MAKING MONEY IN THE STATE: NORTH KOREA'S PSEUDO-STATE ENTERPRISES IN THE EARLY 2000s

Abstract In the 1990s, a part of the North Korean economy underwent a process of marketization and de facto privatization. While largely spontaneous, this process was eerily reminiscent of developments in other post-Communist countries in Eastern Europe. One of the results was the emergence of a new entrepreneurial class, a nascent bourgeoisie. In order to overcome the obstacles that arose from the lack of any legal framework for their activities, they often chose to register their enterprises with state agencies, creating what we call Pseudo-state Enterprises (PSEs). Utilizing an agency theory approach, with particular emphasis on property rights and contracting problems, this article traces the origin of the PSE, their interaction with the state, how they are managed and the challenges they face. The article is based on refugee interviews with five North Koreans involved with the PSE-related activities in nine entities covering a range of different sectors.