History and Technology Routledge Vo. 20, No.1 March 2004, p. 53-74 { Rationalizing the Guerilla State: North Korean Factory Management Reform, 1953-61 Hyungsub Choi This article examines the Taean Management System (TMS), a North Korean factory management reform program of 1961. Three factors explain why the TMS emerged at the time it did: first, influence from the Soviet Union and China since 1945 provided the knowledge of factory management; second, decreasing foreign aid since the mid-1950s urged the North Koreans to search for ways to increase productivity; and third, the rise of aan ideology of self-reliance excluded the option of being integrated into the international economy. The resulting TMS, which arose at this juncture as an amalgam of rationaliza- tion and ideology, was the origin of modern management in North Korea. Keywords: North Korea; Factory Management; Tacan Management System On December 6, 1961, Kim II Sung, the Premier of the Democratic People's Republic of Korea (henceforth North Korea), began his ‘on-the-spot guidance’ visit to the Taean Electrical Machinery Factory. On the last day of his unusually long 11-day visit, he made a speech to the workers of the Taean Factory. Kim pointed out the remarkable achievements of North Korean industry during the 1950s: During the years, our industry has experienced growth in leaps and bounds. Asa result, the complexity of the industrial relationship required the reorganization of irrational manage- rial institutions, so as to adapt to this new environment ... The problem is that planning, production leadership, and technical leadership are not organically linked.! Therefore, he continued, the structure of factory management had to go through immediate and substantial reform. To use the terminology of dialectical materialism, the quantitative change that the North Korean industry had experienced during the Hyungsub Choi is a PhD candidate in the Dept. of the History of Science and Technology at the Johns Hopkins Hyungsub Choi, Dept. of the History of Science and Technology, Johns Hopkins 18, USA. Email: hchoi@jhuedu. University. Correspondence University, Baltimore, MD 21 ISSN 0734-1512 (print)/ISSN 1477-2620 (online) © 2004 Taylor & Francis Ltd DOK: 10.1080/0734151042000202054Figure 1 Premier Kim Il Sung Making His ‘On-the-Spot Guidance’ Visit to the Taean Electrical Machinery Factory in December 1961. Kim is the second from the left. From Korean Machine-Building Industr 1950s led it toward qualitative change. Kim specifically mentioned three areas of reform: factory leadership, material supply, and worker's welfare. His December 1961 speech, in retrospect, was the first official mention of the Taean Management System (TMS, taeanui saop chegye), which remains the economic management system of North Korea to this day. The aim of this article is to examine the decade that preceded the TMS, and trace the circumstances within which the North Korean leaders made the decision to adopt a novel method of managing their industrial enterprises. The TMS is significant because it symbolizes the North Korean leaders’ transition from military commanders of the anti-Japanese guerilla forces to socialist ‘planner-managers.”* Instead of simply urging their people to work harder or emphasizing ideology, they began to take a systematic approach to industrial management. I will ask the following questions: What led theHistory and Technology 35 North Korean leaders to search for a new factory management system? Why did the TMS come to be in the early 1960s? Three factors, in my view, were crucial. Firstly, foreign influence was certainly an important factor. While the Soviet Union was the dominant foreign power since 1945, China became increasingly important in North Korea after 1953. Striking a balance between the two communist powers was a peren- nial task for the North Korean leadership. Confronted with the Sino-Soviet dispute, North Korea maintained a policy of ‘equal distance diplomacy,’ which in turn aggra- vated the trend of decreasing foreign aid in the late 1950s. The economic crisis was met with a number of different measures. Finally, these efforts were embedded in the context of the rise of a nationalistic ideology, ‘juche’ (self-reliance). One way of reading the case of North Korean factory management reform is to see it as another chapter of the reception of scientific management. Several historians of business and technology have told these stories over and over again, Judith Merkle, in her book Management and Ideology, argues that ‘the wide variety of regimes, social structures, and preexisting political ideologies ... will show clearly the kinds of social, economic, and intellectual factors that advanced Scientific Management or retarded its influence.’ For example, ‘pragmatic conservatism’ in Great Britain checked the recep- tivity of scientific management.° On the other hand, Marxism-Leninism in the Soviet Union was generally receptive, though only after eliminating the capitalist undertone.” In Japan, the traditional ‘paternalist paradigm’ of Japanese business existed alongside modern ‘kagaku kanriho’ (scientific management).* However, I will argue that this ideology-receptivity framework is problematic. The diffusion of scientific management should not be described as unilateral acceptance or rejection configured by pre-existing ideologies, but as a process of co-evolution of political ideology and management technology. The synchronicity of the development of the TMS and self-reliance makes the North Korean case particularly useful for making this point explicit. In the remainder of this article, I will discuss the three factors that served as a back- ground for the rise of the TMS. Then, I will go on to describe in more detail about the construction, the components, and the repercussions of the TMS in the 1960s. Foreign Influences and the Sino-Soviet Dispute The mid-twentieth century was a tumultuous period in Korean history. When the Japanese withdrew from Korea in August 1945, the incoming Allied Forces divided the peninsula along the 38th parallel. The southern part of Korea was occupied by the United States, and the northern part by the Soviet Union. The two powers established military governments in their spheres of influence. Military governance in both Koreas continued until 1948, when the Koreans established their own governments: the Republic of Korea in the south and the Democratic People's Republic of Korea in the north.” Industrial capability in the north displayed substantial growth during 1945-50. Compared to the south, which demonstrated meager growth before the outbreak of the Korean War in 1950, the north definitely had a head start. Statistics indicate that the value of North Korean industrial output in 1949 was more than twice that in 1946.!°36H. Choi One of the reasons for the success was that most heavy industrial facilities—approxi- mately 75 percent of the heavy industry—were located in the northern part of the peninsula at the time of division. A number of such heavy industrial facilities (steel mills, chemical and machinery factories) were refurbished during this period with the guidance of Soviet technical advisors and Japanese detainee engineers. For example, the east coast city of Hungnam was the site of one of the largest chemical industrial complexes in East Asia in the 1930s and 1940s. One of the largest companies in the complex during this time was the Japan Nitrogen Fertilizer Corporation, which was later refurbished as the Hungnam Fertilizer Factory,!! These efforts to industrialize North Korea continued until the Korean War broke out in June 1950. Throughout the war, intensive bombing by United Nations (UN) forces destroyed much of the industrial facilities that were present in 1950, Although the North Korean leadership hastily began reconstruction even before the ceasefire treaty was signed in July 1953, the value of industrial output declined 36 percent from that of 1949.'? With some exaggeration, the Nodong Sinmun claimed that North Korea ‘did not have the facilities to produce a single ton of steel, a single ton of cement, a single block of brick, or a single ton of fertilizer after the war.”!> Desperate for post-war recon- struction, the North Korean leadership came up with the first Three-Year Plan (1954~ 56). The war-ravaged country was hungry for most factors of production, such as factory buildings, production machinery, raw materials, and technical knowledge. Assistance from “friendly countries’ provided solutions for many of the problems North Korea faced in executing this Plan. Influence of the Soviet Union Aid from the Soviet Union proved particularly valuable,'+ In August 1955, the Soviets provided North Korea with approximately one billion rubles for the purpose of reno- vating the Kimchaek Iron Works, the Hungnam Fertilizer Factory, the Nampo Smelt- ery, the Supung Hydroelectric Dam, and the Pyongyang Textile Kombinat. However, financial aid was just one of many forms of aid that came from the Soviet Union. It also sent production machinery accompanied by engineers to supervise the reconstruction of buildings and the installation of machines.'> Perhaps more importantly, the Soviet Union served as an important model for North Korea to emulate. Many North Korean institutions were explicitly based on Soviet models, i.e. economic planning, the Party structure, the Academy of Sciences, and the education system. A number of students were sent to the Soviet Union for higher education, and textbooks were translated from Russian into Korean to be used in North Korean schools.!® As such, the presence of the Soviet Union in North Korea since 1945 was diverse and penetrating. ‘Socialist internationalism,’ as the North Korean leadership said, seemed to work well in the first half of the 1950s. For the purpose of this article, the impact of new knowledge is worth noting. Exchange of personnel and extensive translation of Soviet publications created an influx of technical knowledge into North Korea in the 1950s. Although similar trends can be identified in other fields as well, it will be illustrative to mention some examples in theHistory and Technology 57 field of factory management. Scientific management was embraced enthusiastically in the Soviet Union during the 1910s and early 1920s, especially by V. I. Lenin. Hence, it is not surprising that the Soviet Union served as the main conduit through which knowledge in factory management was transferred to North Korea. Factory manage- ment techniques in North Korea in the 1950s displayed certain elements of scientific- managerial techniques. Publications from this period point to the fact that the North Koreans were indeed familiar with the various scientific-managerial techniques. In North Korean books and newspapers throughout the 1950s one can easily observe popular vocabularies or buzzwords related to scientific management. An article in ‘Nodong Sinmun in 1955 described the successful implementation of the ‘flow produc- tion method’ in the Hamhung Rubber Factory. In a paragraph that strongly echoes Fredrick W. Taylor's call for a detailed division of labor, it noted that: At least half of the motions that individual workers performed were unnecessary move. ments. This prevented workers from becoming proficient in their work and was a major hindrance in increasing work efficiency. Therefore subdividing the work process and training the workers to be specialized in a certain task emerged as the most important.'7 A number of Soviet textbooks on factory management were translated from Russian into Korean in the late 1940s and 1950s. Several books were on Russian experiences in the Stakhanovite movement, Others describe scientific-managerial techniques, such as establishing work norms, calculating wages, implementing the flow production method, and designing work organizations. In 1953 and 1954 alone, nearly one hundred Soviet books on various aspects of factory management were translated into Korean.'® In Kongop kiopso kyongje (Economy of Industrial Enterprises), a North Korean textbook for college-level schools published in 1957, compiled many of these scientific-manage- rial techniques, This volume included chapters on establishing work norms, methods to increase production efficiency, and calculating wages. Of particular interest is the chapter on establishing work norms. One section describes the difference between what was called the technical and the experiential method of establishing norms: 1) Technical method of establishing norms. This method starts from advanced technology and engineering to analyze all the factors that affect production efficiency in an elaborate and scientific manner. Taking the analysis as a foundation, this method establishes the norm based on technical grounds. 2) Experiential-statistical method of establishing norms. This method establishes the norm based on personal experience and eye estimate, or by taking the arithmetic mean of the statistical data obtained from past operations.” While this textbook stops short of explaining exactly how to establish a ‘technical’ work norm, it clearly criticizes the old method that ‘it hinders the growth of production efficiency and worker wages, and leads to average wages for all workers.’ In short, the experiential method is ‘conservative, old fashioned, and harmful.” This is a close reit- eration of the scientific management precept that ‘scientific’ methods should replace ‘historical precedent’ in establishing work norms. ‘The chapter on calculating wages also shows scientific-managerial influence. Imple- menting an incentive wage system to induce workers to increase productivity was an38 H. Choi important component of scientific management.” Along this same line, Kim Il Sung himself argued, ‘Above all, we should organize the wage system more precisely to provide an incentive for improved production efficiency.””? Moreover, authors of this book go on to argue that increased production efficiency will lead to satisfaction of both workers and management: [The new] wage system will induce the workers to increase production efficiency by controlling their material compensation. This will bring a convergence of the interests of the nation and that of the individual. Again, this reminds us of the “Mental Revolution,’ which Taylor himself regarded as the centerpiece of scientific management. Taylor dreamt of a harmonious labor rela- tionship by employing ‘scientific’ methods to set a ‘fair day's work’; the North Korean leadership hoped to bring prosperity to the nation and to individual workers by employing the same methods.”* The management textbooks mentioned above were peppered with quotations from Kim II Sung's speeches and writings praising the merits of establishing scientific work norms and implementing incentive wage systems, which indicates that these methods enjoyed the endorsement of the North Korean leadership. Thus, it is clear that even in the 1950s the North Korean leadership regarded scientific-managerial techniques as a feasible option and frequently implemented these techniques in their factories whenever applicable. ‘The impact of Soviet influence could be felt in various quarters of North Korea, and the field of factory management was no different. The knowledge that the North Koreans acquired through the Soviet Union was crucial in shaping factory manage- ment reform from the mid-1950s. The Soviet Union, however, was not the only source of foreign influence. The Growing Influence of China and the Sino-Soviet Dispute In the aftermath of the Korean War, the Chinese Volunteer Army, which played a stra- tegic role in pushing the UN forces back south of the 38th parallel, remained in North Korea. The Chinese troops were instrumental in providing the necessary manpower for the reconstruction effort. A Chinese source claimed that China ‘contributed nearly five million work-days to build, among other things, 4,107 bridges, five reservoirs, and 3,768 dykes with a total length of 346 kilometers.” The influence of China loomed larger on North Korea after 1953. This was not only because of Chinese economic aid. Just as important, the North Korean leaders saw in China a viable model for emulation. In fact, China and North Korea shared a similar set of problems: both countries had recently been through a communist revolution; both were embedded in a similar tradi- tional culture; and both had a primarily agricultural economy and were struggling to establish a heavy industrial base. However, in managing industrial enterprises China had longer experience than North Korea. According to historian Morris L. Bian, the Chinese ‘state enterprise system’ was formed during the Sino-Japanese War (1937-45), and was subsumedHistory and Technology 59 under the socialist state bureaucracy after 1948. Taking the Dadoku Iron and Steel Works (DISW) as an example, Bian argues that three features were central to the Chinese system: bureaucratic organizational structure, distinctive cost accounting methods, and worker welfare provisions. Also, in the 1940s, when the pressure for war- related production intensified, the bureaucrats embarked on the ‘work emulation campaign,’ which was a measure to enhance productivity by selecting model workers or teams for others to emulate. Xiong Shiping, a mid-level administrator of DISW in charge of the campaign, characterized it as ‘equivalent to America's scientific manage- ment campaign, continental Europe's rationalization campaign, England's efficiency campaign, and the Soviet Union's Stakhanovite campaign.”° As we will see, many aspects of the Chinese system were to be emulated by the North Korean system. The challenge for the North Korean leadership was to maintain a diplomatic balance between the Soviet Union and China, Relationship between the two communist powers in the second half of the 1950s made this extremely difficult. The death of Josef Stalin and the rise of Nikita Khrushchev in 1955 signaled the beginning of the Sino-Soviet dispute, At the Twentieth Congress of the Communist Party of the Soviet Union (CPSU) in February 1956, Khrushchev denunciated Stalin for his ‘personality cult’ and belligerent foreign policy. He emphasized the possibility of ‘peaceful coexistence’ with the West, later known as détente. The Chinese Communist Party (CCP) criticized the CPSU, if only indirectly, as ‘revisionist.’ The dispute escalated through a number of smaller clashes, such as the border dispute between China and India in 1959, and the CCP and the CPSU editorials denouncing each other.”” North Korea responded to this challenge by maintaining a ‘policy of equal distance’ and proclaiming self-reliance. The economic implications of these responses will be the subject of the following two sections. Coping With Decreasing Foreign Aid In 1956, North Korea announced that the first Three-Year Plan was a success, The Central Statistical Board proudly proclaimed the ‘great accomplishments’ of the people. Most sectors of industry exceeded or came close to the level of production of 1949, the last year before the war.’> Encouraged by the favorable circumstances and bright prospects, Premier Kim II Sung wished to waste no time in taking the next step of industrial development, and quickly embarked upon the more elaborate first Five- Year Plan (originally scheduled for 1957-61). In this ambitious blueprint, he expected to ‘rehabilitate, expand, and construct old and new factories,’ and to ‘solve the funding problem with the internal resources of our nation.’?? We have noted that aid from the ‘friendly countries’ was crucial in this accomplish- ment. Nevertheless, the North Koreans did their part. Between 1953 and 1956, the North Korean leadership urged their workers to make as much effort as they could to take full advantage of the relatively favorable international climate. During the first half decade of post-war reconstruction, North Korea did not have much of a factory management scheme. As late as the late 1950s, the main method to increase production was competitive campaigns. The North Korean leadership attempted to achieve higher60H. Choi production by encouraging competition on various levels: between groups within factories, between factories, and between industrial sectors. This was a common feature in socialist countries, especially in the initial stage of industrialization, as evidenced in both the Soviet Union and East Germany.*° North Korea relied on this method well into the 1960s. Productivity competition campaigns were not enough, however. At least two obsta- cles impeded further economic growth. First, the lack of skilled technicians was a perpetual problem, recognized by the North Korean leadership since the initial years of post-war reconstruction. Measures to set up a program to train technicians were one of the first things the KWP Central Committee discussed after the war, An executive decision on 29 August 1953 (a month after the cease fire treaty) emphasized ‘the lack of technicians’ as a ‘problem of utmost importance.”*! A second, more serious obstacle was the decreasing foreign aid in the second half of the 1950s. The unfolding Sino-Soviet dispute was not favorable to the North Korean economy. The amount of aid received by North Korea dropped dramatically. Foreign aid made up as much as 24 percent of the total government budget in 1954. This dropped to 14 percent in 1957, and to a meager 4 percent in 1958.>* Although aid from the Soviet Union and China did not stop altogether, it is clear that its importance was curtailed. Whether the decreasing foreign aid was a necessary condition for the North Koreans to pursue a policy of self-reliance is difficult to determine. However, it is clear that the ensuing measures to cope with the economic hardship were a result of this dialectic, ‘The adverse impact of the decrease in foreign aid is not difficult to imagine. Emergency measures such as urging children to gather scrap metal after school or making the family members of factory workers help out in the workplace showed the desperation of the North Korean leadership in coping with the deteriorating national finances.>> Minimizing waste became the first priority in North Korean industries. Together, the lack of skilled technicians and decreasing foreign aid created a severe economic crisis for the North Koreans and deprived them of an opportunity for more advanced technological innovation. Given these circumstances, the North Korean leadership pursued three different strategies in order to promote further economic growth: first, they continued and expanded the emergency measures briefly described above; second, they adapted the scientific-managerial techniques on a shop floor level; and third, they developed a systematic method to rationalize industrial organization. The following two examples will illustrate the first two of the three strategies. The ‘One-Machine-Tool-Makes-Another’ Campaign ‘The ‘one-machine-tool-makes-another (kongjakkigye saekkichigi)’ campaign of 1959 was a clear example of an emergency measure to cope with such quandaries. Lack of production machinery was one of the weaker links in the North Korean economy throughout the 1950s. The campaign literally attempted to double the number of. machine tools by using the available tools. A pamphlet published in 1962 recounts the origin of this campaign:History and Technology 61 In March 1959, Premier Kim I] Sung visited the Joo-eul Flax Mill and, in the course of inspection, found a clue that would lead to the solution of the problem. The workers of the mill, instead of only sitting and waiting for the state to supply necessary machinesand equip ment for them, displayed the revolutionary spirit of self-reliance... Thus, they resolved first to make machine tools on their own ... Seeing an old lathe making a new one with the waste iron which the workers had gathered from the waste iron dump, Premier Kim Il Sung got the idea of tens of thousands of existing machines making another or more each.** Every factory was encouraged to double its number of machine tools using internal reserve resources and machine tools it already had, For instance, the Pyongyang Spin- ning Mill, which only possessed eight machine tools in August 1958, produced eighteen additional tools, including one planer and eight lathes. An article in the Nodong Sinmun gave a snapshot of a discussion that took place in a factory. When itwas first proposed to make machine tools, several comrades had negative opinions. “Machine tools can only be made in a large machinery factory. Since we only have a few machines, itis impossible for us to do it.’ Making machine required iron, but they did not have iron. They did not have wooden patterners or a casting shop. However, as the discus- sion went on, the problems were solved one by one. ‘Iron? Do not just say we do not have it. Let's try to recover some,’ comrade Lim Ung-tack proposed. ‘I believe we can copy the design from the current machine,’ said the engineering chief, comrade Mun Pyong-hui.*? According to the Central Statistical Board, more than 13,000 new machine tools were produced as a result of the ‘one-machine-tool-makes-another’ campaign—I.8 times the quantity that had existed at the end of 1958. It is noteworthy that all these were achieved using ‘waste steel’ and existing machine tools, without the provision of additional resources. Individual factories were expected to turn out new machine tools, in addition to fulfilling their (already superhuman) production goals far ahead of schedule, Although the actual quantity and quality of machinery that were produced are questionable, this shows the attitude of the North Korean leadership to overcoming the economic crisis without external assistance, The ‘Innovator’ Campaign ‘The production ‘innovator (hyoksinja)’ campaign began in 1955 and continued into the 1960s, ‘The term ‘innovator’ was clearly a Soviet import. On 2 June 1955, an article titled ‘From the Great Soviet Union: Production Innovator’ appeared in the Nodong Sinmun. It was an anecdote—apparently translated from Russian—about a legendary Soviet worker who accomplished 1,000 percent of his required work. This article was a signal for a new policy in North Korea, and on 20 June 1955 the first workers were decorated as ‘innovators.’ The first two were Chong Song-bong, a salt farm worker and Han Hui-chon, who was a brick caster.*” In order to be selected as a production inno- vator, a worker not only had to be hard working; he also needed to design a better way of doing work and make an effort to pass the method on to fellow workers. For exam- ple, the citation for Han's award read: Comrade Han Hui-chon, the leader of the youth brigade of the refractory material division at the Kimchaek Steel Works, accomplished his yearly production plan on 3 June. Han6-H. Choi Figure 2 An ‘Innovator’ at Work. An experienced worker is teaching a younger worker how to operate the machine more efficiently. From Korean Machine-Building Industry applied new methods in the refractory brick casting process and constantly spread his methods to the members of his brigade.** This campaign was an attempt to adopt scientific-managerial techniques on the shop floor level. The campaign encouraged the workers to develop and distribute innovative work process to increase productivity. Model workers were selected, awarded a medal, and publicized for their deeds.*” In the absence of ‘efficiency experts’ as in the cases of the West and Japan, the North Korean leadership had to rely upon their workers to raise the production bar at least toward the direction of the ‘one best way’ of operating machines.*° Thus, the ‘production innovator’ campaign was an alternative route that North Korea took to cope with the lack of skilled technicians and production experts.History and Technology 63 Instead of engineers and managers defining the one best way by employing scientific methods, the North Korean workers were expected to tinker with their machines to find a ‘better way’ and diffuse it to other workers on their own initiative. According to official sources, the increased labor productivity accounted for more than eighty percent of national income growth between 1954 and 1958.4! ‘The efforts to increase production exemplified by these two cases enabled North Korea to continue the first Five-Year Plan. Surprisingly, in September 1959, the Nodong Sinmun announced that the first Five-Year Plan had been triumphantly accomplished two and a half years ahead of schedule (recall that the original plan was from 1957 to 1961). The editorial of the newspaper lauded ‘Our people's economy ... reconstructed out of the ruins of the war,’ adding that ‘during the first Five-Year Plan period indus- trial production increased more than 40 percent per annum.’ One can never be sure whether all the production targets were fulfilled. Nevertheless, the fact remains that at least the North Korean leadership thought their economy was ready to move ahead to the second round of comprehensive economic planning. Self-reliance, the Buffering Year, and the Incubation of the TMS The ideology of self-reliance, which Premier Kim promoted from December 1955, was gathering momentum in the late 1950s.** As the ‘one-machine-tool-makes-another’ campaign made clear, the North Korean leadership sought to make a breakthrough in an economic crisis situation using internal resources without further reliance on foreign aid. Similarly, the ‘innovator’ campaign showed a somewhat crude endeavor to cope with the lack of skilled technicians. The concurrence and resonance among the ideology of self-reliance, the decline of foreign aid in the second half of the 1950s, and industrial policies to overcome the resulting economic crisis were closely interrelated. Declining foreign aid was the major impetus for the various industrial policies to increase production. It also served as a background for further advocating the doctrine of self-reliance. At the same time, the ideology of self-reliance can be recognized in the strategies of the new industrial policies. In other words, during the second half of the 1950s, a nega- tive international climate forced the North Korean leadership to choose a path of self-reliance and economic autarky. They attempted to make a breakthrough by taking emergency actions and adapting the basic managerial techniques they had learned from the Soviet Union. It was in 1960 that all these efforts hit the critical point. In the same of issue of the Nodong Sinmun that celebrated the first Five-Year Plan, the KWP Central Committee made an announcement that the year 1960 would be designated a ‘buffering year (wanchunggi).’ In 1960, no comprehensive economic plan would be imposed on the economy. They continued to explain: What is a buffering period? It is a preparation period to ensure new victory, our rising toa higher peak in the socialist construction. During this period, it is important to solidify what we have already achieved, supplement the weaker sectors, further develop necessary sectors, and dramatically improve peoples’ living conditions.