Experts say North Korea is incorporating free markets into its economy — and undergoing a ‘social revolution’ as a result

north korean bank

  • North Korea’s economy has advanced since the famine of the 1990s, and has begun encouraging entrepreneurship.
  • Unlike earlier times, many citizens now earn wages instead of having the state provide everything for them, and shopping opportunities have arisen for a growing middle class.
  • But North Korea’s political isolation as a result of its nuclear program has hampered further progress.

For most Americans, North Korea is synonymous with nuclear aggression, totalitarianism, and dystopian social realities — but experts on the country say this isn’t the whole picture and note that the county is going through a ‘social revolution’ driven by free markets.

“The images you see in western media about North Korea are very dated,” said Jenny Town, the assistant director of the US-Korea Institute at Johns Hopkins School of Advanced International Studies and the managing editor of the North Korea-focused journal 38 North. 

Town says that like in many developing countries, the reality of life in North Korea is multifaceted, and claims that the state’s grip over its society is less pronounced today than it was during the worst years of the Kim dictatorship.

From famine to free markets

“There’s been a lot of changes especially within the past five years or so,” Town said. “A lot of entrepreneurship, a lot of businesses popping up, and you have emerging consumer culture, where in marketplaces you have emphasis on branding. You have different brands of, say for instance, toothpaste. There’s now 10 different brands you can choose from. You have the rising middle class, and you have a culture that’s getting used to wealth generation and disposable income.”

This recent change and market flexibility started out as a reaction to the harsh famine conditions that were prevalent in North Korea in the 1990s, when black markets first sprung up out of sheer necessity. Town said that since then, the presence of independent markets has allowed people to take control of their own lives much like similar reforms did in China in the 1980s.

north korean shop“The state hasn’t been able to provide like a normal communist country would,” Town said, and as a result of these shortages, the state has worked to formalize previous underground markets. 

Town said that while Kim Jong Un’s father Kim Jong Il was focused on providing resources for the military first and foremost, North Korea’s founder Kim Il Sung pursued both military and economic avenues of development equally.

Andray Abrahamian is the visiting fellow at the Center for Strategic and International Studies Pacific Forum in Hawaii, and has broad experience researching North Korean market initiatives. He said steps taken by Kim Jong Un in recent years have heralded a return to the economic policies of Kim Il Sung.

“In 2012 and 2013 [Kim Jong Un] enacted some important rule changes for how they managed the economy, and one of the key things that did was that it not only allowed but encouraged state-owned enterprises to run themselves along market principles,” he said.

Town agrees.

“What you see under Kim Jong Un is that the direction he’s gone is not to stand in the way of the market. It’s given [people] the space to be able to provide for themselves,” she says.

Town described places in modern North Korea where young people can be seen staring at smartphones and shopping for clothes from private stores just like westerners.

“Over 400 formal marketplaces exist throughout the country,” she said.

One of these is the three-story Kwangbok Area Shopping Center in Pyongyang, which houses a supermarket, a clothing department store, and even a food court. And unlike traditional North Korean shopping malls, customers can pick goods off the shelves directly instead of waiting for an assistant to hand the items to them. 

Abrahamian says the new focus on private enterprise and consumerism has led to an entirely new economic lifestyle for North Koreans, many of whom now lead middle class lives.

“A kind of new social contract has emerged over the last few years in North Korea, by which people work and are paid wages for their work,” he attests. “In the old days the state supplied everything, but that isn’t really the case anymore. There is a sense that a lot is possible now.”

Misunderstandings and all-encompassing sanctions have hampered the country’s progress

north korea UN ambassador

North Korea’s progress on economic and social fronts has not been reflected in its international position. In the midst of standoff with the United States, nearly all media attention has concentrated on North Korea’s military ambitions. 

“I think there’s an over-emphasis on looking at North Korea’s nuclear technology, and that it’s very difficult for the average person, if their only exposure to North Korea is the media, to see North Korea as it is today,” Town said.

As a result, she said many international lawmakers don’t realize that the sanctions the United Nations and others have placed on the country have hurt everyone, not just the top brass.

“Given tougher and tougher sanctions, the parts of the economy that’s going to hurt are the civilian economy rather than the government,” Town said. “So I think everything that we’re doing now is going to curtail that market activity, curtail that trajectory.”

“The last UN resolution banned all textile exports,” Abrahamian said. “Textiles are the third or so biggest export item for North Koreans. That will definitely hurt the state, but we’re talking about tens maybe hundreds of thousands of people who are employed in textile factories and are being paid wages for their work. They will no longer be able to earn a wage.”

Because of these limitations then, Abrahamian said, “Options for business people are somewhat limited.”

Town said that the more outside observers are exposed to current and balanced narratives about North Korea, the more relations between it and other countries will improve. 

“I think there’s a lot of people in disbelief that this social evolution is happening,” she said, “but its very real and it is happening, and the more we can come to terms with that, the more we can think of more constructive ways to approach North Korea.”

Still, the fact remains that North Korea is one of the most closed-off countries in the world, and the likelihood of that changing under a regime that continues to threaten nuclear war with the US is slim. And though most of the population now works outside the home, most North Korean offices operate without internet or even computers.

And food shortages remain — two in five North Koreans are undernourished while basic staples such as soy sauce, eggs, meat, and cooking oil are sometimes hard to come by in local stores. The country also suffers from electricity shortages.

SEE ALSO: ‘Asia trades as if North Korea wasn’t a problem’: How top bankers think about the Hermit kingdom

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