Description
Your assignment this week focuses on the Economizing Problem. In your journal entry, address the following:
Define the Economizing Problem and discuss why human needs and wants are unlimited and why resources are limited.
Think about three major economic systems. Most countries are mixed economies. What do you think about the government regulation: should it be increased at the time of increasing scarcity of resources and a growing population, or decrease? Why?
Please remember that all submitted posts: essays, discussion forum and journal reflection posts you can use in your Final Research paper. Please save all your posts.
Readings
Readings
Understanding Economics and Scarcity
Introduction to Economic Systems
Justin V. Hastings. A Most Enterprising Country : North Korea in the Global Economy. Cornell University Press, 2016. EBSCOhost
NOTE: in your Textbook/Reader from McGraw-Hill Create, this can be found on pages 2 – 28.
Videos
Scarcity (2:54)
This video is a short animation explaining why goods and services are scarce.
Video not loading? Watch on YouTube.
Are We Running Out of Resources? (4:07)
In this video, Professor Steve Horwitz addresses the common belief that the world is running out of natural resources. Instead, there are economic reasons why we will never run out of many resources. In a free market system, prices signal scarcity. So as a resource becomes scarcer, it becomes more expensive, which incentivizes people to use less of it and develop new alternatives, or to find new reserves of that resource that were previously unknown or unprofitable. We have seen throughout history that the human mind’s ability to innovate, coupled with a free market economic system, is an unlimited resource that can overcome the limitations we perceive with natural resources.
Video not loading? Watch on YouTube.
Economic Systems (13:44)
This video discusses the differences between command economies and market economies, with a focus on mixed economy towards the end.
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1
Copyright 2016. Cornell University Press.
All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
Surviving the Arduous March
through Enterprise
The story of the Arduous March and its effect on North Korea’s political
economy has been recounted in great detail elsewhere,1 and it is not my
intention to repeat the able work done by previous writers. This chapter
instead traces the origin and development of North Korean entrepreneurialism, and the underlying trading networks, from North Korea’s fumbling attempts at survival during the Cold War through to the collapse of
trade and the economy at the end of the Cold War, the famine that followed, the desperate responses of the state and the people of North Korea,
and finally to the eve of North Korea’s attempted retrenchment in 2005
and the international sanctions in the wake of the 2006 nuclear test.
Survival has always been a priority (and perhaps even the central preoccupation) of the North Korean state and, once they realized that the
state would no longer take care of their needs, the North Korean population. How to survive is a separate question, and one that has not always
been adequately answered by either the state or its citizens. The survival
imperative has led to a glimmer of pragmatism in actual North Korean
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Surviving the Arduous March through Enterprise 23
economic behavior, regardless of the rhetoric emanating from official propaganda outlets or even stated policies on the ground within the country.
This flexibility in reality, if not in ideology, has not always been successful
in keeping the North Korean state strong or much of the population alive
(especially during the darkest years of the Arduous March), but it has been
apparent in North Korean trade for decades.
The survival mechanisms adopted during the Arduous March did not
spring fully formed, as if from the forehead of Zeus, after the Cold War.
Both top-down and bottom-up trading networks had origins in the Cold
War itself; the end of the Cold War drastically increased the scope and
importance of those networks, but they were not wholly new. In turn, the
ecosystem of state, nonstate, and hybrid trading networks that have enmeshed North Korea in the global economy (however unwillingly) since
the international sanctions regime began in 2006 are outgrowths of the
top-down and bottom-up coping mechanisms that began to mature and
become semi-institutionalized during the relatively “liberal” years of the
Arduous March itself and those that followed. This chapter thus provides
the background to how North Korea became the surprisingly enterprising
country that it is today.
The business environment that North Korean state enterprises faced
in the immediate aftermath of the Cold War was harsh, unforgiving,
and (with the collapse of the Soviet Union) something of an uncomfortable surprise, but it was not unfriendly specifically to North Korean trade.
North Korean companies faced few major international sanctions, and
isolation from global economic networks was an artifact of North Korea’s self-imposed hermit status, its terrible credit rating, and a lack of
things to sell to the rest of the world. Private trading networks, while officially banned, also faced a relatively benign operating environment, inasmuch as the famine impaired the state’s ability to crack down on citizens
doing whatever it took to survive. At the same time, both top-down and
bottom-up trading networks had to navigate environments that were not
entirely friendly: what North Korean state enterprises did sell was often
illicit in other countries, such that the trade networks moved from state
supported to “criminal” simply by crossing international borders, while
nonstate networks had to operate, both inside and outside North Korea, in
an environment that was almost entirely informal, politically changeable,
and individually capricious.
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24 Chapter 1
State entities and private citizens alike eventually responded to such
conditions with trading networks that were adaptable and flexible in
where and how they operated, but not infinitely so. Their spread depended
to a large degree on access and territorial proximity to logistical infrastructure and networks that were themselves integrated with the outside world.
Outside of Northeast Asia, North Korean trade network nodes clustered
around diplomatic and commercial outposts of the North Korean state,
leading to networks that were extensive in territorial scope but not particularly dense. Within Northeast Asia, both top-down and bottom-up trade
networks preferred to access outside markets, both for purchasing goods
and obtaining capital, through networks of ethnic Korean businesspeople
around the region. In practice, this funneled the activities of North Korean
trade networks without access to state outposts (and even some with such
access) through informal networks in northeastern China, Japan, and to a
much lesser extent South Korea.
With its own economic survival of paramount importance (to itself), the
North Korean central state attempted to extract as much value as it could
from state-centered trading networks. In practice, this meant the central
state maintained in-house control over the nodes in the chains stretching
from North Korea, and reverted to dealing with outside businesspeople
only when extending control further down the chain was untenable (notably when North Koreans were either not allowed to trade in specific goods
or in particular locations, or when North Korean state traders did not have
their own suppliers or buyers). The brokers at the edge of central state
control themselves often preferred to deal with firms with which they had
nonmarket (often ethnic) ties, but showed themselves capable of delving
into global markets when necessary.
The private citizens who went into business during the Arduous March
did not have many of the advantages of state-centered networks, particularly access to state resources and, given that what they were doing
was technically illegal, political cover. The trade ties of private networks
were in some sense the inverse of those of state-centered networks: private
traders used markets to sell their goods, but if they imported goods from
outside North Korea, they often relied on family and ethnic ties across
the border in China or in Japan. To make up for a lack of dependable
access to infrastructure or political cover, private (and hybrid) networks
also built up ties with state officials, who themselves were often desperate
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Surviving the Arduous March through Enterprise 25
for ways to survive. It was these networks that would be normalized and
even semi-institutionalized by the time the central state attempted to crack
down in 2005.
In the sections that follow, I find the origins of both state and nonstate
North Korean trade networks in pragmatic strategies adopted by the
North Korean state and citizens during the Cold War. After a discussion
of the collapse of the North Korean economy and the famine that followed
the end of the Cold War, I move on to coping mechanisms taken by different segments of North Korean society as they faced economic collapse and
starvation, looking first at top-down coping mechanisms of state trading
networks, and then at those adopted by private citizens and networks that
operated on the boundary between state and nonstate. The chapter concludes with the end of North Korea’s “liberal” period in 2005 and 2006 as
the central state began cracking down on wayward enterprise, and as the
United States and the international community began to take steps to curb
North Korea’s international trade.
The Cold War
Among communist leaders during the Cold War, Kim Il-sung was perhaps the keenest student of Joseph Stalin. North Korea not only did not
follow along with the Soviet Union’s de-Stalinization in the late 1950s,
it pressed forward with versions of Stalinist political and economic policies that were, if anything, even more extreme than those advocated by
Stalin himself. The cult of personality built for Kim Il-sung was perhaps
the most notable example, but economic policies were also highly Stalinist: fertilizer-intensive collectivized agriculture, rapid industrialization,
a centralized command economy, and a distribution system that provided nearly all the food for the entire North Korean population continued through the end of the Cold War.2 Yet, as Stalinist as North Korea
was, and as opposed to foreign infiltration as its elites were, even during
the Cold War, North Korea was remarkably nimble in its foreign trade.
The manner in which it engaged with the global economy (however tentatively) betrayed many of the trading methods that North Korean firms
would use after the end of the Cold War. Despite the sharp divide between
the relatively comfortable isolation of North Korea before the collapse of
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26 Chapter 1
the Soviet Union and the disasters of the Arduous March, North Korea’s
trade behavior was not totally new.
As North Korea fell behind the South beginning in the 1960s, the North
began pursuing alternative strategies for supporting itself financially and
acquiring the goods it wanted from the outside world. These strategies followed two tracks: one in which North Korea extracted concessions from
its allies to support its economy, and a second, hedging, strategy in which
North Korea began to build trading networks that could bring in income
and goods apart from what it could obtain from China and the Soviet
Union.
On the first track, North Korea signed friendship treaties in 1961 with
both China and the Soviet Union within weeks of each other, in the midst
of the Sino-Soviet split. Thereafter, it played China and the USSR off each
other in order to maximize financial benefits, one-sided trade, and technical aid.3 It was a game that China and the USSR played willingly. North
Korea benefited from the willingness of its Communist Bloc allies to provide subsidies as a means of propping up a fellow socialist economy for
strategic reasons.4 Up to the end of the Cold War, in a bid to compete with
China for influence, the Soviet Union served as North Korea’s primary
benefactor, sending technical advisors who helped to keep its power generation and industry functioning, providing fertilizer for North Korea’s
agricultural sector, and accepting barter payment for exports to North
Korea at concessionary rates. In this, the North Korean state displayed the
same penchant for walking diplomatic tightropes as it would later display
in confrontations with the United States and other adversaries.5
North Korea also pursued an economic hedging strategy that was designed to establish trading networks outside Soviet or Chinese control, and
to provide income and goods directly to North Korea on its own terms.
One of the critical aspects of the strategy was the dual political and economic use of North Korean outposts around the world. In the early 1970s,
the North Korean central government began treating its embassies and
consulates as revenue centers. Rather than receiving operating funds from
the state, diplomatic outposts were required not only to provide for their
own costs but also to meet quotas for revenue on a yearly basis and transfer it back to Pyongyang. It was here that many of the characteristics that
would distinguish North Korean trade networks in later decades emerged.
How North Korean officials met these quotas seems to have been left up
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Surviving the Arduous March through Enterprise 27
to the individual diplomats (or rather the outposts), leaving room for a certain desperate creativity. Not all of the trade conducted by North Korean
diplomats was illicit, although enough of it was that North Korea became
associated with illicit trading. The diplomats were indifferent to the legality of the goods they were trading in the countries in which they were
operating—it was not uncommon for both gray market and black market goods (or the proceeds from their sales) to pass through the same outposts. The year 1976, for instance, saw a spate of North Korean diplomats
caught smuggling various contraband. In May, North Korean diplomats
were caught by Egyptian authorities while trying to smuggle hashish, but
were released on account of their diplomatic status. In October the same
year, Danish police expelled the entire North Korean diplomatic staff
(four people) after they were caught handing off 147 kilograms of hashish to local drug dealers. They had previously been spotted passing suspicious bags into a shady jewelry store from their official embassy Mercedes.
Later that month, Swedish, Norwegian, and Finnish police all broke up
North Korean diplomatic smuggling rings. The North Koreans had taken
advantage of the price differential of liquor and cigarettes between the
Soviet Union and Scandinavian countries to bring in large quantities of
goods—four thousand bottles of liquor in Norway, for instance—in their
diplomatic luggage for resale.6
Interestingly, the drug and liquor smuggling incidents, among others,
were cases where North Korean diplomats essentially served as brokers,
connecting buyers and sellers, both of whom were outside of North Korea.
This had several implications for how North Korea was hooked into the
global economy. First, by serving as brokers, North Koreans did not actually need to ship anything out of (or into) North Korea itself, allowing the
home country to continue to isolate itself from the global economy even as
they used the same economy as a source of income. Second, and paradoxically, because they were connecting other nodes within an often illicit trade
network and presumably minimizing risk and search costs for other parties, North Korean “businessmen” of the Cold War both needed relatively
extensive prior contacts and built new contacts with the outside world as
a result of doing business. The manner in which North Koreans did business, in other words, actually required them to become more integrated
into global trade networks than simple trade into and out of North Korea
would have.
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28 Chapter 1
Beginning in the early 1970s, North Korea also established a number
of central state–owned trading companies in Europe and Asia. Zokwang
Trading Company was set up in Macau in 1974, and Golden Star Bank,
an apparent subsidiary of Daesong Bank in Pyongyang, was established
in Austria in 1982. Zokwang and Golden Star did in fact do what they
were theoretically supposed to do: serve as a trading outpost and a bank,
respectively. Zokwang seems to have served as the main hub outside of
North Korea for buying and selling goods around East Asia. Regular Air
Koryo flights between Macau and Pyongyang primarily worked to move
cargo into and out of North Korea. Golden Star Bank seems to have served
as a hub in Europe for North Korea’s financial dealings, making deals for
goods to be shipped to North Korea, serving as a broker for business deals
taking place entirely outside of North Korea, and managing North Korean financial accounts.7 But North Korean trading entities were also used
for political ends: Kim Hyun-hee, one of the North Korean intelligence
operatives who bombed Korean Airlines flight 858 in 1987, claimed to
have trained for several months in Zokwang’s offices in Macau.8
North Korea’s nuclear weapons program, not coincidentally, also intensified in the 1970s.9 While all of the usual security and political motivations
of the program were clear—North Korea’s desire for an effective deterrent against the United States and South Korea, lack of trust in Soviet and
Chinese security guarantees, domestic prestige, and the like—what often
goes unremarked was the trade connections North Korea had to make
outside the Communist Bloc in its bid for the bomb. The Soviet Union
built a research reactor for North Korea in 1967, but by the 1980s was
insisting that North Korea sign the Non-Proliferation Treaty (NPT) in
exchange for further nuclear cooperation and assistance. In December 1985, North Korea did sign the NPT, and within weeks signed an
agreement for the Soviet Union to provide it with a nuclear power reactor by 1990, a reactor that never materialized.10 China, meanwhile, also
cooperated with North Korea’s nuclear program, but reportedly pulled all
technicians and aid in 1987 after it became convinced (not without justification) that North Korea may have had less than peaceful aims for its nuclear program, particularly the Yongbyon research reactor.11 North Korea,
in fact, found itself rebuffed by essentially all of its Communist Bloc allies
in its quest for nuclear technology and nuclear weapons.12
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Surviving the Arduous March through Enterprise 29
As a result, North Korea pursued other avenues for acquiring nuclear
technology. Within the region, in 1987, it tasked the association of Korean
residents of Japan sympathetic to North Korea, Chongryon, with putting
together a team of technicians and scientists who would collect nuclear
information. The next year, it apparently tried to obtain technical equipment, including vacuum tubes, from Japan.13 From Europe, five blasting
furnaces manufactured by the German company Leybold AG apparently
ended up in North Korea in 1987. Although the furnaces may have been
reexported from East Germany, or Pakistan or India, Leybold employees
were, according to Western intelligence sources, in North Korea between
1987 and 1990.14 At the same time, Degussa AG, a West German company,
sourced zirconium (which is used in manufacturing uranium fuel rods)
from the United States, and shipped it to North Korea.15 Nuclear information originating from the European nuclear research agency Urenco may
have also been transferred to North Korea via Pakistan in the 1980s (possibly one of Abdul Qadeer Khan’s earlier outings into nuclear proliferation).16 These networks were, compared to the formal nuclear assistance
from Communist Bloc countries, probably minute, but they demonstrated
that North Korea was able and willing to build new foreign trade links
around the world (with the help of social and ethnic networks such as
those in Japan) to further its goals, even before the end of the Cold War.
The networks were not confined to solely state-centered trade; in its
own way, North Korea encouraged entrepreneurship relatively early on.
After a joint venture law was passed in 1984, North Korea also encouraged joint ventures with foreign companies in a bid to bring in foreign
currency. In practice the reluctance of the North Korean state to deal with
anyone but other Koreans created an odd situation in which the residents
in the best positions to establish joint ventures were ethnic Koreans who
were regarded with some suspicion by the rest of society: Korean Chinese,
and ethnic Koreans from Japan. Tens of thousands of ethnic Koreans had
repatriated to North Korea from Japan in the 1960s and 1970s. Although
they were treated poorly (as member of suspect classes), they did bring with
them Japanese business sensibilities, Japanese currency, and the promise of
more of both from their relatives in Japan. These remittances came not
only in the form of consumer goods unheard of among other North Koreans, but also the ability to buy their way (through “donations”) to a better
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30 Chapter 1
status: the right to live in Pyongyang and to obtain better jobs as well as
seed money to start private enterprises.17 They were in a sense some of the
first international private entrepreneurs in North Korea.
With the passage of the joint venture law, the North Korean government looked to Chongryon to deliver joint venture investments. Between
1986 and 1992, there were only sixty-five actual investments made, all
small and nearly all by Chongryon members.18 In 1985, ethnic Koreans
from Japan and the North Korean government set up the joint venture
Rakwon Department Store, which was allowed to accept foreign currency
in Pyongyang. Within a few years, most localities had at least one foreign
currency–accepting store. Despite some retrenchment, Pyongyang by the
early 2000s had twenty to thirty foreign currency shops. The shops were
originally set up to cater to ethnic Koreans from Japan who had Japanese
yen to spend, but later began targeting Western (and presumably Chinese)
shoppers as well. As a result, most of the products came from Western and
Japanese sources, and the Rakwon chain in particular was run according
to Japanese business sensibilities.19
Collapse of the North Korean Economy
The collapse of the North Korean economy in the early 1990s was directly
tied to the end of the Cold War and the collapse of formal trade with North
Korea’s communist partners. In 1990, the Soviet Union diplomatically recognized South Korea, and informed North Korea that, from 1991, North
Korea would be required to pay in hard currency for goods, particularly oil
and natural gas. Kim Il-sung responded by snubbing Soviet ambassadors
and declaring the Soviet Union on par with Western countries in its villainy. The Soviet Union’s 1990 shipments of oil amounted to 410,000 metric tons, but dropped to 100,000 metric tons in 1991. After the collapse of the
Soviet Union at the end of 1991, Russia demanded that North Korea repay
its debts in hard currency, and withdrew its technical advisors from North
Korean defense facilities. From 1992, many of the goods that North Korea
did export to the former Soviet Union were re-exports of consumer goods it
had imported from other countries. Even this trade had collapsed by 1994.20
China quickly stepped in to take the place of Russia. It also normalized relations with South Korea in August 1992. Unlike Russia, however,
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Surviving the Arduous March through Enterprise 31
China rescheduled or effectively cancelled much of the debt owed it by
North Korea. China also allowed cross-border trade between North
Korea, and Jilin and Liaoning provinces in China. It was trade that would
be vital to North Koreans during the hard years of the Arduous March.21
At the same time, China asked for hard currency in any future trading
with North Korea. North Korea was thus thrust rather suddenly into the
US-dominated global economy by the very partners that it had previously
used to stay isolated from that economy. Despite North Korea’s hedging
since the 1970s, it was strategically caught off guard by the withdrawal of
support from China and Russia, and had little ability to access formal trade
networks in a competitive environment with hard currency.
What followed was a disaster. North Korea’s agricultural system was
based on intensive fertilizer usage and irrigation. Such a system does not
work well without fertilizer or electricity, and North Korea had problems providing either to its farms, leading to shortages. These problems
were exacerbated by the withdrawal of Soviet technical aid in 1991. China
picked up some of the slack, and was soon estimated to be providing approximately three-quarters of North Korea’s food and fuel supplies.22 But
even this was not enough. In 1992, the North Korean government began
promoting a campaign to eat only two meals a day, on the grounds that
three meals were overindulgent and unhealthy.23 In 1993, China had its
own grain shortages, and severely cut supplies. Floods in 1994 and 1995
(particularly in July and August) destroyed much of the country’s food
crop (as well as many food reserves), and swamped hydroelectric plants. In
1994, the Public Distribution System began breaking down in some rural
areas. Droughts in 1996 and 1997 caused many of the remaining hydroelectric plants to cease operating, resulting in electricity shortages that cut
off power to sanitation facilities and caused the country’s rail system to
grind to a halt, which in turn meant that coal could not be transported to
the remaining coal-fired plants, and supplies could not be shipped by rail
around the country.24
While estimates of the number of people who died as a result of the
famine during the Arduous March vary widely, it was large enough to
cause fundamental changes in North Korean society. Because the Public
Distribution System essentially stopped functioning, average citizens and
even many government officials and soldiers were forced to find their own
food sources, or starve. Because factories and workplaces were unable to
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32 Chapter 1
produce anything because of a lack of supplies or electricity, workers remained idle. Those who could afford to leave to look for food or other
sources of income did. Trade became a vital lifeline for private citizens,
state officials, and the state itself.
Top-down Coping Mechanisms
Central state enterprises were better placed than most other entities in
North Korea to cope with the fallout from the Arduous March. The top
officials within these organizations were in no danger of starving, being
among the central elite who did receive what handouts existed from the
Public Distribution System. The officials who were stationed overseas
were not only part of the elite as well, but were long accustomed to providing financially (and one presumes nutritionally) for themselves. The central state enterprises also had the advantage of being able to use North
Korean diplomatic outposts that were pre-positioned in strategic (and not
so strategic) locations around the world. What they did not have was much
of anything to sell.
North Korea’s initial lack of foreign currency–earning industries, the
outsized economic and social effects of natural disasters, and the relative
disconnect from the global economy were almost entirely due to the failure
of North Korea’s political economic system. As such, how the North Korean state, and North Korean citizens, attempted to cope with the disaster
of the 1990s, in part by dealing economically with the outside world, helps
us understand how North Korean trade networks were positioned once
they did face a harsher external political environment from 2006 onward.
A Relatively Benign Environment
Within North Korea, the institutional environment for central state enterprises, and state-owned enterprises in general, changed markedly with
the onset of the Arduous March. The transfer of funds from the central
state to state agencies to cover operating costs (which would normally be
considered a given for most countries) actually began to flow in reverse,
as state entities were expected to cover their own costs (including providing for their workers), and provide sums to the central state for its own
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Surviving the Arduous March through Enterprise 33
upkeep. While the practice had been standard for diplomatic outposts
since the 1970s, it now spread to enterprises within the country. North
Korea thus became one of the few states in the world where nearly all state
organizations—not just those involved in revenue collection (for what
does that mean in a country that officially lacks private ownership?)—
came to function as profit centers. The food, gifts, and luxury goods that
were historically handed out by the central state on public holidays to demonstrate the magnanimity of the Kim family disappeared with the onset
of the Arduous March, and were replaced by requirements for state entities to provide money and gifts of a specified amount to the Kim family
as a demonstration of their loyalty.25 The central state enterprises that had
been explicitly set up to bring in revenue and certain goods (whether military items or luxury goods) from outside continued to be expected to do so.
Outside of North Korea, the country did not only face economic problems in the early 1990s because the country had almost no means to provide the hard currency that China and Russia demanded. The first Korean
nuclear crisis stretched from February 1993, when North Korea refused to
permit an IAEA inspection team access to two undeclared nuclear facilities in violation of its commitments to the Non-Proliferation Treaty, until
October 1994, when the United States and North Korea signed the Agreed
Framework. The effects of the tensions during the crisis, which resulted in
official IAEA censure of North Korea in April 1993, and United Nations
Security Council Resolution 825 in May 1993, were mainly diplomatic.
UNSCR 825 did not actually impose any economic sanctions on North
Korea, and the trade impact of North Korea’s lack of cooperation with the
IAEA was (understandable) reluctance by other countries to approve the
transfer of nuclear components or technology to North Korea. The brief
flicker of hope for an improvement in relations between the two Koreas
that had started in 1992, and which included talks on economic cooperation, also faded during the nuclear crisis.
Yet once the nuclear crisis was resolved, while conditions inside of North
Korea remained dire (inasmuch as the Arduous March was at its peak), the
international conditions for North Korea to engage in foreign trade were
probably never better than from 1994 to 2006, when United Nations sanctions were first imposed. Once the Agreed Framework was signed in October 1994, North Korea enjoyed relatively good relations with the United
States and Japan (or as good as ties can be when there are no actual formal
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34 Chapter 1
diplomatic relations) until 2001. The Sunshine Policy that began under
South Korea’s President Kim Dae-jung in 1998 provided North Korea
with unconditional aid from the South, the opening of Kaesong Industrial
Complex, and the beginning of tourist trips to Mount Kumgang. While
the United States, Japan, and South Korea maintained (sometimes severe)
limits on the formal trade that could be done with North Korea, by and
large the environment in which North Korea operated did not unduly
constrain either its diplomatic or economic operations overseas. What this
meant in effect was that the constraints on North Korea’s foreign trade
behavior during the 1990s were largely domestic.
This is not to say that North Korean state enterprises were entirely
unconstrained as they operated overseas. To the extent that state enterprises engaged in trade considered to be illegal (or even just undesirable)
in other countries, outside of North Korea they faced hostile regulatory
environments that mirrored in many ways the environments faced by private illicit enterprises. Where the enterprises associated with bottom-up
coping mechanisms during the Arduous March had to deal with hostility
from the state within North Korea, and at best indifference in China, the
state-directed foreign trade networks moved from licit status within the
North Korea to ambiguous or even illicit status outside of the country,
depending on the nature of their activities. Both bottom-up and top-down
networks, in other words, passed in and out of legitimacy as they crossed
international borders.
At the same time, state enterprises both benefited from and were handicapped by what might be called state prerogatives, which created an operating environment outside of North Korea that was at the same time more
