“Nobody stole under Stalin,” many old-timers in the former Soviet Union like to say. Many North Koreans who remember the reign of Kim Il-sung—known as “The Great Leader,” “Sun of the Nation,” and “Generalissimo”—felt the same about his regime, which ended with his death in 1994.

And it’s true that the low level of corruption in that period contrasts sharply with the current state of affairs in the Democratic People’s Republic of Korea. It took just one decade for North Korea, one of the least corrupt countries in East Asia in the early 1990s, to devolve into one of the most corrupt states in a region not know for the integrity of its officials.

Futile Graft

It’s easy to explain why there was so little corruption under Kim Il-sung. A properly functioning Stalinist state is not conducive to corruption in its purest form, the acceptance of bribes and kickbacks by officials. And under Kim Il-sung, North Korea was not just a Stalinist state, but a hyper-Stalinist one.

Money has little meaning in a hyper-Stalinist state. Even if an official amasses cash through bribes, he has few opportunities to spend those illicit funds. For example, under Kim Il-sung a North Korean official couldn’t buy a car or an apartment. Cars weren’t sold to individuals, and receiving one was possible only through special permission issued at the highest political echelons. Apartments were distributed by the government based above all on an individual’s status in the official hierarchy.

Allegations of corruption could also undermine an official’s career growth, which was the sole avenue to material success in a country where nothing was sold and everything was distributed. During the Kim Il-sung regime, a North Korean official could not buy a car or an apartment. But once he reached a certain rung on the political ladder, he was almost automatically granted a car with a driver and an apartment in the center of Pyongyang.

In the early 1990s, the situation changed radically.  As the socialist bloc disintegrated and Soviet aid dried up, the North Korean economy—which had long been unsustainable without external support—entered into a deep crisis. Most industry was paralyzed, and people survived primarily thanks to work in the private sector. Private business, completely absent in North Korea for almost 40 years, reemerged and began growing rapidly.

Shadow Capitalists

This situation created considerable temptations for officials. First of all, rank and file bureaucrats quickly discovered that there was good money to be made by simply closing their eyes to business conducted by the shadow capitalists and private entrepreneurs, as well as to the multitude of code and regulation violations. Without this, the majority of North Koreans simply would not have been able to survive. Second, spending money became a lot easier. Starting in the mid-1990s, one could use cash to buy apartments, cars, and all types of consumer goods, from those that had been previously available only via special distribution centers to those that had not been available at all (for example, even the special distribution centers of the Central Committee of the Workers’ Party of Korea did not have Chanel perfume). The temptation was too great, and few could resist. During the brief period from 1992 to 2000, a wave of corruption swept through the country.

The rise in corruption was also fueled by the refusal of the North Korean government to acknowledge – due to ideological and domestic policy considerations – the changes engulfing the country. Even though the private sector currently accounts for between 30% and 60% of the country’s GDP, it is virtually impossible to find mentions of it in the official press (although it is occasionally addressed in bylaws not slated for publication). The paradoxical result is that everything, or almost everything, that the North Koreans currently do to make a living is official illegal, and often it’s even a criminal offense. For this reason, people functioning in the semi-legal economy (i.e. the majority of the population) are forced to grease the palms of officials to reward them for not asking extra questions or enforcing obsolete regulations.

If a North Korean businessman wants to set up a larger enterprise, he has to register it as a state-owned company. Effectively this means that he must not only make contributions to the state coffers, but also pay large bribes to oversight bodies in order to keep them from meddling in his business. The size of such bribes can be quite considerable. For example, the owner of a private coal mine employing several dozen workers pays $3,000-$4,000 per month in bribes alone.

Essentially, there is now an “upward cash flow” system in place in North Korea, whereby low- and medium-rank officials collect money from small-, medium-, and large-scale businessmen and then kick it up to their superiors. These cashflows power the operations of bureaucratic cartels, whose influence over modern-day North Korean politics is increasingly large.

From Economics to Politics 

Notably, corruption goes beyond business: today, North Koreans can also buy their way out of serious political trouble. There was a time when the mere possession of a freely adjustable radio was punishable by several years in prison or, at best, internal exile to remote rural areas. Today, the risk is several hundred dollars. By paying this amount, the radio owner not only dodges criminal charges, but also frequently gets the radio back and continues listening to foreign broadcasts. The fee for closing a case into planning an illegal border crossing into China is currently several thousand dollars, and getting out of a prison camp costs about $10,000.

With these changes, the population is losing its fear of the powers that be. It is becoming increasingly clear that the new moneyed elite can afford to ignore not only economic regulations, but also certain political prohibitions. Thus corruption is contributing to the liberalization that has been underway in North Korea in recent years (though of course other factors contribute to that as well).

Corruption plays a complex role in North Korean society today. On the one hand, it is chipping away at the foundations of the regime. On the other hand, it is key to the survival of many if not most residents of North Korea. The private sector, which saved millions of lives when the state economy collapsed, can function only as long as officials are willing to accept bribes and overlook obvious violations.

For a small incentive (in the late 1990s, this could be several packs of imported cigarettes) officials might turn a blind eye if, after some work at the collective farm, a peasant woman heads back to her small, illegal mountainside garden to toil until nighttime for the benefit of her family. A bigger bribe might keep an official from noticing a seller who is driving bags of corn into a famine-stricken region. In this case the seller is motivated less by humanitarian concerns than by the fact that in troubled regions, prices are much higher. But it is this movement of food across the country, something that the government failed to organize, that put an end by the year 2000 to a famine that claimed half a million lives.

The economic growth that has begun in North Korea in recent years would also be impossible without corruption, since private and semi-private enterprises play a considerable, if not decisive, role in this growth.  The owners of these enterprises are by definition violating the law, and they are only able to do business because the officials who oversee them are willing to take bribes.

In the long term, corruption will most likely become a serious problem for North Korea, regardless of how the country develops.  A culture of corruption has emerged in the country over the last 20 years. When you talk to North Koreans, you quickly understand that everyone assumes that all officials accept bribes. Graft is now considered absolutely normal. The consequences of this are easy to predict, and it’s hard to believe that the situation will change dramatically even if officials start receiving decent wages. But there’s still a long way to go until there is major fallout—for now, corruption is clearly saving many North Korean lives.

Andrei Lankov - historian, Korea expert, professor of Kookmin University (Seoul, South Korea)