No foolin’. Sounds like the free market, while still officially verboten, is finally here to stay.

Bowing to reality, the North Korean government has lifted all restrictions on private markets — a last-resort option for a regime desperate to prevent its people from starving.

In recent weeks, according to North Korea observers and defector groups with sources in the country, Kim Jong Il’s government admitted its inability to solve the current food shortage and encouraged its people to rely on private markets for the purchase of goods. Though the policy reversal will not alter daily patterns — North Koreans have depended on such markets for more than 15 years — the latest order from Pyongyang abandons all pretense of a central, planned economy…

As of May 26, the government no longer forces markets to close at 6 or 7 p.m., has dropped the rule restricting customers to women older than 40 and has lifted a ban on certain goods being sold. One city official in the city of Pyungsung informed the Good Friends humanitarian group that the living standard had “drastically decreased since the currency exchange, and the government cannot provide distribution so they have to bring the market back up.”…

Compared with the peak of the food crisis, in the mid and late ’90s, “the actual amount of food — less is available now,” said Kim Heung-gwang, a North Korean defector and president of a group called North Korea Intellectuals Solidarity. “But back then, the food circulation industry wasn’t as built up. Even though the absolute amount of food is less now than it was 15 years ago, I think the starvation problem will be less significant.”

The key to this, as alluded to in the blockquote and as WaPo explains in more detail, is last year’s currency exchange, in which the NorKs tried to counter inflation by announcing that 100 units of the extant currency would henceforth only be worth one unit. No problem there — except for one small detail. They set a limit on how much currency each citizen could exchange, so if you had the equivalent of $100,000 stashed away in “old” money and the exchange cap was set at $100 of “new” money, guess what: You just lost the equivalent of $90,000. With people’s savings up in smoke, a new round of starvation duly began and now they’re trying to head it off by all but declaring defeat at the hands of the vengeful ghost of Adam Smith.

An interesting detail, though, is why they set that exchange cap in the first place. Time offered a theory last year:

The second reason for the crackdown — as ever with Pyongyang — is control. The government allowed black markets to proliferate this decade out of desperation, but they had grown to the point where the leadership may have begun to feel threatened. Small traders and black markets existed outside of government control, and by definition at some point the regime was not going to tolerate that, analysts say. “The breakaway, snowballing market is a threat to the regime,” says Lim Kang-taeg, senior research fellow at the Korean Institute for National Unification, a government-sponsored think tank in Seoul. “This is a significant blow leveled at the market, and will help the government tighten up control.”

The fact that they’re now bowing to the same market they tried to starve six months ago speaks volumes. There’s surely no moral imperative within the leadership to prevent mass starvation, so I can only guess that Kim and company have concluded they’re so weak that another round of famine could actually topple the government. Which, incidentally, wouldn’t be the first signal we’ve had in that regard: Remember this post from March? Irony of ironies, the dreaded free market might now actually be the only way to preserve authoritarian rule in Pyongyang, a lesson learned long ago by Kim’s friends in Beijing. Speaking of which, your exit question via WaPo: Is the market-ization of North Korea evidence that China’s suddenly gotten stingy with aid?

Tags: China