Is North Korea Reforming?

It seems like looking-glass logic: if people can't afford food, raise prices. But that's what North Korea has done recently, in what could be an epochal shift away from the impoverishment of the country's Stalinist economy. The government acknowledged that market forces are, to a degree, being allowed to function in place of a system based on rationing and subsidies. Farmers' markets, for example, have been allowed to raise rice prices more than 50-fold, equaling black-market prices. To cover the increased living costs, the government is lifting wages as much as 30-fold, but free food and housing are being eliminated, as are subsidies to state-owned companies.

Observers say the tentative reforms could start the sclerotic state on the capitalist road, just as China embarked on economic modernization in the '70s. "The fact that they are tackling the issue and starting to make these changes is significant," says David Morton, head of the World Food Program in Pyongyang. Skeptics suggest North Korean leader Kim Jong Il may be adjusting prices to curb the flourishing black market. A more plausible explanation: persistent food shortages and the need to import fertilizer, fuel and other commodities make it imperative that North Korea develop a functioning economy. The hermit country seems at last to be joining the real world.