The North Korean government appears confused how to handle capitalism within its borders. The government nominally embraced the legality of markets in 2002, but in recent years has been clamping down again. Late last year, the central government notified local officials that all private markets could operate only three days a month in 2009 - yet the new restriction was never adopted.
North Korean observers such as Curtis Melvin, founder of the site "North Korean Economy Watch" have watched the growth of village markets via satellite photos courtesy of Google Earth. "In large towns you can see multiple markets, but you can find them in every town and every city," Melvin said.
The growth of these markets -- long on the fringe of legality in North Korea -- caused government leaders to begin clamping down on the practice as a threat to the regime. According to North Korea watchers, border police began clamping down on widespread smuggling last year.
The markets began sprouting in the wake of the famines of the 1990s as North Koreans struggled for additional food and income. The public distribution system of food and supplies collapsed as aid from the Soviet Union dried up and "grassroots capitalism was born," says Andrei Lankov, a professor of North Korean history at Kookmin University in Seoul.
Some economists estimate North Koreans earn more than 50 percent of their income by illegal trade. It's even the subject of dark humor within the country, said Lankov, quoting a self-deprecating joke North Koreans make: "There are only two kinds of people in North Korea: those who are engaged in trade and those who are dying."
There is a belief that regional governors are making so much money from operations in their districts they are allowing them to grow unchallenged, Melvin said. "It's not clear where all this is going," he added.