[News analysis] North Korea’s masters of money

Posted on : 2019-04-07 18:17 KST Modified on : 2019-04-07 18:17 KST
The “donju” class of affluent entrepreneurs reveals level of marketization in N. Korea
Pyongyang residents gather for the opening ceremony of a new apartment complex on Changjon Street in 2012
Pyongyang residents gather for the opening ceremony of a new apartment complex on Changjon Street in 2012

“I bought a front-loading washing machine for 2,200 Chinese yuan [US$327.48]. Back then, there were just three washing machines of that sort in Haesan. The washing machine was of Chinese manufacture, and I used it once or twice. My television was a flat-screen that I bought for 3,000 yuan [US$446.57]. I bought my fridge for 3,000 yuan, too, but sadly the electricity wasn’t very reliable,” said a woman in her 40s who defected to South Korea in 2014.

“I had nine guitars. One of them was a Yamaha from Japan. I had three American guitars, too, though I can’t remember what they were called. The Yamahas went for between 7,000 and 10,000 yuan [US$1,042-1,489]. The top-of-the-line guitar in Pyongyang, called the “Silver Bell,” sold for about 500 yuan [US$74.43]. But all nine of my guitars were expensive,” said a man in his 30s who defected in May 2010.

These are the testimonies of people who, while they lived in North Korea, were members of the entrepreneurial class known as donju, literally, “masters of money.” Installing pricey electronic gadgets when the power supply is spotty and collecting high-end musical instruments that are too fancy to actually play seem reminiscent of nouveau riche characters in soap operas.

A researcher of North Korea who has conducted detailed interviews with donju who have defected since 2010 describes their spending habits as “conspicuous consumption.” The conclusion is that North Korea is also witnessing the appearance of a peculiar class of wealthy individuals who regard luxury as a way of setting themselves apart from others.

North Korea’s money masters—who carry around three or four cellular phones, sip on coffee in hotels, favor imported cosmetics and live in ornate apartments—are a sign that marketization in the North has proceeded far enough to create an affluent class. An article describing their lives that ran in the Washington Post in May 2016 said that North Korea has its own well-heeled one-percenters who inhabit a parallel world referred to as “Pyonghattan,” a neologism that merges Manhattan with Pyongyang.

“When I made a living making clothing, I started selling items I’d brought in from China. After I got into the business side of things, I got the idea that I could increase my margins if I sold fabric instead of clothing. So I imported fabric from China and sold it wholesale to the merchants,” said a woman in her 60s who defected in January 2011.

A combo meal of hamburger and fries in a popular Pyongyang restaurants in June 2018. Western food and coffee is popular among Pyongyang’s wealthy class. (AP/Yonhap News)
A combo meal of hamburger and fries in a popular Pyongyang restaurants in June 2018. Western food and coffee is popular among Pyongyang’s wealthy class. (AP/Yonhap News)

Wealthy merchants emerge from the Arduous March

The donju appeared during the famine in the 1990s euphemistically known as the “Arduous March.” When the government rationing system collapsed and even the state-run stores closed their doors, North Koreans congregated at the informal markets known as jangmadang to buy daily necessities. Amidst the confusion, some individuals were more adept than others at adapting to market principles. The most successful among them were those who imported fabrics and manufactured goods from China and resold them for a tidy profit. No small number of these entrepreneurs had money from family members in Japan or South Korea to back up their business acumen.

As the markets grew in size, the roles of the donju diversified along with them. Some became retailers connecting the capital of Pyongyang with the provinces, while others entered the transportation business, driving private taxis or operating the sseobicha (“service cars”) that function as buses in the North. There were even exporters eager to bring in foreign currency and private lenders intent on keeping the money flowing. More recently, North Korea is seeing corporate donju who hire employees and have donju middle managers reporting to them. In effect, the donju roles have taken on specialties that parallel the basic functions necessary to keep the market running, including production, distribution, consumption, trade, employment and finance.

Bribing the powers at be in exchange for protection

“If they asked for a motorcycle, I would just give it to them. The people asking were working for the state security agency or similar organizations. The idea was that they were supposed to take care of me down the line. They were a kind of bribe, I guess,” said a man in his 30s who defected in April 2010.

North Koreans are supposed to get a permit if they want to open a business or trade with foreign countries. Financial transactions between individuals are forbidden by law. Therefore, the donju establish a unique relationship with people in power during the process of their wealth accumulation. This is a serpentine symbiosis in which officials in the party and military provide patronage in exchange for a portion of the donju’s profits. “The donju are buying protection from the people in power,” explained Yang Mun-su, a professor at the University of North Korean Studies.

“I made my money in real estate. When apartments are built in North Korea, they’re just bare bones. I would buy ten or so units for about 20,000 yuan [US$2,977] and then have an interior design firm furnish them with all the bells and whistles for another 10,000 yuan [US$1,488]. Then I could sell each one for 100,000 yuan [US$14,885],” said a man in his 30s who came to South Korea in May 2010.

The symbiotic relationship between the donju and the authorities is evident in the process of putting up and parceling out new apartments. Government authorities support donju involvement by drafting apartment construction plans, providing land and approving building designs. Donju cover the cost of the materials and labor needed to build the new apartments. That makes it easy for government authorities to secure the funding and materials needed to achieve their policy goals, while the donju profit from selling the apartments once they’re built. Since heating is more important than transportation in Pyongyang, apartments that are built next to coal plants are reportedly popular. And since it’s illegal to buy or sell apartments, the donju are surrounded by brokers who handle the issuance of resident permits for a fee.

Donju funding major state construction projects

On occasion, the North Korean authorities even enlist the financial resources of the donju as a means of making up for funding shortfalls when working on government projects. After interviewing some 80 donju, Im Eul-chul, a professor at the Institute for Far Eastern Studies at Kyungnam University, concluded that donju had played an important role in the construction of the Munsu Water Park, a large facility in Pyongyang that covers nearly 110,000 square meters and features some 27 slides. Before construction was complete in 2013, North Korean leader Kim Jong-un made three visits to the site, which is regarded as one of the symbols of Kim’s efforts to build a “civilized socialist nation,” along with Rungra People’s Pleasure Ground and Mirim Horse Riding Club, which were completed around the same time.

From time to time, the donju get their wings clipped in government crackdowns. That’s how the state authorities demonstrate their power to the donju and maintain control of the market. But as powerful as the state may be, it can’t be too frivolous in its use of crackdowns. Excessive punishment of the donju can inconvenience the masses who depend upon the market for their livelihood and cause the people employed by the donju to lose their jobs. As the power of the donju gradually increases, researchers on North Korea say, a complicated dynamic is forming between the donju and the apparatus of the state.

“In the past, the children of party leaders were regarded as the best marriage partners, but these days, it’s the children of donju,” said a woman in her 50s who defected in April 2010.

The rise of the donju indicates that economic wealth has become established as a value to envy in North Korea. In effect, money is functioning as a driver of status and class mobility. The donju are amassing their power by colluding with the authorities above them and by dominating the markets below them.

“The growth of the donju touches on the formation of a middle class in North Korea. Their collective choices will have an impact on the North’s future,” Yang Mun-su said.

Yoo Kang-moon, senior staff writer

Please direct comments or questions to [english@hani.co.kr]

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Most viewed articles