Defectors: N. Korea would fall without capitalistic markets

SEOUL, South Korea (AP) " Hundreds of capitalistic markets, each with thousands of stalls, form the glue that holds North Korea's socialist planned economy together, say defectors who sold medicinal herbs, skinny jeans, TV sets, foreign drama CDs and other goods there to make a living.

"People there say North Korean markets have everything except for a cat's horn. They truly have everything there," said Cha Ri-hyuk, 31, who came to South Korea in 2013. "If North Korea shuts down the markets, it will collapse too."

North Korea has tolerated " and taxed " some market activities since the country's state rationing systems crumbled amid an economic crisis and famine that killed an estimated hundreds of thousands in the mid-1990s. The economic boost the markets provide has helped leader Kim Jong Un keep a grip on power and further his nuclear ambitions, leaving the North's harsh political system and alleged human rights abuses largely untouched.

But some political analysts note that market activities are gradually infusing North Koreans with new ways of thinking that eventually could loosen the authoritarian government's hold over its 24 million people.

"It's like North Korea has so far allowed markets that it can control," said Lim Eul Chul, a North Korea expert at South Korea's Kyungnam University.

"But materialism, individualism and the idea of pursuits of profits are taking root in the minds of ordinary people. So potential forces which can fundamentally shake the North's systems are growing."

Satellite photos and testimonies of defectors show there are now about 400 big, mostly outdoor markets, called "jangmadang," in the North. Items sold there are locally produced, or imported or smuggled from countries including China, South Korea and Japan.

Recent surveys of refugees suggest many ordinary North Koreans have turned to market activities because the country's public rationing systems have never been fully restored. Four defectors who talked to The Associated Press said they received no rations at all.

The nascent consumer economy has led to the emergence of a new class of rich people called "donju" " "masters of money." They usually start at markets and invest their savings in larger ventures that state authorities struggle to finance " such as apartment construction, taxi operations and mining works.

North Korea periodically tried to prevent markets and donjus from growing too fast by restricting operating hours, barring people under 40 from working at markets and banning use of foreign currency there. But such measures often were circumvented and later withdrawn, according to Seoul-based North Korea monitoring groups that claim networks of contacts inside North Korea.

The harshest measure was taken in 2009: Authorities replaced all currency and limited the amount of old bills citizens could exchange in a bid to reassert economic control. The revamp triggered despair among many donjus.

No serious measures have been implemented since Kim assumed power in late 2011, after his father's death. Kim has vowed to improve public livelihood while pouring resources into nuclear and missile programs. Jangmadangs are now an important part of the North's economy, with merchants paying taxes that help the cash-strapped country operate, experts say.

Even as nuclear and missile tests drew ever-growing international sanctions and pressure, the country's economy expanded about 1 percent annually from 2011 to 2014, according to South Korea's central bank.

"North Korea lets markets take care of its public economic sector. Jangmadangs are now very essential things in North Korea as it pushes to put many resources into its nuclear and missile programs," said analyst Hong Min at Seoul's Korea Institute for National Unification. "It's impossible to close jangmadangs now."

Many in North Korea would find it hard to imagine life without the markets, especially young people who have no memory of the old days. Indeed, North Korean millennials are sometimes called the "jangmadang generation."

North Korea rarely allows international news organizations to conduct reporting at capitalistic-style markets. In 2004, however, the AP was allowed to film at one of them, Pyongyang's crowded yet clean and well-ordered indoor Tongil Market, where neatly uniformed merchants sold goods including bananas, fish, vegetables, women's underwear, shoes and tennis rackets.

Video secretly taken less-orderly North Korean outdoor markets in recent years show merchants behind tables piled with diverse products and haggling with customers. The footage was disclosed by activists' groups and media outlets in South Korea.

Wholesale markets normally have 3,000 to 10,000 such tables or stalls, Hong said. Defectors say the Pyongsong wholesale market, near the North's capital, Pyongyang, is the biggest.

"You need more than one day to thoroughly look around the Pyongsong market," said Lee So Yeon, 40, a defector who said she supplied goods to the market before she came to South Korea in 2008.

To work at a market, a merchant buys a stall and pays a daily tax. Lee O.P., who sold such clothes in the northeastern town of Musan before making it to South Korea in 2014, said her stall at the Musan market cost 100 Chinese yuan ($15) around 2000. The 66-year-old requested her first name be identified only as initials to protect relatives' safety.

The daily tax she paid market supervisors, 500-1,000 North Korean won, was the equivalent of 6 to 12 U.S. cents under the unofficial exchange rate ordinary North Koreans use; the North's official exchange rate is much higher. There is no official data on how much money North Korea collects from market merchants every year.

South Korean-made clothes, shoes and soap opera CDs are especially popular at the markets, though it's illegal in the North to sell goods made by its archrival. Regular police crackdowns have not sapped demand.

"No matter how high the prices I set for South Korean clothes, they were all sold out," Lee O.P. said.

When North Korean police officers found people wearing South Korean clothes or dresses they consider too skimpy or tight, they often took them to back alleys and ripped parts of the garments with razors or scissors, according to defectors.

"Young women, who are teenagers or those in their early 20s, like wearing South Korean clothes ... they go out with men and care a lot about beauty and fashion ... and they suffer such humiliation," said Cha, who had supplied clothes and other products to a market in the southwestern Hwanghae province.

Also under constant clampdowns were CDs containing South Korean soap operas and entertainment shows, according to Lee So Yeon, who sold CDs, TVs and DVD players at a market in the northeastern city of Hoeryong. She later launched an additional wholesale business by supplying electronics to the Pyongsong market.

Lee, now an activist in Seoul, said her best-selling items included Japanese and Western pornographic films. "They were so popular ... The more obscene they were, the more expensive they were," she said, smiling.

The markets have given North Koreans a taste of foreign culture, eroded their dependence upon a government that no longer feeds them and opened up a new gap between rich and poor. There is little to suggest that the country's authoritarian rule has weakened, but at the same time, experts say, the North must take care to avoid economic policies that harm the markets. For instance, the 2009 botched currency reform reportedly triggered widespread public complaints that led to the execution of a top Workers' Party official.

The salaries of some North Koreans with government-assigned jobs are so low that they feel compelled to also work as merchants. Cha, now an activist in Seoul, said he was a post-office supervisor who made only 2,000 won a month, an amount of money that he said could buy only one bottle of soju, a Korean liquor. Government workers skip work to sell at markets by bribing their bosses with cash, cigarettes or liquor, according to Cha and other defectors interviewed.

Ex-merchants say they held onto Chinese or U.S. currency and kept the money hidden. They didn't trust North Korean banks or currency, especially after the 2009 currency revamp.

"We said the American grandpa is the best," Cha said, referring to Benjamin Franklin on the $100 bill. "The next is the Chinese grandpa," ex-Chinese leader Mao Zedong on the 100-yuan bill. "And the North Korean grandpa" " North Korean founder Kim Il Sung " "is the very last."

There are risks in the business, whether authorities are hunting for contraband, cracking down on foreign currency or simply committing graft.

Lee O.P. said police found and confiscated the savings she hid at home " three $100 bills and 53 100-yuan bills " after detaining her for phone calls with her daughter, who had already defected to South Korea.

Cha said he fought with police who took away 12 gunny sacks of pine nuts to be sold to a market. He said he fled the country after that, rather than face detention at a political prison camp.

Still, the sellers saw the markets as a means of survival. After arriving in South Korea, Lee O.P. said she was amazed by its social welfare programs, though critics say they lag far behind those in other developed countries.

"For me, it's like North Korea is a capitalistic country while South Korea is a socialist country," she said. "I was surprised and really thankful because there are social welfare programs for me here. There in North Korea, if you don't have money, you'll just have to die."

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Follow AP correspondent Hyung-jin Kim at www.twitter.com/hyungjin1972

This story has been automatically published from the Associated Press wire which uses US spellings

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