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Can The Marketplace Liberate North Korea?

Can The Marketplace Liberate North Korea?

In early December, the South Korean think tank KINU (Korean Institute for National Unification) reported, based on satellite images, that North Korea has no less than 404 active marketplaces. These markets, known as “Jangmadang,” are similar to farmers’ markets, and enable North Koreans to buy and sell goods smuggled from China or South Korea and to exchange information. Some view the rise of Jangmadang since the early 2000s as a sign of North Korea’s slow movement towards a market-based economy, which raises the question of whether marketization could bring about North Korea’s political liberalization.

North Korea is often referred to as the world’s last Stalinist country. When the communist Workers’ Party of Korea took over the country after World War II, they expropriated private property, redistributed land from landowners to peasants, nationalized industry, and established food rationing under the Public Distribution System. Never efficient, the centrally planned system was pushed into a tailspin by the collapse of the Soviet Union and the natural disasters of the 1990s, leading to the Great Famine, in which up to three million North Koreans died of starvation. Amidst this chaos, North Koreans began selling whatever they could for survival, launching the spontaneous growth of the free market.

Scholars refer to these developments as a “marketization from below”—a spontaneous development of market activities led by private initiative. The famine era of the 1990s pushed households into the market just to survive, a shift recognized by 2002’s “July 1 Measures,” which cautiously introduced market principles into private trading and state industry. In fact, when in 2009 the Kim regime decided to eradicate the emerging market, they were so scared by the threat of large-scale revolt that they had no choice but to tolerate some of these market activities. Nevertheless, regular police investigations have kept the Jangmadang under tight constraints.

Despite these limitations, the Jangmadang have grew vastly in size over the years—many markets are larger than the 14,437-square-meter Dongdaemun Market in South Korea. A Daily NK study, like KINU, found satellite evidence for around 387 markets and estimated the total number on the ground to be much higher. However, North Korean market activity has come to encompass much more than physical marketplaces. In recent years, free trading has gone well beyond consumer goods, expanding to include markets in services, real estates, and finance. Marketization has also made private employment commonplace—while it is technically illegal, few people end up being punished for engaging in it.

While some of the items sold by the vendors are locally produced, many are imported or smuggled in from South Korea and China. The most popular products are clothes, shoes and CDs from South Korea—all of which are technically banned from sale in North Korea. While it is impossible to assess the size of North Korea’s private sector precisely, it is estimated to account for 30 to 50 percent of North Korea’s GDP. In fact, according to a 2011 survey by Haggard and Noland, over 69 percent of North Koreans make more than half of their income from market activities. The number of individuals working in markets is estimated to be as high as 1.1 million.

Despite the proven economic benefits of marketization, for instance the eradication of starvation, the North Korean regime remains uneasy about this deeply un-socialist trend. Besides the fact that private trading is anathema to a centrally planned economy, the free interactions that take place in marketplaces allow people to form connections and exchange information—outside the state’s control. Kang Chol-Hwan, a defector and a co-founder of the North Korea Strategy Center, believes that growing opportunities for the circulation of information could be the key to gradually weakening the Kim regime’s social control and fostering internally driven regime change. Kang himself decided to defect to China after he learned about the outside world through an illegally-obtained radio. Similarly, defector Kang Ji-Min has described how she first learned about “free expression” through South Korean movies, fundamentally changing her view of her country. At the same time, North Koreans’ growing recognition that foreign goods are of higher quality than their own products erodes their faith in the North Korean government. Are these developments planting the seeds for long-term change?

Unfortunately, a look at the Chinese experience suggests that North Korea’s economic liberalization will not necessarily lead to political liberalization. Deng Xiaoping’s economic reforms have done little to improve China’s human rights situation or hasten democratization. Likewise, the Kim regime keeps the markets under strict control, restricting their operating hours and prohibiting people under 40 from working there. Crackdowns throughout the years have left some markets completely or partially closed. If political liberalization does not arrive, North Korea’s economic reforms do not have a clear future.

In fact, the opposite may happen. North Korean factories started repackaging imported Chinese products to disguise them as domestically produced after Kim Jong-Un recently denounced North Koreans’ “sickness for preferring foreign-made goods.” While marketization might be able to serve as a platform for economic growth and maybe eventual liberalization, as long as the Kim regime remains determined to maintain power at the price of its citizens’ misery, it is highly doubtful that marketization alone will lead to comprehensive political reform.