North Korea’s ‘Criminal’ Economy Detailed

By Alastair Gale

North Korean leader Kim Jong Un attends the Supreme People’s Assembly in Pyongyang, in this still image taken from video released by Kyodo April 9, 2014. Reuters The breakdown of North Korea’s public distribution system during the famine years of the mid-1990s fostered the emergence of an underground market economy as the populace were forced to find ways to try and survive. The growth of that economy in subsequent years has been the subject of great interest to observers of the country, particularly the question of whether it might eventually lead to the collapse of the political power structure headed by the ruling Kim family. A new report helps to shed some light on how the underground economy has developed in one particularly worrying but potentially transformative way. “Illicit: North Korea’s Evolving Operations to Earn Hard Currency,” authored by Dr. Sheena Chestnut Greitens, Non-Resident Senior Fellow at the Center for East Asia Policy Studies at the Brookings Institution, details how North Korea’s illicit economic activities have fostered the emergence of a “criminal” market economy. The report, largely based on interviews with North Korean defectors, tracks three stages of development of illicit economic activities in North Korea. It starts from the 1970s, when North Korean officials trafficked a range of products such as drugs and counterfeit cigarettes, manufactured by others, at locations where North Korea had diplomatic and trade ties. In the second phase from the mid-1990s, North Korea concentrated on the production of illicit goods including counterfeit currency and outsourced distribution to criminal syndicates. Since 2005, the regime has lost its monopoly over some illicit activities such as drug production and sales as a criminal market economy has sprung up, the report says. The findings provide “evidence that a market economy is developing in North Korea, in this case a criminal one that is feeding off the suffering and deprivation of the population,” said Andrew Natsios, co-chair for the Committee for Human Rights in North Korea, which released the report. “No longer limited to elites, the drug trade and other illicit activities now encompass a broader swath of North Korean society than before,” the report says. “This means that a wider array of North Koreans, elite and ordinary, have opportunities for economic activity that is not dependent on the state and benefit economically from illicit trade.” While the report notes one of the impacts of the growth of the drug trade in particular is increased threats to the overall health status of North Koreans, one upbeat way to look at the findings is that an expansion of the private sector increases destabilizing risks for the regime. North Korea has previously tried to limit market activity but with little success. It remains unclear whether growth in markets—licit and illicit–will ultimately unseat the dictatorship, but some analysts and defectors believe the growth of private economic activity is the best hope for eventual change.

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