Economic blunder could cause North Korean regime to implode

The North Korean regime has proved a stubborn one. It refused to disintegrate following the demise of the Soviet Union in 1991, its main financial backer. It has declined from following China's state managed implementation of capitalism. And despite being the world's only communist dynasty, it doesn't interpret the hereditary principle in the most conventional way. This year Kim Il Sung can celebrate his 62nd year as the country's head of state alongside the 16th anniversary of his death.

All of the above and more have led analysts to predict the collapse of North Korea, the world's most isolated country. The 1995-98 famine caused a million deaths and stunted the growth of two million children through malnourishment. The floods of 2006 and 2007 once again left its population reliant on external aid.

The North Korean regime continued to tell its people they lived in a paradise unequalled anywhere else on earth. So what if the capital Pyongyang only gets two hours of electricity a day? In America they only have two hours of electrcity a week! It's hard to prove them wrong with no internet, mobile phones, radios, foreign TV stations and any access whatsoever to the outside world.

But now the 'Dear Leader' may have at last made a fatal error. In November 2009 the North Korean government implemented a currency revaluation, which wiped out the hard won savings its citizens had made from the black markets that have appeared throughout the country in recent years.

The state's heavy handed response to the intrusion of capitalism has created political and economic instability at a time when it is suffering a succession crisis, which could shatter the fragile stability North Korea has enjoyed for decades.

Pyongyang is desperate to groom Kim Jong Il's youngest son, Kim Jong Un, to replace his father, who is believed to have suffered a stroke two years ago.

However the currency misstep has worsened the internal power struggles of the North Korean regime, potentially jeopardising the transition.

Seoul University Professor Kim Byung-Yeon says there are now two kinds of people within North Korea's elite, those who benefit from the market, and those who benefit from restraining the market. He believes the tension between these two groups could lead to a "meltdown".

Pyongyang is also losing its ability to control information. North Koreans are increasingly able to get their hands on mobile phones, radios and foreign DVDs. The currency crisis, so obviously inflicted by the ruling elite and not a foreign power, has fuelled the people's hunger for information about the outside world.

The stability of North Korea is so uncertain even China is talking about its demise, with at least one Chinese expert warning Beijing not to bail out the country.

So what would a North Korean collapse involve? Andrew Lankov, a scholar at Seoul's Sookmin University,said: "I don't believe there is going to be a peacful, gradual end of the North Korean regime. It will be dramatic, and probably violent."

Neither China nor South Korea want the North Korean regime to collapse. Although China no longer needs a communist buffer state between it and the capitalist world of South Korea, it doesn't find the prospect of millions of refugees flooding its northeastern regions particularly appealing. It still has a policy of deporting refugees back to the North.

South Korea faces a more existential threat. The North Korea's regime has justified its existence by protecting its people from the American imperialist aggressors and their puppets in the South. Its people are taught that it was the Americans who started the Korean war in 1950 rather than the other way round. The country's military, the fifth largest in the world, is hotwired to launch an invasion of the South, with thousands of missiles aimed at the capital Seoul.

The prospects of reunification are slim. South Korea has enjoyed an enormous economic boom that has lifted it from the status of a third world country to an economic powerhouse in the space of a generation. Its highly westernised youth know that their lifestyles would certainly fare for the worse should the two Koreas be united.

With the new generation lacking the feeling of brotherhood that still fills many older people with the desire for reunification, the prospects of a unified Korea seem to diminish with the passage of time.