North Korea's famine was in significant part a product of state failure, and unleashed an unintended grassroots process of marketization. Reforms undertaken in 2002 are more usefully interpreted as a response to this development than as a pro-active attempt to improve efficiency, and the government’s stance remains ambivalent. The economy is progressively more integrated with those of China and South Korea, but the modalities differ: involvement with China increasingly occurs on market-conforming terms, while interaction with South Korea has a growing official transfer or subsidy element. Recent floods will contribute to a political context for enhanced South Korean government support.