North Korea's Grassroots Capitalism

How creeping market forces are improving life in the Hermit Kingdom.

North Korea Confidential: Private Markets, Fashion Trends, Prison Camps, Dissenters and Defectors, by Daniel Tudor and James Pearson, Tuttle, 192 pages, $21.95

When most people in the West hear the phrase "North Korea," they think of a country ruled by a fat boy-man with a terrible haircut who enjoys feeding family members to dogs, shooting defense ministers with anti-aircraft guns, and meeting eccentric basketball players. If they head to the library hoping to find a scholarly or journalistic account that cuts through the rumors and offers a more solidly sourced portrait of North Korean life, they will probably be disappointed. Even "serious" publications on the subject consist of little more than speculation about the nation's nuclear capabilities and tea-leaf reading about the factions within the regime.

So it is refreshing to find a book that neither obsesses excessively over the nuclear issue nor treats the Democratic People's Republic of Korea (DPRK) as simply a bad joke or the world's most irrational place. North Korea Confidential, a recent effort by the journalists Daniel Tudor and James Pearson, is one such work.

The first sentence of the first chapter makes things clear: "'Communist' and 'collectivized' are utterly outdated labels for a North Korean economy which now heavily relies on thriving person-to-person market exchanges in which individuals buy and sell private property for the purpose of generating profit." In spite of what is still almost universally believed, North Korea ceased to have a Stalinist, centralized, planned economy some 20 years ago. Tudor and Pearson's new book describes in vivid detail how this dramatic transformation has taken place.

The growth of North Korean "grassroots capitalism" (as some scholars call it) is not necessarily an unknown or unstudied phenomenon: A number of researchers, overwhelmingly but not exclusively from South Korea, have looked at North Korea's nascent bourgeoisie and market economy. They have described how people in the 1990s, amid famine and consequent social dislocation, began to create new businesses from scratch, and how those ventures grew rapidly. They have also explored the enterprises that Tudor and Pearson call "private-public partnerships." Under this very common model, state agencies lend their name to an aspiring entrepreneur, who disguises what is essentially a private operation as a state-owned enterprise. Restaurants, fishing businesses, and even some mines are de facto privately owned and operated, though they are registered as state property.

Tudor and Pearson synthesize this large body of research and ideas, along with their own reporting, into a highly readable, energetic, and compelling narrative that will probably be a complete revelation for non-Korean-speaking Western readers.

Let me be absolutely clear: Neither Pearson nor Tudor is an apologist for the regime. They remind us that common wisdom is often distorted or flat-out wrong, but they do not shy away from the grimmer elements of their subject. North Korea is a brutal and impoverished country with a highly authoritarian monarchy. The Kim dynasty has always taken a ruthless approach to dealing with internal dissent, and it continues to do so. Anyone who dares to express views publicly that contradict the current official line is bound to disappear immediately into the country's network of prison camps. Everybody understands this in North Korea, and as a result they keep their mouths shut. The book describes the world of the prison camps in great detail.

North Korea Confidential also shows that the country's economic situation, while better than generally thought, remains quite bleak. Rich businessmen's mistresses might be sipping lattes in upmarket Pyongyang cafés, but outside the city there are villages full of malnourished children. And North Korean liberalization has its limits. The private economy, however powerful, remains in a kind of limbo, neither recognized nor systematically suppressed by the state. No formal legal or financial infrastructure supports this semi-legal marketplace, and the Kim regime's ideological commitments mean it is currently near-impossible for such structures to emerge.

But the book also skillfully informs readers about parts of North Korean life that outsiders often overlook or oversimplify. Tudor and Pearson correctly criticize "the ridiculous international media image that suggests that DPRK citizens are robots who simply live to serve their 'Dear Leader.'" Like human beings the world over, North Koreans know how to have fun, and in the last 14 years it has become gradually easier for them to enjoy life.

The emergence and steady growth of the market economy has led to a palpable improvement in the economic situation, not just in Pyongyang but also in the countryside. North Koreans still live in poor circumstances, but the specter of famine no longer haunts the country as it once did. The state has also become significantly more permissive than it was in former times. This is partially a product of now-endemic corruption: A small bribe can make an official turn a blind eye to all manner of ideologically suspect activities, such as secretly watching foreign movies or listening to subversive Western broadcasts. It also reflects a general decline in ideological zeal. In Tudor and Pearson's words, North Koreans today "are less likely to inform on each other."

As a result, North Koreans—especially the better-connected and more affluent ones—have begun to enjoy smuggled South Korean and Western culture on a hitherto unthinkable scale. South Korean pop music and TV shows seem to be especially popular. According to the law, these people are committing crimes. But in an age of cynical corrupt permissiveness, such laws are seldom enforced against anyone lucky enough to have a friend in the local government.

Even computers are beginning to get into North Korea, though it is still the only country without public Internet access. Only senior officials and security personnel with high-level clearance are allowed to surf the Net. But other North Koreans do have some access to a nationwide network called Kwangmyong, and they can also use USB sticks to exchange files with one another. Computers—largely elderly machines imported from China—can be found in many North Korean households.

Cellphone users are supposed to pay high tariffs, and the basic fee far exceeds the "official" monthly salary. Nonetheless, nearly 3 million North Koreans, out of a population of 25 million, have mobile phones nowadays. (Tudor and Pearson note "a majority of Pyongyangites between 20 and 50 years of age have cell phones.") Among other things, this is a reminder that in North Korea today, few if any people make their living exclusively (or even largely) in the state economy.

The book also talks about changes in fashion. The new Kim's wife, Ri Sol-ju, seems to be a trendsetter among younger North Korean women. Some of what she has been seen to wear would be considered ideologically dubious under the old regime of Kim Il Sung (or even Kim Jong Il, though to a lesser extent)—like a $1,000 Christian Dior handbag or a rather short skirt—but her heresy has allowed others to follow suit and sport similarly bold clothing in public.

The country has also seen a construction boom, which ironically began around the time the U.N. introduced sanctions (another reminder of sanctions' hopeless inefficiency). The boom is driven by private investors. The state does not recognize property rights in real estate, yet North Koreans manage to sell and buy houses in Pyongyang. A good new apartment might cost the equivalent of $200,000, while the actual income of the average family, mostly coming from the grey market, is about $50–100 a month. Still, there are people in the North Korean capital who can afford this.

Remarkably, all this marketization was essentially spontaneous. The old Leninist command economy quietly expired after it was deprived of the Soviet subsidies that had kept it afloat, and the North Korean people more or less created a new system from scratch. There were no neoliberal economic advisers, and there was no reform drive from above. At best, the government was willing to turn a blind eye on developments that contradicted the official line. The new system emerged by itself—a result, as the Leninists used to say, of "the collective creative activity of the toiling masses."

The system they made is remarkably similar to early European capitalism, with all the associated social problems. But in North Korea, the system has one advantage over its predecessor, the Stalinist economy: It works.

If there is a substantial flaw in Tudor and Pearson's account, it is their discussion of North Korean high politics. A description of daily life and economics can be cross-examined, thanks to the large population of refugees in South Korea and thanks to the Chinese and North Korean merchants who can be interviewed outside the country's borders. In those areas, we can be quite certain about the authors' findings. Politics is much murkier. Only a handful of refugees who claim to have knowledge about the corridors of power in Pyongyang are available to tell us what is going on, and their claims are usually unverifiable.

The authors support a popular theory that North Korea is actually run by the Organization and Guidance Department of the Korean Workers' Party, a highly secretive organization that allegedly acts as collective kingmaker behind the scenes. Numerous scholars have criticized this thesis, arguing that many recent North Korean policies—theme park construction, inviting sports celebrities to the country—clearly reflect the individual tastes and experiences of the young Kim rather than his aging bureaucrats. Given the scarcity of reliable information, we cannot rule out the possibility that the theory is true, but it is still based upon scant evidence. Unfortunately, Tudor and Pearson present it the same way as they present far more reliable data on North Korea's economic transformation.

Other than that, North Korea Confidential is a boon for anyone who wants to wade past the cliché-ridden horror stories and learn about the lives of ordinary North Koreans. There are few books like it.