In the middle of Pyongyang's high-rise apartments, the Tong-il market is buzzing. Thousands of North Koreans haggle and buy goods. On offer are fresh meat and dried fish, Spanish oranges and North African dates, suits, skirts, shoes, light bulbs, computer parts--and embroidered armbands that declare the wearer an engine driver, controller of machines or captain of guards.
This is a country where one in eight people (three million) died in a famine just a few years ago. The People's Distribution Centres, it was recognised, could no longer provide for the population's basic needs, particularly in the urban areas. As a result, there emerged farmers' markets, barely tolerated by the authorities and well off-limits to foreigners, where food was traded for cash or kind.
Since then the climate has changed. Kim Jong-il, North Korea's leader, toured China in May 2000 and January 2001 to view the economic miracle. He has seen the future and its works. "We should transcend the old working style and fixed economic framework of other countries in old time," came the order--showing that North Korea is ready to break with Soviet-style state socialism and to learn from other countries.
North Korea wants to leap several stages of technology and move straight to IT. Elite institutions such as the Moranbong Secondary School No. 1 are training groups of outstanding students in computer skills. Small business is everywhere and the volume of consumer goods is increasing; the urban centres have a litter of new stalls on their streets and every mile or so, even on rural roads, they make a colourful appearance.
However, at least for a while, this will be a market without privatisation. As the vice-chairman of the state planning commission explained, the state will continue to own the means of production. But the people to whom it lends the factories, the co-operative farms and so on will have a responsibility to maximise profitability from the enterprises. How the profits are to be used is less clear. Spending in Tong-il suggests an emerging middle class.
North Korea has bought into reform but has not matched it with Chinese-style openness. One reason is that, with President Bush's "axis of evil" label tied around its neck, it cannot attract inward investment from any but the most buccaneering chancers, or South Korean "family". Too much money is chasing too few goods. Inflation runs at 30 per cent and rather than stimulating indigenous production North Korea is sucking in imports.
In July 2002, a monetary reform packaged devalued the won fortyfold and raised wages by a similar proportion. But wages were also more sharply differentiated to provide incentives. So North Korea is now in danger of creating an underclass of roughly three million people. This underclass will find it increasingly difficult …