The Great Confiscation Backfires, Badly

How can we tell that North Korea is in a state of self-inflicted economic chaos? When the regime can’t even conceal it from the barbarians.

AFP, quoting an unidentified Western diplomat via Yonhap, reports that “[a]t the Koryo Hotel where many foreigners stay, the [North Korean won exchange] rate swung from 51 won to 120 in the space of a few hours on January 22.” Another report says that currently, prices in North Korea are “anyone’s guess” and that in shops near the railroad stations, there are “stacks of unsold goods” because no one really knows how much to sell them for.

Another AFP report mostly reinforces what we already know — that North Korea’s “politically motivated currency revaluation” didn’t recollective the economy, but instead created a lot of inflation, chaos, “widespread anger,” and hardship, and that has forced people to barter just to get enough to eat. The report goes on, “This prompted authorities to further strengthen control of market activities. However, the situation is getting worse.” U.N. Special Rapporteur Vitit Muntarbhorn seems to agree it’s not working out so well, as do Marcus Noland and Stephan Haggard:

“Such an effort is doomed to failure as long as the state lacks the resources and capacity to put goods on the shelves,” they wrote. Despite the regime’s “sheer ruthlessness” including reported executions, there was little evidence it had succeeded in stamping out the market entirely, they said.

Open News reports that food prices continue to rise amid the regime’s dithering failure to set food prices:

The hope that North Korea’s monetary reform would bring stability to inflationary prices has already failed. A source in North Korea communicated on the January 17 that prices have shot up over the past 40 days since the reform. In addition as food prices, the standard measurement for inflation, have rose so have the prices of goods on black markets.

In Pyongyang 1kg of rice is selling for 160-180 won and corn for 80-110 won as of the 17th. In Musan rice is sold at 190-210 won and corn at 80-100 won. In Hyesan rice is selling for 180-210 won and corn for 80-120, while in Shinuiju rice is selling for 170-200 won and corn costs 100-120 won.

These prices have increased over 200% on average since just one week before on the 10th of January. Compared to December 24th prices have increased at least 400%, and compared to the days before the monetary reform (average prices for rice = 20won, corn-10 won) prices rose 10-fold (1000%).

Open News reports that even among those North Koreans who were initially happy that the Great Confiscation increased their wages are now growing discontented that inflation has taken that increase away, and made goods harder to buy. Ironically, this means that the state’s last loyal workers may end up suffering more than those who depend on the markets.

Open News also corroborates AFP’s report that merchants are holding onto their stocks because they don’t know what to sell them for. But the good news is that there is food, and eventually, merchants will release it into the marketplace somehow.

How else do we know that all is not well? Because KCNA is running reports about new “up-to-date foodstuffs factories” and scientific breakthroughs in food production. North Korea tends to issue reports like these in times of public anxiety about the food situation.

Thankfully, and as I’ve noted before, North Koreans have become accomplished survivors. Here’s Marcus Noland, addressing the Korea Society in New York:

“The North Korean people have demonstrated absolutely extraordinary resilience over the last twenty years,” Noland reminded listeners, “It is unlikely that even this government could bring to bear the degree of repression that would be necessary to eliminate the market economy. So the market is going to come back. [Daily NK]

It’s already happening. The people aren’t waiting for the government to get its act together. They’re already taking matters into their own hands by smuggling food into North Korea on an unprecedented scale.

It has been reported that from early December to January 15 of this year food has been rapidly smuggled in on large and small scales throughout the Korean peninsula, from the northernmost part of Ohnsung along the Tumen and the Yalu River all the way to the city of Shinuiju in the Northern Pyong[an] province. In fact it is being reported that in a province near the banks of the Yalu River 100~120 tons of food were smuggled in in one night. However even though there are significant amounts of food entering North Korea the food prices have not been affected and are not dropping. [Open News]

And, as quoted previously:

It has been reported that from early December to January 15 of this year, food has been increasingly smuggled in on large scales throughout North Korea, from the northernmost part of Ohnsung along the Tumen and the Yalu River all the way to the city of Shinuiju in the Northern Pyong province. In fact it is being reported that in a province near the banks of the Yalu River 100~120 tons of food were smuggled in in one night.

According to news from a source inside North Korea on January 15, food began to be smuggled in last December because they needed to exceed the amount of food for their importing licenses. Also when the New Year started many food importation licenses expired and there were no legal ways to import food; many turned to illegally smuggling food in instead. In North Korea the food importation license is issued after the lunar New Year, so it is difficult to import food before then.

It is reported that in these provinces that trucks are furiously loaded with food across the frozen river in the late hours of night. On some nights over 100 tons of rice have been smuggled in. In order to operate, these companies and wholesale agents are mobilizing transportation and the means to whisk them away quickly for their profit. In fact the current rate of smuggling is on a large enough scale to create the term “public smuggling.

Even the National Security Agency and the Military National Headquarters, along with other North Korean regulators are said to be overlooking this situation. [Open News]

It’s difficult to overstate the significance of this. First, it means there probably won’t be famine in the spring, because merchants won’t wait forever for the state to set prices. Eventually, they’ll sell that food for something of value.

But the rise of large-scale food smuggling right under the noses of the Anjeonbu also portends needed economic and even political change. It means that the system is now so frayed and corrupt that smugglers can move goods of any kind into North Korea in quantity. Today, of necessity, the cargo is food. Tomorrow, the cargo will be consumer goods. But next will come information — books, bibles, pamphlets, radios, computers, flash drives, cell phone repeaters that can be lashed to remote treetops, and camera phones. It opens up the possibility for a North Korean opposition to galvanize, organize, coopt and corrupt regime officials, and effectively challenge the power of the state.