North Korea continues to be organized as a Stalinist state with high levels of repression and centralized economic control. The collapse of the Soviet bloc, Western pressure, and the monumental economic success of South Korea have left North Korea isolated. Piecemeal domestic changes have occurred in recent years. It is said that a younger generation of Chinese-trained officers seek a military-backed industrialization program, and a new generation of party officials would like to stimulate the economy by introducing reforms that would deviate from juche . In spite of a dire need for foreign investment and technology, however, the government of Kim Jong Il fears that greater openness could lead to its downfall, as occurred in the Soviet Union. North Korean officials want to improve the economy without losing their monopoly on power. Therefore reform is likely to be carefully orchestrated with tight party control. Future economic reform will likely be based on the Chinese model. Early in 2001 Kim launched a "new thinking campaign" to reform attitudes on work as well as ideological perspectives in order to help the country be more competitive in the global market. Serious reforms are needed in the information technology (IT) field. Most homes are without telephones and internet access is available to an extremely limited group of people.
The economy of North Korea continues to reel from the collapse of trade with the former eastern bloc. The nation's economy is estimated to have shrunk by one-third in the 1990s. Extensive flood damage has forced this fiercely xenophobic nation to request international aid. Humanitarian agencies estimate that food shortages have killed hundreds of thousands and left many more, including large numbers of children, malnourished and in danger of dying. Many governments are reluctant to send aid unless they can be sure that it reaches the starving people and is not diverted to military storehouses. The North Korean government, however, is distrustful of foreigners and limits the amount of monitoring that is allowed.
In July 2002, North Korea undertook a series of economic measures intended to reform the economy and introduce a degree of free-market policy. North Korea devalued its currency, increased wages, and raised food prices by as much as 50%. In September, Kim Jong Il announced plans to build a special free-trade zone with its own laws and elections in the town of Sinuiju on the border with China, meant to attract industry and investment to the region. The free-trade zone was to be run by Yang Bin, a wealthy Chinese businessman. In October, however, Chinese authorities arrested Yang on charges of tax evasion.