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Never let a good crisis go to waste. And from the outside, that seems to be exactly the advice North Korea is running with. From the outside looking in, it now seems like the Hermit Kingdom is home to one of the fastest-growing economies in the world. Satellite data, which we can use to track overall output, shows that the country is now about three times brighter than it was three years ago. Pyongyang built more new homes last year than Chicago or Los Angeles, for what that's worth. And for the first time in its history, there seems to be a very real push towards modernization and potentially even liberalization. On the ground, reports have noted a huge uptick in smartphone usage, food delivery apps, luxury
residential precincts that share their name with intercontinental ballistic missiles, domestic smart TVs with inbuilt advertising, and so many new luxury cars lining the streets of the capital that the country is starting to experience a problem it has never had before, traffic jams. It really puts the dystopia in Mark Fisher's boring dystopia theory. But what's really going on here? North Korea has in the past been one of the most dysfunctional and impoverished countries on the planet, relying effectively on foreign aid and black market trade to keep few lights on. So, this recent boom has really only been enabled by Russia's invasion of Ukraine. Alongside China as something of a plausible deniability
intermediary, the two heavily sanctioned states have formed something of a mutually beneficial arrangement. North Korea provides munitions and fighting men to Russia, Russia provides natural resources to China, and China provides essential components of economic development to North Korea. If it wasn't for the war of aggression and the authoritarian governments it was enabling, it would almost be an ideal case study of mutually beneficial economic cooperation. If the reports are true, this has the potential to massively increase living standards for some of the most oppressed and impoverished people on the planet. And that is worth exploring separate from everything else. But it's also worth finding out how stable this little arrangement really is, and what could
happen if it all falls apart. So, how are we actually measuring the supposed economic miracle? Does it actually have the potential to benefit the people of North Korea long term? And finally, what happens to this relationship of convenience if the war comes to an end. Just as the rest of the world watches North Korea by satellite to measure its GDP, hackers and scammers can do the same thing with your online data. But, instead of your GDP, it can be your social security number, phone number, and even address. That's why I started using Incogni. Incogni is an automated data removal service that tracks down and removes your information from directories, people search sites, and
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have direct access to this very closed-off nation to produce their data in the same way that they would more integrated members of the global economy. Because of this, we will need to rely on what we can reasonably deduce from the outside looking in, which we will mention throughout this video, but is worth keeping in mind from the get-go. Now, with that out of the way, North Korea's economic boom is really being driven by two things. The first is the single largest export opportunity in the country's history, and it comes courtesy of Russia's invasion of Ukraine. Since 2022, Russia has become almost as exiled from global trade as North Korea itself, cut off from Western markets, suppliers, and financial
systems by wave after wave of sanctions. And it just so happens that these two pariahs share a border, a short 17-km stretch of the Tumen River in North Korea's far northeast, crossed until very recently by a single aging rail bridge. The two countries only broke ground on their first-ever road link in 2025, which says a lot about how seriously they are now taking this relationship. Trade between the two has boomed ever since the war began, because Russia has found itself very interested in something North Korea has spent the better part of 70 years hoarding, artillery shells. Russia's war has been consuming ammunition faster than its own factories can produce it, and North Korea runs its military on the same
Soviet standard calibers, which it has been mass-producing and warehousing for decades in preparation for a war that never came. South Korean intelligence estimates that since 2023, the North has shipped somewhere in the order of 6,700 containers worth of munitions across that little rail bridge, potentially containing millions of artillery rounds. At times, those shipments have reportedly accounted for as much as half of all the artillery ammunition being fired by Russian forces in Ukraine, which for a country of 26 million people with an economy smaller than Vermont's, is a remarkable market share. Beyond the shells, North Korea has also been supplying the one thing Russia is running even shorter on than ammunition,
people. Since late 2024, it has sent somewhere between 14 and 15,000 soldiers to fight for Russia, mostly in the Kursk region, alongside thousands of construction workers and laborers to backfill the Russian workforce more broadly. Now, this trade is still difficult to actually carry out for two reasons. The first is a bit obvious. Fighting men are not really a commodity that gets traded on international markets. Not that something like that was ever going to stop either of these two governments. The second is more practical. Both countries have extremely limited access to the international financial system, which means they can't just wire each other money and settle their accounts like normal trading partners would. When Australia sells iron ore to Japan,
nobody ships pallets of cash across the Pacific. The payment moves through a network of international banks that both sides trust to keep score. North Korea and Russia have both been almost entirely cut out of that network. So, the two countries have been forced to devolve into something closer to barter, swapping goods directly across the border instead of settling up in currency. In exchange for its munitions and its men, North Korea has primarily been receiving food, fuel, fertilizer, and building materials alongside, according to Western intelligence agencies, technical help with its satellite, missile, and submarine programs. This barter arrangement has made the true size of
the trade almost impossible to track. Seoul's Institute for National Security Strategy puts North Korea's earnings at somewhere between 7.7 and 14.4 billion dollars from late 2023 to the end of 2025, while the Korea Institute for Defense Analyses has put the cumulative total above 20 billion. At the end of the day, exactly how many munitions Russia is receiving is literally classified military information. So, on top of the sanctions both sides are already ignoring, they have a vested interest in keeping things vague. But, even if we take a conservative middle estimate of about 10 billion dollars worth of exports since the arrangement began, that is an enormous number for this particular economy. The Bank of Korea, which produces the most widely used outside
estimates of the North Korean economy, puts the country's entire gross national income at around 32 billion US dollars a year, which is less than what Woolworths turns over in the same period. So, an export windfall of 10 billion dollars for an economy that size is proportionally similar to the United States suddenly finding an extra 9 trillion dollars of foreign demand, which, on the surface, would seem to explain the boom entirely. More exports means more output, which means more growth, which means brighter lights. But, this is where things get economically interesting. Because, on paper, most of this trade arguably shouldn't count as growth at all. To see
why, we need to talk about how GDP actually gets measured. Gross domestic product is, in theory, a measure of everything an economy produces in a given year. Every ton of steel, every haircut, and every artillery shell. But in practice, nobody can observe production directly because that would mean tracking every single factory and service provider in the economy in real time. So instead, statisticians count where production ends up. Everything that gets made has to go somewhere, so we add up household consumption, business investment, government spending, and exports minus imports and call the total GDP. If you have ever seen the formula GDP equals C plus I plus G plus X minus M, that is all it is describing. And that little accounting
workaround is exactly where North Korea's boom starts to look strange. Most of the munitions North Korea has been shipping to Russia were not actually produced in the last few years. They came out of stockpiles built up over decades of paranoid overproduction by a state that was permanently preparing for a war that hadn't arrived yet. In national accounting terms, those warehouse shells were already counted as production in whatever year they were originally made, where they would have been recorded as investment in inventories.
Think about a fridge factory. If it builds a fridge in December that doesn't sell until the following year, that fridge still counts towards this year's GDP. It just gets recorded as the factory investing in its own inventory rather than as somebody's consumption. The same logic runs in reverse. When a country sells something out of an existing stockpile, exports go up, but inventory investment goes down by the same amount, and the two effectively cancel each other out. This is not some special rule invented to be mean to North Korea. If the United States decided to export its entire strategic petroleum reserve tomorrow, its export figures would look spectacular, but no new production would
have taken place. So the inventory drawdown would offset it, and measured GDP would barely move, which means that when North Korea exports $10 billion worth of shells from a mountain bunker it filled in the 1980s, the net effect on its GDP is, in theory, roughly zero. And it actually gets weirder than that because this is two-way trade. For everything North Korea hands over, it is, in theory, receiving something of roughly equal value back. And those inbound goods are imports, which get subtracted in the GDP calculation. So a barter arrangement where old stockpiles flow out and fresh imports flow in could, all other things being equal, technically show up in the national accounts as the economy
shrinking. It would also be very hard for North Korea to run a meaningful trade surplus with Russia, even if it wanted to, because what would it actually receive in return? The entire system of international finance that keeps track of who owes what to who is unavailable to both of them. The only alternative would be extending credit on a handshake, either trusting North Korea or trusting a Russia that is now in the fourth year of one of the most expensive wars in modern history. Neither is what you would call a risk-free counterparty. So, that is the theory. A boom that on paper might not be a boom at all, but in practice, who cares? People can't eat economic growth, and in North Korea, a country that lost somewhere between
hundreds of thousands and several million people to famine in the 1990s, that is a very literal critique. Selling stockpiles of weapons that were sitting inertly in a cave doing nothing in exchange for food, fuel, and building materials is simply a good trade for a country like this, whatever the national accounts have to say about it. Those materials have also enabled real measurable economic activity that an untouched inventory of artillery shells never could, like the enormous construction program currently reshaping Pyongyang. The showpiece Hwasong district alone added 10,000 new apartments as part of a five-year plan to build 50,000 across the capital, complete with twin missile-shaped towers painted red, which
is a level of on-the-nose symbolism you don't often get in urban planning. And North Korea can also do something that a strategic petroleum reserve can't do. It can just make more munitions. This is the part of the boom that is real new production. The Bank of Korea estimates the North Korean economy grew 3.1% in 2023 and then 3.7% in 2024, its fastest rate in eight years, driven substantially by heavy industry, which grew more than 10% as factories expanded output of exactly the kind of metal products that end up leaving the country in crates. So, the honest reading sits somewhere in the middle. The initial surge was mostly stockpile liquidation that flattered the export numbers, but it has since kick-started
genuine new production, and the goods flowing back have funded construction and consumption that is very visibly real. So, yeah, even if the theoretical GDP boost is smaller than the headline suggests, this has still been a huge practical win for the North Korean economy. And there is a second thing driving this boom that has arguably been just as valuable as the exports themselves. A friend in their corner. Russia is still a permanent member of the UN Security Council, and it turns out that having one of those in your corner is an economic asset all by itself. Since its first nuclear test in 2006, North Korea has been placed under
some of the most comprehensive trade sanctions ever assembled, covering everything from weapons and luxury goods through to hard caps on how much refined petroleum it is allowed to import. And for years, the enforcement of those sanctions was monitored by a UN body called the Panel of Experts, a group of independent investigators who documented violations and published the evidence for the whole world to see. In March 2024, Russia vetoed the routine resolution that would have kept that panel alive against the votes of 13 of the 15 council members, with China abstaining. What this means is that the sanctions still technically exist, but the neutral referees who documented breaches of them are gone. The
consequences of that are bigger than they might sound, and the biggest one runs through China. China has always had a complicated relationship with North Korea. On one hand, it very much wants to keep a friendly buffer state between itself and South Korea, a country hosting tens of thousands of American troops. On the other hand, North Korea is a genuinely troublesome neighbor, and China's trade with the rest of the world is worth thousands of times more than anything Pyongyang can offer. Because of this, Beijing has historically kept its dealings with North Korea deliberately ambiguous. Close enough to keep the regime alive, distant enough to avoid being punished for it. But with the sanctions monitors gone, a lot more
trade can now happen across this border with plausible deniability, because there is nobody left with a mandate to formally document it. And that has quietly completed a rather elegant triangle. China wants Russia's discounted oil, gas, and raw materials. Russia wants North Korea's war fighting inventories, and North Korea is happy to take whatever it can get, which in practice means Chinese manufactured goods filling in any gaps in the barter ledger. That triangle goes a long way to explaining the specific texture of this boom. The smartphones, the domestic smart TVs, the delivery services, and the suspiciously European-looking cars now lining the streets of Pyongyang.
Recent visitors have described Chinese brands like Chery, Changan, and Geely sitting alongside BMWs and Audis selling for anywhere between 5 and 30,000 dollars. With private yellow number plates multiplying so quickly that analysts think the country could pass 20,000 privately owned cars within a year. Tire imports are up 88% on pre-pandemic levels, and the capital now has genuine parking problems. In a country where within living memory the streets were famous for having no cars on them at all. These modern goods have also enabled and even encouraged something that looks a little like liberalization.
The headline anecdotes like Pyongyang residents ordering meal deliveries through an app simply are not possible without some baseline of consumer technology, private transport, and small-scale commerce being tolerated by the state. And broadly speaking, a person with a car and a smartphone is just a more independent person than one without them. They can move further, communicate faster, and participate in the semi-formal market economy that has been slowly growing out of the ruins of the old rationing system ever since the famine years. So, even though the conditions surrounding this boom are obviously horrible, there is at least an argument that the silver lining is real, and that this inflow could genuinely improve living standards and
help loosen the grip on an infamously oppressed and impoverished population. But whether any of that actually happens depends entirely on our third question. Can any of this last? Nobody can predict the future, least of all economists, but the honest answer here is probably not. For starters, most of this boom is happening exclusively among the elites of Pyongyang. That same satellite data tells the story. One recent study of nighttime brightness across 178 North Korean districts found that illumination rose by an average of about 26% between early 2022 and late 2025, but the gains were overwhelmingly concentrated in the
capital and a handful of favorite cities like Sinuiju, Nampo, and Wonsan. For everybody outside those cities, very little of this resource inflow is arriving at all. Even after 2 years of this supposed miracle, average income per person is still about 1,700,000 won a year, which is barely 3% of what the average South Korean earns. And that is if they're lucky. If they are unlucky, they are watching their young men get sent off to a war on the other side of the continent where somewhere between 6 and 7,000 of them have already become casualties according to South Korean and Ukrainian intelligence estimates. Even from a purely cold-hearted economic perspective, that is a real loss because
these are workers at the very start of their productive lives, pulled out of an economy where a huge share of the population is still needed just to keep subsistence agriculture running. There is also a much darker possibility, which is that this arrangement doesn't loosen the system of control at all, but cements it. The imports flowing in are not being distributed by a market. They are being distributed by the regime, which means every new apartment, car, and smartphone is also a reward for loyalty. Those smart TVs come with built-in state advertising, and the smartphones run on a network the government watches. So, the same technology that makes people more independent also gives the state better
tools to monitor and manage them. And it is very much an open question which of those effects wins out. Then there is the awkward fact that this entire boom is built on a single customer fighting a single war three time zones away. Wars eventually come to an end, and building your economic model on being the loot cash for somebody else's front line is not a strategy with a long shelf life. There are already signs of strain. Ukrainian military intelligence reported that North Korea roughly halved its artillery shipments to Russia through 2025 as its famous stockpiles started to run low and its aging industrial base
struggled to keep up with replacement demand. We spend a lot of time on this channel talking about economies that borrow prosperity from the future by running up debts that their children will eventually have to pay back. North Korea has done the opposite. It has borrowed prosperity from the past by spending down a 70-year inheritance of warehouse weapons that for one brief and horrible geopolitical moment turned out to be exactly what somebody wanted to buy. Either way, borrowed prosperity runs out. The real question is whether the apartments, the markets, the cars, and the small new freedoms will outlast the war that paid for them, or whether the lights dim again just as quickly as they came on. Now, we have actually just
made an entire video on the other side of this peninsula, looking at whether South Korea's own economic boom could end up ruining the country. So, we didn't want to repeat too much of that here, but if you're interested, you should be able to click to that on your screen now. Thanks for watching, mate. Bye.
