Individual Motivations
North Koreans have a variety of motivations for participating in the black market economy. Many are driven by poverty and need to supplement their income to meet their basic needs. The average income in North Korea was estimated to be around $1,100 per year, which falls far short of the cost of living. In other cases, black market activities are driven by a desire to gain access to commodities and products that are not available through regular state-controlled channels. The government regulates all economic activity, leaving citizens to resort to alternative markets in order to purchase things such as consumer electronics and clothing.
In addition to individual motivations, the black market economy is a vital source of foreign currency for the North Korean government. As a result, the government has at times openly tolerated the black market in order to generate foreign currency, while also discouraging and punishing it as a means of maintaining control over the population. This further encourages North Koreans to participate in the black market economy as a means of survival.
Denuclearization Impact on North Korea’s Economy
Since the denuclearization of North Korea and the resultant economic sanctions, the black market economy has flourished due to a decrease in economic activity and increased pressure from international actors. The sanctions are meant to limit North Korea’s ability to generate foreign currency and have had a dramatic impact on the nation’s economy. This has resulted in inflation and a decrease in the value of the North Korean won, making it nearly impossible for individuals to purchase basic necessities. As a response to this crisis, citizens have turned to the black market for resources and goods.
The art of bartering has also become a vital form of transacting on the black market. Without access to the formal financial systems, North Koreans are relying on the informal trading of goods and services, such as food and fuel, in order to meet their needs. This has led to an increase in the number of transactions occurring in the black market and a consequent rise in its prominence and power.
Corruption and Human Rights Violations
The black market economy in North Korea thrives off of corruption and human rights violations. Many black market operators, also known as “brokers”, are incentivized to commit acts of bribery, fraud, and extortion in order to maintain their operations and gain access to coveted items. In addition, a number of these brokers have been found to be complicit in human trafficking, mainly involving bringing North Korean citizens to China for the purpose of exploitation in the sex industry.
These activities create an environment of lawlessness and undermine the power of the government. This has implications for the protection and promotion of human rights in North Korea, as citizens living in poverty are more likely to be exploited by brokers. The illicit activities on the black market are further strengthened by the lack of access to international aid from the United Nations, as the government limits or blocks assistance from reaching those who need it most.
Social and Political Impacts
The black market economy has significant implications for North Korean society. Many black market operators are not willing to work with the government at all, thus leading to more distrust between the government and North Korean citizens. This lack of trust in the government has further contributed to a feeling of alienation and weakened loyalty to the state. In addition, the majority of transactions that occur on the black market are conducted in US Dollars or Chinese Yuan, both of which are far more valuable than the North Korean Won.
This has created a hierarchy based on ability to access foreign currency, with those who are able to access it being viewed as the most powerful and influential members of the society. This has severe implications for the political landscape in North Korea, as those at the top of the pyramid now wield immense amounts of power.
International Actions
International actors, including the United Nations and United States, have taken steps to halt the spread of the black market economy in North Korea. Through increased sanctions, they seek to reduce the country’s access to foreign currency and limit its potential influence over the international trading system. In addition, the United Nations has created a Working Group on the Issue of Human Rights in the Democratic People’s Republic of Korea to investigate and address the human rights violations occurring on the black market.
The international community has also increased pressure on China to crack down on its citizens engaging in economic activity with North Korea, as the majority of black market operators and brokers are Chinese nationals. The US has threatened to implement secondary sanctions on Chinese companies and individuals found to be aiding the North Korean black market economy, a move which could potentially have a detrimental effect on China’s economy.
Role of China
China plays a unique role in the North Korean black market economy. The country has traditionally been North Korea’s closest ally and continues to be a major provider of humanitarian assistance. At the same time, China is home to the majority of black market operators and brokers, meaning that it is not only a source of support for North Korea, but also an active participant in the illicit economy.
The Chinese government has made efforts to curtail the activities of its citizens, but these efforts have not been very effective. Chinese traders, businessmen, and black market operators continue to play a role in the North Korean economy and remain largely outside the reach of the Chinese government.
Solutions
Given the size and complexity of the North Korean black market economy, finding a solution to this problem is no easy task. Nonetheless, there are a number of actions that can be taken to improve the situation. International actors must continue to place pressure on the North Korean government to open up its economy and allow for more freedom of trade. In addition, the United States and other countries should increase their sanctions and ensure that these are being implemented to the fullest extent possible.
Furthermore, China must continue its work to combat the activities of its citizens in North Korea, particularly those involved in the black market. Finally, the United Nations should increase its efforts to provide humanitarian aid to the people of North Korea, in order to reduce the need for individuals to resort to the black market for their basic needs.
Economic Mining
As sanctions have become increasingly effective, North Korea has shifted its focus to economic mining, which is the exploitation of natural resources to generate a profit. This industry has become highly lucrative for the North Korean government, as it provides the regime with a way to acquire the foreign currency it needs for strategic purposes.
In addition, the mining industry has become an attractive option for North Koreans looking to supplement their income. Small-scale mining operations are being conducted by individuals and families, and in some cases these are supplying the infrastructure and fuel needed to run the larger mining operations conducted by the state.
The mining industry also serves to further entrench the black market economy in North Korea. The vast majority of the profits generated by this industry are not featured in official accounts and are instead funneled directly into the underground economy. This means that the profits are not taxed and are outside of the reach of the government, reinforcing the power and influence of the black market.
Online Trade
In recent years, the North Korean black market has evolved to encompass online trading platforms. These have become a popular destination for North Koreans looking to buy and sell goods, as well as for brokers and traders wanting to connect with customers.
These platforms provide anonymity and make it easier for many to exchange goods and services, but this also makes it difficult for the government to monitor these activities. As a result, the black market economy continues to exist and thrive, despite efforts by the international community and the North Korean government.
The impact of these platforms extends beyond the borders of North Korea. Many buyers and sellers are based in other countries and this has allowed North Korea to access a wider range of goods and services. This range includes luxury goods, commodities, and equipment, which is then smuggled into North Korea via networks of brokers, traders, and shipping companies.
Financial Inclusion
Despite the difficulties imposed by international sanctions and the prevalence of the black market economy, North Korea continues to make progress towards financial inclusion. This has been achieved through the use of digital payment systems, such as mobile wallets, which allow individuals to quickly send and receive money by simply scanning a QR code or sending a text message.
Many of these payment systems have been developed or adapted from existing platforms, allowing them to remain within the jurisdiction of the North Korean government. In addition, the government has been exploring the use of blockchain technologies and virtual currencies to further facilitate financial transactions within the country.
These efforts have been met with skepticism from the international community, as it is unclear how the government plans to use these technologies in its existing economic system. Nonetheless, these developments demonstrate the potential for North Korea to increase financial inclusion and provide its citizens with access to a secure and reliable form of payment.
