Economic Planning

North Korea Table of Contents

Although general economic policy objectives are decided by the Central People's Committee (CPC), it is the task of the State Planning Committee to translate the broad goals into specific annual and long-term development plans and quantitative targets for the economy as a whole, as well as for each industrial sector and enterprise. Under the basic tenets of the 1964 reforms, the planning process is guided by the principles of "unified planning" (ilwnhwa) and of "detailed planning" (saebunhwa).

Under "unified planning," regional committees are established in each province, city, and county to systematically coordinate planning work. These committees do not belong to any regional organization and are directly supervised by the State Planning Committee. As a result of a reorganization in 1969, they are separated into provincial planning committees, city/county committees, and enterprise committees (for large-scale enterprises).

The various planning committees, under the auspices of the State Planning Committee, coordinate their planning work with the existing planning offices of the various economy-related government organizations in each of the corresponding regional and local areas. The system attempts to enable the regional planning staffs to better coordinate with economic establishments in their areas, which are directly responsible to them with regard to planning, as well as to communicate directly with staff at the CPC. "Detailed planning" seeks to construct plans with precise accuracy and scientific methods based on concrete assessment of the available resources, labor, funds, plant capacities, and all other necessary information.

There are four stages in drafting the final national economic plan. The first stage is collecting and compiling preliminary statistical data. These figures, which are used as the basic planning data on the productive capacities of various economic sectors, originally are prepared by lower level economic units and aggregated on a national level by respective departments and committees. Simultaneously, the regional, local, and enterprise planning committees prepare their own data and forward them to the CPC. Through this two-channel system of simultaneous but separate and independent preparation of statistical data by economic units and planning committees, the government seeks to ensure an accurate, objective, and realistic data base unfettered by local and bureaucratic bias. The second stage is preparing the control figures by the CPC based on the preliminary data in accordance with the basic plan goals presented by the Central People's Committee. In the third stage, a draft plan is prepared.

The draft plan, prepared by the CPC, is the result of coordinating all draft figures submitted by the lower level economic units, which, in turn, base their drafts on the control figures handed down from the committee. In the fourth stage, the CPC submits a unified national draft plan to the Central People's Committee and the State Administration Council for confirmation. After approval by the Supreme People's Assembly, the draft becomes final and is distributed to all economic units as well as to regional and local planning committees. The plan then becomes legal and compulsory. Frequent directives from the central government contain changes in the plan targets or incentives for meeting the plan objectives.

Although the central government is most clearly involved in the formulation and evaluation of the yearly and long-term plans, it also reviews summaries of quarterly or monthly progress. Individual enterprises divide the production period into daily, weekly, ten-day, monthly, quarterly, and annual periods. In general, the monthly plan is the basic factory planning period.

The success of an economic plan depends on the quality and detail of information received, the establishment of realistic targets, coordination among different sectors, and correct implementation. High initial growth during the Three-Year Plan and, to a lesser extent, during the Five-Year Plan contributed to a false sense of confidence among the planners. Statistical overreporting--an inherent tendency in a economy where rewards lie in fulfilling the quantitative targets, particularly when the plan target year approaches--leads to overestimation of economic potential, poor product quality, and eventually to plan errors. Inefficient utilization of plants, equipment, and raw materials also add to planning errors. Lack of coordination in planning and production competition among sectors and regions cause imbalances and disrupt input-output relationships. The planning reforms in 1964 were supposed to solve these problems, but the need for correct and detailed planning and strict implementation of plans was so great that their importance was emphasized in the report unveiling the Second Seven-Year Plan, indicating that planning problems persisted in the 1980s.

The Ch'ongsan-ni Method

The Ch'ongsan-ni Method, or Chngsan-ri Method, of management was born out of Kim Il Sung's February 1960 visit to the Ch'ongsan-ni Cooperative Farm in South P'yngan Province. Kim and other members of the KWP Central Committee offered "on-the-spot guidance" and spent fifteen days instructing and interacting with the workers. The avowed objective of this new method is to combat "bureaucratism" and "formalism" in the farm management system.

The leadership claimed that farm workers were unhappy and produced low output because low-ranking party functionaries, who expounded abstract Marxist theories and slogans, were using incorrect tactics that failed to motivate. To correct this, the leadership recommended that the workers receive specific guidance in solving production problems and be promised readily available material incentives. The Ch'ongsan-ni Method called for highranking party officials, party cadres, and administrative officials to emulate Kim Il Sung by making field inspections. The system also provided opportunities for farmers to present their grievances and ideas to leading cadres and managers.

Perhaps more important than involving administrative personnel in on-site inspections was the increased use of material incentives, such as paid vacations, special bonuses, honorific titles, and monetary rewards. In fact, the Ch'ongsan-ni Method appeared to accommodate almost any expedient to spur production. The method, however, subsequently was undercut by heavy-handed efforts to increase farm production and amalgamate farms into ever-larger units. Actual improvement in the agricultural sector began with the adoption of the subteam contract system as a means of increasing peasant productivity by adjusting individual incentives to those of the immediate, small working group. Thus the increasing scale of collective farms was somewhat offset by the reduction in the size of the working unit. "On-the-spot guidance" by high government functionaries, however, continues in the early 1990s, as exemplified by Kim Il Sung's visits to such places as the Wangjaesan Cooperative Farm in Ssng County and the Kyngsn Branch Experimental Farm of the Academy of Agricultural Sciences between August 20 and 30, 1991.

The Taean Work System

The industrial management system developed in three distinct stages. The first stage was a period of enterprise autonomy that lasted until December 1946. The second stage was a transitional system based on local autonomy, with each enterprise managed by the enterprise management committee under the direction of the local people's committee. This system was replaced by the "oneman management system," with management patterned along Soviet lines as large enterprises were nationalized and came under central control. The third stage, the Taean Work System, was introduced in December 1961 as an application and refinement of agricultural management techniques to industry. The Taean industrial management system grew out of the Ch'ongsan-ni Method.

The highest managerial authority under the Taean system is the party committee. Each committee consists of approximately twenty-five to thirty-five members elected from the ranks of managers, workers, engineers, and the leadership of "working people's organizations" at the factory. A smaller "executive committee," about one-fourth the size of the regular committee, has practical responsibility for day-to-day plant operations and major factory decisions. The most important staff members, including the party committee secretary, factory manager, and chief engineer, make up its membership. The system focuses on cooperation among workers, technicians, and party functionaries at the factory level.

Each factory has two major lines of administration, one headed by the manager, the other by the party committee secretary. A chief engineer and his or her assistants direct a general staff in charge of all aspects of production, planning, and technical guidance. Depending on the size of the factory, varying numbers of deputies oversee factory logistics, marketing, and workers' services. The supply of materials includes securing, storing, and distributing all materials for factory use, as well as storing finished products and shipping them from the factory.

Deputies are in charge of assigning workers to their units and handling factory accounts and payroll. Providing workers' services requires directing any farming done on factory lands, stocking factory retail shops, and taking care of all staff amenities. Deputies in charge of workers' services are encouraged to meet as many of the factory's needs as possible using nearby agricultural cooperatives and local industries.

The secretary of the party committee organizes all political activities in each of the factory party cells and attempts to ensure loyalty to the party's production targets and management goals. According to official claims, all management decisions are arrived at by consensus among the members of the party committee. Given the overwhelming importance of the party in the country's affairs, it seems likely that the party secretary has the last say in any major factory disputes.

The Taean system heralded a more rational approach to industrial management than that practiced previously. Although party functionaries and workers became more important to management under the new system, engineers and technical staff also received more responsibility in areas where their expertise could contribute the most. The system recognizes the importance of material as well as "politico-moral" incentives for managing the factory workers. The "internal accounting system," a spin-off of the "independent accounting system," grants bonuses to work teams and workshops that use raw materials and equipment most efficiently. These financial rewards come out of enterprise profits.

A measure of the success of the Taean Work System is its longevity and its continued endorsement by the leadership. In his 1991 New Year's address marking the thirtieth anniversary of the creation of the system, Kim Il Sung said that the "Taean work system is the best system of economic management. It enables the producer masses to fulfill their responsibility and role as masters and to manage the economy in a scientific and rational manner by implementing the mass line in economic management, and by combining party leadership organically with administrative, economic, and technical guidance."

Mass Production Campaigns

Parallel to management techniques such as the Ch'ongsan-ni Method and the Taean Work System, which were designed to increase output in the course of more normalized and regularized operations of farms and enterprises, the leadership continuously resorts to exhortations and mass campaigns to motivate the workers to meet output targets. The earliest and the most pervasive mass production campaign was the Ch'llima Movement. Introduced in 1958, and fashioned after China's Great Leap Forward (1958-60), the Ch'llima Movement organized the labor force into work teams and brigades to compete at increasing production. The campaign was aimed not only at industrial and agricultural workers but also at organizations in education, science, sanitation and health, and culture. In addition to work teams, units eligible for Ch'llima citations included entire factories, factory workshops, and such self-contained units as a ship or a railroad station. The "socialist competition" among the industrial sectors, enterprises, farms, and work teams under the Ch'llima Movement frantically sought to complete the Five-Year Plan (1957-60), but instead created chaotic disruptions in the economy. The disruptions made it necessary to set aside 1959 as a "buffer year" to restore balance in the economy.

Although the Ch'llima Movement was replaced in the early 1960s by the Ch'ongsan-ni Method and the Taean Work System, the regime's reliance on some form of mass campaign continued into the early 1990s. Campaigns conducted after the Ch'llima Movement have been narrower in scope and have concentrated on specific time frames for a particular industry or economic sector. Often, the mass production movement takes the form of a "speed battle"-- the "100-day speed battle" being most common. The fact that the leadership has to resort to these campaigns points to the weakness or improper functioning of the regular day-to-day management system, as well as to a lack of incentives for workers to achieve the desired economic results. The leadership frequently resorts to speed battles toward the end of a certain period (such as a month, a year, or a particular economic plan) to reach production targets. The "Speed of the 1990s" is designed to carry out the economic goals of the decade.

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Source: U.S. Library of Congress