$Unique_ID{COW02664} $Pretitle{281} $Title{North Korea Chapter 3B. Industry} $Subtitle{} $Author{Stephan B. Wickman} $Affiliation{HQ, Department of the Army} $Subject{production system government management north plan factory industrial work major} $Date{1981} $Log{Figure 17.*0266401.scf Figure 19.*0266403.scf Figure 20.*0266405.scf } Country: North Korea Book: North Korea, A Country Study Author: Stephan B. Wickman Affiliation: HQ, Department of the Army Date: 1981 Chapter 3B. Industry The industrial sector has benefited from Kim's policies. Over 50 percent of state investment went to the industrial sector during most of the 1950s and 1960s, and new industrial plants and equipment accounted for 49 percent of state investment during the Six-Year Plan. As a result, industry's share of the combined total of gross agricultural and industrial output (see Glossary) climbed to well over 90 percent in 1980. At the start of the 1980s the country had a variety of industries, ranging from mining to textiles manufacturing, located in nine major industrial centers. The government also had expanded the transportation and communications networks and increased the utilization of domestic energy resources. Per capita supplies of many industrial items were comparable to those of many of the world's middle-income countries, if not to the most technologically advanced nations. At the same time, some industries have prospered at the expense of others, and bottlenecks in key sectors have not been uncommon. Like the Soviet Union, North Korea concentrated on heavy industry first, while investing only modestly in the light and consumer goods industries. Additionally, in spite of strong financial support for machinery manufacturing and numerous infrastructure projects, problems in the transportation, power, and mining sectors constrained growth in the 1970s. Uneven supplies of capital investment caused some of these bottlenecks, and other problems resulted from inefficiencies in the management system. Of these sources of economic strain, the ability of the government to match managerial and technological expertise to the growing level of economic output seemed most fundamental to the future performance of the economy. As of 1981, however, it was impossible to predict any widespread reformation of the management system. Performance of Major Sectors Large gaps and inconsistencies in official statistics made it impossible to calculate the sectoral distribution of industry in 1981. In 1965, when data was last available for several sectors, the machinery manufacturing and metal processing industries (the "engineering sector") had made up about 29 percent of the value of industrial production. The next largest shares in the total were 17 percent for textile manufacturing and 9 percent for the food processing and luxury goods industries; the remaining shares were unknown. Although the production of consumer goods seemed to become relatively more important in the 1970s, North Korea continued to devote most of its economic resources to the production of minerals, metals, and heavy machinery. In fact, most industry was located around the major mining and machinery manufacturing centers that formed the focal points of the transportation and communications networks (see fig. 18). [See Figure 17.: National Budget Expenditures, 1971 and 1978 Source: Adapted from Kuktong Munje Yon'guso, Pukhan chonso: 1945-1980, Seoul, 1980, p. 335.] Mining and Metal Processing The economy relied to a considerable degree on the extraction and processing of its many mineral resources, of which the most important was coal. The more than forty anthracite mines in operation in 1979 combined to produce an estimated 34.6 million tons. Production of the less abundant brown coal and lignite was around 8.6 million tons that year. The largest anthracite mines were situated in the North and South P'yongan provinces and in Kowon County in South Hamgyong Province. The type of anthracite most commonly extracted was a fine powder, ranging in grade from 4,000 to 6,000 kilogram calories. The estimated production of 43 million tons was less than the total capacity of the mines, which was reported to be 50 million tons per year. This underutilization of capacity was related to bottlenecks in the transportation sector reported in the late 1970s. Nevertheless, by all accounts and estimates, coal production was increasing at a fairly steady rate throughout most of the decade. Despite increases in coal production, demand was also rising, particularly since North Korea had no known oil or gas reserves. According to one South Korean estimate, household use accounted for about 41 percent of demand, industrial energy for 31 percent, power production for 22 percent, and miscellaneous uses for the remainder. The government's plan to increase the production of steel during the 1980s would require more coking coal. Since North Korea had very little coking-grade coal, imports would probably increase. Iron ore production continued to be important for industry. By foreign estimates, the rate of growth trailed off in the 1970s, but annual output increased to about 7 million tons in 1979. During the Six-Year Plan the government invested in expansion projects at the Tokhyon and Songam mines and built at least one new mine in South Hwanghae Province. The goal for the Second Seven-Year Plan was to expand the mining facilities at Musan near Ch'ongjin, where iron ore deposits were reputed to be 1.3 billion tons. Total production was supposed to reach 16 million tons a year by 1984. Multimineral mine fields were scattered throughout the peninsula and contained deposits of nonferrous metals, such as gold, silver, copper, lead, and zinc, as well as important nonmetals like magnesite, graphite, fluorite, pyrite, salt, and talc. The Tanch'on and Komdok mines in South Hamgyong Province were the two largest mining areas and were connected by a conveyor belt and an electric railway line. The Tanch'on mine was said to contain 3.6 billion tons of magnesite, the world's largest such deposit. The installation of a revolving calcinating furnace imported from the Federal Republic of Germany (West Germany) was to greatly increase the production of magnesia clinker, a major export commodity. Metals refineries were located at Namp'o, Hungnam, Munp'yong, Haeju, and Tanch'on. Actual output of the major nonferrous metals and other minerals was a matter of conjecture in 1980 (see table 5, Appendix). As Kim inveighed in 1978, "one of the most serious shortcomings revealed in the economic work during the Six-Year Plan was a failure to keep the mining industry well ahead of the processing industries." The government has set about the task of pushing the mining sector ahead in the Second Seven-Year Plan. Investments in coal and other types of mining accounted for over one-third of total industrial investment in 1979 and 1980, and the country was not likely to change this course of development until mineral production matched the total processing capacity. Manufacturing Kim has consistently emphasized the machine-building industry, but at the end of the 1970s complained that it fell short of playing its full part as "the heart of industry." According to government reports, the value of production from the machine-building sector (probably including some semifinished metals) accounted for 33.7 percent of the gross industrial output value in 1980. The production of crude and semifinished steel was related most obviously to supplies of iron ore, but improvements of steelmaking plants and equipment were no less important. During the Six-Year Plan the government outfitted the Kimch'aek, Hwanghae, Kangson, and Songjin steel plants with remote control facilities or closed-circuit monitors to improve efficiency. Data on steel production were conspicuously lacking during most of the 1970s, but the output of crude steel was estimated to be around 4 million tons in 1979. The government planned to increase this total to 7.4-8 million tons per year by 1984 (see table 6, Appendix). Specific data on the output of many manufactured products was unavailable, but the output of machine tools and tractors seemed to be increasing. In the case of machine tools, production data were given in terms of units and only for the plan periods. During the Six-Year Plan, for instance, the target of 27,000 units was exceeded in the first year of the plan. There was no way of knowing, however, how many of the machine tools were of top quality or value. Some of the tools produced were large-scale eighteen- or twenty-meter turning lathes of considerable value, while others were much smaller. The yearly production target of 50,000 units for 1984 seemed easy to reach, given these arbitrary accounting methods. Tractor production also outpaced the economic development plan targets, but was unable to meet the demands of the farming sector (see Resource Development, this ch.). The manufacture of trucks and buses also proceeded apace, although the rate of growth diminished during the 1970s. Because no price data were available, improvements in the quality of this machinery could not be assessed. One report stated that North Korea produced nine different classes of trucks, the largest of which could carry loads of 100 tons. Domestic plants also produced two types of jeeps, one domestic automobile model, twenty-two-passenger buses, and larger trolley cars. Other important types of machinery included 5,000-meter boring machines, 300-horsepower bulldozers, and ten-cubic-meter excavators for mining and construction; 50,000-kilovolt-ampere generators and 200,000-kilovolt-ampere transformers for power production; sixty-ton freight cars, 2,500-3,000-horsepower locomotives, and 15,000-20,000-ton class ships for the transportation sector; and plant facilities for many types of metallurgy, cement, chemicals, and textile industries. Much of North Korea's machinery lagged behind world standards. The size and power of generators and ships and the quality of electronics equipment remained inferior to that of its main antagonist and competitor, South Korea. Furthermore, many of the gains in the machine-building sector were attributable to foreign technology imported from the Soviet Union, Western Europe, or Japan, and compromised the country's claims of self-reliance. The goal of the Second Seven-Year Plan has been to increase the efficiency of indigenous technologies and to utilize more fully the nation's own resources. Light manufactures increased their level of production during the Six-Year Plan, but at a somewhat slower rate than that of the machinery sector. The production of synthetic fibers grew to a level permitting the manufacture of some 600 million meters of textile cloth and 15 million pieces of woven goods. Some fibers were woven into yarn on the premises of the fiber plants, but most were sent to centrally located factories and to numerous medium- and small-scale plants throughout the provinces. P'yongyang remained the textile capital but weaving facilities in Sinuiju were becoming more important. The government intended to increase the production of synthetic fibers and resins to 100,000 tons each year in order to produce 800 million meters of textile fabric by 1984. From the point of view of the farmer, the supply of chemical fertilizer and pesticides was essential for agriculture, and the government has actively attempted to spur their production. Because of different methods of weighing fertilizers, however, it was impossible to make comparisons between North Korea and other countries on the basis of official data. According to one foreign source, production capacity for urea and ammonia was 370,000 and 496,000 tons respectively in the late 1970s. The government claimed that an average of 1.5 tons of chemical fertilizer was applied to each chongbo of cultivated land in 1979. Local industry has been the major supplier of consumer goods and foodstuffs since the early 1960s. The KWP's policy of developing medium and small-scale local industry factories together with the large-scale, centrally controlled light industry plants continued into the 1980s. Most consumer goods, including shoes, clothing, washing machines, refrigerators, radios, televisions, watches and clocks, and sewing machines were produced at local factories. In the late 1970s there was an upsurge in the number of government directives to develop local industry. In 1980 the government claimed that an average of "twenty-odd" local factories or women's producer cooperatives were in every county or city. The central government supplied local industries with 185,000 machine tools during the 1970s, and their number has doubled since 1969. This report was consistent with other official information that indicated that the gap between the growth rates of consumer goods and producer goods was narrowing in the 1970s. The tone of Kim's report to the Sixth Party Congress suggested that the emphasis on consumer goods manufacturing would continue in the 1980s. The manufacture of building materials, such as the cement used in almost every construction project, took place in seven large factories and over thirty small-scale local industrial plants. The combined production capacity of these plants was about 9.5 million tons a year. Outside observers estimated production at only 8 million tons in 1979, indicating substantial room for improvement in plant operations. Demand for cement was expected to rise during the 1980s as the state construction enterprises increased the number of houses, apartment buildings, and dock facilities to be built. More cement was needed for highway construction, since all paved roads were made from concrete. Infrastructure As in most industrializing economies, North Korea's transportation, communications, and power networks formed the essential foundation for progress. Particularly in an oil-short nation like North Korea, the development of a transportation system capable of delivering timely supplies of coal to generating plants was necessary to further economic growth. The emphases of Kim's new year's speeches in the late 1970s and early 1980s indicated the importance of these key sectors. Transportation ranked second only to mining in the 1978 and 1980 messages and was third in importance in 1981. In that year the theme of Kim's speech was the need to "satisfy the increasing demands of the national economy for electricity." Transportation and Communications Railroads have been the major means of transportation, hauling approximately 90 percent of all freight and 70 percent of all passenger traffic in the mid-1970s (see fig. 19). The Ministry of Railways coordinated the announced expansion of the rail system from fifty-nine to sixty-four lines during 1972-80. In 1980 the total length of standard-gauge track (1.5 meters wide) was about 4,500 kilometers, while narrow-gauge track (.75 meters) ran a distance of 600 kilometers, altogether about 20 percent more than in 1972. More significantly, the government was able to electrify over half of the standard-gauge track and announced that 87.5 percent of all railroad freight traveled on electric rails in 1980. Nevertheless, it required the implementation of major country-wide "200-day speed transportation battles" and continued attention and investment in order to achieve these results. [See Figure 19.: Major Railways and Ports, 1980 Source: Adapted from U.S. Department of Commerce, Office of Technical Services, Joint Publications Research Service series Korean Affairs Report, "The Direction of Sino-Korean Cooperation in the 1980s," June 19, 1980, pp. 77-78.] The government blamed inefficiencies in the transportation system for the shortfalls experienced during the Six-Year Plan. Under the Second Seven-Year Plan, North Korea hoped to expand both the number and the handling capacity of central freight stations to preclude transportation bottlenecks. Kim also planned to increase the use of containers in order to integrate the road and rail networks more smoothly. To ensure the timely provision of industrial supplies, more and more railroad lines were being restricted to industrial use. Road transportation played an important supplementary role in moving freight and passengers. Trucks hauled about 6 percent of all freight in terms of ton-kilometers and a larger share in terms of the total freight carried. Construction brought the road network to a total of about 20,000 kilometers by 1960. Since then the pace of construction has slowed, but two new multiple-lane highways were built in the 1970s. One spanned the 200 kilometers between P'yongyang and Wonsan, and the other connected the capital with its port, Namp'o, some fifty kilometers away. These and other principal highways were paved with concrete, but the vast majority of roads remained made of dirt and gravel. The few vehicles and short fuel supplies constrained growth of the road system, however, and most of the estimated 191,000 vehicles in use in 1979 were military. One measure of the government's concern for utilizing the scarce supply of motor vehicles as efficiently as possible was a regulation which forbade the running of empty trucks without good cause. Any empty vehicle was subject to immediate inspection. Rural public bus service expanded greatly in the 1970s, and by 1975 the government claimed that all villages were accessible by the largest buses. Korean cities had bus and tram service, and P'yongyang boasted an extravagantly outfitted, thirty-two-kilometer subway system completed in 1973. During the Second Seven-Year Plan the subway was to be extended. Water transport was responsible for only a small portion of freight and passenger traffic, but some important supplies were transported along the coasts and on the major rivers. Coastal traffic was heaviest on the eastern seaboard where deeper waters could accommodate larger vessels. Foreign vessels were restricted to the port of Namp'o on the west coast and to the ports of Ch'ongjin and Hamhung on the east coast. In 1975 North Korean ports loaded and unloaded over 3 million metric tons from international freighters, 65 percent more than just two years earlier. This increased handling capacity was made possible by concerted efforts under the Six-Year Plan to modernize port facilities. The Second Seven-Year Plan aimed to continue port renovation and construction in order to alleviate congestion and delay in handling port cargoes. All of North Korea's civil aircraft were purchased from the Soviet Union, and flights were limited to service from P'yongyang to Beijing or Khabarovsk. Special flights took official visitors to Moscow or other national capitals. Between 1976 and 1978 North Korea received three Tu-154 jet aircraft to add to its small fleet of propeller-driven An-24s. In 1981 there was some question as to whether or not any of the new jets had been placed into service on a Moscow run. North Korea used an I1-62-a four-engine civilian aircraft-to bring in visitors to the Sixth Party Congress in 1980, but it was not known if the aircraft would be kept permanently. Little information was available about the communications network in 1981. Telephone facilities were probably located at all government offices, factories, and cooperatives. In 1970 automatic switching facilities operated in P'yongyang, Sinuiju, Hamhung, and Hyesan and were planned for all major cities. About 1,500 post offices were scattered around the country in 1975. The country joined the Universal Postal Union in 1974 but had direct postal arrangements with only a select group of nations. Two television networks broadcast every evening, one in color. The government claimed that its television transmissions reached 97 percent of the nation and that 73 percent of all broadcasts were in color in 1977. These claims were somewhat misleading since far fewer than every household had access to a television set. Only in 1980 did North Korea acquire the technology to produce all of the parts for the nineteen-inch black-and-white television sets it made available to the people. Color televisions were imported from Japan with a North Korean brand name on the casings. Televisions were available to the public only on a rental basis. The Korean Central Broadcasting Committee transmitted radio programs on four different frequencies from the capital city, with contributions from local broadcasting committees. In 1975 one 1,500-kilowatt transmitting station, two 1,000-kilowatt, and some ninety-five transmitters of less than 500 kilowatts were in operation. Loudspeakers installed in offices, factories, cooperatives, and public squares supplemented the portable radios produced in local industrial factories. Energy and Power In 1979 more than 80 percent of domestic supplies of energy came from coal, with the remainder from the country's many water resources. In 1965 the shares were 66 and 34 percent respectively, which shows an increasing reliance on coal to provide for the country's energy needs. Oil was imported from China and the Soviet Union to supply North Korea's two refineries, which had a combined capacity of 90,000 barrels per day. There was little indication that the country planned to invest heavily in nuclear energy. Although it received a small three-kilowatt experimental reactor as early as 1959, any pleas for more sophisticated facilities have been turned down by the Soviet Union. Since 1977 North Korea has been a member of the International Atomic Energy Agency (IAEA), which gave the country's nuclear researchers access to state-of-the-art knowledge. North Korea relied on the Soviet Union for supplies of nuclear fuel, but followed the nuclear safeguards of the IAEA. The abundant supply of coal and water resources allowed North Korea to build one of the most highly developed electrical power networks in Asia. The estimated installed capacity of 5.4 million kilowatts in 1979 produced about 25 million kilowatt-hours of electricity, or over 1,300 kilowatt-hours per person. Official data on electricity production was somewhat higher. A major shift occurred in the 1970s when the share of total electrical production generated at thermal plants rose from one-third to over one-half. Production from hydroelectric facilities increased at a correspondingly slower rate. The reasons for this shift were the high initial costs, long construction period, and vulnerability to drought of hydroelectric plants. Thermal plants were much easier to locate near population centers, but they tended to be less efficient than hydroelectric generators, and operating costs were high. As of 1980 there were seven major hydroelectric plants with capacities of over 200,000 kilowatts each, three along the Yalu River alone and the newest facility, completed in October 1980, located in the upper reaches of the Taedong River. Two other major hydroelectric facilities were scheduled to open under the Second Seven-Year Plan. Five major thermal plants were located in urban areas, and three more were slated to be completed in the Seven-Year Plan. Hundreds of small hydro and thermal facilities were attached to specific industries or cooperatives around the country. Several of the major hydroelectric plants were built with assistance from China, and North Korea shared with the Chinese the electrical output from two of these facilities. The only oil-fired thermal plant, constructed with Soviet aid, was located in Unggi, on the Soviet border. Organization and Management State involvement in industry has been intense since the nationalization of industrial enterprises in 1946. Major enterprises operated under the guidance of ministries and committees subordinate to the State Administration Council (see Government Control of the Economy, this ch.). Management of local industry was more decentralized, usually the responsibility of the province or county. Even these small-scale industries received general guidance, however, from a Ministry of Local Industry established in the late 1970s. In general the central agencies were responsible not only for the determination of broad priorities for industry, but for setting targets for production and prices for all available industrial supplies and commodities. Within this broad framework of central control each enterprise held an important degree of individual responsibility. An "independent accounting system" had been in effect since 1960, which required the enterprise managers not only to achieve production targets but to operate as efficiently as possible and with the highest "profit" attainable under the given price structure. The central government made the initial investment in construction, but thereafter each enterprise had to meet its own costs, including wages, materials, and machinery depreciation. The Central Bank would underwrite losses with additional funds only if national economic policy had shifted significantly enough to disrupt the enterprise plan. Otherwise the enterprise had to take out an interest-free loan from one of the state banks. In 1973 the government initiated the "local budget system" designed to encourage the growth of local industries, which were under the direction of provincial and county-level authorities. Thereafter the provinces were expected to bear the costs of operating all industries or services not under direct national-level management, including most hospital, schooling, and retailing services and consumer goods industries, rather than receiving state subsidies. To raise the necessary revenues they were to organize as many moneymaking ventures as possible; but some provinces found it difficult to cover their expenses this way. Surpluses-if there were any-were turned over at year's end to the national treasury for state investment projects. The Taean Work System While the accounting system was concerned with economy and profitability, the Taean Work System focused on cooperation among workers, technicians, and party functionaries at each factory. Introduced in December 1961 as a refinement of the agricultural management techniques to industry, the system required that every factory be run by a party committee. Each committee consisted 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, had 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, made up its membership. Under the Taean Work System each factory had two major lines of administration, one of which was headed by the manager and the other by the party committee secretary (see fig. 20). A chief engineer and his or her assistants directed a general staff in charge of all aspects of production, planning, and technical guidance. Depending upon the size of the factory, varying numbers of deputies would oversee factory logistics, marketing, and workers' services. Materials supply work included securing, storing, and distributing all materials for factory use, as well as storing and shipping finished products out of the factory. Deputies in charge of labor administration had the task of assigning workers to their units and handling factory accounts and payroll. Providing workers' services required directing any farming done on factory lands, stocking factory retail shops, and taking care of all the amenities of the staff. Deputies in charge of workers' services were encouraged to meet as many of the factory's needs as possible from nearby agricultural cooperatives and local industries. The party committee secretary, on the other hand, organized all political activities in each of the factory party cells and attempted to ensure loyalty to the party's production targets and management goals. According to official claims, all management decisions were arrived at by consensus among the members of the party committee. Given the overwhelming importance of the Party in the country's affairs, it seemed most likely that the party secretary would have the last say in any major factory disputes. The Taean Work System was a departure from the previous "one-man management system" inherited from the Soviet Union. The purpose of the change was to reinforce the "mass line" (see Glossary) by allowing the workers' active participation in management, in order to inspire increased production and newer and better technology. The Taean Work System, however, heralded a more rational approach to management than that practiced during the Ch'ollima Movement. Although party functionaries and workers became more important to management under the new system, the engineers and technical staff also received more responsibility in areas where their expertise could contribute most. Whereas the Ch'ollima Movement primarily utilized mass enthusiasm to spur production, the Taean Work System recognized 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," granted bonuses to work teams (see Glossary) and workshops that were most efficient in the use of raw materials and equipment. These reward funds came out of enterprise profits. [See Figure 20.: The Taean Work System at the Factory Level] One measure of the success of the Taean Work System has been its longevity. Only one major organizational change has occurred since its inception. In 1964 the government established special planning departments at the provincial, city, and county agencies, which were responsible directly to the State Planning Committee as well as to the local agency where they were based. The government was apparently afraid that some of the problems that had characterized the "one-man management" system were also threatening the Taean Work System. The planning departments were supposed to check the tendency of local agencies to misrepresent their achievements to superior agencies and their hesitancy to risk innovations. Kim praised the accomplishments of the revised system in his report to the Fifth Party Congress in 1970 and maintained its importance again ten years later in his report to the Sixth Congress. Mass Campaigns vs. Normalized Production Ideally, the Taean Work System should have solved North Korea's management problems once and for all, but repeated references in the press and in Kim's own speeches to difficulties in the "normalization" and "regularization" of industry told a different story. Kim especially criticized the management of materials supply work, equipment maintenance, labor administration, and finance. In 1973 he even went so far as to say "economic guidance functionaries have not made one single definite regulation to administer properly the independent accounting system." As a result, inefficient practices were not penalized and may have been rewarded. The typical response to these malpractices was to launch a campaign to straighten out production and management. One such campaign was the Three Revolution Team Movement begun in February 1973. The government sent groups of upper level party cadres, technicians, and students to factories all over the country to attack conservatism, bureaucratism, and other ills. Although this was considered to be "political work," the main emphasis was on technological innovation and experimentation on the production line. With their greater technical knowledge and easier access to the upper echelons of the party bureaucracy, the team members had advantages which the ordinary factory manager must have envied. Indeed, there was at least one report of managers who either resented or were unable to follow the advice of the "three revolution team" that had come to their factory. Another management approach was the economic "speed battle" (see Glossary), a mass campaign similar in style to the Ch'ollima Movement but narrower in focus. The "battle" was concentrated into a time frame of a couple of months and often was specific to a particular industry or sector of the economy. The "100-day speed battle" seemed to be the most common form, and one such nationwide event preceded the Sixth Party Congress. In late 1974 Kim Jong Il personally initiated and led the country in the Seventy-Day Speed Battle to fulfill the year's economic plan ahead of schedule. Presumably this campaign was a quick reaction to the deteriorating international situation that threatened the Six-Year Plan (see Foreign Economic, Relations, this ch.). The government initiated two "200-day speed battles" in 1977 and 1978 to overcome bottlenecks in the transportation system. Beginning in late 1979 "technical shock brigades" appeared in many factories to spur production, innovation, and efficient management. According to Kim Il Sung, it was not uncommon for individual factories to have "speed battles" at the end of the month to meet the production targets. Combined with Kim Il Sung's frequent "on-the-spot" factory visits, these campaigns effectively maintained the level of tension among workers, if not the level of production. The party's view of the value of these various movements and "battles" to mobilize workers and managers seemed ambivalent at best. The successful completion of a campaign was reassuring and provided the media with an abundant supply of stories. But, as Kim Il Sung argued in 1979, the need for "shock battles" imposed extreme costs on the economy and was indicative of irregularities in the industrial management system. According to the party head, not only did a "speed battle" uncover wasted labor but it tended to exhaust factory machinery and create production gaps in other sectors. Such campaigns caused the economy to spurt and sputter like a poorly tuned automobile. Kim Il Sung was correct in focusing on materials supply work as a cause of inefficiency, for it, more than any other aspect of industrial management except labor administration, posed the most persistent challenge to economic planners. The purpose of supply work was to deliver to the factory the raw materials and machinery needed for the production of the factory's own products in a timely fashion. According to the Taean Work System, supply work was supposed to take a "commercial form," and all transactions between industrial enterprises were to be arranged by contract. The success of the system depended on determining the exact amount and number of contracts in advance and assigning an optimal price to cover each commodity purchased. Recurrent pleas in the press for "realistic accounting," "prompt account setting," and establishing a "strict system for selling materials only when the purchaser has the money to pay for them" indicated that the system was not functioning at all smoothly. In 1981 considerable mystery still surrounded prices and contract schedules. It appeared that delivery delays and delinquent payments were not unusual. Moreover there was no automatic mechanism such as a free-floating price, that could adjust to changes in the availability of goods and services. Kim cited the telltale signs of poor resource management when he described some of the setbacks of the Six-Year Plan. They included: overconsumption of power per unit of output in the chemical and metallurgical industries, inefficient burning of coal in some industrial processes, scarce supplies of rolled steel, idle equipment, wasted labor, and poor accounting. All of these led to the "strained situation" of 1977 and depicted an economy which had not yet come to grips with the problems of modern industrial management. Mobilizational techniques continued to bolster the automatic incentives to industrial production in 1981. According to the government's perspective, there was no contradiction between these management styles, and material incentives complemented the party's work to stimulate active production guidance and hard work. The monetary returns to laborers and management also fulfilled the important goals of increasing the material well-being of the people. But the experience of the KWP leadership demonstrated that it was more capable in directing mass campaigns than in designing effective material incentives for production and technological innovation. The Party was understandably more comfortable with politics than with economics, and its close supervision of the latter resulted in erratic economic performance. Whether or not a reform of the system might occur as power passed into the hands of Kim Il Sung's heir apparent, Kim Jong Il, was difficult to predict. The elder Kim's report to the Sixth Party Congress in 1980 straddled the issue. While stressing the need to "scientize and rationalize management activity," he continued to praise the mobilizational and ideological aspects of the Taean Work System. Kim Jong Il's deep involvement in the Three Revolution Team Movement and Seventy-Day Speed Battle suggested that the younger Kim's experience lay in directing mobilizational campaigns. But, as North Korea vied with South Korea for economic as well as military superiority and as bottlenecks recurred in the economy, the possibility for significant economic reform could not be completely discounted.