We Demand a Sacrifice! North Korea Purges Economic Official

[Update: Kushibo notes that North Korea has started lifting market restrictions. Rice prices and exchange rates have begun to stabilize. The confiscation is done, but does this mean the regime is backing down? That would mean that change is irreversible, and that the regime has just surrendered much of its control over the economy. And just to thank Kushibo for re-posting his comment after I stupidly deleted it, I’ll recommend you read his post on the sacking of Pak Nam-Ki. Give credit where it’s due: Kushibo saw the significance of the currency revaluation immediately.]

North Korea is acknowledging the obvious: the Great Confiscation has been an economic and political fiasco:

Pak Nam-Ki, the Communist Party’s director for planning and finance, has reportedly been absent from public activities since early January. South Korea’s Intelligence Service said it could not confirm his sacking. But an intelligence official told the Associated Press news agency it had been closely monitoring Mr Pak’s whereabouts and he had recently disappeared from view. [BBC]

There has also been infighting within the Inner Party:

“Mutual recriminations are rampant within the North’s power circles over the failure of the redenomination, [and] Director Pak who led the reform has been sacrificed,” a diplomatic source in Beijing told Chosun Ilbo. Yonhap news agency, quoting traders in the Chinese city of Dandong near the North Korean border, said Mr Pak had been sacked and was awaiting trial.

Related Korean article here. Wondering about the meaning of this, I asked Kim Kwang Jin, a friend and former senior regime official involved in North Korea’s insurance fraud scam, what this means. He gave me permission to print his response.

We are now seeing the sad reality that North Korea has as leadership for economy somebody like the current “scapegoat” Pak Nam-kee who does not know how credit card works and has no idea how bad the hyper-inflation is. It is even sadder that in North Korea they have no right and access to know this, not to say any right to act what they think is right. So, this time again, another “stupid” currency reform by the government, increased sufferings for the people and another scapegoat to calm down anger, on its painful way of final collapse, which is coming closer.

All the signs point to Mr. Kim being right about that. Even Kim Jong Il himself must again acknowledge that the people are unhappy:

The official Rodong Shinmun newspaper on Monday said Kim expressed “compassion” for the reliance of his people on broken rice, a cheaper, inferior product, in their staple diet. “What I should do now is feed the world’s greatest people with rice and let them eat their fill of bread and noodles. Let us all honor the oath we made before the leader [Kim Il-sung] and help our people feed themselves without having to know broken rice.”

The newspaper on Jan. 9 quoted Kim as recalling nation founder Kim Il-sung’s promise of rice and meat soup for all, but adding, “We have not yet fulfilled his wishes.” [Chosun Ilbo]

So who will be the one to postpone the inevitable and bail Kim Jong Il out now?

5 Comments

  1. I’m trying to put back together a comment that got deleted, but I think it was on a post that was about Barbara Demick talking about the popular discontent. Did you have something like that up just a while ago, or did I imagine that?

    Anyway, the comment was drawing your attention to news about the sacking of Pak. Ha ha, as if you wouldn’t have picked up on this yourself.

    In my own post about that, I also noted, regarding Daily NK’s news that the markets are being reopened, that even if this means food will be back on the shelves and starvation will be staved off for many, that doesn’t necessarily remove the impetus for people to rise up. After all, their savings have still been obliterated and moreover, they have now gotten a taste of how displays of anger and threats of violence can be used to challenge the authorities.

    I think I said it better the first time, but that was the gist.




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  2. Do we know anything much about the ownership and supply of gold wafers in the DPRK? Over the past century, the Chinese have been heavily invested in them — 1, 2.5 and 5 gram wafers — and so one would suppose they are available at the border. Destruction of the local currency, and supposed confiscation of foreign paper money would likely mean that those who hold (what is essentially secret) foreign funds may have an incentive to exchange them across the border for gold wafers.

    This is likely to be further bad news for North Korea. There is always a premium to exchange gold, a discount from the official gold price. The DPRK’s dollar forgeries mean that the premium to exchange gold for dollar notes is likely to be high — but if the punishment for holding large quantities of foreign currency is death, then the incentive to sell all foreign notes is extremely high, with the result that the internal quantity of foreign currency will diminish, with the government eventually holding a disproportionate quantity of its own forged dollars. In an unstable currency like North Korea’s, foreign exchange reserves are stabilizers — and I think they are parlously low on that form of stability.

    Gold has always been a hedge in times of financial crisis — and I suspect “merchants” and senior military officers for their own account are cutting their losses by buying gold at a huge paper loss, — but also officials with access to foreign funds must do so too. that creates its own problems for institutional loyalty to the regime.

    The recent order to identify and return “reserve” foodstuffs is not just a potential famine relief procedure, but it is also a way to suss out those officials who have already depleted official food stocks in the black market. Their motives could be private gain, or simple humanity in local distribution to their workforce. Nonetheless, their punishment is likely to be death, and their loyalty is suspect as a group and individually. Likewise, “bankers” or custodians of foreign funds who are called upon to account for their monetary supplies are also likely to be disloyal if they have used their funds to buy gold wafers.

    As you know, I think that regime change by military intervention with the consent of China is imminent — and this is another group of disaffected but enterprising citizens who will go with the flow against the Kims. But, beside mere speculation, is there any general understanding of the gold wafer trade to North Korea?




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  3. Joshua wrote:

    And just to thank Kushibo for re-posting his comment after I stupidly deleted it, I’ll recommend you read his post on the sacking of Pak Nam-Ki. Give credit where it’s due: Kushibo saw the significance of the currency revaluation immediately.

    Ha ha, thanks for the hat tip. I just wish I had been able to recall the wording I’d used in the first one, which I think was better.

    Anyway, as far as seeing the significance of this particular move, I think it has to do with the public health and sociology background from which I’m approaching this. What happens in North Korea has political science aspects, economic aspects, and sociology aspects, among others, often all rolled together, and to gain a grasp on what’s going on we need a variety of people all giving their input. Trying to channel C. Wright Mills has served me well (imagining yourself in a given sociological situation and then trying to predict the social, political, and legal mechanisms which would guide or deter behavior), even if I think a lot of stuff coming out of sociology is froufrou crap that misses the point because of him.




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  4. The NYT is carrying a story on the market reopening. I found this to be interesting:

    Good Friends say North Koreans have rallied against the new rules in defiant shows of protest in a country where opposition earns severe punishment.

    “When people talk about (leader) Kim Jong Il, they just call him ‘Jong Il’ not like in the past when they referred to him as ‘great general comrade Kim Jong Il,”‘ Seo said.

    The affront comes at a great risk. If caught, they would be sent to one of the North’s notorious political prison camps, he said.

    If true, I see it as further indication of the unraveling.




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