July 8, 2012: The North Korean economy is undergoing changes. In fact, last year there was actually some growth, with GDP increasing .8 percent, versus a .5 percent decline in 2010. The North Korea GDP (about $28 billion, compared to $1,100 billion for South Korea). Thus even with a larger population, the average South Korean has 20 times more income as their northern counterparts. Moreover, income distribution is quite different in the north, where about two-thirds of the population is very poor and very hungry. The other third contains the well-fed ruling elite (whose lavish country estates can be seen via commercial satellite photos) and their supporters (secret police, military officers, bureaucrats) plus the semi-legal merchant class that has been allowed to develop over the last six years to avoid total economic collapse.

The economic decline in 2010, was the result of agricultural (floods) and industrial (massive power shortages) failure. But China came to the rescue by offering to set up mining operations in North Korea and buy billions of dollars-worth of minerals each year. China rebuilt railroads to handle the increased traffic from the remote North Korean mines. In addition, China offered legal jobs for North Koreans in China. The only catch was that the North Korean government took most of the pay. Similar deals have long been used with Russia but China offered far more jobs under more comfortable conditions. Competition for these jobs is fierce in North Korea and the government selects those deemed least likely to run away.

Last year North Korea bought more fertilizer for farmers and the weather was pretty good. That, plus the growing income from Chinese run mines and North Korean workers in China made up for the continuing declines in manufacturing. A good year on the farm is a big deal in North Korea, where farming and fishing are 23 percent of the economy (compared to under three percent in the south). But this year all of Korea is suffering from a record-breaking drought. This is hurting the north a lot more than the south. Although the monsoon (jangma) rains recenly arrived, a month late, the damage was already done in the north. Three months of very hot and very dry weather has seriously damaged crops. The rains will save some of them but at least a fifth of this year's crops will be lost.

The new North Korean government of Kim Jong Un has made a big deal about attempts to improve the food supply. This resonates with most North Koreans, who have suffered through two decades of food shortages and several famines. While record-breaking drought is a natural disaster, North Koreans have been indoctrinated for decades to believe that their leaders from the Kim family have God-like powers. To avoid some embarrassing disappointment, Kim Jong Un has to find a lot of food and fast. China is willing to help but only if North Korea enacts even more economic reforms. North Korea has long been urged to be "more like China." Three decades ago the communist rulers of China decided to adopt a market economy while maintaining their communist dictatorship. It worked, and they have been urging North Korea to do the same. But the two countries are different, and many North Korean officials believe that Chinese-like reforms would cause unrest. That's because North Koreans despise the Chinese (and vice-versa) and more North Koreans have become aware that the South Korean economy has outperformed even the Chinese. This ethnocentrism (often called racism) is common in East Asia and plays a major role in decisions, like North Korean reluctance to adopt Chinese economic reforms. Many in the North Korean leadership believe that a market economy would make it possible for prosperous rebels to overthrow the 65 year old North Korean dictatorship, with disastrous results for the current rulers and their henchmen. China is becoming impatient with this and is now telling the northern leaders that they must reform the economy or else (meaning less Chinese food and other aid). The Chinese also have their supporters among the North Korean leadership and have long been suspected of making preparations for a coup in the north.

China has told South Korea that it will not allow the unification of Korea under a democratic government. North Korea will remain under Chinese "influence." If worse comes to worse, China will send in troops to set up a North Korean government that will faithfully follow orders from China. In an effort to dampen some of the anger in South Korea (the United States, Japan, and so on), China would maintain North Korea as a separate entity (and not a new province of China). China wants no misunderstanding about who "owns" North Korea.

North Korean and Chinese efforts to reduce escapes from North Korea are working. For the first five months of this year, North Korean refugees arriving in South Korea were down 43 percent compared to the same period last year. This does not mean that 43 percent fewer people got out of North Korea, because China has also made it more difficult for North Korean refugees to travel through China to South Korean embassies in Thailand and Burma. But it is harder, and more expensive, to escape North Korea. This has included more public executions of those who attempted to escape, or were arrested in China and returned. There are now nearly 24,000 North Korean refugees living in South Korea and most of them arrived in the last decade.

For the third time in the last two decades, North Koreans have been promised that a sharp improvement in living conditions is just around the corner. In the late 1990s, after a famine that killed up to ten percent of the population, people were told that prosperity would arrive in 2003. It didn't happen. The government saw that failure coming and in 2000, announced that prosperity would be delayed until 2012. Now people are told that it will happen in 3-5 years.

July 4, 2012: In yet another effort to improve morale, North Korea cancelled laws that prohibited women from wearing high heels, trousers and earrings. All had long been banned as evil influences from the West. But so many North Korean women (at least among the third of the population that has any money) were secretly (or openly) flaunting these rules that Kim Jong Un saw another opportunity to please his core supporters.

June 29, 2012: After a month of delays by China, the UN finally released a report detailing an investigation of how well economic sanctions against North Korea have been working. UN inspectors assert that China, or at least Chinese firms, are responsible for about half the incidents of sanctions on North Korea being violated. For example, the UN claims that the 16 wheel missile transporters seen in an April 15, North Korean parade came from China, as did luxury cars frequently seen in the North Korean capital. China denies allowing violation of the North Korea sanctions. In addition, Western missile experts believe the new long-range ballistic missile shown on those transporters was a fake.

South Korea backed away from an intelligence sharing agreement with Japan. A preliminary agreement had been secretly signed last April. But the public signing was canceled due to continued anti-Japanese feelings (for the harsh treatment Koreans received when Japan ruled Korea as a colony from 1905 to 1945).

June 28, 2012: In Japan three men were arrested and charged with illegally exporting slot machines to North Korea.