An employee watches a bank of TV’s broadcasting a news report on a Hanoi summit between North Korean leader Kim Jong Un and U.S. President Donald Trump, in Seoul, South Korea, Feb. 28, 2019. Reuters/Kim Hong-Ji

Why North Korean prosperity would be the ruin of Kim Jong Un

Vietnam seemed like the perfect place for Donald Trump and North Korean dictator Kim Jong Un to meet in late February for their latest summit on denuclearization. At Hanoi’s posh Metropole Hotel, Trump hoped to convince Kim to abandon nuclear weapons in exchange for lifting U.S. sanctions against North Korea, which would spur needed economic development in that country.

North Korea’s economy has been in dire straits since the Soviet Union – which had propped up its communist regime – collapsed in the early 1990s. Starvation remains common in North Korea, where 10.5 of its 25 million people are undernourished.

Meanwhile, Vietnam – once one of the world’s poorest countries – has prospered. Its communist government introduced free-market reforms in the late 1980s after the failure of its Soviet-style planned economy, permitting the private ownership of businesses and farms after years of controlling all markets.

Referencing Vietnam’s economic success story, President Trump wrote on Twitter on February 8: “With complete Denuclearization, North Korea will rapidly become an Economic Powerhouse” too.

The communist divide

As a historian, I disagree with Trump’s view that Vietnam is the blueprint for North Korea.

I am currently writing a college textbook on the history of Germany, my country of birth. The Vietnam summit came while I was focused on the chapter about East Germany’s transition, in the 1990s, from a Soviet-style socialist economy to a more free-market economy.

In my assessment, North Korea is much more similar to Cold War-era East Germany than it is to modern Vietnam.

Both North Korea and East Germany were separated by communism from the other half of their once-unified nation. They are countries founded entirely on the rejection of their capitalist brothers.

The Korean peninsula has been split in two since 1945, when Soviet and American troops liberated it from Japan at the end of World War II. The Allies divided the peninsula along the 38th parallel, with the Soviets occupying the North and the Americans occupying the South.

This split deepened in June 1950, when the communist North tried to unify the country under its rule, invading the South. Korea’s civil war turned into a proxy Cold War as communist China aided North Korea and the U.S. sent troops to defend the South Koreans. A 1953 armistice has divided the Korean peninsula ever since.

A South Korean army soldier stands guard at the South’s dismantled guard post inside the Demilitarized Zone in the central section of the inter-Korean border in Cheorwon, Dec. 12, 2018. Reuters/Ahn Young-joon

Like Korea, Germany was also split into two competing states. Capitalist West Germany and communist East Germany existed side by side, divided by the Berlin Wall, from 1945 to 1990.

Initially, East Germany’s centralized, planned economy was quite successful in rebuilding the country after the war. But by the mid-1960s, economic growth had slowed, resulting in a shortage of consumer and industrial products.

To reinvigorate the economy, East German leader Walter Ulbricht began relaxing the government’s grip on the economy. Managers of state-run enterprises were given decision-making power over what goods to produce, a role previously retained by the government, and allowed to keep some of their profits. Banks got permission to extend loans to the businesses of their choice, helping them grow and invest.

Even though productivity, wages and availability of consumer goods all increased, East Germany abruptly abandoned these reforms in the early 1970s.

It was not because they did not work. Rather, according to my research and the historian Joerg Roesler, East Germany began to fear that its liberal economy was starting to make it look dangerously similar to West Germany.

In 1968, the Soviets had invaded neighboring Czechoslovakia, terminating its experimentation with both economic and political liberalization. The East German government worried that its economy had become a little too liberal, too.

West Berlin citizens atop the Berlin Wall in 1989. Reuters/Str Old

East Germany’s attempt to preserve communist rule by maintaining authority over its faltering economy proved futile. On Oct. 3, 1990, Germany was reunified under West German control.

Reunification

The economy has always been at the heart of communism. A planned economy is what set countries like the Soviet Union, Cuba, and Vietnam apart from capitalist democracies. For communist leaders like Vladimir Lenin and Fidel Castro, it’s what made them superior.

Plenty of communist governments have managed to mix some free-market capitalism into their socialist economies without endangering the Communist Party’s monopoly on power – Vietnam, Cuba and China top among them.

The transition toward capitalism in those countries has come at the cost of social inequalities. Freer markets have created a growing class of wealthy entrepreneurs, while some more marginal populations have remained excluded from these new riches.

Still, vastly improved living conditions have actually boosted the legitimacy of communist governments in Vietnam, Cuba and China.

East Germany and North Korea differ from these examples. They are halves of a whole.

The planned economy doesn’t just inform their political system – it is the sole reason for their existence. East Germany and North Korea were born to offer an economic alternative from their capitalist compatriots.

If these countries cease to present a clear economic alternative that distinguishes them from their capitalist brother-country, history shows, they are absorbed by them.

My research suggests that denuclearization, the lifting of U.S. sanctions and a transition into market socialism would trigger an East Germany-style existential crisis for North Korea. That’s because a prospering economy would eliminate the very reason for North Korean existence, obviating the rationale for Kim’s totalitarian policies, anti-American rhetoric and isolation.

For North Korea’s all-powerful leader, a failing centralized economy and a grip on power that’s guaranteed by the threat of nuclear warfare is better than a vibrant capitalist economy.

Kim promised North Koreans better living conditions after succeeding his father, dictator Kim Jong Il, in 2011. But what he really needs are economic reforms that boost the economy without threatening the communist character of North Korea’s economy.

No post-Cold War country has managed it yet.