Capitalism

Organized crime enters North Korea’s markets

From the perspective of North Korea’s poor, the era of Kim Jong-un has been a time of increasing state control over information and borders, but also a time when the state has taken a relatively (by North Korean standards, anyway) laissez-faire approach to market trade. There are exceptions, of course, including crackdowns on South Korean imports and on the Chinese mobile phones that could have made cross-border trade so much more efficient, but the general trend is for State Security Department officers to collect taxes — and bribes, of course — and let merchants work out affairs among themselves.

Inevitably, that has led to the rise of an industry of men who will, for a price, help people “work out affairs” among themselves. In this sort of system, the litigant with the most wealth and power has the advantage and invariably uses it to suppress competition.

“Wealthy and powerful donju and merchants often hire mob members to secure their business interests. The mobs have contacts in powerful organizations, so as long as they pay bribes to various officials, they are untouchable by ordinary citizens.”

According to the source, there is an unwritten rule in North Korea’s markets to not intrude in each other’s business areas. There are also frequent cases in which trust has been established between merchants who acquire products and donju who provide cashflows, featuring transactions with ‘post-payment systems’ for half of their trade money. [Daily NK]

Local merchants also use violence to control prices, including by beating up merchants who undercut their competitors’ prices. The police don’t care, so “muscle has become the rule of law in the markets.”

“In July, a woman in Pyongsong City requested a mob member take care of a merchant who stole the donju she was trading with. The merchant was attacked with a knife and left with an ugly scar on his face, although he was not seriously harmed,” a separate source in South Pyongan Province reported. As such, she explained, locals are increasingly saying that in order to survive in the markets, one needs to be fiercer than wolves without a conscience, and that the law is useless and safety is only assured via close relations with mob members.

The Daily NK reports that sanctions are exacerbating the ferocity of competition for certain products, like solar panels, and causing “frequent conflicts” among merchants. That is too bad, because solar panels help people to achieve a degree of independence from state control. There are no U.N. or U.S. sanctions that prohibit the export of solar panels to North Korea, but it’s possible that de-risking by banks and the freezing assets of state-connected trading companies is having spillover effects. That’s to be expected, I suppose. One hopes that in time, small independent traders will find ways to supply this demand.

The real story here, however, may be that Pyongyang is starting to cede its monopoly on the use of violence, a subject that Thomas Hobbes and Max Weber both wrote about extensively. This is not to say that organized crime in North Korea is entirely new. Pyongyang has long partnered with organized crime groups in Japan to skim off pachinko revenue or the Russian mob distribute counterfeit $100 bills. Some scholars believe that Pyongyang largely outsourced its drug trade to organized crime groups a decade ago. Others say that North Korea’s government is itself an organized crime family with a flag and a seat at the U.N.

What is new is that ordinary, non-elite North Koreans are now going around the state to seek justice, or injustice, through violent means from providers that the state itself does not tolerate, but which its corrupt police do, for a fee. The inevitable reaction to this will be, first, a loss of legitimacy by the state, and eventually, the rise of vigilantes, perhaps backed by mediators and informal courts, to keep the peace that the state will not. As with the rise of guerrilla journalism and guerrilla clinics, the rise of guerrilla justice would be an important step toward the creation of undergovernments like the ones I wrote about here.