What next for North Korea?

What happened?

Jang Song-thaek, an uncle by marriage of North Korea's young dictator Kim Jong-un and long regarded as Kim's mentor and right-hand man was last week dramatically purged from power and summarily executed.

Jang, who in the months after the death in 2011 of Kim's father, Kim Jong-il, was seen as the regent for the "Great Successor", was denounced as a traitor in front of his party comrades, manhandled from his seat and led away to his fate.

In an unprecedented public humiliation, the Pyongyang government denounced Jang as a "traitor for all ages", "worse than a dog", "despicable human scum" and accused him of crimes including plotting a coup, womanising, drug-taking, spreading pornography, selling off national resources too cheaply and "failing to applaud with sufficient enthusiasm".

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What does it all mean?

Korea-watchers are divided over the reasons for Jang's fall. South Korean media have suggested that Jang had hoped to oust Kim Jong-un and replace him with his exiled elder brother, Kim Jong-nam.

Some have speculated at a more personal motive, namely sexual jealousy: Jang had introduced Kim to his future wife, Ri Sol-Ju, a young woman whom Jang had also allegedly slept with.

Jang Jin-sung, a former North Korea propaganda official, thinks that Jang was ousted by a powerful military faction who had grown suspicious of his influence and friendliness towards China, North Korea's only ally.

Whatever the explanation, most analysts agree that Jang's ousting suggests a bitter power struggle at the top of the ruling elite, giving rise to fears of further purges and instability ahead.

What 'resources' was Jang selling?

Iron ore and other minerals, to China. Jang was seen by foreigners as something of a reformer, in the sense that he favoured Chinese-style economic liberalisation, and was Beijing's key man in Pyongyang.

Beginning in 2006, and more concretely since 2012, Jang had been in charge of negotiating closer economic ties with the Chinese, including plans to set up as many as 14 special enterprise zones (SEZs) as a forerunner to a wider liberalisation of the North's economy.

According to Bradley O Babson, an academic expert on North Korea writing this week on the 38north.org website, North Korea's commitment to its SEZ programme should be taken seriously (see below).

However, the fact that Jang was damned in part for selling resources at cheap prices does not bode well for Chinese or other foreign investment.

Which natural resources does North Korea have?

Its economy such as it is is heavily reliant on the export of anthracite coal and mining for metals, including gold, magnesite and zinc, among others. But it is also estimated (by the Seoul government) to have rare earth elements worth a potential $6trn.

Rare earth elements (such as lanthanum, cerium, and praseodymium) are used in the construction of everything from iPods to precision guided missiles, and constitute a massive potential economic opportunity.

How's the wider economy doing?

Sadly, it remains a disastrous failed experiment in state socialism that has been locked in a downward spiral since the collapse of its former sponsor, the Soviet Union. North Korea has not published economic statistics since the early 1960s, but according to estimates, GDP per capita could be anything from $506 (a UN figure for 2011) to $1,800 (a CIA World Factbook 2011 estimate based on an OECD estimate from 1999).

What's certain is that the country remains racked by hunger and poverty, ruled by a thoroughly corrupt and brutal elite; an estimated 200,000 people suffer in vast prison camps. But in recent years the standard of life in Pyongyang itself appears to be improving.

Improving in what ways?

Rdiger Frank, a German economist who frequently visits North Korea, lists various improvements in recent years: more street booths selling basic goods, and more permanent commercial premises; more cars on the roads, including privately owned ones; new trolley-buses; in general more goods and services available to purchase, and more customers able to do so.

Frank argues that North Korea is seeing the emergence of an urban "middle-class", numbering about two million, with access to mobile phones and even locally made tablet computers.

As access to information about life in the South and other countries has spread over the past decade, a quasi-capitalist parallel economy appears to be developing in the North, based on black markets, influence, inside information and crime. Whether all that adds up to the beginnings of a Chinese-style transformation remains very much contested.

Will economic reform be affected?

There were mixed messages this week on how Jang's fall might affect economic reform. On the one hand, North Korean business people living and working in the Chinese border cities of Dandong and Shenyang are being recalled to Pyongyang. On the other, a senior government official gave an interview to Associated Press designed to reassure the Chinese and the world that nothing would change.

Moreover, in the days after Jang's humiliation, North Korea signed its latest agreement with a Chinese border city to create a new SEZ, and also reached agreement with China on building a new 380km rail link between Dandong in China and Kaesong, the North's recently reopened SEZ on the South Korean border.