Peterson Institute publications
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search


Breaking the Cycle of North Korean Provocations

by Marcus Noland, Peterson Institute for International Economics

Testimony before the Committee on Foreign Relations, United States Senate
March 1, 2011

View full document [pdf]

The North Korean regime resembles a surfer attempting to maintain his balance on top of a changing, unstable foundation. While attention has understandably focused on the nuclear issue, it is worthwhile to examine the wave as well as the surfer to understand how the ride may end.
I would like to make three basic points:

  • The growing centrality of markets in the North Korean economy over the past two decades is primarily due to state failure, not pro-active reform. The market is emerging as a semi-autonomous zone of social communication and, potentially, political organizing. On its own terms, the state is right to fear the market.
  • This fear of the market prevents the North Korean authorities from embracing economic reforms that would allow them to address their chronic food problems, which appear to be worsening.
  • One aspect of the economy's unplanned marketization has been a substantial growth in cross-border exchange, particularly with China, which accounts for a rising share of North Korean trade. China appears utterly uninterested in implementing sanctions in response to North Korean provocations. In turn, North Korean authorities are attempting to re-centralize trade, eliminating the decentralized market-oriented participants, and replacing them with intermediaries subject to greater direct political control.

The tragedy of North Korea is that while the circumstances of many are abysmal the government is almost wholly unaccountable for its manifest failures.


Book: Witness to Transformation: Refugee Insights into North Korea January 2011

Policy Brief 15-24: An Assessment of the Korea-China Free Trade Agreement December 2015

Peterson Perspective: North Korea's Immunity to Outside Pressure: Part I December 12, 2012

Policy Brief 10-1: The Winter of Their Discontent: Pyongyang Attacks the Market January 2010

Working Paper 10-2: Economic Crime and Punishment in North Korea March 2010

Paper: FTAs and the Future of US-Korean Trade Relations November 2009

Paper: Implementing the KORUS FTA: Key Challenges and Policy Proposals February 2008

Policy Brief 08-6: North Korea on the Precipice of Famine May 2008

Policy Brief 07-7: The Korea-US Free Trade Agreement: A Summary Assessment August 2007

Policy Brief 06-4: Negotiating the Korea–United States Free Trade Agreement June 2006

Working Paper 07-7: North Korea’s External Economic Relations August 2007

Book: Avoiding the Apocalypse: The Future of the Two Koreas June 2000

Book: Free Trade Between Korea and the United States? April 2001

Working Paper 08-4: Migration Experiences of North Korean Refugees: Survey Evidence from China March 2008