A thriving North Korean black market appears to be helping the isolated country overcome mounting international sanctions for its regular illegal nuclear and ballistic missile tests.
Despite the sanctions, data from Daily NK and North Korea Economy Watch show that North Korea’s food and fuel prices have remained stable. Furthermore, North Korea has yet to see the same serious fluctuations in prices and currency value that the country saw under the leadership of Kim Jong Il.
North Korea was slapped with a new round of sanctions in March after carrying out its fourth nuclear test and launching a long-range rocket. Other tests since then have raised tensions between North Korea and other members of the international community.
In June, the U.N. Food and Agricultural Organization (FAO) said that North Korea is likely to experience its worst food shortage in years. According to the U.N. FAO’s global information and early warning system North Korea will need an additional 694,000 tons of food through foreign aid to effectively feed its citizens.
Despite concerns, market prices, which have remained quite stable for rice and other products, do not reflect a nervous and unstable market where supply is dropping rapidly against rising demands.
The reason is North Korea’s booming black market, where free market practices allow citizens to bypass harmful state restrictions and regulations on commercial activities. Were North Korea to strictly adhere to the rules of the Soviet-style command economy, it would have been crippled long ago by sanctions and American-led containment efforts.
North Korea’s “jangmadang” or black markets which are semi-illegal but regulated collectively serve as one of the country’s most important economic and sociological forces.
These markets emerged out of a devastating famine in the mid-1990s. When the state rationing system failed, the North Korean people, especially those living in rural areas, were forced to find innovative ways to skirt the failure of the state economic system.
Around 2009, Kim Jong Il lashed out against the new rising class of entrepreneurs through a severely-mismanaged attempt at currency reform. Black market transactions were conducted using foreign currency, and the result was two years of hyperinflation.
After the death of his father, Kim Jong Un took a different stance and decided to turn a blind eye to the country’s black markets and illicit economy. According to North Korea expert Andrei Lankov, “Under Kim Jong Un, not a single piece of policy has been implemented which would somehow damage the interests and efficiency of private businesses.”
“Since Kim Jong Un came to power, there has been no control or crackdown on the jangmadang,” Reuters reported Kang Mi-jin, a North Korean defector, as saying.
Kang continued, “Kim Jong Un is doing a lot of bad things, but keeping the markets open has had a positive effect on the people. He has no other option. He can’t feed the people, and he can’t completely shut down the markets.”
The World Food Programme (WFP) recently reported that the North Korean government handed out only 360 grams of rations per person per day, the lowest figure in five years, yet the market has been able to make up the difference.
Despite international sanctions, the price of rice, corn, pork, petrol, and diesel have remained fairly stable, which is making North Korea much more resilient to outside pressure.
While this counters arguments that putting pressure on North Korea for its illegal tests is detrimental to average North Korean citizens, the growth of the black market will also strengthen Kim Jong Un’s control of state power.
Kim Jong Un’s loose acceptance of the black market in North Korea indicates that the country may eventually choose to develop a market economy like communist China did, but that may still be years away.
For the time being, average North Korean citizens are surviving sanctions, but that could soon change. According to Seo Jae-pyoung, another defector, “Despite the sanctions this year, ordinary people are doing fine, but the effects may slowly start to hit from next year.”
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