Question: which country suffers famine, launches missiles over its neighbours and prints counterfeit dollar bills?

Answer: the secret Stalinist state of North Korea. Aidan Foster-Carter reports

Winston Churchill once famously described Soviet Russia as "a riddle wrapped in a mystery inside an enigma". North Korea, it might be said, is the same. Much about the world's last surviving Stalinist state is unknown. With no economic statistics emerging from North Korea since the 1960s, and no research or social science as usually understood, there are plenty of gaps in our knowledge.

Yet the Democratic People's Republic of Korea - to use its official title - is not quite the terra incognita that it once was. Since the food crisis of the past three years (of which more below), dozens of westerners working for United Nations agencies and non-governmental organisations now live in its capital, Pyongyang. More important, they get to travel out from this showpiece capital - with its Arc de Triomphe bigger than the original - into most of North Korea's countryside, hitherto completely off-limits to foreigners. As for the rest of us, you can quite easily go as a tourist and view the officially approved sites; although a CV is required (journalists need not apply, but academics are acceptable), and one should be prepared for the trip to be cancelled at the last minute without explanation.

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These days, the North Korean enigma is not so much a heart of darkness as a problem of knowing which of several discordant images to believe. The official rhetoric inhabits a militant world nonpareil. Slogans issued in April by the ruling Korean Workers' Party to celebrate the DPRK's 50th birthday (on September 9) include calls to "imbue society with the red flag spiritI", "join in the great forced marchI", "invigorate the class struggleI", "become heroic human bombs and suicide squadsI" and "mercilessly annihilate the enemies.I" Vigilance is essential against "the ideological and cultural poisoning by imperialism as well as the infiltration of the yellow wind of capitalism into the minds of the people". In economics, "self-reliance is the only way out... strictly rejecting an iota of capitalism in economic management".

No ambiguity there. Yet the Rajin-Sonbong free zone, on North Korea's border with Russia and China, contains rather more than an iota of capitalism. The northern won floats freely, worth only 1 per cent of its official exchange rate of 2.2 to the United States dollar; and a $160 million casino, bank and hotel complex, built by Hong Kong interests, is nearing completion. Credit for this goes to Kim Jong-u, an urbane vice-minister who has travelled tirelessly from Tokyo to Davos to try to drum up investment. Yet no one has seen Mr Kim for months; the word is that he has been purged for failing to attract enough foreign cash. All in all, this seems a strange kind of "self-reliance".

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But in fact North Korea's boasts of self-reliance (the so-called juche philosophy) were false from the start. When the US and the USSR casually split Korea "temporarily" in 1945, to take the Japanese surrender in what had been a Japanese colony, the young Kim Il-sung came home from Siberia - where his son Kim Jong-il, who succeeded him in 1994, was born - in Soviet army uniform.

True, in half a century of absolute rule Kim senior proved no puppet of Moscow, any more than the dictators in South Korea were ever in Washington's pocket. But the initially spectacular growth and industrialisation in the north - which led the south economically until the 1970s - was built largely on Soviet and Chinese finance and technology as Kim played off his two superpower sponsors and took advantage of their rivalry and of the cold war.

Such dependence was dangerous - as shown in 1991, when Moscow at last got fed up and abruptly turned off the aid tap, plunging North Korea (like Cuba) into years of economic contraction. Yet while the Cuban economy has bottomed out thanks to pragmatic reforms, Pyongyang's remains in free fall.

Kim Jong-u told a US conference in 1994 that his country's per capita income was $719: a miserable sum for modern East Asia. South Korea, by contrast, had topped $10,000 before the recent financial crisis, though it will fall below $7,000 this year. On almost any criteria it is hard to fit the two Koreas on the same graph. Each week Seoul does twice as much trade as Pyongyang manages in a year.

But economic decline is one thing, stark famine another. How bad is it? Typically for North Korea, there are no hard numbers, thus leaving the field open to a wild range of estimates. Two different organisations, World Vision of the US and a South Korean Buddhist charity, reckon that up to three million people have perished from hunger or illness during the past three years of freak weather (two of flood, one of drought). That represents a death toll of one in eight of the entire population. Other charities, however, suspect Pyongyang of vastly exaggerating its plight so as to attract more foreign aid.

What no one doubts, although North Korea refuses to admit it, is that the crisis is as much man-made as natural. Decades of over-emphasis on rice and maize sidelined other crops and led to a poor-quality diet, while zapping the soil with chemical fertiliser eventually led to diminishing returns and falling yields. The floods were the coup de grce, sweeping away unwise hillside terracing and dumping the gunge downstream to damage the country's few floodplains, as well as destroying crops and grain stores.

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A recent United Nations Development Programme-sponsored round table produced a three-year action plan, which will hopefully start the road to recovery. Yet the real tragedy is that, bad weather aside, none of this need have occurred. At any time in the past 20 years, North Korea could have emulated China's market reforms, as Beijing - Pyongyang's last remaining ally - constantly urges. Yet the Kims p re et fils have consistently rejected reform (except in the free zone); although since hunger began to bite, some markets and foraging have perforce been tolerated.

Instead, North Korea has adopted a strategy of militant mendicancy: getting aid no longer by playing off its comrades but by threatening rich enemies. This may sound contradictory, but it works. The nuclear crisis of 1993-94, which came alarmingly close to war, was resolved by the US setting up a consortium to build safer nuclear reactors for North Korea and, meanwhile, supplying half a million tons of fuel oil a year. The $5 billion bill will be paid mainly by South Korea and Japan, which Pyongyang continues otherwise to treat as its sworn foes. Likewise, even before the floods of 1995 North Korea coolly asked Japan for half a million tons of free rice - and got it. This week's missile test is yet another attempt to scare the neighbours into more handouts.

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Brazen begging is one thing, but North Korea also has more dubious means of finance. It sells improved Scud missiles to the likes of Iran, Syria and most recently Pakistan, thus helping to precipitate India's nuclear test. Also, while many governments resort to printing money, North Korea is unique in making its own US dollars - self-reliance indeed. Pyongyang's diplomats have been caught with forged $100 bills from Macao to Mongolia and Vietnam to Vladivostok, where the culprit turned out to be a key aide of Kim Jong-il. Drug seizures and smuggling of all kinds by North Koreans abroad are also so common as to leave no doubt that these are not random crimes by individuals but deliberate policy.

In short, by any standards North Korea is a rogue state par excellence. Yet ironically it is treated much more kindly by Washington than are Cuba, Libya or Iran. Bilateral contacts are growing, including joint searches by US and North Korean teams for MIA (missing in action) remains from the Korean war. The US is also the most generous donor to UN appeals for food aid to North Korea. It is not hard to see why, and even to agree, despite the paradoxes. The argument for engaging Pyongyang is that, conversely, to isolate it would raise two grim risks: either a desperate last-ditch invasion of the south, or economic collapse leading to German-style reunification by absorption - an appalling prospect, given Seoul's financial condition.

Hence the reclusive Kim Jong-il can rest secure in the ironic knowledge that his worst foes are his best friends. For his regime to fall would alarm them as much as him; so they will continue to prop him up. All he has to do is keep them guessing, blow hot (not too hot) and cold - and keep taking the money. A bonus here is the "sunshine" policy of South Korea's new president Kim Dae-jung, with its green light for inter-Korean business and civilian contacts. Thus Chung Ju-yung, founder of the Hyundai conglomerate, in July took 500 cattle across the usually impermeable Demilitarised Zone as a gift to his northern hometown. And late this month, Hyundai ships will ferry the first southern tourists to the north -Ja change from the spy submarines that the north sends southwards.

Even so, it may be hard to overlook North Korea's roguery indefinitely or to ignore human rights issues. (Pyongyang's gulags hold up to 200,000 desperate souls.) Yet given the consensus that a northern collapse (let alone war) would be even worse, the hope has to be that sustaining such an odious state will gradually transform it into something nicer - or at least into one less given to both oppressing its own people and threatening everyone else. This may seem a forlorn hope, but no one has a better idea.

Meanwhile, North Koreans are dying in unknown numbers, quite unnecessarily, yet uncomplainingly, victims of a regime to which almost all continue to profess loyalty. And that Weberian riddle - why do they put up with it? - is the biggest enigma of all.

Aidan Foster-Carter is honorary senior research fellow in sociology and modern Korea at the University of Leeds.

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