#800: North Korea's Capitalists Capitalism isn't supposed to exist in North Korea. But all over the country, small businesses are popping up, growing the nation's economy. And much of that money is going straight to the country's nuclear program.
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#800: North Korea's Capitalists

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#800: North Korea's Capitalists

#800: North Korea's Capitalists

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STACEY VANEK SMITH, HOST:

By now, we are all very familiar with North Korea's accelerated missile program. And we're pretty sure we know how they got the technology. But how did they get the money? I mean, North Korea's broke. Right? They're sanctioned to the teeth. So how on earth could they afford to get their hands on some of the most expensive, coveted technology on the planet?

So how old are you? What is your age?

JESSIE: (Through interpreter) Twenty-six years old.

VANEK SMITH: How would you describe yourself to someone who has never seen you?

JESSIE: (Through interpreter) I'm sexy and cute at the same time.

VANEK SMITH: (Laughter).

This is Jessie. She is from North Korea. And she grew up in Hyesan, a town on the northern border on this river called the Yalu River.

JESSIE: (Through interpreter) Hyesan is known as the place that is closest to China. When we open the door and go outside, you can basically see China there.

VANEK SMITH: Jessie is in Seoul, South Korea, now. I spoke with her over Skype through my translator, Jihye Lee who was able to affirm that yes, Jessie is sexy and cute at the same time.

JIHYE LEE, BYLINE: It's true. I can attest to that.

(LAUGHTER)

VANEK SMITH: Jessie says money was always really tight when she was growing up. If you needed something, you had to find a way to get money for it. When she was 8 years old, her family needed matches. So she and her brother went up into the mountains, picked a bunch of wild raspberries and sold them at the local market.

JESSIE: (Through interpreter) We went to the market, and we started selling. And it sold well not because people loved wild berries but because there was this 8-year-old girl trying to sell all these wild berries at the market.

VANEK SMITH: Jessie made 45 North Korean won selling her berries that day. That is about a nickel. It was the first time she'd ever had money of her own, and she still remembers how it felt in her hand. So she bought the matches, and then she saw these peaches.

Jessie says her mom loved peaches. And her mom was one of those people who was always doing things for other people, never really did anything for herself. So Jessie took her leftover money, and she bought her mom a peach.

JESSIE: (Through interpreter) When I got that peach and I saw her getting the peach and eating the peach, she looked really happy. And it made me really happy. That's when I realized that I wanted to make a lot of money to make her happy.

VANEK SMITH: Jessie started selling berries and other things at the market regularly - saving up her earnings, looking for more opportunities. And then one day, she had this flash of brilliance. She noticed that the men in her village would always gather for a drink at the end of the day. And they were drinking this alcohol that they were making themselves out of the potatoes they were farming.

And Jessie thought she could get them better stuff. So she hitched a ride to a bigger city. She took all of her berry money - all of it. And she bought corn alcohol - as much as she could carry. And she walked back to her village with it. It was a six-hour walk.

JESSIE: (Through interpreter) Because I was little, I couldn't bring back more than 5 kilograms of alcohol.

VANEK SMITH: That is about 10 pounds. So Jessie walks for six hours with all of this corn alcohol. She gets to her house. She cuts it with a little water. And then she tells her grandmother to go into town and spread the word that they were selling the good stuff.

JESSIE: (Through interpreter) My alcohol was really, really popular because it was very pure. There was no hangover. And so they said it was a huge difference.

VANEK SMITH: Jessie had more orders than she could fill. A small business was born, a little pilot light of capitalism right in the heart of the most locked-down, restrictive socialist regime in the world.

(SOUNDBITE OF JOSSELIN BORDAT AND LE FAT CLUB'S "SUPERNOVA AMOUR")

VANEK SMITH: Hello, and welcome to PLANET MONEY. I'm Stacey Vanek Smith. North Korea got a lot of its missile money from us, from ideas the U.S. has been exporting all over the world for decades - the free market, the entrepreneurial spirit, good old-fashioned capitalism. North Korea's missile money - it started with people like Jessie. Today on the show, we go inside the hermit kingdom and meet North Korea's capitalists and the people who trained them.

(SOUNDBITE OF JOSSELIN BORDAT AND LE FAT CLUB'S "SUPERNOVA AMOUR")

VANEK SMITH: There is a special name for North Korea's entrepreneurial types like Jessie. They're called the donju. It means lords of money. Thirty years ago, there is no way the donju would have existed in North Korea. It's a socialist country. People are supposed to work for the good of the whole and get everything they need from the government. The idea of making a profit or growing a business or even owning something was blasphemy. The North Korean regime, in fact, had a special term for it.

NICHOLAS EBERSTADT: Honey-coated poison. And we, the West in general, wanted North Korea to swallow the honey-coated poison.

VANEK SMITH: That's what they - those were the words they used?

EBERSTADT: Those were - yeah, their words not mine.

VANEK SMITH: Wow. That is some...

EBERSTADT: Yeah.

VANEK SMITH: ...Serious writing.

EBERSTADT: Poetry - yeah, some Pyongyang poetry.

VANEK SMITH: Nicholas Eberstadt is with the American Enterprise Institute. He's been studying the North Korean economy since the '70s. And he says the shocking thing to him is that back then, North and South Korea were in a heated economic race. Now South Korea's economy is 50 times larger than North Korea's. And just to put this into perspective, the state of Wyoming has a bigger economy than North Korea.

EBERSTADT: North Korea is the only place in human history that has suffered a famine during peacetime with an urbanized, literate population. It's almost impossible to do, but they managed somehow to do that in the 1990s.

VANEK SMITH: That famine was known as the Arduous March. North Korea's economy collapsed, and aid from Russia dried up. Hundreds of thousands of people starved to death. Bodies were piled up in the streets. And for years, the North Korean people were on their own.

So they started scraping together what they could - little bits of food, basic necessities - and coming together in markets, like the one where Jessie sold her raspberries. And these markets got bigger and bigger. And the government just let it happen.

EBERSTADT: From the North Korean leadership's standpoint, it was a devil's deal that had to be struck to prevent the total breakdown of the state. It's gone a long way since then. And now there is a whole class of marketeers. And donju are - I say donju are like North Korean yuppies.

VANEK SMITH: The country's leader, Kim Jong Il, would occasionally crack down on the donju - throw some of them in prison, close down some markets. But when Kim Jong Il's son Kim Jong Un came into power, he had a very different approach.

(SOUNDBITE OF ARCHIVED RECORDING)

SUPREME LEADER KIM JONG UN: (Speaking Korean).

VANEK SMITH: Kim Jong Un proclaimed that the era of struggle was over. And he declared two main goals for his country - number one, to build up the weapons program and number two, to grow the economy. Growing the economy - that meant making a little more room to maneuver for this tiny class of donju.

EBERSTADT: The North Korean government has implicitly revealed that they believe they can take a little bit more of that honey-coated poison than would have been tolerated in the past. And that's getting economic results.

VANEK SMITH: But North Korean entrepreneurs were at a real disadvantage. Things that are just, like, in our blood in the U.S. - marketing, two-for-one sales, venture capital - these things don't really exist in North Korea. So Kim Jong Un decided to help out the donju. He started letting business experts come in from overseas and coach them.

ANDRAY ABRAHAMIAN: For the last several years, I've been involved with a nonprofit called Choson Exchange that trains North Koreans in entrepreneurship and economic policy.

VANEK SMITH: This is Andray Abrahamian. He's been to North Korea dozens of times teaching classes on things like marketing, management, accounting, trade. And North Korea's cool with this? They'll say like - great, come, like, spread your capitalist ways in our like...

ABRAHAMIAN: Oh, heavens, no - we're not spreading capitalism by any means. We are just introducing management techniques so that they can develop their economy more efficiently.

VANEK SMITH: In 2010, Andray got on a plane in China headed to North Korea. He was on a quest to train the North Korean donju in Western-style business techniques, basically bringing honey-coated poison into North Korea with Kim Jong Un's blessing. Nothing about this was normal, not even the plane.

ABRAHAMIAN: So sort of like stepping back in time and they were running quite old Russian planes, kind of like from the '60s, where there's sort of cute doilies on the window as if you were visiting a grandmother's house rather than an airliner.

VANEK SMITH: Like little lace curtains?

ABRAHAMIAN: Yeah, like little lace curtains.

VANEK SMITH: (Laughter) No way. And as soon as the plane took off, music started blasting through the cabin, these loud, rousing songs about the government and its recent triumphs.

ABRAHAMIAN: They were promoting a very important national technology that they had developed. And so they had a song to go along with it. And it was all like (imitating melody).

(SOUNDBITE OF SONG, "ATTAIN THE CUTTING EDGE")

POCHONBO ELECTRONIC ENSEMBLE: (Singing in Korean).

ABRAHAMIAN: And, you know, after one or two rounds, it would really get stuck in your head.

VANEK SMITH: Andray's plane landed just outside of Pyongyang. Andray got into a van and rode into the city for the first time, this city that had been totally sealed off to people like him for decades.

ABRAHAMIAN: As you approach Victory Street, you start to get confronted with the monoliths of the city. So there's a huge what they call Immortality Tower, a massive kind of obelisk. Then you come around the corner, and you're confronted with those huge statues of Kim Il Sung and Kim Jong Il - 20-meter-high, bronze, just looking out over their domain for eternity.

VANEK SMITH: Andray says it was a really beautiful city - very august. He saw a lot of parks, a lot of green space, a lot of people outside. One thing he did not see...

ABRAHAMIAN: There are no ads. You know, you're not seeing sunglasses or makeup ads. The only ads are for the country itself and their socialism and their leadership.

VANEK SMITH: No advertising. And that was just one of the obstacles Andray encountered trying to teach these eager groups of donju how to grow their businesses. Another problem - there was just a lot of stuff they could not talk about.

ABRAHAMIAN: So in one case, we wanted to talk about the trade relationship between China and North Korea. But that is obviously very political. And so what our workshop leader very cleverly did was he created two fictional islands, Big Island and Small Island. And everybody in the room knew what we were talking about. They knew who the small island was, and they knew who the big island was. But they were able to have a really fruitful discussion about how to manage a trade relationship with a much larger partner because it was abstracted.

VANEK SMITH: Andray says donju would crowd into his classes - people who ran retail shops, shoe factories, software companies, people with start-up ideas. The government even let Choson Exchange take a group of entrepreneurs abroad to see how people ran businesses overseas. Andray said some of the donju were so poor they brought their luggage in plastic shopping bags. But they were so excited to go and so excited to see everything.

ABRAHAMIAN: What do you want to see in Singapore? - I asked. What's - you know, what are you curious about? He's like, an ATM - never seen one, I've heard about them. Show me an ATM. I was like, all right. Let's go.

VANEK SMITH: And? What happened? Did you, like, go to the ATM?

ABRAHAMIAN: Yeah. And the guy was like awesome, this is so cool - can't wait for us to get these in my country.

VANEK SMITH: Were they, like, taking photos of the ATM?

ABRAHAMIAN: They took photos of everything.

VANEK SMITH: The donju were getting training and support. Their businesses were growing. But growing local businesses was not going to be enough to expand North Korea's economy the way Kim Jong Un wanted to. To do that, they were going to need to bring in money from overseas.

PAUL TJIA: Hello.

VANEK SMITH: Oh, hi. Hi. Can you hear me?

TJIA: Yeah, although your voice is a little bit soft.

VANEK SMITH: Oh, sorry. Is that better?

TJIA: No, it is not better.

VANEK SMITH: Paul Tjia is a Dutch business consultant. We spoke over Skype. Apparently, the connection wasn't great. Paul pairs Western companies up with Asian businesses, and he's been working with North Korea since the '90s. He says since Kim Jong Un took power, a lot more international business is being done in North Korea.

TJIA: For example, maybe your smartphone is from Samsung, the South Korean phone maker. In that case, it contains some software which was made in North Korea.

VANEK SMITH: Paul says you can now find products like Heineken beer and Philips Electronics in North Korean stores. We talked to both companies. They denied doing any business in North Korea. But Paul says it can be hard to know what's actually true because companies always deny doing business in North Korea. Being associated with the country is just really bad PR. But Paul says the sanctions are not as tight as you think. And a lot of Western companies do business with North Korea, although some of them don't actually know it.

TJIA: Your Walt Disney Company - it happens some of their animation work took place in North Korea.

VANEK SMITH: Is that true?

TJIA: It was "Lion King."

VANEK SMITH: "The Lion King," apparently partially drawn by SEK Studios in Pyongyang, North Korea.

TJIA: So it was outsourced, I think to the Philippines. But then somebody decided it was cheaper to do it in North Korea. So it was actually done in Pyongyang - without, by the way, the knowledge of Walt Disney.

VANEK SMITH: Kim Jong Un's plan was working. Local businesses were thriving, foreign investment was increasing, and North Korea's economy was growing. The capital city had a construction boom - got an ice skating rink and a floating restaurant. Pyongyang is tightly controlled by the government. It's kind of a showplace for the country. For instance, people with wheelchairs are not allowed in the city because the government thinks it makes them look bad. Nevertheless, Paul Tjia says the changes he saw were striking.

TJIA: You see a lot of recent - new buildings. Let's say 30, 40 or 50 stories high.

VANEK SMITH: Like skyscrapers.

TJIA: You will see much more traffic than in the past. And sometimes you even come across traffic jams. And I see fat North Koreans now...

VANEK SMITH: You see fat North Koreans (laughter).

TJIA: ...Which was quite rare in the past.

VANEK SMITH: But the real change, says Paul, is in the mentality of the North Koreans. He says everybody he talks to now has a start-up idea. They all want to go into business. Now, there's almost no venture capital to be had in North Korea, but there is this start-up mentality. The tech sector has grown a bit. There's a domestic intranet and even an Amazon-type company called Manmulsung, where you order online anything from noodles to two-by-fours and can get them delivered to your door.

Andray Abrahamian, the business teacher, says he has seen the effects of his teachings firsthand, most recently when he visited the cafe of one of his students in Pyongyang.

ABRAHAMIAN: I did notice that the barista at the coffee shop were starting to give, you know, little freebies - making these tiny decisions on their own that generally North Korean waitstaff just do not do. So I like to think that we contributed to a slight change in mindset there.

VANEK SMITH: Did you get a little freebie as a customer?

ABRAHAMIAN: I did.

VANEK SMITH: What did you get? Do you remember?

ABRAHAMIAN: Yeah, a little extra shot of espresso.

VANEK SMITH: Jessie, our North Korean entrepreneur-cum-bootlegger, also caught this entrepreneurial spirit. Her business grew and expanded, and she started trading products back and forth with China, smuggling things across the border. She would send medicinal herbs, animal skins and pine nuts over to China across the Yalu River in these boats. And she would bring very in-demand items back to North Korea.

JESSIE: (Through interpreter) And what we would get in return is sausages. And we would get soaps.

LEE: And there's something called saccharin.

VANEK SMITH: That is an artificial sweetener that North Koreans like to use in desserts. This was one of Jessie's biggest sellers. In fact, she uses it at her home in Seoul. She ran to the kitchen to let my translator Jihye try some.

LEE: Mm - tastes like dried whipped cream.

VANEK SMITH: Jessie's business had gone international.

JESSIE: (Through interpreter) The business was prospering on a whole new level.

VANEK SMITH: And so was North Korea's government. Kim Jong Un's plan to grow the economy was working. The donju you like Jessie were doing better. They were making more money and paying more in taxes and bribes to the North Korean government. There was also more money coming in from other countries, from overseas businesses. Political economist Nicholas Eberstadt says all of that money was going straight to one place - nuclear weapons.

EBERSTADT: You have to assume that the really rapid increase in the tempo of the testing has something to do with getting more funds to do it.

VANEK SMITH: The economic prosperity the donju helped bring to North Korea made the nuclear program possible for Kim Jong Un. And all the subversive-seeming capitalism - the marketing training, the international relationships - all of it had ultimately gone to support the military ambitions of Kim Jong Un.

And this puts people like Paul and Andray in a really strange position. I mean, they had originally started working in North Korea to try to help people, to try to bring money into the economy and help a population that had, at one point, literally been starving in the streets. But they had helped North Korea become a wealthier country, a more weaponized country.

Do you ever feel an ethical conflict working with North Korea?

TJIA: I don't have to be ashamed to support this economic cooperation because it also helps the individual worker in the garment factory, for example. You will not hear me talking as a fan of the North Korea political system. I'm not a fan of them. But if we want to see changes in North Korea, it has to be changed from the inside, like we have seen in China. It is only because of an upcoming middle class that a country can change.

VANEK SMITH: But that upcoming middle class is in a really tough position because in North Korea, the state technically owns everything. The donju are always operating in a legal gray area. Everything they have can be taken away at any moment. And the wealth that they accrue can make them targets. In fact, that is what happened to Jessie. Her business was booming. She was making more money. And people close to her started to notice.

JESSIE: (Through interpreter) My uncle realized that I was doing all this business, and he didn't approve of it at all. And he reported me. It felt like everything vanished, and everything just evaporated in a snap of a moment. And basically, what I had was almost all gone.

VANEK SMITH: Years and years of work just went up in smoke. And Jessie says she was actually lucky she wasn't sent to prison. But it was at that moment that Jessie realized she was never going to be able to have a stable life in North Korea. And as far as building her business back up, she says her heart just wasn't in it anymore. Her mother had died, and her mother was the whole inspiration for her going into business in the first place.

JESSIE: (Through interpreter) It felt like the sky was falling for me. I had nowhere to turn to. I had nobody to lean on.

VANEK SMITH: Jessie decided to leave North Korea. She had relationships with border guards in China and North Korea from working as a smuggler for all those years. So one night, she just smuggled herself out across the Yalu River on one of the same boats that she'd used to transport animal skins and sweetener back and forth. All of Jessie's money, everything she owned was taken by the government. Then again, the government had always owned it all anyway.

Political economist Nicholas Eberstadt says people like Jessie are the real tragedy of the current situation in North Korea. I mean, Kim Jong Un got what he wanted. He got the money he needed to grow the nuclear program. But it came, of course, at a huge price for the North Korean people.

EBERSTADT: Yes, the nuclear threat; yes, the missile threat; the vicious threats against people abroad - but that's just the Janus face of what's happening at home all the time to millions and millions of people who don't have a voice. And I guess I find that to be the saddest part.

VANEK SMITH: The latest round of sanctions and political pressure from the U.S. is having a big effect on North Korea's donju. Funding has dried up for entrepreneurial training. Everything is more expensive and harder to get. And Paul Tjia says foreign companies are pulling out of North Korea as fast as they can.

The donju have always been a contradiction in North Korea. They were allowed to exist - they got these little freedoms - because they helped build up North Korea's military might. But now that Kim Jong Un has that military might, the donju are in a more fragile position than ever.

(SOUNDBITE OF BRIAN FLORES, JAMES HENDERSON, JOHN HUNTER JR. AND JONATHAN SLOTT'S "PROTON AND ON")

VANEK SMITH: We'll give you an update on Jessie right after this.

(SOUNDBITE OF BRIAN FLORES, JAMES HENDERSON, JOHN HUNTER JR. AND JONATHAN SLOTT'S "PROTON AND ON")

VANEK SMITH: Jessie is now a student in Seoul, South Korea. And I asked her if she's planning on going into business for herself. I mean, she has all of this amazing business experience. And she's now in a place where entrepreneurship is actually celebrated. But she told me she doesn't think she wants to go into business because her years in North Korea have changed what she thinks of as success.

JESSIE: (Through interpreter) At a young age, I realized the value of money. And I think for me success is the fact that I'm alive and well. I feel like I've already succeeded in South Korea.

(SOUNDBITE OF BRIAN FLORES, JAMES HENDERSON, JOHN HUNTER JR. AND JONATHAN SLOTT'S "PROTON AND ON")

VANEK SMITH: We always love to hear what you think of the show. Send us an email - planetmoney@npr.org. Or find us on Facebook or Twitter. Today's show was produced by the wonderful Elizabeth Kulas. PLANET MONEY's senior producer is Alex Goldmark. Bryant Urstadt is our editor. And I have a couple of people I would like to thank, Sokeel Park and Ian McKay with the group Liberty in North Korea.

Also, we are looking for our next intern. Come help us make the show. It's a fun job, and it's paid. Applications are due this Sunday, October 15. You can find more information on our website npr.org/money.

I'm Stacey Vanek Smith. Thanks for listening.

(SOUNDBITE OF BRIAN FLORES, JAMES HENDERSON, JOHN HUNTER JR. AND JONATHAN SLOTT'S "PROTON AND ON")

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