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If NK is accepted as a nuclear state and they are allowed to produce any nuclear weapons they like, they will use them to intimidate S. Korea. If they make military provocation and S. Korea wants to respond, N. Korea will threaten them with nuclear retaliation. They can incrementally intimidate S. Korea into being under its control.

N. Korea would reform its economy if there is absolutely no other choice. The current level of market economy, however marginal it is, came about during the great famine period in 90's. The state's food distribution system collapsed, and millions were dead. They abandoned millions of N. Koreans, leaving them to fend for themselves. So out of sheer necessity, the surviving population learned to make a living by trading and making things, while always facing the specter of starvation. Thus the rudimentary market economy was born in the region hit hard by the famine. The state does not like it, but they cannot feed them, so they looked the other way. Over the years, there were occasional attempts to roll back the growth of market, and emergence of business class, who got very rich. The market won't die, though. The current situation is no different. Again the state has less money than it used to. It can take care of smaller number of elites. Less economic aid has been flowing in for quite a while, and it started to show its impact. They have no choice but to loosen state control further: make state farms keep the proceeds beyond the state quota, for example.

Despite these development, it is slow and heavily restrained. The market should not be allowed to challenge the absolute power of hereditary cult of personality. You need to push them to the brink to squeeze out a small change. If we give them money again, then they will be back to their old ways.