ⓒ KBS

In North Korea, markets carry great significance in both economic and cultural aspects. 

For North Korean people, markets were new places that they had never seen before. Before markets were created, they spent their time in schools, workplaces, social groups or homes, where their identity was known. Markets, in contrast, were the first anonymous places ever. There, locals could express their personal needs and desires. For young people, markets were popular places to bring a date. Children would hang around with friends and have fun at marketplaces. North Koreans regarded markets as interesting places of consumption and culture, where no one could recognize them. Markets were also places where new trends were created. Things traded at the markets made a distinction between classes. If people possess particular products displayed at the markets, it would mean they belong to the upper or lower class of society. Markets turned into areas of great cultural significance. 

As places of commerce and anonymity, markets have expanded in North Korea, in terms of number and size. At the same time, their system has changed in quality as well. 

Apart from the typical market activity of selling and buying things from vendors, North Koreans engaged in other activities such as buying wholesale and selling at retail for profit-taking as well as delivering goods. In the process, brokers and deliverymen emerged as market participants. That is, markets were no longer a place for simple commodity transactions between a few people but developed into a systematic structure.  

In the past, commercial activity was illegal in North Korea. Of course, there were no merchants. But the situation changed after the emergence of general markets. Markets have given rise to a new wealthy class called donju, who amassed a big fortune through economic activities at the markets.

The donju class was created during the severe food shortages in the 1990s when North Koreans gradually learned how to trade things at markets. Some even ran loan-shark businesses, although the scale was small. By distributing goods to different regions, people got the distribution margin to accumulate wealth. They earned money not by producing and selling something but by obtaining the distribution margin or commercial capital. 

As the markets expanded, merchants were divided into wholesalers and retailers, while market participants engaged in more diverse activities. The Donju class also expanded their business scope, making heavy investment in warehousing, in particular. 

The Donju class began to join hands with those in power and focused on warehousing business. They would keep goods at their apartments near the markets and collected hefty fees from merchants. They made easy money on the business. For the lucrative business, some purchased apartments near the markets for the sole purpose of storing things. Some even built a storehouse. The donju earned a lot of money through warehousing. 

With powerful people at their back, the donju continued to accumulate capital. After they invested in housing construction, their capital increased even more. Merchants previously pursued margin-based commercial capital, which evolved into productive or industrial capital. 

By leveraging their ties to those with power, the donju turned their eyes to apartment construction. They were able to capitalize on the construction boom that lasted for about ten years after Kim Jong-un took power in the early 2010s. As the apartment prices skyrocketed, those who had invested in the early period earned a tremendous amount of money. 

Based on capital they secured through construction business, they began to build factories to gain productive capital. They brought in machinery and materials from China and built factories to produce goods locally. After getting a permit from the authorities, they sold the goods to become productive capitalists. 

Formerly, North Koreans would trade things at farmers’ markets at small villages. Afterwards, small-scale commercial capital emerged, with its size expanding later. It then turned into construction or productive capital. Now, even the state cannot control the capitalists easily. 

The rapid surge of private markets or jangmadang facilitated the growth of the donju, the new generation of capitalists in North Korea. According to data released from South Korea’s National Intelligence Service a few years ago, it is estimated that there were 240-thousand donju who possess between 50-thousand and 100-thousand US dollars or even more in North Korea. But there are no specific figures on exactly how many donju exist in the North and how large their capital is. But their lavish lifestyle is said to be beyond imagination. 

The capitalists in North Korea grow rich day after day. Around 2002, those living in apartments priced at 10-thousand dollars were considered very rich. Those apartments were mostly located in commercial business centers where money changers were found. Just a few years later, the housing prices jumped to 40-thousand to 50-thousand dollars. Amid the apartment construction boom in the 2010s, 100-thousand-dollar apartments were occupied by the middle class. 150-thousand- to 200-thousand-dollar apartments are found in the Central District in Pyongyang. Most of the owners of those expensive apartments are those at the top of the donju list. They install marble tile floors, raise pet dogs and let their children get private tutoring. Those who have nice passenger cars and live in apartments priced at 100-thousand dollars or more are regarded as mid-level donju.

The donju’s growing influence is evident in North Korean society overall, especially in private financing. The donju play a role of banks in North Korea, where there are no private banks. Until the 1990s, North Korea’s private money market was mostly about currency exchanges and extremely high interest loans. 

As the markets flourished and the donju wielded greater influence, the private money market became more complicated and specialized. These days, the donju deal with loans, corporate investment, person-to-person money transfer and even cross-border remittances between individuals and businesses. Based on the huge capital they gained from private financing, the donju make investment in various areas, including transportation. It is said that the number of private transport companies run by the donju has been on a steady rise lately. In most cases, individuals in collusion with central government agencies can get business permits, and purchase vehicles for the transportation business. 

Markets began to crop up across North Korea. In the nationwide market network, rice prices in border cities should be equal to those in inland areas. That is to say, products should be distributed at market prices in a stable way. The donju made great contributions to this part by introducing new transportation means to distribute goods rapidly. 

Indeed, transportation plays a crucial role in distribution. North Korea’s outdated railroad system could not meet the market demands. Markets could not function properly due to poor traffic infrastructure in North Korea. The donju resolved this problem. They asked the authorities to give them management rights and proposed opening a route between Haeju and Sariwon. They brought in used buses from China and operated them to transport goods using the new route. The new service drew an enthusiastic response. Businesspeople were willing to pay fees to use the fast transportation service. More vehicles including taxies and cargo trucks were used for transportation and transport routes diversified to develop the nationwide distribution network. Transportation also involved warehousing and laborers who carried goods. In short, the transportation system created various networks. 

Under Kim Jong-un’s rule, North Korea has adopted various market-friendly policies to promote the donju’s investment officially and unofficially. By implementing new economic management measures called the “socialist corporate responsible management system,” the communist state granted greater autonomy to enterprises and organizations. North Korea revised the Enterprise Act in 2014 to allow individuals to invest in enterprises, in an apparent bid to encourage the donju to make as much investment as they wanted and to develop the economy eventually. 

Leader Kim Jong-un may have been under heavy pressure to produce meaningful outcomes and show his leadership. But it was difficult to produce results based on state finance. So the leader took a “choice and concentration” approach. North Korea poured finance into projects that would show visible outcome, such as the creation of Ryomyong Street in Pyongyang, while allowing private investors to build apartments and cultural facilities and giving them rights to sell them in lots. The results from private investment were reported to the Supreme People’s Assembly as the government’s achievement in construction overall. Kim Jong-un created his achievement by drawing in private investments, which acted as the catalyst for expanding and developing markets further. In other words, the leader promoted his achievement, ensured profits for private investors and provided goods to residents successfully. 

In line with the development of markets and the emergence of wealthy capitalists, namely, the donju, widening income gap has deepened economic polarization in North Korea. Still, markets were indisputably the starting point of a market economy in the communist North and served as an important channel, through which outside products and culture flowed into the country. 

At present, North Korean markets have apparently been hit hard by international sanctions and the border shutdown triggered by the COVID-19 pandemic. Researcher Hong explains how North Korean authorities are trying to tackle this difficult situation. 

From the mid-1990s to around 2015, North Korea took the distribution margin from Chinese imports. North Korean markets depended entirely on imports from China. Since 2015, however, the proportion of locally produced goods has increased. Kim Jong-un believes it is important to run factories domestically, even using private investments. Now, North Korea stresses the need to produce and sell things locally, although raw materials and equipment might be imported from China. It also calls for procuring as many indigenous materials as possible. As trade with China had been suspended during the pandemic, I imagine the North Korean leadership feels the need for the local production of goods more acutely and considers managing and controlling local markets properly for economic growth.

Markets have taken root as a large, vital axis that keeps the North Korean economy moving, regardless of the authorities’ intention. Now, the communist North should inevitably coexist with a market economy. With both internal and external environments worsening, it remains to be seen how markets will change North Korean society.