For the third time in three years, North Korea is going to try to impose price controls, to deal with inflation and the growing power of legal and illegal markets. There appears to be some debate within the North Korean leadership about whether price controls (even at higher levels, close to current market prices) and big raises for state employees (most of the population) will work, given that inflation continues to rise because the government is just printing more money while not increasing production, particularly of food.
North Korea is having trouble feeding members of the security forces in areas hit by this year's flooding. Military and police (including secret police) organizations must, as was the custom in communist countries, maintain their own farms and produce 10-20 percent of the food troops require. Normally, when there is a natural disaster and crops are wiped out, the government uses its strategic (for wartime) reserves and ships in food. But fuel shortages and lack of maintenance on the railroads (and apparent shortages in the strategic food reserves) have left some security forces in flooded areas complaining of food shortages. Winter is coming and fuel shortages will mean less heat and light. Cold, hungry guys with guns sitting in the dark wondering what to do next is not good news for the North Korean rulers. What these hungry troops and police will do is more of what they are already doing: stealing from the people.
One of North Korea's notorious (for killing their inmates with overwork and starvation) labor camps was closed last June. For the last two months there have been rumors that Camp 22 in the northeast (near Hoiryeong City) was closed and over 20,000 inmates transferred to other camps. Apparently the commander of the camp, his deputy, and their families all escaped to China in June as well.
These camps are run by the NSA (National Security Agency, the secret police). Camp 22 was apparently a marginal operation and already in the process of closing when the two commanders fled. The defections took place about the time Kim Jong Un took over, along with a purge of senior officials thought to be potentially disloyal.
These camps, which used to hold over 200,000 prisoners, were basically slave labor economic enterprises. Mining, manufacturing, and other productive operations made the camps pay for themselves. But fuel and food shortages have made it difficult to run the camps at a profit, so fewer people are being sent to them. Because of the corruption, more people are able to bribe their way out of a trip to the camps.
Six months ago control of border security was taken over by the NSA, and that's what apparently enabled two senior NSA officers from Camp 22 to get across the border with their families. Six months ago NSA agents were very enthusiastic about enforcing border security, were more resistant to bribes, and enthusiastic about searching for traitors (cell phone owners, potential defectors, and traders selling goods above the government mandated prices) on the borders. This new authority gave the NSA an edge when competing (to find people to send to labor camps) with military intelligence and police investigators. For example, the families of those who escape into China were (for a while) more frequently just disappearing, usually overnight because of the NSA. These midnight visits and arrests were meant to terrorize the population as a whole and are an NSA specialty. These new responsibilities spread the NSA thin, especially with so many of their members succumbing to corruption. After a few months on the border most NSA men began to succumb to bribes.
The border duty has corrupted a lot of NSA personnel. But at the same time, NSA commanders have noted that the economic situation keeps getting worse and the country was edging towards economic and political collapse. For older NSA commanders, the idea of retiring in North Korea was no longer acceptable. Labor camp commanders are usually older officers who run these places as a final assignment before retiring. Apparently the commander of Camp 22 decided to modify his retirement arrangements. Civilians near Camp 22 noted that kin of the commander and his deputy were seen selling (for Chinese currency) possessions in the markets. On the Chinese side of the border, it's no secret that more and more senior North Korean officials are buying homes or investment property. The rats, so to speak, are fleeing a sinking ship.
North Korea is again selling gold in China to obtain foreign currency. Much of this gold if obtained from North Koreans, who are compelled to sell gold to the government for North Korean currency (which is rapidly eroded by inflation) at rates far below the current price in China, which is $59,000 per kilogram (35 ounces) of 24 karat purity metal.
There are lots of rumors in North Korea about economic changes but little action. This indicates continued debate within the leadership over how to get the economy going again. Many North Korean officials believe that reforms like China enacted in the 1980s, would create an entrepreneurial class that could lead a rebellion. This argument holds that Korea is different than China in that most Koreans want the two Koreas to unify. If there are economic reforms, the newly wealthy and powerful business class will seek unification with prosperous and democratic South Korea. To the North Korean leadership this means it is better to maintain an impoverished police state in the north than to risk economic reforms and rebellion. But the reformers point out that without economic reforms the north is facing mass starvation and political collapse. The signs of this are already quite obvious and no one has a solution that does not involve allowing some kind of economic freedom. There is a rumored compromise deal in the works, with the details still being worked out. Meanwhile, the growing corruption among government officials makes it likely that any reforms would be crippled by the extortionate demands of greedy bureaucrats.
September 21, 2012: Off the west coast, South Korean patrol boats fired warning shots at six North Korean fishing boats that had crossed the Northern Limit Line (NLL, the unofficial but generally observed border). The north protested but did not respond with any military action, at least not yet.
Iraq refused a North Korean request for permission to fly a transport aircraft to Syria via Iraq. North Korea refused to allow Iraq to examine the aircrafts' cargo and the Iraqis feared the cargo was weapons for the Syrian government (currently facing a massive armed uprising).
September 20, 2012: Officials in the north revealed that last month a key railroad tunnel near the northeastern city of Hyesen collapsed. About a quarter of the 1,600 meter tunnel fell in due to shoddy construction and recent rains. Foreign engineers who have travelled around North Korea have noted the shoddy construction practices and the lack of maintenance on tunnels, roads, bridges, and buildings. More of this stuff is expected to collapse as maintenance and cutting corners escalated in the 1990s, with the loss of Russian subsidies.
September 18, 2012: Russia has agreed to write off 90 percent of the $11 billion Russia loaned North Korea during the Cold War. In addition, Russia will make investments in North Korean energy and transportation projects.
September 17, 2012: In the north the security services were alarmed to discover that twenty people from seven families had escaped by crossing the Yalu River together. Four homes were found abandoned and that confirmed the escape. The secret police are alarmed at the ability of smugglers to get such a large group, containing elderly people and children, across the frontier. This indicates either poor performance or corruption of border guards.