It might just be a matter of glass halves and the shades of eyeglasses, but whether or not the North Korean economy is moribund might be controversial. Nightwatch’s is probably the majority opinion: “North Korea is out of ideas and resources. Without the new Chinese assistance and state-supported illegal activities, including currency counterfeiting and illegal drug manufacturing and sales, the regime could be toppled by skillful economic strategies.” Andrei Lankov is taking the glass-half-full perspective.

My frequent talks with North Korean refugees, smugglers, migrant workers and those who have illegal Chinese mobile phones confirm the statistics. Throughout the last ten years the economic situation in the country has improved, even though this improvement was very moderate.

What exactly does ‘improvement’ mean in this context?

First, few if any North Koreans now face the threat of starvation. Malnourishment remains a widespread problem as many (perhaps, a majority of) North Koreans don’t have enough to eat in spring. This has a seriously negative impact on their health and is especially bad for children. Nonetheless, unlike the 1990s, it seldom leads to death.

The average North Korean meal is a bowl of boiled corn with a few pickles. Meat or fish are eaten only on special occasions or by affluent people.

Second, over the last decade material inequality increased in leaps and bounds. Some of the new rich are officials who take advantage of their positions while others are successful entrepreneurs running all kinds of private businesses.

A successful North Korean entrepreneur nowadays might even openly own a car. For instance, in a relatively small borderland city with a population of some 90,000 people there are officially three private cars. Much more frequently well-to-do North Koreans prefer to register their cars with state agencies. But at any rate, just ten years ago a private car was almost unthinkable.

The less successful entrepreneurs and craftsmen are still doing quite well as indicated by the significant increase in consumer durables owned by North Koreans. Fifteen years ago a fridge was a sign of exceptional luxury, almost as rare as a private jet in the US. Now it’s a bit like a luxury car, an item that 10–20 per cent of households can afford.

Third, there has been a spread of computers, including privately owned ones. In most cases these are old, used computers which are imported or smuggled from China. They are quite outdated but they are computers nonetheless. Recently I interviewed a group of school teachers from the countryside and they said that nowadays every high school, even in remote parts of the country, is likely to have at least one computer (admittedly, this wonderful contraption is seldom switched on).

This does not mean of course that North Korea has become a consumer paradise. In spite of some improvements, the gap between the North and its successful neighbours continues to widen. However, in absolute terms the North Korean economy is not shrinking any more.

There have been serious setbacks. The currency reform early last year is a perfect example. For a while, this failure almost paralysed the economy and created serious food shortages across the country.

But what brought about this moderate growth? It seems that there are three major contributing factors.

First, North Korea has been quite good at begging and blackmailing the outside world into providing aid. The aid was initially provided by South Korea and the US, but now it comes almost exclusively from China.

Second, North Korea’s technocrats have learned how to run the country in its new situation. They are not very efficient at this, but, to quote Marcus Noland, ‘they are muddling through.’

Third and most importantly, over the last decade a relatively powerful private economy has developed in North Korea. North Koreans did not merely learn how to trade privately, they now produce privately as well. This growth of industry, invisibly and privately, seems to have contributed to the growth described above.

The growth is moderate, and no breakthrough is likely. Nonetheless, it is real and palpable.

There also seems to be controversy around the amount of defector remittances from South Korea to “politically unreliable” family members in North Korea and their impact. The numbers debate between Joshua Stanton, Dennis, and david woolley.

Aside from the veracity of these claims, I would take issue with the perspective, that remittances are an anti-government tool, Gaeseong keeps Pyongyang in the black, or that Rajin-Sonbong is bad. The amount of bribery and regulation funneling money to third parties on any side of the North Korean borders to anyone besides a real North Korean layperson is obviously wrong, but are the cost of doing business in this very abnormal context. For once, though, I’m more on Lankov’s side here, because I see the goal not as toppling the regime precipitously, but slowly building a strong economy that will eventually become the core of a sovereign economy.

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Filed under: Business/Economy, Korea Tagged: kaesong, north korea, rajin-sonbong, remittances crrenct reform