North Korean officials keep demanding large bribes (in food and fertilizer) before they will schedule any meetings between the two Koreas. This includes disarmament negotiations. Senior North Korean officials apparently refuse to acknowledge that the new South Korean government has dropped the former Sunshine Policy (which introduced the payment of such bribes, which eventually became unpopular because the North Koreans would talk, but rarely agreed to anything.) South Korea will not budge on the "no bribe" policy, and the North Koreans refuse to talk without payments. So any negotiations are stalled. China, on the other hand, never paid to meet with North Korean officials, and the Chinese are now telling them to stop trying to shut down the market economy, and encourage it instead. The Chinese are also hostile to the succession plan (with the Kim family staying in power), and want the North Koreans to shut down their nuclear weapons program. The Chinese are getting impatient, but fear being more forceful, lest North Korea collapse into anarchy, which will mostly spill over into China. There is a heavily mined and barb wired DMZ (Demilitarized Zone) between north and south Korea. Besides, there are a lot more personal and economic connections between North Korea and China.
Meanwhile, the border area with China is becoming ungovernable. In response, the government has ordered officials (including "volunteers" from the local Communist Party cells) to make regular headcounts of families, to discourage kin from fleeing to China, or simply slipping across the unguarded parts of the border to do business, and eventually return. A greater problem is that North Koreans living near the Chinese border have stopped using the North Korean currency, and switched to Chinese currency. This is largely because the government has printed a lot more money, so that everyone could have enough cash to buy food. But with the free markets shut down, only government stores were available, and these had little food. So inflation has skyrocketed.
North Korea is also cleaning house in the military, forcibly retiring many of the oldest (some in their 80s) generals. Several younger generals were also relieved, indicating that loyalty (to Kim Jong Il) was more a factor than age. Some government officials were relieved because they were put on a UN sanctions list. This limits an individual's ability to travel overseas and do business.
The north has also decreed that local government and Communist Party officials will lose their jobs (and access to cheap food) if anyone starves to death in their area of responsibility. Since there is not enough food to go around, officials are encouraged to hide starvation deaths as best they can. A lot of people are going to "disappear." Even the dead are subject to punishment in North Korea.
Kim Jong Il is responding to all this pressure by depending on family members more and more. His 64 year old younger sister is seen now in his entourage, and other kin, often previously unknown ones, are showing up.
The currency revaluation (which wiped out the savings of most North Koreans, especially those that ran small businesses), and the attempt to shut down the markets turned out disastrously. Kim Jong Il not only made a rare public apology, but dozens of senior officials lost their jobs because of the currency and markets policy. The damage done by the currency "reform" could not be undone, even though the government allowed business people to exchange nearly all their old currency. North Koreans had lost faith in their currency. North Korean cash is basically worthless in China. Because so many goods are imported from China, this means that the use of Chinese, instead of North Korean, currency will spread throughout the north.
North Korea is so broke that it can't even expand its prison system. Currently, there are six main work camps, holding 200,000 prisoners. The camps run factories, mines and farms, but to build additional camps requires cash and resources the government doesn't have. So food for the camps is being cut, to encourage the weaker prisoners to die, and make room for the many new "economic criminals" (especially those sneaking food in from China.) There is also paralysis at the top when it comes to resuming negotiations with the U.S. and neighboring countries, that are willing to provide food and other aid, if the north will abandon nuclear weapons. Many North Korean officials are willing to make the trade, but refuse to allow the inspections demanded. The big fear is that the outsiders will find out how bad off North Korea really is. This, despite the fact that this is not much of a secret anymore.
But the more prosperous south has its own special problems. South Korea has the lowest birth rate (1.15 children per woman, on average) in the world, for two years in a row. This is because of growing affluence over the last half century. South Korea is now one of the wealthiest nations on the planet. At the current birth rate, the South Korean population is expected to stop growing in the next decade, after reaching about 52 million (about twice the population of the north). If the birth rate stays under 2.1, the population will then begin to shrink. In North Korea, the birth rate is 1.9, and is also declining, because of increasing poverty and famine. For example, life expectancy in the north has declined from 72.7 years in the early 1990s, to 69.3 now. That's ten years less than in South Korea. Northerners are not only living shorter lives, they are also shorter. A study of teenagers in the north and south revealed that the northerners are 8 percent shorter, and weigh nearly 20 percent less. It's not as bad with adults, because they were not born during the famine (which began after Cold War subsidies ended in the early 1990s).
China is unwilling to give North Korea enough food to halt the growing famine. North Korea currently needs an additional 1.25 million tons of food a year. But last year it only received 300,000 tons, most of it bought from, or donated by, China. North Korea has refused foreign aid from the West, because there are conditions attached (distribution must be supervised to insure that the government does not resell the food to raise hard currency, or just use the food for the military.) Most of last year's food imports went to the military and government workers.
North Korea tried to break the UN weapons embargo on Congo, and was caught. South Africa revealed that, three months ago, it seized several containers of spare parts for T-55 tanks. These parts were estimated to be worth about $750,000. The crew of the French ship transporting the containers were suspicious of the contents, and asked port authorities in South Africa to investigate. The containers had been put on the French ship in Malaysia (a growing center for arms trafficking), and were marked "bulldozer parts." The containers had earlier been shipped from North Korea to China, changed ships, and carried to Malaysia.