StrategyPage has two very interesting articles outlining current problems and potential solutions to the North Korean issue.
The first article examines North Korea's internal problems.
In the north the government may be socialist in theory but in practice they follow the money. Thus a growing number of state run factories in North Korea have become market based enterprises. The police, and even the secret police, spend more time collecting taxes, fees and “contributions” from the growing number of donju (entrepreneurs).People are responding by devoting much imagination and energy to evading the demands (which keep growing) from a desperate government that is under increasing international economic pressure. The North Korean government is nothing if not adaptive, which is how it has survived for so long. So the secret police have now been ordered to not only collect more money but also to do it with minimal use of terror. Popular opinion and morale is important, even in a police state. It was never easy being in the secret police and with all the economic problems it just keeps getting worse. Yet compared to most other North Koreans, being in the secret police pays well and there is a degree of job security not found anywhere else in the north.
The tax collectors up north have a hard job. In the last year China has enforced the sanctions more than ever before. That suddenly put a lot more government enterprises out of business and forced over a million people to find a new source of income. State owned firms, particularly those producing military goods, were always seen as immune to nationwide economic problems. But China cutting off much of its trade hit the military factories hard and now there are desperate people seeking food and other necessities. Many of these newly unemployed did not expect it and there is an increase in suicides and petty crime in the areas where large state owned factories abruptly shut down in the last year. At the same time government officials are finding out that they no longer control the economy. That began during the 1990s when the government could no longer provide basic food and energy needs because decades of Russian economic subsidies were cut off. The growing power of the black market (and now legal free markets) means price controls no longer work either.
What it has come to is that the government will allow an illegal enterprise to operate as long as they pay the bribes and fees demanded by the government and do not engage in activities that threaten the Kim dynasty. While much of this additional income goes to the “special weapons “ (nukes and missiles) programs and gifts to keep the senior officials loyal a lot is spent on vanity projects that glorify the Kim dynasty. This is a problem when word gets around that work continues on these vanity projects (especially new, and very visible one, in the capital) while aid for reconstruction in northwestern areas hit by major floods is not arriving as promised. In the past the news of these shortages would not get around, but with the cell phones that is no longer possible.
There's more at the link.
The second article examines China's options with regard to its troublesome southern neighbor. This is particularly important in the light of China's relationship with the USA.
China is increasingly angry at Koreans in general for not showing sufficient respect. The biggest (and growing) problem is North Korea. China wants a stable communist dictatorship in North Korea, not a failed government that would send several million starving refugees fleeing across the border. China also does not want North Korea to collapse and get absorbed by South Korea. That would put a democracy on China's border and give many Chinese a view of how things might be much better with a different political system in China. Koreans are seen as "younger brothers" to China, and it's embarrassing if the younger brother outdoes his older sibling. South Korean democracy is played down in China, but that would be difficult if a democratic, united, Korea were right on the border.
The Chinese have made it more obvious to the North Korean leadership that China will support pro-China elements in the North Korean government if the current North Korean leadership fails to turn things around. China has recently sent 150,000 additional troops to the North Korean border to emphasize Chinese concern. While many of these troops are there for training (which the Chinese Army is doing a lot more of), other are to reinforce border security and most of those additional troops are showing up at the border so North Koreans can see them and draw their own conclusions. The latest escalation is accompanied by blunt suggestions in Chinese state controlled media that perhaps some Chinese military action inside North Korea might be more persuasive.
. . .
For China the main threat from North Korea is also economic. China wants to avoid chaos in North Korea because that would be bad for the Chinese economy and increase the threat of conflict with even more dangerous opponents like Japan, South Korea and the United States. The most extreme (but acceptable) measures China could try include literally taking control of North Korea, something which China has done in the distant past. Staging a coup in North Korea has always been a possibility but the paranoid (for good reason in this case) North Korean leadership has made it difficult for China to recruit enough North Korean officials to make this feasible. That said, the potential is still there and China could still go this route. Many North Koreans believe that the Chinese will just move in and take over if it appears that the North Korean government is about to fall apart or otherwise becoming too dangerous to China.
Again, more at the link.
StrategyPage is a very interesting Web site. If you're interested in geopolitical affairs and their military implications, and vice versa, and you're not already following it, I strongly recommend that you do.