The New North Korea: How Geopolitical Advantages and Growing Middle Class Prosperity Challenge the Next South Korean President
On June 3, the Republic of Korea (South Korea or ROK) will hold a snap presidential election, prompted by the impeachment and removal of President Yoon Suk Yeol. The new president will be inaugurated on June 4. Current polling and political analysis indicate that Lee Jae-myung, leader of the main opposition Democratic Party (DP), is the clear front-runner and as of now, most likely to win.
The next ROK president will confront what is, in many respects, a “New” North Korea, one that has both an enhanced strategic position in regional and global geopolitics, an evolving posture toward South Korea, and a domestic situation that is relatively more resilient to external pressures than ever before. Substantial purchasing power is now found not only among the elite but also within a growing and diverse middle class. This fact has largely escaped mainstream attention, overshadowed by persistent images of poverty, backwardness, and inefficiency. North Korean producers now face a sizable private domestic market—a fundamentally new situation in the country’s economic history.
These conditions prepare Pyongyang better for the possible return of global anarchy and a new imperial age while posing significant risks for South Korea’s new leadership and will have major implications for the incoming administration in Seoul, especially given the DP’s longstanding pro-engagement policies.
The New North Korea: Geopolitics
Kim Jong Un’s policies have shifted in recent years, influenced by the failed rapprochement with the US after the 2019 Hanoi summit, the COVID-19 pandemic, and the emergence of a new geopolitical landscape following Russia’s invasion of Ukraine in 2022.
North Korea’s alleged delivery of arms and munitions to Russia, as well as reports of sending combat troops to Kursk, have raised significant concerns in South Korea. It is feared that these developments could generate new income for Pyongyang’s regime, increase the likelihood of military technology transfers from Russia, further erode the international sanctions regime, and provide North Korean troops with practical experience in modern warfare.
For inter-Korean relations, Kim Jong Un announced a dramatic shift at the end of 2023: the abandonment of unification as a policy goal, along with the associated concepts developed by Kim Il Sung and Kim Jong Il. For the first time, North Korea has officially relinquished the idea of a single Korean nation, replacing it with a doctrine of two separate states on the peninsula and designating the Republic of Korea as permanently hostile.
The geopolitical transformation is ongoing and hence often obscured by singular dramatic events, making it difficult to discern the broader trends. Under such circumstances, historical analogies can be instructive. While a new Cold War structure may eventually emerge—with blocks forming around rival hegemons and defined by clear ideological boundaries—such an order will likely be preceded by a period reminiscent of the late 19th-century imperial age. For the next decade, global affairs are likely to be characterized by what I call multipolar anarchy.
Multipolar anarchy describes a transitional phase in the international system characterized by the coexistence of regional order and global disorder. In this phase, multiple power centers shape relatively stable regional environments governed by localized rules and norms. However, at the global level, no overarching consensus on rules exists, resulting in a fragmented system marked by the assertive and often coercive pursuit of national interests. Multipolar anarchy lacks a stable hierarchy or dominant hegemon. It features a plurality of actors—including traditional great powers, regional middle powers, and non-state entities—operating in an environment of normative ambivalence and strategic competition. This condition is not permanent but transitional: a liminal stage between the waning liberal international order and the possible emergence of a new systemic configuration, such as a renewed bipolarity or a contested multipolar equilibrium. Especially for states founded after 1945, such as the two Koreas, this will be a fundamentally new situation.
During the original Cold War, hegemons provided global public goods: an “international order” of norms, economic exchange, and security guarantees. International organizations facilitated negotiations within and between the antagonistic blocs. After China’s tacit retreat from this system in the late 1970s and the Soviet Union’s collapse in the late 1980s, the United States continued to provide these public goods unilaterally. However, as becoming apparent in these first few months of Donald Trump’s second term, the US is no longer willing to shoulder this burden. The world is now entering a period of dynamic geopolitical realignment that may eventually stabilize into a unipolar, bipolar, or multipolar order. For now, however, the rules governing foreign policy, economic exchange, and defense will increasingly be negotiated on a case-by-case basis with allies and adversaries alike.
This new “imperial age” brings both opportunity and risk. East Asia’s history offers a cautionary tale: In the 19th century, China, once the unchallenged regional hegemon, saw its influence wane rapidly, leading to Korea’s colonization and Japan’s meteoric rise as a regional power. History rarely repeats itself, but it often rhymes. Today, the two Koreas face challenges reminiscent of those confronting the Korean kingdom 150 years ago: declining old hegemons, emerging new powers, shifting balances, and changing rules. Trust in alliances is eroding, and national power is becoming more important than ever.
Somewhat ironically, North Korea appears better positioned to navigate this uncertainty, not least thanks to its longstanding pursuit of autarky. Its economy has low trade dependency, it is not part of any formal defense alliance, and it possesses nuclear weapons. Much of what European leaders now discuss under the banners of “decoupling” and “indigenous defense capabilities” strikingly echoes North Korea’s Juche ideology.
For South Korea, the traditional alliance structure is under strain. Pyongyang is emboldened by the silent collapse of international opposition and renewed support from Moscow and Beijing. Meanwhile, Seoul faces multiple threats: structural issues like demographic decline, the potential reduction or withdrawal of US military presence (possibly restoring the Acheson Line of 1950), and challenges to its export-oriented economic model due to US tariffs. Under these conditions, South Korea may find it increasingly difficult to resist China’s overtures for closer cooperation. If the new president seeks greater strategic independence by pursuing nuclear weapons in violation of or even by withdrawing from the Nuclear Nonprolifreation Treaty (NPT), South Korea risks international isolation and triggering a regional arms race.
The New North Korea: Middle Class and Domestic Demand
North Korea’s improved geopolitical position is matched by growing internal resilience. The country is less reliant than ever on cooperation with its adversaries for economic survival.
Despite the lack of comprehensive reforms, North Korea’s domestic economy has been transformed since the collapse of the socialist system and the “Arduous March” of the 1990s. Limited market reforms, the rise of informal markets, and pragmatic adaptation by the regime have given rise to a middle class capable of sustaining modest domestic demand for goods and services.
Defining and measuring North Korea’s “middle class” is challenging, given opaque data, a hybrid economy, and a unique socio-political classification system. Typically, the term refers to a social stratum with moderate income, economic security, access to education, and discretionary spending. North Korea’s middle class includes two broad groups: the “old” middle class of state-affiliated officials in administration, the party, and the military, who have leveraged their positions for economic gain especially since the 1990s; and the “new” middle class of market entrepreneurs, traders, and educated professionals who have capitalized on the semi-tolerated private sector, investing in ventures from transportation to retail. Their influence extends to financing state-sanctioned projects, reflecting a symbiotic relationship with the regime reminiscent of the state-Chaebol connection in South Korea during the military dictatorship.
Numerous indicators point to this transformation. The middle class has for years become more and more visible, especially in urban centers, where shopping malls, coffee shops, and leisure facilities cater to new consumer preferences. Ownership of goods such as refrigerators, washing machines, air conditioners, and electric bicycles has grown, reflecting enhanced purchasing power and consumerism. There is a marked increase in private spending on education, healthcare, and leisure activities. The proliferation of private tutoring, beauty salons, and entertainment venues in urban areas underscores this shift.
Cell phone subscriptions have risen to around 7 million—close to one-third of the population. This figure is noteworthy, since it can serve as a useful proxy for the size of North Korea’s middle class. Many of these devices are smartphones, and mobile payment systems are now in use.
Despite these advances, cash still dominates North Korea’s private economy. Higher-value banknotes, such as recently introduced 50,000 won bills or vouchers, have appeared. The sharply rising won-dollar exchange rate, especially since 2024, may indicate large cash holdings among a significant segment of the population. Following a major wage increase in late 2023, mid-level managers reportedly earn 80,000–120,000 won per month.
While not exhaustive, these examples illustrate the availability of significant disposable income among North Koreans, transforming them from passive recipients of state support into active consumers.
Excess liquidity in the economy poses risks, including inflationary pressures. Moreover, the denial of consumption opportunities can foster politically dangerous discontent, as East Germany’s experience demonstrated. From this perspective, the North Korean government’s development of attractions like the Masikryong Ski Resort and Yangdok Hot Springs Resort over the Kim Jong Un years appears less misguided—they help absorb excess liquidity and cater to the middle class’s desire for leisure.
The soon-to-open Wonsan-Kalma Beach Resort will be a telling test of this middle-class hypothesis. Its scale suggests that Western tourists are not the primary target. While Chinese visitors could theoretically fill its 10,000–20,000 beds, it is plausible but rarely considered that the resort will mainly serve paying domestic tourists, in addition to model workers granted a resort vacation and a handful of occasional foreign guests.
A key consequence of the expanding domestic market is reduced dependence on external inputs. While foreign engagement remains welcome, the regime’s willingness to take political risks for economic gain has clearly diminished. This affects areas central to past inter-Korean relations, such as tourism, trade, humanitarian aid, joint ventures, and infrastructure projects. The latter were often facilitated by performative “soft” exchanges, including summits, family reunions, joint sports events, or cultural activities. These will become less necessary, dampening hopes for gradual change from within through cultural infiltration.
Conclusion: A Double Challenge for South Korea
The evolving geopolitical landscape benefits North Korea by undermining sanctions and increasing support from China and Russia, while simultaneously threatening to weaken South Korea’s position. The growing purchasing power of North Korea’s middle class further reduces the country’s dependence on external economic cooperation and the regime’s willingness to accept risky people-to-people exchanges. The new South Korean president, even if he should have a pro-engagement background, may conclude that now is not the time for an active North Korea policy and may choose to deprioritize the relationship.