ⓒ YONHAP News

Jangmadang is associated with black markets that began to emerge in North Korea amid the deepening economic hardships in the 1990s. Local residents used to trade things there before North Korea officially approved markets in the early 2000s. 

The word, jangmadang, literally means a marketplace or market grounds. Now, it has a more comprehensive meaning to indicate a place for trading things, commodity distribution and even some computerized market transactions. Basically, jangmadang represents a significant symbol of the emergence of the market in the communist North. 

The North Korean economy was operated under a centrally-planned system and the public rationing system. Accordingly, the state controlled the production and distribution of all products ranging from farm produce to industrial goods, with state-run stores supplying all the products. Food and industrial goods, in particular, comprised the basis of the state rationing system, so individuals were prohibited from trading them. But farmers’ markets were an exception. 

Before the 1990s, farmers’ markets would open in empty lots in small villages. There, older people in the villages would sell vegetables they had grown in their family gardens. Also, crops and food items that were not provided by the state were traded. The state allowed the operation of those local markets, which were not really like capitalistic markets. Rather, it seems local residents regarded them as a place for trading some foodstuff or enjoying their pastime. 

Farmers’ markets made up an insignificant portion of the North Korean economy. Basically, food and daily necessities were distributed by the state. At farmers’ markets, therefore, people would purchase things that were not supplied by the state and simply sell off something unnecessary or redundant.

But the situation changed in the 1990s. More and more people used farmers’ markets due to economic difficulties. 

Formerly, North Korea used to rely on China and the Soviet Union for more than 90 percent of crude oil. At the time, economic relations between socialist states were based on the so-called “friendship price system.” For instance, North Korea would import oil from those socialist countries at “friendship prices,” or very low prices, or in the form of loans. Using the oil, North Korea operated fertilizer factories to produce farm products. Fertilizer was indeed an important element in the local farming sector. After the collapse of socialist regimes, however, China and Russia requested North Korea to pay for oil at international prices. The North found it difficult to import oil. As a result, fertilizer production stopped and agricultural output decreased sharply. 

To make matters worse, North Korea was hit hard by natural disasters and severe economic difficulties in the 1990s. During the harsh period known as the Arduous March, the state distribution system fell apart, causing immense suffering and starvation among North Korean citizens who had depended entirely on the state rationing system. They had to sell something to secure food, and the number and size of private markets continued to expand. In the late 1990s, markets took up such a large portion of the economy that North Korean society would fail to operate properly without markets. 

It is said that 600-thousand to two million North Koreans starved to death during the Arduous March period in the mid-1990s. Most of them were urban workers. Those in farming villages subsisted on crops and herbs on nearby fields and mountains. 

Many North Korean residents sold their household goods one by one to get food. After they resorted to selling their house, they ended up as derelicts living on the streets. In the process, various household goods were traded by brokers in unofficial markets. There was no legal framework to regulate market activities and there were too many loopholes in the government’s crackdown on those unofficial, illegal activities. 

To control farmers’ markets, North Korean authorities carried out massive crackdowns, which did not prove effective due to strong opposition from residents and their uncooperative attitude. On the contrary, farmers’ markets continued to grow and more and more residents participated in market activities. Traded items and types of trading also diversified. Farmers’ markets expanded, even replacing the state distribution network involving food and consumer goods. The authorities had no other choice but to recognize the markets. 

In 2003, North Korea finally legalized farmers’ markets as general markets to allow for the trade of a variety of products including industrial goods. General markets that opened in each region in 2004 had a roof and a fence. The official markets were controlled by the management office in their region. Merchants were required to get a permit to secure a vending stall inside the market and to pay fees for using the stall. Sales hours and products for sale were also regulated by the office. 

North Korea authorized markets because local residents earned a livelihood through market activities. But more than that, the country began to use markets as a source of collecting taxes. The market management offices collected operating fees from merchants on a daily basis. Vendors who wanted to secure a good location within the market also had to pay fees regularly. The offices collected even higher storage fees. 

At first, the state tried to regulate unofficial markets. Then, it legalized them for effective management. And later, the state used markets as an important means of securing financial resources. 

Merchants at general markets dealt in diverse products, ranging from food and daily supplies to industrial products and even goods that were distributed illegally. Some markets in famous cities developed into wholesale markets to play an important role in establishing the national market network. Major wholesale markets in North Korea are located in the northeastern city of Chongjin and Pyongsong, north of Pyongyang. 

Markets in Chongjin sell a variety of products including inexpensive consumer goods and high-priced industrial products. There are about nine general markets in different districts in the city, with three markets located in the Pohang district alone. Markets deal in their own products such as general merchandise and bonded goods. In other words, each market tends to specialize in a particular product category. Markets in Chongjin generally distribute Chinese imports to North Korean people. 

Markets in Pyongsong(평성) also carry imported products from China but they mostly sell domestically-produced goods. Home-based factories clustered near Pyongsong function as a production base for shoes, which are supplied to markets nationwide. 

Although North Korea approved the jangmadang, it regulated the private markets in accordance with policy needs. The state set rules governing opening hours, the number of items displayed at stalls and even age limits for merchants. The North attempted to control the markets even more strictly through currency reform that was enacted in November 2009. 

The proliferation of private markets gave rise to a new affluent class known as donju. Their market transactions were not transparent and they hid a lot of money, resulting in rampant inflation. North Korea introduced currency reform that redenominated banknotes. Each individual was allowed to convert money up to 300-thousand won, meaning that the remaining local currency would be a mere scrap of paper. The purpose of the drastic currency reform was to stabilize prices and confiscate the hidden money of rich people. 

The reform drew a strong backlash from markets. The protest in markets exploded into a riot, which startled the authorities. Pak Nam-ki, then-director for planning and finance at the party, was held responsible for the failed reform. By killing him by firing squad, North Korea tried to ease angry public sentiment. 

North Korea’s currency reform aimed at reining in markets ended in failure, due to vehement opposition from local residents. The authorities loosened crackdowns on the jangmadang and backtracked on its policy of controlling the markets. 

After the currency reform, North Korean people distrusted the local currency and used the Chinese yuan or the U.S. dollar instead at the jangmadang. The reform worsened markets for a while but they expanded more rapidly after the reform. 

Market fences were extended, and much bigger dome-shaped roofs covered the markets. Markets were rearranged in a way to accommodate many more stalls and trade various more items in a convenient way. According to the 2017 data, there were 404 general markets across North Korea. But if unofficial, smaller ones are included, the number is estimated to be much higher now. The authorities seem to be conniving at those unofficial markets to some extent. North Korea now has several markets as large as Seoul’s Dongdaemun Market. Indeed, markets are flourishing in the communist state. 

Under current leader Kim Jong-un’s rule, North Korea has adopted market-friendly policies, introducing more elements of a market economy. In line with the trend, the jangmadang is developing in diverse forms. Markets are expected to play an even greater role in the North Korean economy down the road. 

North Korea’s recent policy stance shows that the state is determined to take an active part in the market domain. But it doesn’t mean the state will control markets. Rather, the state seeks to make the most of the market mechanism so it can accumulate as many financial resources as possible. This is Chinese-style socialism. In the past, North Korean authorities stayed outside of the markets and simply regulated them to collect taxes. But now, the North has included markets in the state domain to amass more capital. This qualitative change has somewhat lost steam in recent years due to the COVID-19 pandemic that suspended North Korea’s trade with other countries and affected local markets negatively. 

In the latest development, a freight train service between North Korea and China has resumed. Cargo transportation has reopened in Sinuiju for now, but it seems the rail traffic will be expanded to other regions after more disinfection facilities are established. If and when trade with China is normalized, I imagine North Korea will devise its market policies in a smarter way.

Markets have developed remarkably in North Korea since the country officially recognized them about 20 years ago. In a survey conducted on North Korean defectors who have resettled in South Korea, more than 70 percent of the respondents said that they had engaged in market activities in their home country. Clearly, markets account for a significant portion in North Korean household income and in the economy overall.