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At the Heart of North Korea's Troubles, an Intractable Hunger Crisis

The Rise of Private Markets

Barter trade ran wild in North Korea in the mid-1990s, at the height of the famine. It was a panicked response to the government's failure to supply food.

The immediate trigger for the famine was flooding in 1995. But the centrally planned economy had been in free fall since 1990-91, when the Soviet Union collapsed and cut off subsidies. Without free fuel for its aging factories and without a guaranteed market for its often shoddy goods, North Korea came unglued.

Kim Jong Il has explained some of what happened. "When the state was unable to supply food efficiently, people began to abandon their jobs and began searching for ways to acquire personal gains," he said in 2004.

In the temporary vacuum of state authority that accompanied the chaos of the famine years, bartering spawned a scruffy network of private markets. By the time Kim's government reasserted control at the end of the decade, small-town farmers markets, street-corner hawkers, roadside vendors and traders with stalls in big-city markets were keeping millions of North Koreans alive.

By 2002, Kim had approved limited reforms that allowed some of the traders to be licensed -- de facto recognition that they could provide what his government could not.

"Markets broke the government's ability to control the population using food," said Andrew S. Natsios, a former director of the U.S. Agency for International Development and author of a book about the famine.

Because private traders needed to move goods, elites cashed in by creating a transportation system, Ishimaru said. His reporters have smuggled out stories about military and police officials buying secondhand buses from China and establishing intercity bus routes for traders.

Stolen food aid helped prime the pump for market growth. Refugees from North Korea have told authorities in Seoul for years that donated food is widely available in private markets, said Lee Jong-joo, director of humanitarian assistance at South Korea's Ministry of Unification.

About 30 percent of international aid is diverted by North Korean elites and finds its way into markets, according to Marcus Noland, a Washington-based specialist on food and famine in North Korea.

U.N. officials do not dispute that estimate. Monitoring food distribution in North Korea is uniquely difficult, they say. Unlike any other aid recipient in the world, Kim's government demands sole responsibility for transporting and delivering donated food. Bureaucrats and military officers use their connections and government vehicles to fill market stalls with diverted food aid.

"Aid created a situation that gave powerful forces and institutions in the North Korean government an interest in seeing markets develop," Noland said. "If you gain physical control over aid that you receive for free, you can reap astronomical profits -- but only if you could sell it. It was unintended, but diverted food aid acted as a lubricant to the development of the market."

'Genie Is Out of the Bottle'

Kim has tried to throttle the markets, which he blames for "giving rise to egotism and collapsing the social order of the classless society." But their importance in filling North Korean stomachs continues to grow.

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