North Korea Turns Towards Private Markets

The WaPo is reporting that North Korea is turning towards private markets to stave off a food crisis, and has lifted all restrictions on them.  I blogged earlier on indicators that the regime's grip on its citizenry may be slipping, as large riots and civil disturbances ensued when they reversed market reforms last year.  So its seems the regime is indeed backing down:

In recent weeks, according to North Korea observers and defector groups with sources in the country, Kim Jong Il's government admitted its inability to solve the current food shortage and encouraged its people to rely on private markets for the purchase of goods. Though the policy reversal will not alter daily patterns -- North Koreans have depended on such markets for more than 15 years -- the latest order from Pyongyang abandons a key pillar of a central, planned economy.

With November's currency revaluation, Kim wiped out his citizens' personal savings and struck a blow against the private food distribution system sustaining his country. The latest policy switch, though, stands as an acknowledgment that the currency move was a failure and that only capitalist-style trading can prevent widespread famine.

"The North Korean government has tried all possible ways [for a planned economy] and failed, and it now has to resort to the last option," said Koh Yu-hwan, professor of North Korean studies at Dongguk University in Seoul. "There's been lots of back and forth in what the government has been willing to tolerate, and I cannot rule out the possibility of them trying to bring back restrictions on the markets. But it is hard for the government to reverse it now."

Because North Korea operates in secrecy and isolation, outside observers rely on informants and accounts from defectors. In this case, experts agree that the food shortage is dire. Several analysts who monitor and travel to North Korea said that in recent weeks, Pyongyang has abandoned almost all its rules about who can spend money and when. That would seem to indicate that Kim -- who once equated free-market trading with "egotism" and a collapse of social order -- now wants to rehabilitate the markets damaged in November.

There's evidence in scholarly research that shows authoritarian governments who open up too quickly to democratic reforms become destabilized.  North Korea may be trying to imitate the Chinese model of gradual economic reforms to harness some support and legitimacy of the regime while still keeping a clamp on any political reforms. The hermit kingdom can't stay isolated forever in the same manner of other small nations.  Korea is a divided country on a peninsula, and standing in stark contrast to North Korea's poverty is it's rich sibling of South Korea. Just as East and West Germany eventually reunited, I feel that history will eventually lead to reunification of the peninsula. Unless the North Korea regime, desperate to retain vestiges of legitimacy, provokes a war with South Korea.