Friday, February 19, 2010

The Korea Times on North Korea's botched currency moves

The venerable Korea Times (you know, the one with the affirmative action policy for NSET haters), has a piece on North Korea's currency reform, that which is also referred to more accurately and less Pollyannaish as currency revaluation, which Joshua at One Free Korea refers to as The Great Currency Confiscation, and which I refer to as The Great Currency Obliteration of 2009.

Their innocuous terminology seems to go hand in hand with an overall not-getting-it-ness. In referring to a talk by Baek Seung-joo, the director of the Korea Institute for Defense Analyses's Center for Security and Strategy, the KT writes:
Last November, the secretive state dropped two zeros from the nominal value of its currency in an apparent bid to fight inflation and black marketeering.

But the effort is driving markets in the North into chaos and Pak Nam-ki, who led the re-denomination, might have been fired over the malfunction, according to reports.

The director said that the currency revamp is falling through as Pyongyang appears not to have been fully prepared.

"In order to raise the nominal value of the new currency, the North should have fully furnished supplies to its people. But it seems not to have prepared enough," he said.

"Besides, the currency revaluation should have aimed to satisfy all the people but only the privileged class benefited from it," he added.
In reading some of the things in the news (both Korean and international) about the "reform," and in hearing some things from political elite in Korea who should be better clued in, I'm getting the feeling that a lot of people don't fully understand (a) the full deleterious effect of the currency "reform," (b) the mechanisms for how that undermines the regime, and (c) the looming seriousness of this and how it may have accelerated the fall of the regime up north. These are things I've discussed before.

We read things like the North not having been fully prepared, when what it really means is that they didn't think things through. In the article above, Mr Baek is quoted as saying that "they haven't prepared enough" and "the North should have fully furnished supplies to its people," which makes me wonder if the reporter is mistranslating — or if Mr Baek is describing poorly — the idea that there was a very low cap on how much could be exchanged and that the low cap was on purpose.

Maybe I'm misinterpreting the message (I should look at the Korean for this), but it seems they're looking at the exchange caps as a minor mishap rather than a central piece of the "reform." It was by design that the savings of people who may have gained money through non-state-sponsored means (e.g., black marketers, smugglers, etc.) be wiped out. Wiped out. Eliminated. Obliterated.

That was not an oversight: that was the intended purpose. What was not thought out — for which no preparation would have been enough — was the reaction to (a) people having lost their life savings and (b) the hobbling of markets which fill the gaps in the state's food delivery system and thus fill the void in people's stomachs.

I described all this before, particularly how this changes the calculus of survival-versus-death when making choices, so go read my original post on the matter (link here again), as well as Joshua's original post on the issue (link here again). I wish more people higher up in Korea would. (Maybe I should translate it — er, have it translated — into Korean. Any volunteers?)

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