North Koreans Seeing the S-Word

In the shop windows of Pyongyang, North Korea, something unusual is on display.

In the rigidly communist nation, where shops are run by the state and almost no one has the means for impulse-buying, hand-written signs have begun to appear. “Sale – 10% off,” they say.

Such a sight would hardly be noteworthy in consumer crazy South Korea, but in North Korea the posters suggest a new eagerness to make money, which can only mean that profit has become a motive in Kim Jong Il’s “socialist paradise.”

“This has great significance because it implies an interest in selling,” says Rudiger Frank, professor of East Asian political economy at the University of Vienna. “In a socialist country, it is a burden to sell. If you run short of supplies you have to get more and consumer goods are generally in short supply. But if you don’t sell anything it doesn’t matter because you still get paid.”

When Frank was in Pyongyang in October – at the time of the 60th anniversary of the foundation of the Korean Workers’ party – he saw a poster in a watch store that read: “To celebrate the important holiday, we are selling many goods at a 10% discount from Oct. 10 until Oct. 31.” Foreign residents in Pyongyang also report seeing more “sale” signs, an oddity in a country where prices are fixed by the state.

“Obviously they are making a profit and they are benefiting personally – the owners or managers must have an interest in increasing their sales – otherwise why would they bother?” Frank said.

Buying and selling in North Korea has traditionally been tricky. To buy a television, a person needed money, a coupon saying they could buy a TV, and for televisions to be available.

The appearance of discounts shows that shops now have some flexibility over prices. Recent visitors to Pyongyang also describe an increased willingness to bargain.

Peter Beck, head of the Korea office for the International Crisis Group think tank, experienced a “nascent form of kiosk capitalism” at a street co-operative in Pyongyang.

“I only had 100 won – good for two cups of juice – but we bargained for three, and then they let us pay for ice cream in Chinese money, asking for more than the street rate,” Beck said.

The North Korean regime, meanwhile, remains highly aware of the political instability that could be generated if it lost its grip on the populace.

Some economists say the half-hearted economic reforms of 2002 – such as liberalizing prices and devolving management of state-run companies – merely institutionalized changes that had already taken place. But the regime has shown little enthusiasm for further reform. Pyongyang last year banned grain sales in markets and reintroduced the public distribution system of rations.

The North Korean leader’s visit to the Chinese boom towns of Guangzhou and Shenzhen last month prompted speculation that his regime might introduce more market elements. Kim toured the same cities that Deng Xiaoping, the former Chinese leader, visited during his famous “southern tour” in 1992, after which he repeated his call for more opening.

But Bruce Klingner, Korea analyst for the Eurasia Group political risk consultancy, said the tour was probably more of an attempt to win additional Chinese support to counter growing U.S. pressure. Beijing has long encouraged Pyongyang to adopt Chinese-style economic reforms

“Kim must balance the economic benefits of acquiring Chinese developmental assistance and increased business activity with his fear of the contagion of foreign influence on the North Korean populace,” Klingner said.