In the 1990s, there were significant economic reforms under Kim Jong Il — leader of North Korea from 1994 o 2011. Bans on private trading were dropped, local governments were given more authority, unwieldy collective farms were scaled down, prohibitions on the movement of individuals was eased, some prices were deregulated and farmers markets were allowed to open. The reforms were similar to those made by China in the 1970s and 80s.

As a result of the famine in North Korea in the 1990s that killed up to 2 million people the tradition of unquestioning loyalty to the North Korean regime began to decline. After the famine, a significant black market emerged. Farmers’ markets expanded into people scavenging and selling whatever they could get their hands on. As economic conditions deteriorated, bribery and corruption grew. [Source: Luke O'Neil,, Apr 9, 2018]

In many ways the reforms took place because there was no other choice. By the time the main famine was over in 1999, many North Koreans had lost faith in the rationing system that had existed since the 1950s and were moonlighting, bartering services for food and involved in bootleg trade and selling stuff in illegal markets.

Kim Jong Il began talking about following the Swedish model of reforms. Some North Korean officials were sent abroad to study business. On a trip to China in January 2001, Kim Jong Il visited the Shanghai Stock Exchange and a Buick assembly plant.

In July 2002, a new round of economic reforms — described as radical — were launched in North Korea in an effort to boost food production and economic growth. The government devalued its currency by 98 percent, largely abolished a 50-year-old ration-card system and raised wages and prices as much as 500-fold. The regime began allowing some food markets to sell groceries and cooking materials at prices not fixed by the government. In many cases prices jumped more than 20 times from their previous absurdly low levels.

Reforms of the North Korean Economy in the 1980s

Kim Jong Il was involved in reforming the North Korean economy before he became when he served as the right hand man for his dad, Kim Il Sung, leader of North Korea, from it inception in the late 1940s to 1994. Sme minor efforts toward relaxing central control of the economy that involve industrial enterprises began in the 1980s. Encouraged by Kim Jong Il's call to strengthen the implementation of the independent accounting system (tongnip ch'aesangje) of enterprises in March 1984, interest in enterprise management and the independent accounting system has increased, as evidenced by increasing coverage of the topic in various North Korean journals. Under the system, factory managers still are assigned output targets but are given more discretion in making decisions about labor, equipment, materials, and funds. [Source: Andrea Matles Savada, Library of Congress, 1993 *]

In addition to fixed capital, each enterprise is allocated a minimum of working capital from the state through the Central Bank and is required to meet various operating expenses with the proceeds from sales of its output. Up to 50 percent of the "profit" is taxed, the remaining half being kept by the enterprise for purchase of equipment, introduction of new technology, welfare benefits, and bonuses. As such, the system provides some built-in incentives and some degree of micro-level autonomy, unlike the budget allocation system, under which any surplus is turned over to the government in its entirety.*

Another innovation, the August Third People's Consumer Goods Production Movement, is centered on consumer goods production. This measure was so named after Kim Jong Il made an inspection tour of an exhibition of light industrial products held in Pyongyang on August 3, 1984. The movement charges workers to use locally available resources and production facilities to produce needed consumer goods. On the surface, the movement does not appear to differ much from the local industry programs in existence since the 1960s, although some degree of local autonomy is allowed. However, a major departure places output, pricing, and purchases outside central planning. In addition, direct sales stores have been established to distribute goods produced under the movement directly to consumers. The movement is characterized as a third sector in the production of consumer goods, alongside centrally controlled light industry and locally controlled traditional light industry. Moreover, there were some reports in the mid-1980s of increasing encouragement of small-scale private handicrafts and farm markets. As of 1992, however, no move was reported to expand the size of private garden plots.*

All these measures appear to be minor stop-gap measures to alleviate severe shortages of consumer goods by infusing some degree of incentives. In mid-1993 no significant moves signaling a fundamental deviation from the existing system had occurred. The reluctance to initiate reform appears to be largely political. It is, perhaps, the linkage between economic reform and political liberalization that worries the leadership. This concern is based on the belief that economic reform will produce new interests that will demand political expression, and that demands for the institutionalization of such pluralism eventually will lead to political liberalization. There clearly exists a catch-22 situation for Kim Il Sung and, particularly, for Kim Jong Il. In order to legitimize his power base, the younger Kim needs an economic base. However, his economic reforms challenge his position as the advancer of juche and may eventually undo the regime.*

In the mid-1980s, the speculation that North Korea would emulate China in establishing Chinese-style special economic zones was flatly denied by then deputy chairman of the Economic Policy Commission Yun Ki-pok (Yun became chairman as of June 1989). China's special economic zones typically are coastal areas established to promote economic development and the introduction of advanced technology through foreign investment. Investors are offered preferential tax terms and facilities. The zones, which allow greater reliance on market forces, have more decisionmaking power in economic activities than do provincial-level units. Over the years, China has tried to convince the North Korean leadership of the advantages of these zones by giving tours of the various zones and explaining their values to visiting high-level officials.*

In December 1991, North Korea established a "zone of free economy and trade" to include the northeastern port cities of Unggi, Chongjin, and Najin. The establishment of this zone also had ramifications on the questions of how far North Korea would go in opening its economy to the West and to South Korea, the future of the development scheme for the Tumen River area, and, more important, how much North Korea would reform its economic system.*

Reforms in the 1990s

The reforms picked up after Kim Jong Il became leader in 1994. To create an incentive for peasant to work harder "work units" were reduced from about 100 people to between 15 and 20 in 1996. This reform was similar to one introduced in China in the mid 1970s. In 1997, Pyongyang approved a $13 million U.N. program that would give small loans to individual households in the hope people would raise animals and crops which could be sold to cooperative farms for a profit.

Kim Jong Il was reportedly interested in making reforms but also afraid these reforms might lead to losing power. In 1999, he said, “We must create a self-sufficient strong nation and not yield to economic reforms and marketing openings that would certainly lead to our destruction.” A North Korea official told a Western diplomat, "Never, ever use the word reform. "We will adjust, change, make accommodation, but we will never 'reform.'" In a speech in 1992, Kim reportedly said that "revival of capitalism" was only a local and passing phenomena.

On what it was like to deal with North Korea at that time, a senior South Korean official told Newsweek: "What North Korea needs is economic assistance—and nothing is for free. Everything must be dealt with on a quid-pro-quo basis."

Farmers Markets in North Korea

In the 1990s, the government allowed peasant to sell produce at prices they set themselves in farmers markets. Markets selling fruits and vegetables were opened in villages and towns and along roadsides. In the past such activities would have meant exile to a labor camp. Pyongyang said the markets would be disbanded when "North Korea perfects Communism."

One market in Anju dubbed the Hong Kong Market sold handicrafts and other items. Semi-independent stores sold goods produced by women and retire workers. One American economist told Newsweek that these "collective market" reforms have "allowed North Korea to survive in the 1990s."

At first, people were only supposed to sell good in authorized markets. As time went on more and more people began defying the government and set up roadside stands and sold stuff on the streets. Items sold at markets included homemade baskets and furniture, balls of bean paste, meat from rabbits and fruit and vegetables grown in home gardens,

The position of traders and markets was elevated by the famine in the 1990s when the North Korean government was unable to provide enough food to fend off starvation. Blaine Harden wrote in the Washington Post: In the temporary vacuum of state authority that accompanied the chaos of the famine years in the 1990s, bartering spawned a scruffy network of private markets. By the time Kim's government reasserted control at the end of the decade, small-town farmers markets, street-corner hawkers, roadside vendors and traders with stalls in big-city markets were keeping millions of North Koreans alive. [Source: Blaine Harden, Washington Post, March 6, 2009]

On the evolution of the markets in a town near the Chinese border, Barbara Demick wrote in the Los Angeles Times: “Kilju is an agricultural and industrial city in North Hamgyong province. Like other remote North Korean cities, it was decimated by famine in the mid-1990s when the public distribution system for food broke down. As a consequence, the government was forced to loosen its grip on the economy. Farmers markets that had been permitted to sell homegrown vegetables, usually laid out on tarpaulins on the ground, gradually expanded. Traders (many crossing the border illegally) started importing Chinese goods, including children's sneakers, bananas and DVD players. North Koreans brightened up their famously drab landscape a bit by wearing pinks, polka dots and paisleys, occasionally sporting T-shirts with English writing. [Source: Barbara Demick, Los Angeles Times, July 5, 2009]

Growth of Markets, Peddlers and Traders in North Korea

Bong Dae Choi and Kab Woo Koo of the Natilus Institute wrote: “North Korea completed collectivization of farms and private industries in 1958, and from then until the end of the 1980s, farmers’ markets were the only legal outlet in the unregulated sector. The authorization of independent sales of agricultural goods raised farms’ incomes, yet despite the fact that the government officially affirmed the legality of ‘limited use’ of markets, the use of state distribution systems for food stuffs and daily necessities, meant that the lives of most city residents saw little change. [Source: Bong Dae Choi and Kab Woo Koo, Natilus Institute, November 3, 2005]

“Until at least the early part of the 1980s, North Korea’s ‘restricted activity’ farmers’ markets did not break out from under the control of administrative policy. There are many reasons for this, but following the establishment of farmers’ markets, supplementary systemic measures put in place by the North Korean authorities in order to limit side effects were not unrelated. These measures went beyond the role of restricting the market when these supplementary systemic tools did not work smoothly, they created a tense relationship with the planned sector.

“After the socialist restructuring, authorities saw to it that there was no chance of a revival of the idea of those outside of the agricultural realm selling at markets. In anticipation of an outcry from traders, in 1946 the authorities created joint cooperative trade groups in cities and farming communities, and in 1947 combined production and sales in the “Farming Communities’ Family Workers and Businessmen,” gradually expanding this group of cooperative producers. Following that, with the official announcement of the socialist reorganization in 1958, these groups were completely incorporated into the planned system as they transformed into cooperative production and consumer groups. Even up until the 1970s, it was practically impossible to find peddlers in cities or in agricultural towns. In the latter half of the 1980s, when the economy faced stiff stagnation, temporary, illegal markets and family businesses reappeared, and functioned reasonably effectively.

“In order to repress supply to the farmers’ markets, authorities decided to seize goods that had the potential to be delivered to the markets. This was because even up until after the Korean War, individual peddlers were not just satisfied with getting into the grain business, but individuals wanting to get into the business of selling daily-use items were procuring the necessary raw material by forming individual relationships with farm workers. This drove the State to strengthen and expand operations in order to bring individual farmhouses under the umbrella of the farming cooperatives. In 1957 the subject of selling from cooperative farms was addressed and the supply of all agricultural products, with the exception of some daily allowances, was carried out by the state through the state purchasing mechanism and cooperative trade groups. By taking hold of the production base, the North Korean authorities were able to control both the volume and type of agricultural products that could be sent to farmers’ markets.

“On the premise of operating a state system of planned distribution of foodstuffs and everyday items for its citizens, the North Korean authorities decided to restrict city residents from participating in farmers’ markets. It followed that the sale of agricultural goods that were on the required purchase list was forbidden, and this could be seen as one measure restricting the participation of city residents in farmers’ markets. Authorities reinforced the systemic structure by replacing the markets’ cereal distribution function with a food rationing system based on state-mandated prices.In 1946, DPRK authorities established a foodstuff rationing system for limited classes such as students and office workers. This system was gradually expanded. As this expansion occurred, in November 1957, the Cabinet banned the independent sale of cereals by passing articles 96 and 102. By employing a state rationing system for all citizens except farm workers, the state completed its efforts to systematically enforce a ban on the participation of city residents in farmers’ markets.

“However, in the mid to late 1980s it became impossible not to rely on the black markets operating within the farmers’ markets. There are several factors behind this as well: 1) As time went by, the state distribution center continued to weaken, and the farmers’ markets previously pushed to the outskirts of the planned economy arose as a tool for supporting one’s livelihood, as theft of goods from factories could be traded for food or supplies as a barter system developed; 2) Since the middle of the decade, Chinese goods increasingly made their way into the country and a wider range of goods became available on the black market; 3) In the latter half of the decade, products previously available only through the state’s direct outlet stores slowly made their way to the black market.

“The mid- to late-80s saw the sidelining of farmers’ markets due to government regulations while at the same time, saw the emergence of black markets increase their importance. The presiding factors over the sideline activities and reemergence of farmers’ markets were the physical change in the state distribution system and the binding power of the intangible anti-market sentiment. It follows that these tangible and intangible measures, along with the three factors mentioned previously, worked together to have significant influence over the emergence of markets and market economics. We will have to wait and see how the latest reversal in policy is seen by the marketeers of North Korea.

Early Investment by South Korea in North Korea

In the 1990s and early 2000s, South Korea became the largest foreign investor in North Korea and North Korea’s second largest trading partner after China. South Korean companies built cars, roads, railroads and an huge industrial park in North Korea and used North Korean factories to make shoes, beds, televisions, and men’s suits. One U.S. official in Seoul told the Washington Post, "It impossible to find a better fit: The North has cheap labor and natural resources, the South has capital and technology."

In November 1994, South Korea lifted its ban on doing business with the north. Trade between the countries increased from $1 million in 1984 (mostly emergency food supplies) to $250 million in 1994. South Korean law prohibited the transfer of cash to North Korea without proper government approval. Because it was illegal for South Koreans to import goods directly from North Korea, items from the North that made their way to the South were usually imported via a third country, usually China. Efforts by South Korea companies to invest and cooperate with Pyongyang undermined efforts by the United States to isolate North Korea over the nuclear issue.

Large South Korean companies showed keen interest in investing in North Korea. The first South Korean corporate chief to visit the North was Chung Ju Yung, the founder of Hyundai, whose family originally came from the North. In 1989 he received permission to develop a resort near Kumgang Mountain. Chung was born in North Korea. In 1998, he walked across the DMZ with a gift of 501 head of cattle.

Kim Woo Choong, the chairman of Daewoo, in 1992 became the first South Korean to meet Kim Jong Il. He made an agreement to jointly-run several low-tech factories—producing items like clothes, golf bags and leather goods—with North Korea in Nampo, a port near Pyongyang.

Samsung produced televisions in North Korea that were indistinguishably from South Korea-made models except they had a made in North Korea sticker on them. Samsung wanted to develop a railroad and other infrastructure projects as well as joint ventures in telecommunications, pharmaceuticals and consumer electronics. LG produced 20-inch television in Pyongyang and was considering investing in a chemical and light industrial complex. A South Korean-financed pharmaceutical factory opened in Rajin, free trade zone.

Economic Reforms in the Early 2000s

By the early 2000s, things were beginning to improve somewhat in North Korea. The mass starvation of the 1990s was largely over and the economy was starting to pick up a little. Aid from the United States and other countries credited from bring North Korea back from the brink.

In July 2002, a new round of economic reforms — described as radical — were launched in North Korea in an effort to boost food production and economic growth. The government devalued its currency by 98 percent, largely abolished a 50-year-old ration-card system and raised wages and prices as much as 500-fold. The regime began allowing some food markets to sell groceries and cooking materials at prices not fixed by the government. In many cases prices jumped more than 20 times from their previous absurdly low levels.

The cabinet was reshuffled and officials that advocated free-market reforms were promoted. Laws were passed to make it easier to fire poor managers. Factories were denied subsidies. Foreign exchange was poured into production and private groups leased hotels, shops and restaurants. The won was allowed to freely float.

Farm managers were given more freedom to chose the crops they wanted to grow and individuals were allowed to set up small business to repair bicycle and renovate apartments. Apartment residents started paying rents that worked out to about 10 percent of their salary. Before they paid practically nothing.

Large market halls were built in Pyongyang and most major cities and towns. The amount and variety of goods in markets expanded dramatically and included food, clothes, manufactured goods, cosmetics and shoes. Chinese socks, T-shirts and toothpaste filled markets. Kiosks selling drinks, cigarettes and snacks popped up on roadsides and city streets.

Barbara Demick wrote in the Los Angeles Times: “In 2002, the North Korean regime belatedly legalized the markets and in many cities built stalls and enclosures to rent out to vendors. The dismal state-owned stores closed their doors and mysterious North Korea began to look a little more like other countries. [Source: Barbara Demick, Los Angeles Times, July 5, 2009]

Problems with the Economic Reforms in North Korea

The reforms set off a serious round of hyperinflation. In some cases rice prices were raised 400 times, diesel fuel increased 60 times and electricity increased 60 times. In many cases the prices were about the same as those in small markets. The increases in wages weren’t nearly high enough to offset the price increases. They increased only about 20 times. To keep up with hyperinflation the government the government printed a 1,000 won banknote for the first time, and then a few months later printed a 10,000 banknote.

Exposure to the outside world and the realization that North Korea was a poor country not a workers paradise created demands for more reforms and led to a wave of defections. One defector who was a member of the privileged elite in North Korea told the Washington Post: "From my Chinese and South Korean clients, I heard about just how rich South Korea really was.I began to understand that I was living in a poor country, and that China and South Korea had riches beyond our imagination. Once I could see through the lie that we were as well-off as any nation, I knew I could not live in North Korea anymore." [Source: Anthony Faiola, Washington Post, December 13, 2004]

"North Korean people and the elite bureaucrats all want more reform," Sohn Kwang Joo, managing editor of the North Korea Daily, a Seoul-based Web site, told the Washington Post. "But the faster the doors open, the more vulnerable becomes Kim Jong Il's tight grip of the nation. Kim Jong Il will therefore try to control and limit the opening. But as more people cross in and out of the border, there are more mobile phones, and more flows of information, the North Korean people will begin to realize the truth about Kim Jong Il."

The economic reforms caused many problems for North Koreans, who were now expected to buy much of their own at food at open markets at prices they couldn’t afford rather than receiving it from the state. A study by U.N. World Food Program found that the price of a liter of vegetable oil, for example, increased threefold from September 2003 to September 2004 to about $1.50 — an amount roughly equal to a week's salary for many North Korean workers. "The reforms are creating new groups of vulnerable individuals," said Anthony Branbury, the program's Asia director told the Washington Post. "They are hurting many of the people who simply don't have the money to buy food privately while benefiting a minority who were already in the elite and weren't at risk in the past, anyway.."

The Washington Post reported: “To keep control, Kim is moving harshly against perceived threats to his authority, according to analysts. Diplomats who have recently traveled to Pyongyang say the government has added more checkpoints and restrictions on foreign aid groups and overseas missions. More important, South Korean and Japanese government officials say Kim is believed to have recently removed Chang Song Taek, his powerful brother-in-law and a top-ranking member of North Korea's Workers' Party, from his post. Officials say they believe Kim acted against Chang because his private business dealings had grown too lucrative -- so lucrative, sources say, that Chang may have begun to establish his own group of high-ranking, loyal followers.”

North Korean Economy in Mid 2000s: Like China in the 1980s?

Howard W. French wrote in the New York Times in 2005: “North Koreans who have recently arrived in China, and Chinese businessmen who have extensive experience in North Korea, speak of significant changes in the economic life in a country with a reputation as one of the most closed and regimented. They say the changes, which were officially started in 2002 and have gradually gained momentum, have undone many of the most basic tenets of North Korea's Communist system, where private commerce was banned, private property circumscribed, and an all-powerful state the universal employer and provider. [Source: Howard W. French, New York Times, March 28, 2005]

“Now in ways that many Chinese say remind them of their own early economic reforms a quarter century ago, North Korean farmers are allowed to take over fallow land and plant it for their own profit, selling their products in markets. "It seems they are learning from the Chinese model of the 1980's, giving land to farmers and not allowing people to depend on the central government for everything," said Yu Zhongde, a Chinese businessman whose company operates bus routes in North Korea. "The rate of change is speeding up, and the aspiration for wealth among the people is really growing."

“In the cities, Mr. Yu and others say, the changes have been even more noticeable, with people being allowed to trade goods for profit in newly created public markets, including 38 in the capital, Pyongyang. These days, traders sell everything from clothing and bicycles to televisions and refrigerators, mostly imported from China. Private automobile ownership is still not permitted, but people reported seeing signs advertising used cars for sale in Pyongyang, nonetheless. Here and there, others also report the opening of small restaurants and karaoke bars. "The standard of living is improving, not just in Pyongyang, but throughout the country," said another Chinese businessman who has been a frequent visitor to the country since 1997. "Nowadays, if you have money you can buy whatever you want. The problem is that most people still don't have much money." "The government has no money, and everything has become much more expensive," said a woman from the northeastern city of Chongjin, who sneaked into China three months ago. "Many people steal things to survive."

“People from the countryside said farmers had tended to do better than city residents under the economic changes. "You can find anything you want in the markets now, but the prices are too high for us to afford them," said one 50-year-old woman from a village in the Musan region, near the Chinese border. "Farming for ourselves, though, made us better off than people in the towns. At least we always had enough to eat."

“Deok Ryong Yoon, an economist at the South Korean Institute for International Economic Policy, acknowledged the growing social disparity. "The market has become the main mechanism for the North Korean economy, and they are trying to use the market to rehabilitate their economy," he said. "The changes have increased net production in North Korea. They have more goods and seem to be benefiting from the reforms, but distribution is very unequal."

“North Korean officials have used the state's propaganda machine to spread the new market-economy gospel, including quotes from the supreme leader, Kim Jong Il. They began with an article attributed to Mr. Kim published in the state press in 2001 under the headline "Gigantic Change," in which he called for making "constant efforts to renew the landscape to replace the one which was formed in the past, to meet the requirements of a new era."

“Chinese businessmen and foreign economists say North Korea's emergent capitalist class has two disparate components: the operators of a small, clandestine private economy who have survived since their emergence during the famines of the mid-1990's, when the state distribution system was failing, and a far larger group consisting of officials of all description, from petty and mid-level functionaries to members of the political elite and perhaps largest of all, the military. "Pretty much everyone in business is an official of one kind or another," said one Chinese investor who is a frequent visitor to North Korea. "Ordinary people simply don't have the money, and if they had money, they'd be asked where they got it, and get in trouble."The businessman said corruption, abuse of office and the seemingly arbitrary application of rules were the biggest weaknesses in the country's new policy drive. "Changes are declared," he said. "They are spoken, but it's not put into law, and this makes it very difficult for business."

North Korean Markets and Economy in the Late 2000s

On the North Korean economy in the late 2000s, Blaine Harden wrote in the Washington Post: According to estimates by outside economists with access to North Korean and U.N. food data, at least half the calories consumed by the population come from food sold in markets. And nearly 80 percent of household income in North Korea derives from buying and selling in the markets, according to a study last year in the Seoul Journal of Economics. Inside North Korea, people with trading savvy can now get plenty to eat. But hunger remains widespread. About 37 percent of the population will require food assistance. A World Food Program official said the rate of stunting among children younger than 6 has changed little in the past five years.” [Source: Blaine Harden, Washington Post, March 6, 2009]

The limited 2002 reforms allowed “some of the traders to be licensed — de facto recognition that they could provide what his government could not. "Markets broke the government's ability to control the population using food," said Andrew S. Natsios, a former director of the U.S. Agency for International Development and author of a book about the famine. Because private traders needed to move goods, elites cashed in by creating a transportation system, Ishimaru said. His reporters have smuggled out stories about military and police officials buying secondhand buses from China and establishing intercity bus routes for traders.

“Stolen food aid helped prime the pump for market growth. Refugees from North Korea have told authorities in Seoul for years that donated food is widely available in private markets, said Lee Jong-joo, director of humanitarian assistance at South Korea's Ministry of Unification. About 30 percent of international aid is diverted by North Korean elites and finds its way into markets, according to Marcus Noland, a Washington-based specialist on food and famine in North Korea.

“U.N. officials do not dispute that estimate. Monitoring food distribution in North Korea is uniquely difficult, they say. Unlike any other aid recipient in the world, Kim's government demands sole responsibility for transporting and delivering donated food. Bureaucrats and military officers use their connections and government vehicles to fill market stalls with diverted food aid. "Aid created a situation that gave powerful forces and institutions in the North Korean government an interest in seeing markets develop," Noland said. "If you gain physical control over aid that you receive for free, you can reap astronomical profits — but only if you could sell it. It was unintended, but diverted food aid acted as a lubricant to the development of the market."

“Kim has tried to throttle the markets, which he blames for "giving rise to egotism and collapsing the social order of the classless society." But their importance in filling North Korean stomachs continues to grow. "Kim Jong Il orders police to restrict the markets, but they don't always do what they are told," said Ishimaru, the editor whose journal documents daily life in the North. "So many police and other authorities are making money."

The government recently launched another of its periodic efforts to contain the markets, restrict their hours, limit what they sell, chase vendors off streets and halt unauthorized traffic of goods and people across the Chinese border. The measures have helped raise food prices, thinned profits and increased the cost of bribing border guards. An order that prohibited women younger than 50 from working in markets was rescinded after it triggered clashes between female traders and police. Still, women must be at least 40, although many who are younger install their grandmothers as window-dressing in market stalls while they seek out buyers, Ishimaru said. Men are banned from selling in the markets. "The military was popular for kids so they wouldn't starve," Kwon said. "Now they feel it is better to make money in the market."

North Korea Cracksdown on Markets and Entrepreneurs

In the late 2000s, officials that had previously tolerated trade along the border with China, began rolling back reforms, cracking down on traders and ramping up the rhetoric on juch self-sufficiency. Barbara Demick wrote in the Los Angeles Times: In the markets of Kilju, a city of 100,000 near North Korea's eastern seacoast, the ruling Korean Workers' Party has ordered the removal of Chinese-made cookies, candies and pharmaceuticals. Even soybeans, many articles of clothing and shoes are now forbidden. [Source: Barbara Demick, Los Angeles Times, July 5, 2009]

“It is all part of a great leap backward taking place in the secretive autocracy. North Koreans interviewed in China in recent weeks say that the regime of Kim Jong Il has made a concerted effort to roll back reforms that had over the last decade liberalized the most strictly controlled economy in the world. "They're telling us that we don't need markets and that socialism provides everything we need," said an unemployed factory worker in her 50s, who gave her name as Lee Myong Hee. "If they don't give us food and clothing and we're not allowed to buy things, how can we survive?" Lee said, tears rolling down hollowed cheeks.

“The Korean Workers' Party has banned the sale and swapping of apartments, practices that were widespread for more than a decade. The open-air markets where people do most of their buying and selling are now open only from 2 p.m. to 6 p.m. The only people permitted to sell at the markets are women older than 50; everybody else is required to spend their days at their official jobs at government-run businesses. So many Chinese goods are now taboo that markets stock only about 35 percent of the merchandise previously available, some say. "They want to promote our own products made in North Korea, but since everything is 'made in China,' there is nothing to buy," said Kim Young Chul, a civilian working for the North Korean military who had come to China to sell wild ginseng on behalf of his employer.

“In ideological sessions compulsory for all North Koreans, the Workers' Party railed against markets as "hotbeds of anti-socialism." In recent months, the North Korean government has become as strict about what is exported as what comes in. The sale of soybeans -- a staple in the North Korean diet -- has been banned, with the explanation that they might be taken out of the country for re-sale in China. "They tell us the army needs the soybeans and that our soldiers won't be strong enough to lift their guns," said Lee, the unemployed factory worker.

“Kim Chol Hee, a trader from Yanji, a Chinese city near the border with a large ethnic Korean population, said it was harder now than at any time in the 10 years he's been in business to import from North Korea. "I used to bring in squid, crab, steel parts from Chongjin. We can still buy seafood, but the North Korean government won't let us buy steel," he said Kim. "They say they need to keep all their resources for themselves." Along the Tumen River, which runs along the border and which traders and defectors used to cross freely, North Korean guards are now posted every 10 yards instead of every 100 yards as they were a few years ago, residents say.

The crackdown has mainly targeted North Hamgyong province, which has had the most vibrant markets in the country because of its proximity to the Chinese border and its distance from Pyongyang, the capital. Edicts from Pyongyang often have been met with resistance. In the province's main city, Chongjin, vendors held a rare public protest in March 2008 outside the main Sunnam market after officials tried to ban younger women from trading, according to Good Friends, a Seoul-based Buddhist charity. "Give us food or let us trade," hundreds of woman reportedly chanted. The protests forced Chongjin officials to reverse the order. But this year, Pyongyang has become more insistent. "The controls are very strict right now," said Lee. "If they find clothing with a South Korean label, the police will take it away. They'll confiscate Chinese clothing too unless it's old and ugly."

Reasons for North Korea’s Market Crackdown and Why It Didn’t Work So Good

Barbara Demick wrote in the Los Angeles Times: “The economic restrictions reflect the rising power of the hard-liners within the staunchly communist regime and go hand in hand with the belligerent mood that led to North Korea's May 25 nuclear test. Those jostling for power in the scramble created by the failing health of 68-year-old North Korean leader Kim Jong Il are raising the banner of juche, the term coined by his father, Kim Il Sung, the country's founder, for an ideology emphasizing self-sufficiency. [Source: Barbara Demick, Los Angeles Times, July 5, 2009]

“North Korea has in effect scuttled dialogue with the United States, South Korea and Japan, shut down South Korean business interests within its borders and evicted many humanitarian aid operations. "The North Koreans want to close off their country so they will not be hurt by sanctions. They think everybody is out to ruin their country and they are getting rid of anything that could be a threat," said Cho Myong-chol, a former economics professor at Pyongyang's Kim Il Sung University who defected to South Korea in 1994.

“Kilju residents have not dared to hold public protests against the restriction. But the Korean Workers Party nonetheless might be fighting a losing battle. Much of the trading is done by people with powerful connections in the provincial government and the military. Many state-owned enterprises do illegal trading to raise cash for their operations. For example, trader Kim Young Chul says he is responsible for raising about $900 each year for his work unit by selling ginseng, while he and his partners keep any additional profits. "I have a lot of freedom. They don't dare ask me too many questions in North Korea, because I work for the ministry," said Kim.

“Just as quickly as the Korean Workers' Party issues a decree, people find a way to circumvent it. Vendors banned from the market bring out their mothers and grandmothers, while secretly running the businesses from behind the scenes. Others sell banned good from their homes, or simply stash it behind other merchandise. "If you want to buy cosmetics in Kilju, you still can find them, but they are usually hidden underneath the table," Lee said.

Image Sources: Wikimedia Commons.

Text Sources: UNESCO, Wikipedia, Library of Congress, CIA World Factbook, World Bank, New York Times, Washington Post, Los Angeles Times, National Geographic, Smithsonian magazine, The New Yorker, “Culture and Customs of Korea” by Donald N. Clark, Chunghee Sarah Soh in “Countries and Their Cultures”, “Columbia Encyclopedia”, Korea Times, Korea Herald, The Hankyoreh, JoongAng Daily, Radio Free Asia, Bloomberg, Reuters, Associated Press, Daily NK, NK News, BBC, AFP, The Atlantic, Yomiuri Shimbun, The Guardian and various books and other publications.

Updated in July 2021

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