World Economy

Sanctions could actually end up helping North Korea's economy in the long run

Key Points
  • The international community must use its sanctions leverage over North Korea to demand it enact structural reforms, William Brown, adjunct professor at Georgetown University, wrote in a new report.
  • Reforms such as the introduction of private farming could "unshackle the economy" and lift the state out of its long-term poverty trap, Brown said.
People participate in a Pyongyang city mass rally held at Kim Il Sung Square on August 9, 2017, to fully support the statement of the Democratic People's Republic of Korea (DPRK) government.
KCNA | Reuters

International sanctions on North Korea could produce structural reforms that boost long-term economic growth in the pariah state.

Pyongyang's frequent acts of nuclear aggression have earned the isolated country multiple penalties from the United Nations and the United States, including heavy restrictions on trade and financial transactions. Earlier this month, Washington imposed additional punishments for the use of a banned nerve agent that the White House says was used to assassinate leader Kim Jong Un's half-brother.

These sanctions actually "provide a narrow pathway for reforms that could unshackle the economy," according to William Brown, adjunct professor at Georgetown University.

Overseas aid organizations and the U.N. should use sanctions leverage as a means to demand market and productivity enhancing reforms, Brown wrote in a new report published by The National Committee on North Korea, a Washington-based non-governmental organization.

Kim's government "may be more interested in systemic reform than it has previously been, given its need for hard currency and the dangers it must understand are coming from the increasingly dollarized economy," Brown said.

No signs that US-North Korea summit will happen: Professor
No signs that US-North Korea summit will happen: Professor

Kim's administration has allowed and Chinese yuan to saturate the economy, which has led to the North Korean won becoming "nearly fixed to the dollar," Brown said. That raises questions as to how long the regime can maintain monetary stability, he said.

The international community should focus on the following reforms, according to Brown.

  • Transferring ownership of property from the state to the private sector
  • Unifying its monetary system
  • Bringing state salaries in line with market wages
  • Allowing private farming

Those measures have the potential to "save the country from the debilitating crush of its classic long-term poverty trap" and create "growth even greater" than South Korea, China, and Japan at equivalent periods in their development, Brown said.