Benchmarking North Korean Economic Policies; The Lessons from Russia and China

This study attempts to provide benchmarks of North Korean institutional changes that signal the increased role of markets, looking at macroeconomic management, introduction of market-supporting policies, and provision of market-supporting infrastructure. The weight of the evidence indicates that North Korea today is an unraveling command system, which shares many features with China in 1978 or the former Soviet Union in 1985. A rising share of household purchases of food and consumer goods in informal markets at market-determined prices raises the question of whether a legal, market-oriented consumer sector is emerging. The answer depends on whether there is a legal, decentralized population of non-state producers, not merely black-market traders. Alternatively, the appearance of market-based trade may simply signal the ability of decision-makers within the state apparatus to convert their access to rationed goods at low prices into hard-currency, black-market revenues. A much more worrisome indicator for the planners is the indirect evidence that the DPRK is experiencing, not just a one-time adjustment from controlled to market prices, but a destabilizing approach to hyperinflation.