(SOURCE) “Communist” and “collectivized” are utterly outdated labels for a North Korean economy that now heavily relies on thriving, person-to-person market exchanges in which individuals buy and sell private property for the purpose of generating profit.
Private trade has become so prevalent in recent years that it permeates all levels of society, from the poorest through to the Communist Party and military elites. But as with sex in Victorian Britain, there is a double standard with capitalism in North Korea: everybody does it, but few publicly admit to its existence.
Though markets in some form have always existed in North Korea, the declining official role of the state in economic activity means that private trade has never been as widespread — or necessary — as it is today. The reason for this is simple: the state can no longer provide for the people in the way it once could, and it was the horrific famine of the mid-1990s that was the turning point.
Regular, government-supplied food rations all but disappeared during this period, and never fully returned. The lesson that survivors took from this experience was one of self-reliance — not the self-reliance of North Korea’s official Juche ideology, but rather self-reliance through by-hook-or-by-crook capitalism.
Private property and private trade remain illegal, but for post-famine North Korea, there is but one real economic rule: don’t follow the rules. Sixty-two percent of defectors surveyed in 2010 stated that they had engaged in work other than their official jobs before leaving North Korea, and a thriving gray market that uses unofficial currency exchange rates is now the de facto way of setting prices, even for the elite.
The breakdown of the system
From the foundation of North Korea in the 1940s, North Korea was almost food self-sufficient for many years. Under the Public Distribution System, farmers turned over a majority of their harvest to the government, which then redistributed it to the wider population. During the earlier and middle years of Kim Il Sung ’s rule North Koreans were not wealthy, but they at least did not starve en masse.
There was one other crucial factor in that initial success: Soviet and Chinese aid. Throughout the Cold War era, North Korea was able to exploit the rift between China and the Soviet Union by cleverly playing the two against each other. In this “love triangle” relationship, North Korea would carefully seek benefits from both Beijing and Moscow, turning its weakness as a “shrimp between whales” into an asset.
The public system came under unprecedented pressure: between 1994 and 1997, the basic ration was cut from 450 grams of food per day to a meager 128 grams. In the same period, the official rations went from being the main food source for a majority of the people, to a resource that only 6 percent of the population could receive. The result was a serious famine between 1994 and 1998 that claimed the lives of between 200,000 and three million North Koreans.
The government had failed the people, and crucially, everyone had to fend for themselves. Even professors at Pyongyang’s prestigious universities had to turn to low-level market activities, simply to survive. Some would join their wives outside busy train stations or colleges, selling cheap broth made from flour and water. Other members of Pyongyang’s lesser elite circles took to selling their household possessions at knockdown prices in makeshift market stalls. Thus, the famine sowed the seeds of marketization in North Korea.