North Korean House of Cards

for Kim Il-sung’s own consolidation of power. For him to pass the mantle of power
to Kim Jong-il he still needed to purge or co-opt more officials. With the depletion
of the regime’s coffers, a separate line of funding became necessary. Following the
anointment of his son as the heir apparent in 1974, Kim Il-sung gave Kim Jong-il
the authority to create a Royal Economy to ensure a smooth transition of power.
“Under Kim Il-sung’s People’s Economy, state funds completely
provided for the people and the leadership. Under Kim Jong-il, the
economy became personalized in order to allow the heir apparent to
consolidate his power.”
-Anonymous senior-level North Korean defector
The Royal Economy was developed along two lines. The first line was
dedicated to a daunting task Kim Jong-il faced upon becoming heir apparent. He
needed to appease the rent-seeking class of the North Korean economy. These were
the members of the elite whose loyalty he would need to secure in order to rule
the regime. They included Party, military, and technical cadres and their families,
numbering close to 20,000 individuals. 387 The second line was dedicated to the Kim
family. The creation of the heir apparent essentially doubled the costs within the
Kim family. Kim Jong-il now had assets and an apparatus of his own that would need
to be managed.
2. Constructing the Royal Economy
In order to create what has become known as North Korea’s secret economy,
Kim Jong-il turned to the blueprint used by his father to secure financing for the
defense-industrial complex. It consisted of four principles:
1. Establishing an economic sector that is not under the administration
of the Cabinet
2. Planning for this economic sector would not fall under the National
Planning Committee
387 When expanded beyond those who received special gifts to members of the trusted sector of
the North Korean population, the figure rises to nearly three million individuals who received gifts on
special holidays.
Committee for Human Rights in North Korea
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