In the middle of Pyongyang's high- rise apartments, the Tong-il market is buzzing. Thousands of North Koreans haggle and buy goods. On offer are fresh meat and dried fish, Spanish oranges and North African dates, suits, skirts, shoes, light bulbs, computer parts - and embroidered armbands that declare the wearer an engine driver, controller of machines or captain of guards.
This is a country where one in eight people (three million) died in a famine just a few years ago. The People's Distribution Centres, it was recognised, could no longer provide for the population's basic needs, particularly in the urban areas. As a result, there emerged farmers' markets, barely tolerated by the authorities and well off-limits to foreigners, where food was traded for cash or kind.
Since then the climate has changed. Kim Jong-il, North Korea's leader, toured China in May 2000 and January 2001 to view the economic miracle. He has seen the future and its works. "We should transcend the old working style and fixed economic framework of other countries in old time," came the order - showing that North Korea is ready to break with Soviet-style state socialism and to learn from other countries.
North Korea wants to leap several stages of technology and move straight to IT. Elite institutions such as the Moranbong Secondary School No. 1 are training groups of outstanding students in computer skills. Small business is everywhere and the volume of consumer goods is increasing; the urban centres have a litter of new stalls on their streets and every mile or so, even on rural roads, they make a colourful appearance.
However, at least for a while, this will be a market without privatisation. As the vice-chairman of the state planning commission explained, the state will continue to own the means of production. But the people to whom it lends the factories, the co-operative farms and so on will have a responsibility to maximise profitability from the enterprises. How the profits are to be used is less clear. Spending in Tong-il suggests an emerging middle class.
North Korea has bought into reform but has not matched it with Chinese-style openness. One reason is that, with President Bush's "axis of evil" label tied around its neck, it cannot attract inward investment from any but the most buccaneering chancers, or South Korean "family". Too much money is chasing too few goods. Inflation runs at 30 per cent and rather than stimulating indigenous production North Korea is sucking in imports.
In July 2002, a monetary reform packaged devalued the won fortyfold and raised wages by a similar proportion. But wages were also more sharply differentiated to provide incentives. So North Korea is now in danger of creating an underclass of roughly three million people. This underclass will find it increasingly difficult to survive. Coal miners, if they achieve their targets, may earn 10,000 won per month; workers in the service sector get 2,000 won. The minimum wage for a family of four, in which both parents are working, is roughly 4,000 won; it needs about 90kg of rice to survive for a month. Families can buy at most 45kg of rice at 45 won/kg, through the People's Distribution Centres. The current "market" price is 90 won/kg. In effect, a family needs 6,075 won per month just to survive; the minimum family income is thus one-third below the minimum level it requires for survival. Pork - rarely available from the distribution centres at the official price of 75 won/kg - is sold on the market at 400 won. People get by on family or international aid, or by resorting to Korea's traditional substitute - a mixture of tree bark, roots and cabbage.
The country also suffers woefully from energy shortages, made worse by Bush's decision to suspend delivery of 500,000 tonnes of heavy fuel oil per year, pledged as part of the framework agreement between the US and North Korea in 1994. Now, in most rural areas, power flows for three or four hours per day - it used to be 12 - in temperatures that often drop as low as minus 40 C during winter. In Pyongyang, however, the lights remain on.
North Korea has another problem. In areas such as South Pyongan Province, to the north of Pyongyang, there is a shortage of workers for this year's harvest. They are all down with malaria. Climatic conditions in 1998 led to small outbreaks of the disease in China and both Koreas. In central China and South Korea it was rapidly brought under control. But North Korea has no insecticide, no drugs and no equipment - one Chinese expert reported that when he arrived all that was available was a single Russian microscope from the 1940s. The disease spiralled out of control. Now 300,000 people are infected with a relapsing malaria that lays victims low for months on end, returning repeatedly. Most are agricultural workers, who get infected while sleeping out in the fields. Consequently, portions of this year's better-than-average harvest, born of early rain and an extended summer, will rot in the fields and do nothing to ease the crisis.
North Korea's future does not lie entirely in its own hands. It will be determined largely by its neighbours and by post-9/11 global politics. The country can be driven into a corner - though not to collapse - by a US administration that prefers regime change to a changing regime.
But equally - with the help of its neighbours and the European Union, which Pyongyang sees as the only power capable of checking the US - there is every chance that North Korea could follow China, emerge from isolation, and join the rest of the world to play its own special role.
Glyn Ford is Labour MEP for south-west England