Accessibility links

North Koreans Face Tough Economic Conditions

While the global economy continues to struggle, citizens in North Korea continue to deal with austere currency reforms implemented in late 2009. North Korean experts say the reforms and a two-economy system have sapped the country's already thin resources.

Kim Kwong-Jin grew up in North Korea and was a member of the government, but he is now a fellow at the U.S. Committee on human rights in North Korea.

Kim has spoken publicly only a few times since he defected to the west in 2004. He participated in a recent discussion about North Korea at the American Enterprise Institute in Washington. He says the economic reforms in North Korea devastated the ability of the average person to buy common items.

"Literally, the North Korean government confiscated all of the cash from the people," he said. "The exchange rate was 100 old North Korean Yuan to one North Korean new Yuan. Which means they left only one-percent of cash in circulation."

Former North Korean official says the majority of North Korea's hard currency income goes to its leader, Kim Jong-il, to fund his lavish lifestyle, the military, and missile and nuclear programs. Kim says the new money flow has crippled an already delicate economy.

"This new economy began to suck all of the resources, the best companies, the best manufacturers, and the best banks in North Korea. And it destroyed the socialist system there," he said.

Kim says the effects of the reforms closed markets, caused hyperinflation and further strangled access to food and other basics.

Ambassador Robert King, the U.S. Special Envoy for North Korean Human Rights Issues, says the situation has stabilized to a limited extent.

"There are indications that inflation has been brought under control. Some markets are beginning to function again. But the economy seems to be functioning at a lower level," he said.

The difficult conditions for North Koreans have been nearly impossible to assess because information inside the country is tightly controlled by the government. But technology is beginning to reveal glimpses of the economy there.

Bruce Bechtol is a professor of international relations at the U.S. Marine Corps Command and Staff College in Quantico, Virginia. He says an influx of cell phones is beginning to change communication from North Korea to the rest of the world. While calls inside the country are very closely monitored by the government, some North Koreans are beginning to describe the economic situation through other cell phone networks.

"The cell phones that have been getting the word out to the South [Korea], to reporters, to NGOs [non-government organizations], and perhaps even government agencies are the cell phones connected to networks in China," he said. "These cell phones have exploded in proliferation in the past 18 months. And are causing the government in North Korea some real problems. In fact, the first word about disastrous currency reform North Korea recently undertook reportedly came from a cell phone call from North Korea to a newspaper reporter in China before the South Korean government had even heard about it."

Even though cell phones have the potential to open wider communication, Bechtol says contact with people outside of North Korea carries stiff penalties for those who are caught.

"For obvious reasons, the North Koreans have reacted to this very strongly," he said. "Those caught are put into prison camps and recently some have even been reported as executed."

Bechtol says he has hopes that conditions inside North Korea can improve with economic sanctions, which would essentially target the government and not the people.

Meantime Ambassador Robert King is seeking a resumption of the stalled six-party talks aimed at curbing North Korea's nuclear program, which could have a side effect of easing the overall economy.