Farmers' markets have gained considerable headway since the mid-1990s, with these markets now used as a stop-gap method to provide consumers with daily necessities, including farm products. According to recent research, the North Korean people purchase around 60 percent of their grain and 70 percent of daily necessities through farmers' markets. About 300~350 farmers' markets are located throughout the country and several hundred items are being traded at free-market prices, based on the law of supply and demand. Furthermore, the North Korean authorities have not only allowed the farmers' market to enlarge from 100 pyung (395 square yards) to 500 pyung, but have allowed new farmers' markets to be established. This means that the authorities have tacitly acknowledged that the farmers' market is a necessity, in order to complement the distorted distribution network of state and cooperative stores in North Korea.
If North Korea's agricultural productivity deteriorates and economic depression is prolonged, the farmers' market will proliferate and will end up dominating North Korea's distribution network of farm products. Thus, a study of the recent establishment and development of the farmers's market is vital.
Before 1950, Inmin (people's) markets were the only venues for the trade of daily necessities. In fact, in urban areas they were operated as permanent markets, while in rural areas, they were regularly opened every three or five days. In 1950, while the name "people's market" was changed to "Nongchon (rural) market," there was no change in the structure or function.
In August of 1958, according to the Cabinet Decree No. 140, North Korea closed down rural markets and established farmers' markets that were open every ten days (on the 1st, 11th, and 21st of each month), regardless of whether they were in urban or rural areas. At that time, North Korea permitted the farmers' market in order to provide farmers with commercial locations where they could sell surplus farm products to other consumers, since the state could not successfully control the nation-wide distribution network.
In 1969, Kim Il-sung ordered markets in the urban areas to close or move, in order to establish a farmers' market in each county.1) After the mid-1970s, however, black markets had increased because of North Korea's economic depression. Moreover, in the early 1980s, farmers' markets boomed after the state rationing system was paralyzed because of severe shortages of consumer goods. Consequently, farmers' markets became daily markets in 1982.
However, as food supplies improved in the mid-1980s, the North Korean authorities began to regulate private trade in farmers' markets. In 1987, they changed existing daily markets into 7-day-markets, and later on into 10-day-markets.2) In addition, Kim Jong-il ordered the government "to tightly regulate farmers' markets and to get people back to their work-places," in 1992. All of the unlicensed markets, which had usually been allowed to operate, were closed or transformed into 10-day-markets.2) In 1993 farmers' markets once again became permanent and since then, have expanded dramatically, both in number and in scale, because the traditional state distribution network has failed to work under the economic crisis and food shortages.
During the last 40 years, the North Korean authorities have tried to regulate farmers's markets through various measures. Since they regarded the farmers' market as a non-socialist distribution system, they changed the names and the management styles. Furthermore, most regulation policies were temporary, followed by other deregulation policies, which reflected the food situation at the time. These markets, however, have never been closed down entirely. In other words, the authorities have considered the farmers' market system a necessary evil in a socialist planned economy. In fact, the expansion of the farmers' market is closely related with North Korea's economic conditions and its food supply.
Distribution System of Farm Products
The official farm product distribution system is built on two pillars, the state purchase system and the rationing system. The purchase system of farm products entails three different methods-mandatory, free, and autonomous. The mandatory purchase system involves the purchase of farm products at city/county collection centers, so that the authorities can provide the major farm products through the state planning system.
The distribution channel can be categorized by production type: production by cooperative farms, private farming, and state-run farms. For example, it is mandatory that grains from cooperative farms are purchased by grain-collection centers in each county. Fruits and livestock products from cooperative farms are purchased by grocery-collection centers under the administration of each county. Livestock, e.g., beef or pork, are purchased by these centers, while small farm animals, e.g., chickens, are butchered by individuals and are sold at farmers' markets. Private products that have been grown in family gardens, subsidiary fields, and patch fields are also traded at farmers' market.
The rationing system forms the basic structure of the farm products distribution. Mainly, it deals with free or cheap supplies (grains, meats), quota per capita allotted items (side dishes), and discretionary (vegetables and fruits). The official distribution channel for foods is as follows: cooperative farms ¡ægrains collection centers ¡æration control centers. On the other hand, the distribution channel for fruit and vegetables is as follows: cooperative farms or individual farmers ¡æ grocery-collection centers ¡æ farm products wholesalers ¡æ retail stores. However, since the late 1980s, because the official distribution network of foods weakened, most farm products have been traded in farmers ¡æor black markets. Two channels have been used: first, individual farmers ¡æ farmers' or black markets ¡æ consumers; and second, individual farmers ¡æ individual merchants ¡æ consumers.
The Farmers' Market
In the mid-1990s, following the economic depression and deterioration of agricultural productivity, there was an explosive increase of farmers' markets in North Korea, as necessities became scarce and food shortages worsened. Now it is estimated that there are around 300 to 350 farmers' markets throughout North Korea, or an average of two or three farmers' markets per county and three to five per city. According to recent research, there are six or seven farmers' markets in Pyongyang, three or four in Sinuiju, one in Kaesong, two in Hamhung, and seven or eight in Chongjin. The thriving trade along the border area between North Korea and China, has resulted in farmers' markets that much more developed than in any other area in North Korea.
From the perspective of scale, there are basically two types of markets: markets operating in a building, and open-air markets. In the case of Wonjong-ri farmers' market, there are 40 shops with a floor space of 20 pyong (3.95 square yards). The farmers' market in Hoeryong is an open-air market with an area of 3,000 square meters in which 200~300 merchants are working. The Namyang market covers an area of 200 square meters and has 50 kiosks.
b. Management and Operational Systems
1) The Management Offices
The management offices under the local people's committees, take charge of the farmers' market. Each office has seven or eight managers, who have the authority to manage the market. Those hired are mainly retired soldiers, social security agents, or retired Party officials.
The management offices are known to be collecting about 2 to 15 won from each merchant in the form of a management fee. In addition, management offices sometimes take part in marketing activities in order to make a profit on its own. For instance, they make profits by opening stores in order to purchase items from wholesalers or producers at low prices, reselling them to consumers at a margin. Furthermore, they own kiosks and rent them out to individual merchants.
2) Operations
¨ç Commodities
In the past, only vegetables produced in family gardens could be traded in farmers' markets. Since the mid-1990s, however, almost all goods seen in black markets are traded in farmers' markets. Most goods were industrial products rather than those of agricultural in farmers' markets. On the other hand, noodles and rice cakes were major foods sold in farmers' markets.
While the North Korean authorities had imposed restrictions on the trade of foods and industrial products, they are now tacitly allowing that trade. Especially in the case of industrial products, there are no special restrictions placed on their trade. Moreover, even though trading raw materials, machinery, medicine and jewelry is prohibited, they are all traded in farmers' markets. Although the authorities have tried to confiscate illegal items, many types of goods are being traded in farmers' markets. In fact, people who have money can buy anything in the markets.
¨è Suppliers
There are three types of resources in supply: private products, stolen or smuggled items from the state distribution channels, and imported goods from third countries such as China or Russia. The private products consist of farm products from family gardens, subsidiary fields, and patch fields. Also included are livestock farming products including poultry and handcrafts. Pork and chicken are main items among livestock farming products and poultry, supplied by individuals. Sometimes meat or honey are illegally supplied under the name of certain organizations licensed to keep bees or raise livestock.
Handcrafts are supplied by so-called "side-job work teams" or "household work teams" producing "August-3 Consumer Goods,"3) as well as by non-registered individual merchants. Recently, "cottage industries" have been established to process raw materials or mended shoes, clothing, and umbrellas. However, to perform such wage labor, they are still required to obtain a license from "the union of cottage industries."
Social discipline has slackened in the face of the protracted economic disaster. Stolen or smuggled items from the state distribution channels have flowed at an even greater rate into farmers' markets, in large part because of a huge price gap between the official and the unofficial sectors.
Over 80 percent of daily essentials currently traded in farmers' markets are made in China. This is quite different from the situation in 1987 when the state began to control farmers' markets. At that time, the items traded in farmers' markets in 1987 were mostly made in North Korea. However, since then, Chinese items have replaced North Korean goods because the North Korean economic tumble brought about a domestic production decrease and, at the same time, North Korea lifted the ban on importing Chinese goods. Especially from a geographical and economic viewpoint, China is in the most advantageous position because it not only borders North Korea, but it is also rich in resources. Many North Korean-Chinese who are living in Northeast China or along the border between the two countries, are involved in cross-border trade with North Korea. Moreover, when they visit relatives in North Korea, they are taking with them Chinese daily essentials. The trade between North Korea and China has increased notably through official border trade and through Chinese peddlers. The items brought in by Chinese merchants are delivered to Chinese-North Koreans (around 5,000 people) or to North Korean dealers at wholesale prices, who then act as brokers or retailers in farmers' markets. The farm products imported from China are maize, flour, and rice. Despite the fact that flour is not authorized as an import item, relatively large amounts have been imported.
¨é Operation
The distribution structure of the farmers' market in North Korea is still primitive, even though both the number of items and the volume of trade have increased. Farmers' markets in North Korea have a mixed trade structure, somewhere between a bartering and a monetary system. Official trading hours of farmers' markets are from 9 am to 6 pm, however, some merchants do business around market areas even after closing time. The main means of trade in farmers' markets are the North Korean monetary unit, won. However, in practice, the Chinese monetary unit, yuan, is also used as subsidiary means in the markets.
North Korean people are highly dependent on the farmers' market. According to recent research, 70~80 percent of the women and 40 percent of the men trade at farmers' markets. In fact, farmers have come to prefer market trade because the state-run distribution system jeopardized and the state's purchase prices dropped. As a consequence, farmers' markets have become bustling centers of commercial activity. However, the result is that the lower class has relatively weaker buying power. Unable to purchase expensive goods in the farmers' market, they buy only the basic essentials, while only the privileged class buy the expensive items.
In addition, Merchants of farmers' markets are mostly brokers who purchase cheap goods from producers or wholesalers, and resell them to consumers at a margin. Among ordinary workers, there are some people who skip work and start their own businesses in farmers' or black markets. If ordinary workers are absent from their jobs, they must pay 10 won per day.
3) Pricing System
¨ç Setting of Prices
Prices of goods in North Korea are not decided by the supply and demand in markets, but are unilaterally controlled by the state.
Thus, the prices set by the state have legally binding force. Even so, prices of some vegetables, fruits, and seafoods produced by cooperative farms are not unilaterally controlled, but are set between the bottom and the ceiling prices set by the state, corresponding to the supply and demand in markets.
The prices of the state-run distribution system are unilaterally decided by "the State Price Establishment Committee," a branch of the government. Prices of farm products reflect the industrial wholesale price, the state regulated retail price, the farmers' market (black market) price, and the purchase price. Farmers' market prices set by sellers and buyers are similar to the capitalist market price system, but prices vary only within a restricted range. Since the state's purchase price is much lower than the farmers' or black market price, people selling their goods deliberately avoid selling to the state.
Prices of maize and rice vary widely. <Table 4> shows the different prices: the procurement price of the grain-collection center, the settled distribution price of the farm cooperative, the rationing price to urban workers, and the farmers¤£market price. The pricing system of the farmers¤£market is very similar to that of capitalism. In other words, market prices are also decided by the balance between supply and demand.
¨è Trade prices
Farmers' market prices are so unrestricted that they are often ten, or even one hundred times higher than the state procurement or regulated price. In the case of rice, while the state regulated price is only 0.8 won per kilogram, the farmers' market price is 60~75 won, which is 70~90 times higher than the state regulated price. Almost every item, including grains, meats, and vegetables, exhibits a wide gap between farmers' market prices and the prices set by the state.
The price shifts of major items traded in the farmers' market reveal that in the previous years the prices had soared, whereas the prices of 1999 had settled to a lower level. This seems to have resulted from the easing of the food crisis following food aid from the U.S., international organizations, and non-governmental organizations. In other words, when the North Korean economic collapse and food shortages worsened during the mid-1990s, the farmers' market prices soared and the gap between the farmers' market prices and the state-regulated prices increased.
According to a recent report by the Kyoto press on September 1, 1999, Kim Jong-il ordered the closure of "prevailing free markets" to keep North Korea from being contaminated by capitalism. The order seems to be related to tightening social control by means of successively holding various national conventions of low-ranking officials in late 1999, as the food shortage problem was somewhat alleviated. However, taking into account North Korea's current situation, it seems too early to close down the farmers' markets. Therefore, the recent order by Kim Jong-il appears to be a warning against the social phenomenon in which ordinary workers have become overly involved in commercial activities at the farmers' market, even absenting themselves from their regular jobs. However, in spite of repeated warnings against the farmers' market, it is reported that commercial activity in the farmers' markets has not decreased.
In order to settle the farmers' market question in North Korea, the following issues should be addressed. First, there should be an institutional back-up mechanism. Farmers' markets are currently thriving, corresponding to North Korea¤£ social needs. However, unless an institutional back-up mechanism is established, the development of the farmers' market could be hindered by restrictions or controls from the state at any time. Second, the gap between farmers' market prices and state-regulated prices should be narrowed. Under the circumstances where such a big gap exists (from 10 to 100 times), commercial activities in the farmers' market will inevitably be operated illegally. Third, more surplus farm products from individual or cooperative farms should be traded in the farmers' market. In doing so, agricultural productivity could be heightened, and subsequently living standards can be improved.
Even though there are some issues to be resolved, the spillover effect of the farmers' market on North Korean society cannot be underestimated. First of all, through the farmers' market the North Korean people will naturally have opportunities to experience the capitalist market system. Thus, when the unification of the Korean peninsula is realized, North Korea can move easily adapt to the capitalist market system. In addition, the social costs following unification can be decreased. As the farmers' markets contribute to the increase of independent economic activities, as well as to the private sectors in North Korea, they can be a harbinger of reform to a free market system. Therefore, there should be consistent research of North Korea's the farmers' market, as well as of North Korean policy changes.
- At "the National Conference of Merchants" in 1969, Kim Il-sung ordered daily markets into 10-day-markets and limited the number of markets one per county, to prevent increasing private food production and widespread farmers' markets.
- In order to check the spread of the non-socialist ideas, Kim Jong-il ordered the establishment of a "Socialist Groups," which are mandated to crack down on wrongdoing such as bootlegging, smuggling, black marketing, and brokerage business, in October of 1992. In the same vein, he ordered all daily-markets transformed into 10-day-markets again.
- The term August-3 Consumer Goods came from the August-3 Consumer Goods Production Campaign, began when Kim Jong-il inspected a consumer goods fair held in Pyongyang on August 3, 1984, ordering the government and Party officials to launch a campaign to boost the production of consumer goods. The results of the campaign have been meager, however, because it was totally dependent on the achievements of the side-job and household work teams for the production of such commodities. These teams had been encouraged to exploit as many resources as possible from the immediate surroundings as well as to work extra hours in addition to their regular assignments.
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