Russia in Global Affairs

For citation, please use:
Lankov, A.N., 2026. Power and Market Commerce in the DPRK: From Prohibition to Recognition. Russia in Global Affairs, 24(1), pp. 200–216. DOI: 10.31278/1810-6374-2026-24-1-200-216

In the early days of North Korea’s statehood in 1958-1984, its leadership imposed maximal restrictions on private commercial activity. This anti-market policy was unparalleled in its severity, with the possible exception of China during its Great Leap Forward. It was gradually revised in the mid-1980s, due to economic hardships, but even today the political elite remains suspicious of markets as a possible source of political instability, and thus constantly vacillates in its policy regarding them.

This article considers North Korea’s market policy across five stages: 1956–1984, 1984–1992, 1992–2002, 2002–2010, and 2010–2020.

1956–1984: Between Elimination and Control

This period, which can be called the ‘Kim Il Sung era,’ began with the introduction of extremely severe restrictions on market operations and private economic activity. The DPRK economy was maximally decommercialized, even by socialist countries’ standards (Hwang, 2017, pp. 32-86). Most products, including almost all basic foods and consumer goods, were not sold, but distributed in accordance with officially approved rations.

The transition to total rationing began in 1957, following the Cabinet of Ministers’ special decision banning all private trade in grain, which was and remains the staple food for most of the population (North Korean Government, 1961, p. 533). Over time, the rationing encompassed practically all essential items, and by the end of the 1970s only a few goods, such as toys, books, and stationery, could be purchased without ration cards, coupons, or stamps (Lee et al., 2007, pp. 48-49).

In most socialist countries, rationing was an emergency measure. But in the DPRK, in the 1950s through 1980s, rationing was seen as the norm and even ideal.

As Kim Il Sung said in April 1978: “Some executives have repeatedly expressed the opinion that we should abolish rice distribution cards and start selling rice on the open market at regular prices. […] But I told them that the system of rice distribution cards in our country is a good system because it allows all people to live a good life without worrying about food, and therefore we should not think about scrapping it” (Kim, 2006a, pp. 441-442).

Suspicion or even hostility, towards markets and commerce more generally, may have been held not only by the elite, but by all of society (until the early 1990s). The author saw that much of the urban population was hostile towards vendors, and considered rationing to be quite normal (see also Min and Ko, 2018, p. 110).

Yet this does not mean that markets did not exist. Although the government saw no place for them in the far-left economic course that it began pursuing in the late 1950s, it is soon became clear that rationing could not fully meet even the most basic of needs, and markets could not be eliminated completely (Chŏng, 2011, pp. 233-235).

This acknowledgement was officially formalized at the November 1965 Plenary Meeting, following the Central Committee’s discussion of the ‘market issue.’ Similar instructions came from Kim Il Sung personally in 1969. Yet, despite this legalization, markets were restrictively regulated (beginning in 1969) even by socialist countries’ standards. Each county was allowed only one market, which could work only one in ten days, and only on the outskirts of a population center (Hwang, 2017, pp. 118-119).

In 1969, Kim Il Sung publicly admitted that the authorities had so far been unable to completely eradicate private economic activity. He noted that even if markets were banned completely, peasants would still sell homegrown chickens and eggs “somewhere in the backyard.” He thus declared the tolerance of markets to be justified at the country’s current stage of development: “If we forcefully get rid of the markets, this will not solve the problems but will only create inconvenience for the people and turn many honest citizens into violators of the law” (Kim, 2002, p. 24). He reaffirmed this pragmatic position again in 1977, when he said that “there is nothing wrong” if a worker buys chicken at the market to celebrate his daughter’s wedding, or to treat a particularly dear guest (Kim, 2006b, p. 282).

At that time, the government assumed that markets would mainly be used by peasants to sell “surplus” groceries produced on their personal plots.

However, household plots were restricted to a mere 100m², meaning that peasants had essentially nothing to sell. Moreover, the 1957 order banned trade in rice, corn, and other cereals. This ban was never officially lifted, although in practice it ceased to be observed in the late 1980s.

In this context, of particular interest is a report by Dmitry Kapustin, a young and observant Soviet diplomat who visited Pyongyang’s markets in 1969. Kapustin described the city’s Central Market as a rectangular site, unpaved and dirty, with only a few buyers and sellers—about 100-150 of the latter on Sundays, and about 30 on weekdays. They sold the simplest items and the choice was very limited. Kapustin concluded that “Pyongyang’s markets play almost no role in supplying the population with food. […] The amount of goods brought to the market is small (a backpack and two bags at most). It seems that older people come there to talk to each other, rather than to sell their goods.” Kapustin noted the meager range of wares. The fruits and vegetables largely came from household plots. The brooms, wooden spoons, and baskets on sale were of unclear origin, but their low quality and quantity suggested that they were homemade. At the end of his report, Kapustin said that Pyongyang’s Central Market in 1969 “was nowhere close to a colorful Oriental bazaar” (Kapustin, n.d, pp. 215-219).

1984–1992: Easing Control

The literature often describes private trade in North Korea as beginning to grow only after 1990. That is not exactly true. The economic catastrophe of the 1990s, officially referred to as the Arduous March, indeed triggered growth in markets and the private-commercial sector more generally. Yet incipient changes in official policy (and economic reality) appeared a little earlier, in 1980-1985.

In many ways, these were forced changes. In the late 1970s and early 1980s, the DPRK’s economic situation rapidly deteriorated. According to official statistics, production of grain and key industrial commodities (steel, fertilizers, cement, fabrics, etc.) fell after a peak in the late 1970s (Ward, 2021, pp. 101-127). Faced with growing economic problems, the government decided to revise the market management system that had been in effect since 1969. The new rules, enacted in 1984, eased some of the previous restrictions: markets could operate every day (though most continued to work only once every ten) and within urban areas. And there could be more than one per county (Hwang, 2017, p. 127).

Immediately after the 1984 reform, many new markets began opening in the country. For example, the construction of a new market in Haeju County began in 1984, i.e., as soon as the previous restrictions on private trade were loosened. The new market was designed to accommodate 200 vendors and had permanent counters, some covered from the elements. The market was fenced off, locked at night, and in operation daily according to a schedule. In addition to this central market, which quickly became the core of the Haeju County market network, seven more opened in the county in the mid-1980s, but operated only once every ten days (Kwak, 2012, p.12; Ch’oe, 2020, pp. 97-99).

It is not surprising that, when I visited the DPRK in 1984-1985, I saw a picture strikingly different from Kapustin’s description. Pyongyang’s Central Market was crowded on Sundays, with several hundred people trading there. In addition, by that time, each Pyongyang district had its own market (compared to just two for the entire city in 1969). A district market was usually an asphalted area with shopping stalls, surrounded by a brick or concrete fence. Apples, meat, sprouted soybeans, homemade sweets, and occasionally potatoes were on sale. However, most vendors sold not food, but manufactured goods such as clothing, foreign medicines, and films (in contrast to the Soviet Union, where manufactured goods could rarely be found in markets in those days).

Markets were also revived in the early 1980s by the emergence of at least two new sources of legal or semi-legal goods.

Firstly, in the early 1980s, the government encouraged cottage industries that were formally state-controlled but actually private. The ‘3 August Movement,’ initiated in 1984 by Kim Jong Il, recognized small private production and home workshops, and permitted the sale of some of their products (Chŏng, 2007; Yun, 2017; Chŏng, 2011, pp. 258-259).

Secondly, in 1982, the DPRK and China agreed to permit relatives to visit one another. Most of the travel was from China to the DPRK, since the North Korean authorities were not enthusiastic about letting their citizens go overseas, even to the ostensibly ‘friendly’ countries. These visits served as legal cover for shuttle trade, which mainly benefited the hwagyo (Korean pronunciation of Huaqiao, Chinese citizens living in the DPRK) (Rim, 2002, pp. 167-170; Ri, 2013).

1992–2002: Economic Catastrophe and Rising Markets

Although the first signs of reviving private trade and handicraft production appeared in the 1980s, this was greatly accelerated by the external shock of the socialist camp’s dissolution in the early 1990s.

This was a heavy blow to the DPRK, instantly stopping Soviet assistance, both direct and (in the form of subsidized trade) indirect. Exact data on the scale of the economic catastrophe of the 1990s are still unavailable. However, some estimates, including official ones, are worth consideration. In 1997, the DPRK informed the IMF that its GDP had shrunk by half between 1993 and 1996 (IMF, 1997). The South Korean Central Bank estimates that North Korea’s GDP contracted by a third in 1990-1998 (Noland, 2004, p. 22). Finally, Lee Kisŏng, a North Korean economist who often acts as a government liaison to foreigners, reported in 2005 that the government’s revenue had fallen by half in 1994-2000 (Han, 2019, p. 133).

In 1991–1992, rationed goods, including food, were handed out with a delay and, increasingly, in reduced amounts. At first, this was mainly in remote areas, but in 1994–1995 it became common in large cities, too. Local distribution networks, responsible for supplying the population with consumer goods and some foodstuffs, were closed down in 1990–1995.

The collapse of the rationing system, to which most people had become accustomed over the decades, was perceived as a disaster.

The economic catastrophe and the collapse of the rationing system led to the rapid growth of markets in both quantity and size. They also increasingly took central positions, often near railroads (the primary means of intercity transportation in the DPRK).

A typical example is the city of Hoeryŏng on the border with China. During Kim Il Sung’s rule, i.e., until the mid-1980s, Hoeryŏng’s market was located on the far outskirts of the city and opened once every ten days, as prescribed by the 1969 system. The market started working daily around 1990, and was officially moved much closer to the city center in 1995. In 2006, it was relocated again, now to the very center of the city, quite close to the memorial complex for Kim Jŏng-suk (wife of Kim Il Sung, mother of Kim Jong Il, and native of Hoeryŏng) and to the local administration building (Kwak, 2017, pp. 167-168).

The market also expanded dramatically. While in the late 1980s, no more than a hundred people sold their products (and only on market days), in the 2010s, 2,500-3,000 vendors traded there every day (Kwak, 2017, pp. 166-170), a several-hundred-fold increase in that 25-year period.

In the late 1990s, markets began receiving roofs, storage rooms, canteens, and parking lots for bicycles (the primary vehicle of personal transportation). By 1995-2000, almost all markets in the country were operating daily (Hong et al., 2016, p. 64).

Beginning around 2000, vendors could buy or rent places at the market (usually sections of a counter) for long periods, at least several years (Hong, 2016, pp. 100-101).

In addition to official permanent markets, numerous unofficial markets sprang up at unequipped sites, where market fees were naturally not required. These are often called ‘grasshopper markets,’ because police raids cause vendors to scatter with their goods like frightened grasshoppers (Kim, 2004, pp. 210-212).

By the end of the 1990s, two categories of vendor had emerged: sedentary and wandering (a categorization that is not equivalent to retail vs. wholesale). Sedentary vendors trade at the same place, usually an outlet or warehouse. Wandering vendors purchase goods in one region and sell them in another.

The wandering vendor is typified by a woman who sold Chinese cigarettes wholesale since 1996. A resident of Pyongyang, she regularly visited border areas to purchase the cigarettes from smugglers. In 1996, a carton of ten packs cost her 240-280 North Korean won, but could be sold in bulk in Pyongyang for 380-400 won. The young entrepreneur traveled by train. Since all trains to and from Pyongyang always have police on board, she had to make a deal with them. Having received their share, the policemen never asked any questions, even helping her to move the goods and guarding them if necessary. On average, each trip took about a week and, in 1996-1997, brought about 20,000 won in profit. Before fully engaging in private trade, the woman had worked as a telephone operator, receiving an official salary of 80 won. Now, each trip earned her 250 times (!) her previous monthly paycheck, and she usually made two to three such trips every month (Lankov and Kim, 2008).

Between 1990 and 2001, the central North Korean leadership vacillated between tolerance for markets, which were considered a ‘necessary evil’ amid hunger and economic upheaval, and attempts to suppress them.

This resulted in an internally disputed policy that was presumably influenced by three factors.

Firstly, county, city, and provincial officials were interested in preserving and developing markets, and preferred to stay aloof from campaigns to eradicate them.

Secondly, the central authorities tended to view vendors, and almost all other people engaged in the spontaneously emerging private economy, as a politically suspicious social group, potentially hostile to the regime. This group’s growth was seen as a threat to political stability, the government’s highest priority.

Thirdly, despite the ideological rejection of markets, and fears of their negative effects on domestic political stability, the central leadership realized that they were necessary for the people’s survival.

The central leadership’s attitude to the spread of market trade in the 1990s is well illustrated by Ri Sin-hyŏn’s novel Kanggye Spirit. Published as part of the Immortal Leadership series, it was dedicated to the deeds and achievements of Kim Jong Il. This series is directly supervised by the WPK Central Committee, so all novels in this collection can be considered the most official of all official North Korean literary works.

Kanggye Spirit describes a conversation between North Korean party officials, in the border town of Kanggye, about opening a border market with China. The novel unequivocally sides with the official who opposes the plan, who says: “If, in the current unstable situation, we open a market on the island of Pyŏldŭng [on the border], then what will creep here through it, using it as a steppingstone? If people go crazy for money, they will stop at nothing. Who can guarantee that the corrupt capitalist way of life will not penetrate here and corrupt the consciousness of our people?” (Ri, 2002, p. 279).

Thus, even at a time when most people depended on markets for survival, the country’s top leadership remained deeply suspicious of them. The novel explains that they might threaten the existing regime, by disseminating unwanted information and views about the outside world.

However, the government faced many obstacles to anti-market measures, which often worsened people’s economic situation and provoked discontent. Moreover, local administrations and police—closely linked to the markets, and most directly exposed to the possible political, economic, and social consequences of suppressing them—were leery of such measures.

The early 1990s were marked by a series of vigorous anti-market campaigns. The authorities set up ‘groups for the eradication of anti-socialist practices’ to combat private economic and commercial activity (Pak, 1990, p. 78). However, this campaign was soon suspended, and the 1994-1997 famine became a time of tolerance for markets.

In August 1997, the government resumed restrictions on market trade. The police warned that anyone selling ‘stolen grain’ would be ‘severely punished.’ Since the government had in 1957 declared all grain to be under its exclusive control, any privately-owned grain would technically be stolen (although the ban on trade in grain essentially lapsed around 1990) (Pak, 2004, p. 79). This campaign continued throughout 1998 and culminated in early 1999 (Han, 2019, p. 109). In the spring of 1999, propaganda trucks with loudspeakers drove through the streets of P’yŏngsŏng (home to the country’s largest wholesale market), urging people to fight the “evil capitalist spirit of profit.” At the same time ‘groups for the eradication of anti-socialist practices’ were particularly active in targeting street vendors (Pak, 2004, p.79). However, in the summer of 1999, the campaign was suddenly rolled back, as the government began preparing a major revision of policy.

2002–2010: The Triumph of Inconsistency

In the summer of 2002, North Korea began implementing the ‘Measures to Improve the Economic Management System,’ often referred to as the ‘July 1st Measure.’ It called for a major overhaul of the country’s economic system.

This included a radical change in markets’ status. On 5 May 2003, the Cabinet of Ministers issued Decree 27, allowing permanent and officially-recognized markets and introducing new rules of their operation. The old official term ‘peasant market’ was dropped: markets were no longer intended for peasants to sell surplus produce or handicrafts (Han, 2019, pp. 111-112). All vendors were required to pay a market fee, which depended on the location and size of the vendor’s place, as well as on the range of goods sold. Trade outside the markets was prohibited; markets were to be regularly inspected by the sanitary authorities (Cha, 2007, pp. 86-87). The authorities initially also intended to control the prices of basic goods, but all such attempts failed (Han, 2019, p. 119).

However, the reforms and liberalization of 2002-2005 were short-lived. In October 2005, the grain rationing system, and ban on private trade in grain, were restored (although cereals had returned to markets by the end of 2006 (Yan, 2012, p. 91)). And every fall throughout 2005-2009, the government announced new market restrictions. (By fall, the crop had already been harvested and stored, so the economic damage caused by the orders was minimized.)

In December 2006, able-bodied men were forbidden to trade in the market. (But men rarely did so anyway.) More seriously, at the end of 2007, young women were forbidden (Han, 2019, p. 199). The minimum age varied by region from 40 to 50 years (Yan, 2012, p. 94), with younger women meant to work at state-owned enterprises or stay home as housewives. Merchants devised several schemes to limit the damage, such as the registration of elderly women or disabled people as the nominal traders (Lee, 2008, pp. 106-107). Meanwhile, the central authorities kept ramping up pressure. In October 2007, the WPK Central Committee released a booklet on the “problem of markets” (Ryu, 2008, pp. 83-85), which describes them as sources of unrest and pervaded by selfish greed (“vendors drive up prices and get excessive profit”). Markets sell smuggled South Korean goods that create dangerous “illusions about the enemy.” “If there is disarray and chaos at the markets, who knows what kind of monster may grow there. Now people get drunk to unconsciousness and cannot get home, lying pitifully on the lawns or near bus stops—there is no way to tell whether they are alive or dead. If a person is drunk, he can say anything, get involved in a fight or provoke public unrest. This is exactly what the enemy expects, using the situation for his evil propaganda” (Han, 2019, p. 127). Yet the document concluded that markets are unavoidable at present, in need of proper control (Ryu, 2008, pp. 83-85).

In late October 2008, it was announced that starting 3 January 2009 markets would operate only once every ten days, and the range of products permitted for sale was restricted (Yonhap, 2009; Han, 2009, p. 100). But nothing happened in January, and the markets continued to operate as usual. To save face, the government later announced that the new regulations had been postponed for six months, and the plan was never mentioned again (Yonhap, 2009).

The entire anti-market campaign of 2005-2009 culminated in the monetary reform of 30 November 2009, according to which old banknotes were exchanged for new ones at a nominal rate of 100:1, and prices were cut at the same ratio. Yet official salaries remained nominally unchanged (Cho, 2010; Kim, 2010), which meant an unprecedented 100-fold pay rise.

Predictably, this unorthodox decision led to hyperinflation.

The reform’s stated purpose was to undermine market trade. On 4 December 2009, a Central Bank official told a Japanese newspaper that “we expect that the planned distribution system, not the market, will play a key role in the economy now, thereby strengthening planned economic management” (Chŏng, 2009).

Yet the money supply’s hundredfold growth soon had its consequences. The 9 December 2009 implementation of price ceilings at markets proved futile: vendors refused to sell, expecting prices to rise. In response, the government closed all markets (DailyNK, 2010) and stores selling goods for foreign currency (DailyNK, 2009). But vendors simply gathered at the markets’ closed gates and traded right there. By early January 2010, the actual price of rice was ten times above the official ceiling, and by January 2011, 90 times above (Daily NK, 2009-2025). Markets’ closure left people unable to buy even basic essentials. A wave of discontent forced the government to back down.

Political responsibility for the failure was placed on Pak Namgi, who headed the financial department of the WPK Central Committee during the reform’s preparation. He was arrested and executed for the reform’s sabotage (Han, 2019, p. 218). In 2013, a news agency reported that traitors had planned the reform to harm the country (Korean Central News Agency, 2013).

2010–2020: Reluctant Acknowledgement of the Obvious

This drew a line under the anti-market policy of 2005-2009. The monetary reform’s failure made the political risks of anti-market measures clear even to the most stubborn of hardliners.

In May and June 2010, the government issued a series of instructions and circulars, the best known and most important of which were the “May 26th Instructions of the WPK Central Committee.” These lifted almost all of the 2005-2009 restrictions on private economic activity and clearly stated that markets and vendors should not be touched (Kwon, 2016). The government reassumed its stance from 1992-2002, neither encouraging nor suppressing market trade.

This policy continued until Kim Jong Il’s sudden death in December 2011. Power predictably passed to his son Kim Jong Un, who at first maintained the previous course, and then began encouraging market trade more vigorously, in line with the 2002-2004 reforms.

Kim Jong Un’s reform focused on broader autonomy for state-owned enterprises, greater tolerance for large private businesses, and changes in agricultural policy. The new regulations did not affect retail trade, markets, or household production, but the economy’s overall liberalization benefitted them, too. In 2012, the government allowed private investment in public stores (Han, 2019, p. 248). The number of markets continued to grow, reaching a record 414 by 2022 (Hong, 2023, p. 9). Overall, the 2012-2020 period saw a steady growth and expansion of markets, which remained the center of consumer life across the country. The country’s next round of reforms was interrupted by new and particularly tough sanctions imposed by the UN Security Council in 2017-2019 (a topic beyond the scope of the article). Nevertheless, markets continued to develop thanks to a fairly stable legal environment.

However, Kim Jong Un’s reform drive started waning in 2018, taking its toll on the markets. The police began to monitor compliance with bans on the sale of certain goods, and to prosecute unlicensed vendors. The opening hours of markets were reduced. Most notably, the sale of grain was banned in 2022, although enforcement was just as complicated as it had been in 2005 (Han, 2023, p. 486-491).

*  *  *

The DPRK’s policy towards markets and private commercial activity is of considerable interest, as there are almost no countries in world history that have tried to restrict private trade to the extent that the DPRK did in 1958-1992. However, in an acute economic crisis, the state proved unable to ensure the normal functioning of the rationing system, and basically had to allow private commercial activity.

Yet the North Korean ruling elite remains wary and hostile towards private trade. Some view it as a dangerous challenge to official ideology, others as a source of forces hostile to the existing system. Trade in the conventional sense has been and still is seen, throughout most of the DPRK’s history, as a forced emergency measure. Such an approach is economically detrimental, but can hardly be overcome in the foreseeable future.

The specifics of North Korean market trade are of practical and theoretical interest.

Firstly, North Korea has followed a unique path from a state-run socialist economy to a market one. It has been largely spontaneous, and even when the government has taken initiative, the measures were partially masked and their market nature officially denied. This was and remains necessary because sharp ideological swerves could jeopardize political stability.

Secondly, understanding North Korea’s economic transition is important for Russia-DPRK cooperation. Many organizations that seem state-owned to an external observer, including Russian entrepreneurs and companies, are actually private. North Korean partners may use politically expedient rhetoric, but they are guided by market laws, seeking foremost to maximize profits, preferably as quickly as possible.