energy needs.
A flavor of the breadth and diversity of the construction projects and activities undertaken by
the KPA can be derived from an examination of visits by Kim Jong Un and other high ranking
officials over the period from January to August 2013111:

109
March 2013. Construction of Taesongsan Combined General Hospital in Pyongyang.
Oh et al, op cit, 2000, p131
JS Park, North Korea Inc, US Institute of Peace, USA, April 2009, p8. Based on research, I believe the use of state trading
companies antecedes the 1980s at least into the 1970s and possibly even before although I would concede the cost of the
Games would have encouraged other money-making efforts.
111
This is based on NK Leadership watch for the period.
110






May 2013. Construction of Munsu Wading pool – a water park. Construction of KPA
Breeding station # 621 for grass fed livestock (note later for KPA agricultural
activities).
June 2013. KPA Construction Shock Brigade #618 contributed to construction
expansion of Kosan Fruit Farm.
July 2013. Construction of Victims of the Fatherland Liberation (Korean) War
Museum as well as apartments for scientists in Pyongyang. Renovation of grounds of
Mirin Riding Club (equestrian company of Unit 534) in East Pyongyang. Construction
of Masik Pass skiing grounds as part of the Masikryo`ng speed campaign.
Reclamation works on Sep`o tableland – reclaiming 50,000 hectares of grassland as
well as stockbreeding management centre. Construction on Ch`onych`ongang Power
Station in Tiers. In addition, it is likely that other projects may entail use of KPA units
on other “speed campaign” building work include: the construction of the terraced
Ch’o'ngch’o'n River Power Plant, Mount Paektu Military-First Youth Power Plant, and
Wo’nsan Army-People Power Plant.
In August, Kim Jong Un visited the Mirin Riding Club (his third visit since November 2012)
and the Munsu Wading pool again (see above). The KPA `s General Political Bureau Director
(and a Vice marshal) visited the Masik Pass skiing facility to review progress.
On 14 August, Kim Jong Un visited the construction of apartment housing for the science
faculty and researchers of Kim Il Sung University in Pyongyang – one tower is comprised of
36 stories and the other 44 stories. The project is being undertaken by KPA Unit#267.
On 17 August, Kim Jong Un visited the construction of Masik Pass (see above) and also
inspected KPA Unit#3404. According to the statement released: “Soldier builders and
combatants of various units, took part…construction of 20 projects…overcoming rugged
mountainous topography…(such projects) including a hotel, guesthouse, service facilities and
skat(ing) park.” Kim also “appreciated” the “inventions and products” of Unit#3404.
The units visited suggest a wide range of non military related construction, infrastructure and
renovation works carried out by the KPA.
A further example of the scale and magnitude of such projects is provided by Becker 112 in
respect of the Mount Kumgang hydropower project, which would entail the redirection of
three rivers. As part of the construction effort, 50,000 troops (or almost 5% of the KPA
manpower, or put another away, just under 50% of the British Army current headcount)
blasted tunnels of respectively 28 and 36 miles respectively through granite and built
aqueducts to link up four separate reservoirs. Despite overcoming these significant civil
engineering obstacles, the project was not completed, according to Becker.
As noted beforehand, the DPRK has sought to employ the KPA, sometimes in conjunction
with building workers, to construct public works projects akin to the proposals made by
Keynes and Liberal party politicians in the UK of the 1920s and 1930s when unemployment
was around 10% of the working population. As noted, a number of the projects constitute
memorials, high status construction etc are designed to align the KPA with the celebration of
its deceased leadership and to engender pride in the state. It is telling however that
112
J Becker, Rogue Regime, OUP, USA, 2006, p111
infrastructure in the DPRK remains poor and particularly so in the areas of the Special
Economic Zones, such as Rason. It suggests little priority is given by the leadership or the
KPA to those projects which may result in considerable positive externalities, easing the
means of doing business in the border areas113.
The KPA in Agriculture
Haggard & Nolan refer to the militarisation of agriculture in 1996114 as armed units were sent
to the countryside to assist in planting and harvesting as well as for security purposes
following the famine, as noted later below. This was not the first time that the KPA had been
mobilised for this end. According to Armstrong115, following the poor harvest in 1954, which
created immense hardship in North Korea, the KPA was mobilised in the fall of 1955 to
gather in the harvest and thereby alleviate rural suffering.
In her book, Smith116 noted the KPA`s activities in the early 2000s with examples of a
reforestation project and the construction of a chicken farm.
A flavor of the breadth and diversity of the agricultural and fishing projects and activities
undertaken by the KPA can be derived from an examination of visits by Kim Jong Un and
high ranking officials over the period from January to early August 2013117:




March 2013. Visited goat farm newly built by Seoul Ryn Kyon Su 105 General Tank
Division. Cotton farm under KPA Unit 1596. A pig farm and foodstuffs factory under
the supervision of the KPA. Also a visit to the Taedonggang Combined Fruit Farm
operated by the MPS.
May 2013. Visit to 20 February Foodstuffs Factory of the KPA. 25 August Fishing
Station of KPA unit #313 which produces also fish and soyabeans. After visiting KPA
unit 639 on the east coast of the DPRK, Kim inspected the food factory subordinate to
KPA unit # 534.
July 2013. Visited mushroom farm constructed by unit # 1116, operated by KPA unit
#534.
August 2013. Visit to KPA run mushroom production facilities by the DPRK premier.
The units visited suggest a relatively ambitious self sufficiency programme being operated by
the KPA with construction units carrying out the building side and others actually managing
the farm and fishing activities. It cannot be ruled out that, in addition to self sufficiency, such
activities also form of the profit making ventures of the KPA with some output reserved for
the farmers` (private) markets and for particular foodstuffs eg fish, for export to the Chinese
market for hard currency.
In 2010, animal products and marine products accounted for 3% of the country`s total exports.
113
See J Gittings et al, Crisis in North Korea, Spokesman Books, UK, 1977, p99. He identifies problems in ports in the early
1970s affecting imports but the KPA had embarked on significant projects regarding underground port facilities.
114
S Haggard & M Noland, Famine in North Korea: Markets, Aid and Reform, CUP, USA, 2007, p111
115
Armstrong, op cit, 2013, p86-7
116
H Smith, op cit, 2005, note 48 p275-6
117
This is based on NK Leadership watch for the period.
Furthermore, in 1995, as a further move to encourage self sufficiency, the right to cultivate private
plots was also granted to military personnel although not formally approved until the new constitution
in 1998.
The KPA in Mining
To date, North Korea had experienced minimal dependence on external trade, which
amounted to 10% of GDP. That said, trade volumes experienced annual growth of 11%
between 2000 and 2010, compared with average growth in GNI of just 2%. The country
increased its trade dependence with China where trade increased from just US$ 610 million in
1991 to US$ 3.5 billion in 2010. 50% of North Korea`s exports to China in 2000 constituted
minerals and non – metal products but this share had risen to 76.2% in 2010; with agricultural
and marine products, the share rose to 79%.
We have seen above that the KPA was granted a number of mines in the late 1970s to assist in
financing its military expenditures. The KPA owns several uranium mines from which it has
extracted ore as part of the country`s nuclear programme. In addition, it is understood to own
several coal mines in which, again, it employs KPA personnel. Coal is vital for the country`s
own domestic needs, accounting for around 75% of the domestic energy supply structure118.
That said, productivity in this sector is extremely low by world standards as the KPA utilizes
labour inputs, as supplemented by the liberal use of explosives to open shafts rather than
employing modern machinery.
According to the US Geological Survey, coal, iron ore, limestone and magnesite deposits in
the DPRK are substantial by world standards. The growing importance of minerals,
particularly to its neighbor, China, has therefore left the KPA well positioned to benefit from
this business activity, albeit it is subject to the vagaries of world market prices and its
neighbour`s considerable negotiating leverage.
The KPA in Transport
We have already noted that, due to its preferred status, KPA has priority over fuel for transport as well
as being one of the principal “owners” of large trucks and vehicles able to transport goods and people
throughout the country. In particular, during the provision of foreign aid following the famine of the
late 1990s, it was noted that there was significant reliance placed on the KPA to transport food aid
although given the absence of other credible alternatives and the poor overall level of transport
infrastructure, it would have been difficult to envisage any other viable alternative. This led to
allegations of KPA diverting up to 30% of food aid for its needs (thereby feeding its conscripts), the
party elite and also for sale to the private markets.
In addition to the above, it should be noted that the KPA`s airforce also controls DPRK`s civil airline,
Air Koryo, which would be integrated into the military command in the event of increased
international tensions or war.
The KPA`s navy also controls and operates a number of ocean-going sea vessels, which carry arms to
customers. The vessels include Jang Soo Bong-Ho & Haen Yo-Ho.119
118
119
PH Park, The Dynamics of Change in North Korea, Kyungnam UP, ROK, 2009, p35
Bermudez, op cit, 2001, p127 & p110
The KPA`s Financial Operations
At the onset, it should be emphasised that this section is more tentative in both the underlying sources
and the findings and conclusions that might be derived therefrom. It therefore represents a “first
attempt” to bring together a disparate set of sources which are often contradictory and set out some
tentative structure to an area of the KPA`s activities which is surrounded in mystery. In addition, it is
worth noting some downsides from the approach adopted. On the one hand, it might serve as
“confirmatory” if more than one source states that such an occurrence is a “fact”. But, as may be the
case elsewhere and certainly in the case of dealing with DPRK, a reported “occurrence” may, in point
of fact, be nothing more than derived from the same original “source”, which may be false. In the
event, we can also encounter “false echoes” whereby one party repeats as “fact” an occurrence without
specifying the underlying source and this can then be “replayed” in any number of works and papers
as an “undoubted fact”! A case in point is this author`s experience with the “fact” that North Korea
allegedly earned US$ 500 million from an arms deal with Iran - see earlier section. SIPRI, a well
respected institution, has raised questions as to whether this was really the case, and cited South
Korean parties as to whether the actual figure was anything like that suggested. And yet, that US$ 500
million figure has been cited in quite a number of works, often without any reference to where it was
derived from.
Based on the above, I therefore trust the reader will digest the following with a healthy dose of
scepticism and with due care and attention.
Park120 interviewed ROK firms operating in the DPRK (but not in Kaesong Industrial Complex), and
around18 defectors with experience of state trading entities in the DPRK (of which 4 were specifically
helpful on the KPA linked entities). The author has noted the emergence of the so-called “foreign
currency revenue generation base” or weh-hwa buhrhee-keegee on a regional and sub-regional level
across the country. A base comprised labor units, made up of conscripts and/or civilians, who were
mandated with producing or generating exportable goods to be sold for foreign currency. The revenues
flowed ultimately to the KWP, KPA or the NDC depending on which ultimate party had mandated the
relevant units. Park states, in the case of the KPA, that Division 34 issues instructions and quotas to
Division 44 liaison units that, in turn, relay the orders to the units to which they are assigned.
In his “funds diagram”, Bureau (or Office) 39 performs a role of directing funds collected by the KWP
to Kim Jong Un while Bureaux 35 & 38 appear to perform a similar role. Based on previous section,
the No. 39 Department (or Bureau or Office#39) has (allegedly) 17 overseas branches, 100 trading
companies and banks under its auspices. (The figures should be viewed with caution due to sourcing
and also lapse of time, including the effects of the UN/US sanctions regime). It has operated through
Daesung Bank and its affiliate, Gold Star Bank (Geumbyeol Bank), which was located in Austria until
2004 when it was closed following sanctions. They generate foreign currency through loyalty funds
collected from each agency and management of hotels and foreign currency stores. Also, the office
trades in the country’s natural resources including pine mushrooms, gold and silver.
According to one source121, due to difficulties in earning foreign currency, Office 38, which used to be
in charge of overseas currency earning, was actually merged with Office 39 in September 2009. But,
according to another source dated late 2011122, “KWP Office No. 38” and “Koryo Bank” handle the
service industry, hotels and department stores that cater to foreigners.
Daesung (or Daesong) Bank is noted by one source as having been established in November 1978
(another says sometime in the 1970s)123 and is linked to the Daesong General Bureau, a significant
120
JS Park, North Korea Inc, US Institute of Peace, USA, April 2009, p3-5, p10 & p20.
Daily NK, What is the no 39 Department? 30 August 2010
122
World Affairs, The Defectors Tale: Inside North Korea`s Secret Economy, September/October 2011
123
AsiaTradeHub.com, Trade Gallery of North, North Korea Banking, Undated but accessed & printed off 8 September
2013. This schedule is fairly detailed but from what it was compiled is unclear but useful as a cross-reference. Second source:
as per note 122 above.
121
trading and manufacturing conglomerate as well as a part of the Second Economic Committee.
According to NKEconomy Watch124, the bank settles accounts for trading and shipping companies,
such as Korea Daesong Trading Corporation, Korea Tonghae Shipping Company, and Korea
Mangyong Trading Corporation. The bank was also once involved in trade with South Korea, such as
selling gold and silver nuggets.
According to the AsiaTradeHub source, Koryo Bank (established in July 1994 and originally a part of
the main Foreign Trade Bank of North Korea) is linked to the KPA and its functions constitute
financing trade and joint ventures with foreign countries. However, in line with the reorganization
carried out on Taepung Investment (see earlier section), its latter activities were probably transferred
to the Joint Venture and Investment Commission. According to the Asian Times125, in 1997 it was
reportedly involved in a $50 million money-laundering operation with South African partners.
The NKEconomy Watch article also notes Changkwang Credit Bank was established in February 1983
and as being “associated with the military". This is ambiguous as here "military" might be viewed as
either the KPA or SEC but my inclination is that it is SEC as a separate source126 states that it handled
settlement of payments concerning foreign transactions performed by Yongaksan Trading Co (see
diagram above regarding “The Key Organs of the KPA`s Command and Control” and note underneath
“External Economic General Bureau”) and handled fund management for the SEC. The same source
notes however that Changkwang Credit Bank opened in August 1986.
According to Hoare127, Kumsung (or Kumsong) Bank was also tied to the KPA and, based on another
source, engaged in fund management. According to information received, this bank closed in 2004 due
to UN/US sanctions.
There is, in addition, another non-bank financial institution, linked to the KPA, which was established
in December 1992, - Cheil Trust Financial Co128. This was/is engaged in transactions in foreign
currencies and settlement of payments therein, foreign exchange management for a subsidiary
organization of the KPA and engaged in transactions of precious metals and stones for the KPA. No
further information is available on this entity.
North Korean banks, given the sanctions regime, will continue to encounter issues in expanding their
overseas interests although given their remit to earn foreign currency, they will seek to circumvent
such measures by means available ie through relationships with Chinese banks and financial
institutions with minimum presence in the US market. More intriguing are the possibilities in the
domestic market where there is growth in markets and private entrepreneurs arising from changes
taking place in the late 1990s. This raises a further intriguing prospect: banks close to the KPA and
NDC might seek, through their privileged access to the elite, to lobby against, or curtail, actions by the
leadership to confiscate deposits (although the corollary in China is that banks have assisted the
central authorities in effectively doing so via financial repression ie low interest rates) as was pursued
in the currency reforms of November 2009, which were extremely unpopular. In such a way, property
rights may be established in North Korea by the “backdoor” rather than directly through legislation.
124
North Korean Financial Institutions, 5 March 2002. It also gives establishment date as November 1978 which is
consistent with first source in note 123 above.
125
Asia Times online, North Korea Banks on China, 24 March 2005, http://www.atimes.com/atimes/Korea/GC24Dg02.html
126
AsiaTradeHub.com, Trade Gallery of North, North Korea Banking, see note 123 above.
127
JE Hoare & S Pares, North Korea in the 21st Century, Global Oriental, UK, 2005, p57. The second source as per note 122
above. Dr Hoare also provided update on the bank`s closure.
128
See note 123 above.
The KPA as an integral institution (“Pillar”) of the DPRK
It is argued that while the Kim family provides the “charisma”, it is the KPA that supplies the
“institutional anchor”, that would otherwise experience degeneration. As Weber noted129:
“Charisma…is not an institutional and permanent structure, but rather, where its ‘pure’ type is
at work, it is the very opposite of the institutionally permanent”. There is therefore an
inherent tension arising as the leader seeks to harness the bureaucracy (of which the KPA is a
partial constituent), as seen in the earlier diagram but also seeks to float above the state
structures. The KPA gives “body and form” to the ethereal Kim image but it itself is not only
a bureaucracy, it also possesses “charisma” among its other constituents. The Kims employ
the Weberian attribute of “It is written – but I say unto you” as it “floats above” the various
organs – playing one off against the other; providing overlapping functions; embedding
family members in state, military and party functions; regularly rotating individuals out of
positions while exhibiting a preference for descendants of regime adherents linked to Kim IlSung130; and judicious management of rents to interested groups, including the KPA.
The centrality of the “rational institution” versus “irrational charisma” in the context of the
DPRK is not well addressed in the Northian framework but the balancing of the two concepts
is important in understanding how institutions evolve and adapt. An additional attribute also
not wholly addressed in the framework is the importance of rent generating function in
underpinning an institution. The KPA is not only a recipient of rents through official
government spending but, through its licence from the leadership, engages in, and derives
income from, economic activities131.
This has furthermore led to the accommodations of interests of both: for the KPA, defence
expenditure cuts in the 1970s were offset by granting the KPA an enhanced role in the
economy and the responsibility for the unemployed – the KPA still derived substantial
“official” rents in the guise of almost 20% of budgeted expenditures plus access to foreign
currency earnings through trading companies; while the Kim family obtained the imprimatur
of the major VC organization in arranging two relatively trouble free transitions from Kim Il
Sung to Kim Jong Il in 1994 and thereafter to Kim Jong Un in 2011. The KPA thus performed
an important function in ensuring a peaceful resolution of intra elite (and possibly intra
family?) disputes – another facet viewed by North as important to an evolution of a LAO to
an OAO.
Conclusion
In the face of considerable economic shocks in the 1990s noted above, industrial output in the
state sector fell by around a half between 1990 and 2000132. Given the “Military First” policy
129
Weber, op cit, 1991 edn, p248
D-S Suh, op cit, 1988, p286
131
In Tudor and Stuart England, monarchs provided licences to parties to engage in trade and acts of plunder, sometimes
commensurately as there was little difference in how benefits were derived. The East India Company is a good example of a
VC/PO/EO institution (established in 1600 at the command of Queen Elizabeth I) which, through military and political
activities, later gained control over India and exploited its wealth as well as through supplying opium to China. This
military/economic institution was later absorbed by the State; all that remains is its public school at Hailebury where one of
Britain`s leading economists, John Stuart Mill, was educated.
132
See P Mceachern, op cit, 2010, p192 – he believes it lost 80-90% of industrial capacity.
130
of preferential access to fuel and materials, it is likely that the military-industry sector would
have increased in importance as the “unprotected” sector deindustrialised. In addition, another
trend may well have benefited the military-economy, namely the rise of the new market
economy and private entrepreneurs: according to Kim133, there were an estimated 800,000
private entrepreneurs by the end of the 1990s, with start up businesses in the grey/black zone.
Opportunities for the KPA providing private protection would have increased
commensurately. The KPA with its thirty years plus experience of trading companies and
access to foreign currency and imported technology is well positioned to take advantage of
the new market opportunities. We have also observed the scope for private entrepreneurs to
register business activities with the KPA and to also benefit particularly from the logistics and
distribution capability offered by the KPA with access to fuel and vehicles.
A further aspect of note is the close attention paid by the top leadership, including Kim Jong
Un, to the commercial activities of the KPA with regular visits to the construction sites where
“soldier-labourers” work or KPA built and operated agricultural production facilities.
In particular, we have noted that the KPA appears to fulfill a substantial role as “employer of
last resort” through public works programmes with its considerable experience in
“mobilization and organization” functions as well as ideological indoctrination. As a corollary
to this aspect, let us also consider the following:
i.
ii.
iii.
iv.
The substantial increase in KPA manpower of 300,000 in the 1970s in a period of
mounting economic problems offset by cuts in defence expenditures, notwithstanding
a re equipment programme.
The extensive public works programmes in the 1980s at a time when KPA manpower
rose by almost 230,000.
The broadly static level of KPA manpower from the early 1990s notwithstanding the
economic crisis arising from the 3 shocks noted above and the onset of the nuclear and
ballistic programme, which might have contributed to a headcount reduction.
External events such as, but not limited to, the First Gulf War in 1991 which saw an
Iraqi army of comparable size to the KPA defeated quickly by US airpower and land
forces, as well as the Iraqi and Afghan insurgencies of the 2000s, which has
highlighted the capabilities of relatively small numbers of motivated armed groups
with IEDs (Improvised Explosive Devices)134.
Taking the above, it is argued that the estimate of 1/3 to ½ of the KPA as representing
nonmilitary, construction or production oriented manpower would appear to be a significant
underestimate135. Indeed, it is argued that, in fact, the KPA has taken on the role of
administering a sizeable “work for welfare” programme in the DPRK.
The above remit has also served as an important tool in effecting stability for the regime. The
KPA through its form of a military-economic institution is a major guarantor for the ongoing
survival of the DPRK. The KPA and the Kim family are so deeply enmeshed with each other
133
S-C Kim, op cit, 2006, p150
In Iraq, the US military has suffered 4,500 fataliites and in excess of 30,000 wounded.
135
As a guesstimate, considerably in excess of 50% of the KPA`s manpower is engaged in such projects.
134
and the other leading organs of the state that it is almost impossible to distinguish between
them; their “legends” are so entertwined with the other such that it is difficult to envisage how
they might be separated. Through its business activities, the KPA is a substantial generator of
rents for itself and the regime as well as being a substantial recipient of official government
spending. We have noted that the military sector probably accounted for over 25% of
domestic output prior to the problems faced in the mid 1990s, when by virtue of its priority
“first-call” over domestic resources, this share increased as offset by the non, or under,
reporting of the private (grey and illegal) economy, which the KPA also is involved in. Hard
figures are few and far between, with even reported figures on the DPRK viewed with
caution136, but it is possible that KPA`s share is in the region of 30 to 40%.
The paper has placed emphasis on the horizontal dimension of the Northian framework rather
than its vertical axis. The KPA, in addition to being a VC entity, also possesses attributes of
being a political and economic entity. In particular, it has extensive business and commercial
interests as well as constituting one of the largest employers, consumers and producers in the
DPRK. Its economic interests, particularly in generating rents and its involvement in high
status ceremonial public works projects, are strongly identified with the regime. In addition, it
is also a significant recipient of government largesse.
Of considerable interest in the context of the Northian framework is how the KPA shares
characteristics with a number of other states` VC entities eg Iran, Egypt, Pakistan, whose
militaries also demonstrate their own forms of “Military First” in the economic sphere. The
Northian framework would appear to suggest that the clearer delineation of types of
organizational form ie VC/PO/EO, or a progressive division of social labour thereof, is
important to the progression in the vertical axis. While forms may continue to exist, their
substantial, or intrinsic, function is subject to transformation. It can be argued that China
partially accomplished this through the decision by its then leader, Jiang Zemin, for the
Chinese PLA to exit commercial activities, in the late 1990s. A more pertinent example
perhaps is South Korea which progressed from a Park run military dictatorship (1962-79) to
an Open Access Order.
Thus, while the KPA has a VC, and indeed a constitutional, form, in substance, it is much
more than this. It represents a solid base on which the Kim family can depend on to retain
power through its considerable presence in politics of the DPRK – a Political Organisation. It
also wields considerable economic power through operating a quasi welfare system in
addition to its considerable business activities. But also to return to the “priest-warrior”
analogy, the KPA is fully integrated within the charismatic leadership-ideology-ic
onology nexus as a fundamental pillar of the country`s society, such that there is a lack of
incentive to overturn “the priest” given both its rent extraction/generation role which would
be threatened by such a move, as well as the fact that the image of the KPA has been so
closely aligned (if not fused) with the Kim family.
136
The Bank of Korea provides regular estimates of the DPRK GDP which should probably be viewed as “illustrative” rather
than “hard and fast”. See also Hamm, op cit, 1999 p 119-129 for a useful discussion on estimation.
The KPA is furthermore an important facilitator in the shaping of the superstructure of the
DPRK through its duality as both a key component of the economic base, via its ownership
of, and involvement, the country`s economy, as well as through its co-responsibility (together
with the leadership) of structuring the national culture, beliefs and symbols ie participation in
construction of memorials and other important national construction works, involvement in
the mobilisation and organisation, and ongoing indoctrination, of a sizeable segment of the
population.
The KPA, as the leadership`s power base, its considerable economic power in addition to its
violence capacity remit, as well as the inherent conservatism of armed forces, has a vested
interest in avoiding changes in North Korea. For the time being, unless and until, the KPA
views the future benefits and opportunities from an opening of the economy as being greater
than the costs of losing all – power, prestige and a disproportionate amount of national
resources devoted to it, it will not perceive any advantage in foregoing them and the country
is unlikely to proceed further from its existing Limited Access Order basic status.
Bilbliography
Ansar S, Military in Pakistan Politics: A Case Study of the Zia Regime: A Study of the Longest
Military Coup in Pakistan, LAI Lambert, UK, 2012
Arias LM, A Collective Action Theory of Fiscal-Military State Building, 2013
Armstrong CK, The North Korean Revolution, 1945-50, Cornell University, USA, 2003
Tyranny of the Weak, North Korea and the World 1950-1992, Cornell University,
USA, 2013
Barrington Moore JR, Social origins of Dictatorship and Democracy, Penguin, UK, 1977 edn
Becker J, Rogue Regime, OUP, USA, 2006
Bermudez JS, The Armed Forces of North Korea, IB Taurus, USA, 2001
Breidenstein G & Rosenberg W, Economic Comparison of North and South Korea, Journal of
Contemporary Asia, 1975
Brenes A et al, Soldiers as Businessmen: The Economic Activities of Central America`s Militaries,
COSUDE, 1998
Brun E & Hersh J, Socialist Korea: A Case Study in the Strategy of Economic Development, Monthly
Review Press, USA, 1976
Buzo A, The Guerilla Dynasty: Politics and Leadership in North Korea, IB Taurus, UK, 1999
Callinicos A, The Revenge of History, Polity Press, UK, 2004 edn
Cha V, North Korea: The Impossible State, Bodley Head, UK, 2012
Cheung TM, China`s Entrepreneurial Army, Oxford University Press, UK, 2001
Choi S-Y, A Study on the Structure of Industry in North Korea, 2006, KINU, Republic of Korea
(ROK)
Chun H-T, The Second Economy in North Korea, Seoul Journal of Economics, ROK, 1999
Chung CO, Pyongyang between Peking and Moscow, University of Alabama, USA, 1978
Collier P, The Bottom Billion, OUP, USA, 2007
Congleton RD, Rent-Extraction, Liberalism, and Economic Development, Center for Study of
Public Choice, George Mason University, April 2010
Cox TS, Civil-Military Relations in Sierra Leone, HUP, USA, 1976
Custers P, Globalised Militarism: Nuclear and Military Production and Critical Economic Theory,
Merlin Press, UK, 2006
Desai M, Lenin`s Economic Writings, Lawrence and Wishart, UK, 1989
Djilas M, The New Class, Harvest, USA, 1957
Eberstadt N, Policy and Economic Performance in Divided Korea during the Cold War era: 1945-91,
AEI Press, USA, 2010
Evans PB, Embedded Autonomy: States & Industrial Transformation, Princeton University Press,
USA, 1995
Finer SE, The Man on Horseback: The Role of the Military in Politics, Penguin, UK, 1976
Fitch SJ, The Armed Forces & Democracy in Latin America, John Hopkins University Press, USA,
1998
Fukuyama F, The Origin of Political Order, Profile Books, UK, 2011
Fukuyama F & Shulsky AN, The “Virtual Corporation” and Army Organization, RAND, USA, 1997
Fuqua JL,
Nuclear Endgame, Praeger, USA, 2007
Korean Unification: Inevitable Challenges, Potomac Books, USA, 2011,
Gittings J et al, Crisis in North Korea, Spokesman Books, UK, 1977
Graeber D, Debt: The First 5,000 Years, Melville House, USA, 2012
Grayson G et al, The Executioner`s Men: Los Zetas, Rogue Soldiers, Criminal Entrepreneurs and the
Shadow State they created, Transaction Publishers, USA, 2012
Grillo I, El Narco, Bloomsbury, UK, 2011
Groenewegen J et al, Institutional Economics: An Introduction, Palgrave Macmillan, UK, 2010
Hacker BC, American Military Technology: The Life Story of a Technology, John Hopkins University
Press, USA, 2007
Hacker BC & Hacker SL, Military Institutions and the Labour Process: Noneconomic Sources of
Technological Change, Women`s Subordination & The Organization of Work, “Technology &
Culture, Vol 28, No 4, p743-775, 1987
Haggard S & Noland M, Famine in North Korea: Markets, Aid and Reform, CUP, USA, 2007
Hamm T-Y, Arming the Two Koreas: State, Capital and Military Power, Routledge, UK, 1999
Harding N, Lenin`s Political Thought Vol 2: Theory and Practice in the Soviet Revolution, Haymarket
Books, USA, 1978
Hoare JE & Pares S, North Korea in the 21st Century, Global Oriental, UK, 2005
Hodgson GM, What are Institutions?Journal of Economic Issues, Vol XL, No 1, 2006
Huntington SP, The Soldier and the State, Harvard University Press, USA, 1957
Political Order in Changing Societies, Yale University Press, USA, 1968
M Khan, Rents, Rent-seeking & Economic Development: Theory & Evidence in Asia, CUP, UK, 2000
Kim S-C, North Korea under Kim Jong Il: From Consolidation to Systemic Dissonance, State
University of New York Press, USA, 2006
Kwon H & Chung B-H, North Korea: Beyond Charismatic Politics, Rowman & Littlefield, USA,
2012
Kyung-Ae Park et al, North Korea in Transition: Politics, Economy, and Society, 2013, Rowman &
Littlefield, USA
Lankov A, The Real North Korea: Life and Politics in the Failed Stalinist Utopia, OUP, UK, 2013
Crisis in North Korea: The Failure of De-Stalinization, 1956, University of Hawaii Press,
USA, 2005
From Stalin to Kim Il Sung: The Formation of North Korea 1945 – 50, Hurst, UK, 2002
Lee C-S, Korean Workers` Party: A Short History, Hoover, USA, 1978
Levi M, Consent, Dissent and Patriotism, CUP, UK, 1997
Levitt M, Hezbollah: The Global Footprint of Lebanon`s Party of God, Georgetown University Press,
USA, 2013
Los M & Zybertowicz A, Privatizing the Police-State: The Case of Poland, Macmillan, UK, 2000
Manyin ME & Nanto RK, The Kaesong North-South Korean Industrial Complex, Congressional
Research Service, 18 April 2011
Mao Tse-tung, Selected Works, Turn the Army into a Working Force, 8 February 1949
On Production by the Army for its own support and on the Importance
of the Great Movements for Rectification and for production, 27 April 1945
On Coalition Government, 24 April 1945
Get Organized,
Marx K, A Contribution to the Critique of Political Economy, General Books, USA, 2009 edn
Eighteenth Brumaire of Louis Napoleon, Surveys of Exile vol 2, Penguin, UK, 1977 edn
The First International and After, Vol 3, Penguin, UK, 1992 edn
Capital Volume 1, Penguin, UK, 1990 edition
Mceachern P, Inside the Red Box: North Korea`s Post Totalitarian Politics, Columbia UP, USA, 2010
McNamara DL, The Colonial Origins of Korean Enterprise 1910-45, CUP, USA, 1990
Ministry of Unification, 2012 Understanding North Korea, Institute for Unification Education, ROK
Mosca G, The Ruling Class, McGraw-Hill Book Company, Inc., USA, 1939
Nam K-W, The North Korean Communist Leadership, 1945 to1965, University of Alabama, USA,
1974
North DC (& Thomas RT), The Rise of the Western World: A New Economic History, Cambridge
University Press, USA, 1973
North DC, Structure and Change in Economic History, WW Norton, USA, 1981
Institutions, Institutional Change & Economic Performance, Cambridge University Press,
USA, 2009 (originally 1990)
Understanding the Process of Economic Change, Princeton University Press, USA, 2005
North et al, Violence and Social Orders, CUP, USA, 2009
North et al, In the Shadow of Violence, USA, CUP, 2012
Nove A, An Economic History of the USSR 1917-91, Penguin, UK, 1992 edn,
Odon WE, The Collapse of the Soviet Military, Yale University Press, USA, 1998
Oh K & Hassig RC, North Korea: Through the Looking Glass, Brookings, USA, 2000
Ottolenghi E, The Pasdaran: Inside Iran`s Revolutionary Guard Corps, FDD, USA, 2011
Park JS, North Korea Inc, US Institute of Peace, USA, April 2009
Park K-A & Snyder S, North Korea in Transition: Politics, Economy and Society, Rowman &
Littlefield, USA, 2013
Park PH, The Dynamics of Change in North Korea, Kyungnam UP, ROK, 2009
Rouquie A, The Military and State in Latin America, University of California Press, USA, 1987
Rueschmeyer D, Capitalist Development and Democracy, University of Chicago Press, USA, 1992
Schneider F & Buehn A, Shadow Economies and Corruption All Over the World: Revised Estimates
for 120 Countries, 27 October 2009
Sen G, The Military Origins of Industrialisation and International Trade Rivalry, Pinter, UK, 1984
Siddiqa A, Military Inc: Inside Pakistan`s Military Economy, UK, Pluto Press, 2007
SIPRI, International Arms Transfers, Appendix 12D, 2012
Skocpol T, States & Social Revolutions:A Comparative Analysis of France, Russia & China, CUP,
USA, 1979
Smith H, Hungry for Peace, US Institute of Peace, USA, 2005
Stalin JV, Selected Works, University Press of the Pacific, USA, 2002
Steinmo S, Taxation and Democracy, Yale University Press, USA, 1993
Stepan A, Rethinking Military Politics: Brazil and the Southern Cone, Princeton University Press,
USA, 1988
Suh D-S, Kim Il Sung: The North Korean Leader, Columbia University Press, USA, 1988
Sung K-I, The Selected Works, Prism, USA, 2011
Sztompka P, The Sociology of Social Change, Blackwell, USA, 1993
Thompson D, Silent Partners: Chinese Joint Ventures in North Korea, February 2011,
http://uskoreainstitute.org/wpcontent/uploads/2011/02/USKI_Report_SilentPartners_DrewThompson_020311.pdf
Tilly C, Coercion, Capital and European States AD 990-1992, Blackwell, USA, 1992
Big Structures, Large Processes, Huge Comparisons, Russell Sage, USA, 1984.
Tucker RC, The Lenin Anthology, WW Norton & Company, USA, 1975
Tullock G, The Rent Seeking Society, Liberty Fund, Inc, USA, 2005
Turchin P, War and Peace and War, Plume, USA, 2006
Ulus OM, The Army and the Radical Left in Turkey: Military Coups, Socialist Revolutions and
Kemalism, Taurus, UK, 2011
Weber M, Essays in Sociology, ed by HH Gerth & C Wright Mills, Routledge, UK, 1991 edn
The Theory of Social and Economic Change, Mantino Publishing, USA, 2012
Wehrey F et al, The Rise of the Pasdaran,
http://www.rand.org/pubs/monographs/2008/RAND_MG821.pdf,
RAND,
USA,
2009
Wright Mills C, The Power Elite, OUP, USA, 2000 edn
Other
NK Leadership Watch e – mail have been particularly useful in respect of information on official
visits.
Daily
NK,
What
is
the
no
39
Department?
http://www.dailynk.com/english/read.php?cataId=nk00400&num=6750
30
August
2010,
North Korea Economy Watch, North Korean Financial Institutions, 5 March 2002,
http://www.nkeconwatch.com/category/dprk-organizations/state-offices/state-fiscal-and-financialcommittee/foreign-trade-bank/koryo-bankkoryo-global-credit-bank/
World Affairs, The Defectors Tale: Inside North Korea`s Secret Economy, September/October 2011,
http://www.worldaffairsjournal.org/article/defector%E2%80%99s-tale-inside-northkorea%E2%80%99s-secret-economy
AsiaTradeHub.com,
Trade
Gallery
of
North,
North
Korea
Banking,
http://asiatradehub/n.korea/banks.asp Undated but accessed & printed off 8 September 2013
US Treasury Department, FINCEN Advisory, Update on the Continuing Illicit Finance Threat
Emanating from North Korea, 1 July 2013, accessed 9 September 2013, hardcopy retained.