The Nature and Direction of Economic Reform in North Korea

Abstract

In this article we critically examine the nature and direction of economic reform in North Korea. While North Korea began to experiment with reforms and a partial open-door policy in the mid-1980s, the most substantial attempt at economic restructuring occurred in July 2002. In these latest reforms, the government attempted to change the planned economic system through the introduction of price reforms, market and commodity relations, profit motivation and material incentives. However, scholars disagree on the nature and direction of economic restructuring. In order to analyze the state of economic transformation, we develop a conceptual framework of market socialism with a set of empirical indicators against which we examine the trends, direction and limitations of reforms. Our study strongly suggests that North Korea is moving away from the command economy towards a model of market socialism as practiced in China and Vietnam.