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Absolute Must-See: Video of Onsung Market, Before and After The Great Confiscation

I knew Onsung was a shit hole, but wow. Just, wow. Watch it here — English subtitles and all — and read about it in the New York Times.

Don’t miss the corrupt officials shaking down the merchants, or the South Korean Red Cross aid for sale. We’ve seen other video showing American aid being sold, too, as well as previous reports of South Korean food aid being confiscated and diverted for military use.

Could individual corrupt officials be responsible for all of this diversion? They could be, on a smaller scale, but large-scale diversion suggests that the “socialist” regime takes what it needs for itself, then sells the rest in the markets to raise cash. It’s yet another reason to refuse to send more food aid unless we’re able to do the only kind of monitoring that we can really be sure about — nutritional surveys of the recipients.

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North Korea Shoots Great Confiscation Scapegoat

I suppose this at least implicitly acknowledges that The Great Confiscation didn’t quite earn “widespread support” from “[a]n absolute majority of workers from laborers, farmers and office workers” after all:

North Korea has executed a ruling party official blamed for a botched currency reform, in a desperate attempt to quell public unrest and stem negative impact on Pyongyang’s power succession, a news report said on Thursday.

The execution by firing squad in Pyongyang last week of Pak Nam-ki, Labour Party chief for planned economy, was for the crime of “a son of a bourgeois conspiring to infiltrate the ranks of revolutionaries to destroy the national economy,” South Korea’s Yonhap news agency said, quoting sources.

But both North Korean officials and even many in the communist country’s public do not believe the explanation that Pak was a conspiring anti-revolutionary, Yonhap quoted sources knowledgeable about the issue as saying.

“The mood is the leadership has made Pak Nam-ki a scapegoat,” one source was quoted as saying. [Reuters, via NYT]

The significance of this report is magnified immensely by widespread rumors that the regime had set Kim Jong Eun up as the architect of this fiasco. Whether that’s true or not, don’t expect KCNA to report that now.

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Great Confiscation Updates: So Much for That “Collective Spirit”

So much for that “collective spirit” Christine Ahn is so fond of talking about:

In January and February at neighborhood meetings, participants from many regions spoke out and threw objects at the chiefs who said the currency reform has been successful and that people should show devotion to the party. Since the currency reform, many people have become homeless; and for that, they took their frustrations out on the neighborhood chiefs who are the mouth-piece of the government.

Such incidents were unheard of prior to the currency reform. If it did happen, the “rebel” would be prosecuted and punished. However, due to the currency remain silent. Such incidents are seen as the beginning process of widespread anti-government sentiments. People’s outward expression gains more strength because Kim Jong-Il acknowledged the failure of the currency reform. [Open News]

Just add cell phones, hope, and guns. Surely in a place where domestic institutions are so oppressive and international institutions are so ineffective, no human right is so fundamental to securing the others as the right to bear arms. And in a place where “peace” is so deadly to so many, it would be difficult to argue that a revolution to destroy that oppressive system would increase the net suffering of the people.


People are still killing themselves over the effects of The Great Confiscation. Another is reported to have died of shock.


If you’re a Wall Street Journal subscriber, here’s a link to a story on an apparent official North Korean acknowledgment that The Great Confiscation was a failure.


Open News thinks that the dismissal of financial official Park Nam Ki means that the military is winning a power struggle. Always bet on the guys with guns.

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Great Confiscation Updates

More proof that times have changed in North Korea: in the 1990’s, Kim Jong Il allowed perhaps millions to starve and did next to nothing about it. This year, the regime is ordering the urgent distribution of rice rations to prevent starvation in the most vulnerable areas. Well, it’s a modest step in the right direction that the regime is actually trying to prevent starvation, even if, as the Daily NK suggests, that it’s because the regime is afraid of unrest. Of course, if it really wanted the people to eat well, it wouldn’t have rejected U.S. food aid and severely restricted the World Food Program’s operations.

It demonstrates that the only way for the North Korean people to improve their lives even marginally is to oppose it. When the tyrants also fear for their lives, there is a balance of terror, which results in some small measure of accountability.


How Kim Jong Il reached the conclusion that The Great Confiscation had failed.


More on the growing acceptance of the Chinese yuan as North Korea’s de facto currency. I expected that this would happen, and I also expect that within the next year or so, the regime will try to set confiscatory limits on the possession of foreign currency.


An interesting CNN podcast, in which Christiane Amanpour interviews a U.N. official and (in the second half) my friend Professor Sung Yoon Lee on hunger, food aid, and North Korea’s palace economy, a term that seems to be catching on in the media. I don’t recall having seen that term used elsewhere before I used it here, although I suppose it’s always possible.

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Great Confiscation Updates

Newspapers around the world are now coming to grips with North Korea’s most conspicuous policy disaster since the Great Famine, and the first one in which a state that has long claimed infallibility had to admit error:

The policy backfired. Prices skyrocketed as market activities ground to a near halt, while state-run stores failed to meet the demand. In recent weeks, Web sites based in Seoul that collect news from sources inside North Korea have reported starvation in some towns in the North, a protest rally by elderly military veterans and arguments between women and the soldiers trying to shut down markets.

The reported apology, from the North Korean prime minister Kim Yong-il, came just days after South Korean news outlets reported that the North Korean leader, Kim Jong-il, fired the senior official who had spearheaded the currency reform. The apology came a meeting in the North’s capital, Pyongyang, last Friday, according to Chosun Ilbo, a mass-circulation daily in Seoul. Its report, published Thursday, quoted Prime Minister Kim as saying, “I offer a sincere apology about the currency reform as we pushed ahead with it without sufficient preparation and it caused a great pain to the people. The paper’s account, published Thursday, quoted an unidentified source inside the North.

“We will do our best to stabilize people’s lives,” the prime minister Kim said, according to the newspaper. [….]

Poor weather, inept economic management and the cutting off of aid and trade following the collapse of the Communist bloc led to a famine that killed many North Koreans in the mid-1990s. Since then, illegal markets have sprouted up to supplement, or sometimes even replace, the state’s failed ration system.

But the markets have had a destabilizing impact on the regime. The smuggling of Chinese goods bred corruption among soldiers and party officials who took a cut from the growing underground economy, analysts in Seoul said. Profiteering spread as people scavenged for survival, and a mew moneyed class emerged in what was supposed to be a classless society. After years of turning a blind eye to the markets and even dabbling with Chinese-style market reforms, North Korea began cracking down on the markets in 2005. [N.Y. Times, Choe Sang-Hun]

“I am most heartbroken by the fact that our people are living on corn,” Kim said in a report monitored by South Korea’s Yonhap news agency. “What I must do now is feed them white rice, bread and noodles generously.”

Kim made a similar statement in January, mentioning white rice and meat soup. But the likelihood of his being able to improve nutrition in his country in the short term seems small. [Washington Post, Blaine Harden]

Adding to the poignancy, experts say the bungled reforms were done in the name of Kim Jong Un, the dictator’s third son and potential heir. His involvement may have been part of a strategy to reassert Stalinist-style state control of the enfeebled economy ahead of 2012, the 100th anniversary of grandfather Kim’s birth.

It seems unlikely the plan has been abandoned altogether, not least because the small markets that have flourished since the famine of the 1990s pose such a challenge to the state’s authority. But the ineptitude must have been glaringly obvious, even in the hermetic state.

“The government has never said sorry to the people, especially on a topic as sensitive as rice,” says Andrei Lankov, of Kookmin University in Seoul, a writer on North Korea. “Because of Kim Jong Il’s age and the age of those around him, it looks like he may be losing touch with reality. [….]

[T]he mere hint of economic fallibility in a regime that demands almost religious devotion from its subjects may turn out to matter more than the diplomatic manoeuvres. It comes at a time when North Koreans, using smuggled DVDs and telephones, have a better idea than ever before of how far their living conditions fall short of their neighbours’. That is a rare point of vulnerability for Mr Kim’s interlocutors to exploit. [The Economist]

My strong suspicion is that for a large percentage of the North Korean people, The Great Confiscation was a deal breaker. I don’t mean the social contract between the people and the state. For most North Koreans, that contract was breached during the Great Famine. This time, the broken deal is the pretense that the social contract still exists.

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North Korean Premier Apologizes for Great Confiscation

kim-yong-il.jpgIf absolute power is never having to say you’re sorry, what could this possibly mean?

On Friday, Premier Kim Yong Il apologized for the aftermath in a meeting with government officials and local village leaders, the mass-circulation Chosun Ilbo newspaper reported, citing an unidentified source in North Korea.

“Regarding the currency reform, I sincerely apologize as we pushed ahead with it without a sufficient preparation so that it caused a big pain to the people,” Kim read a statement during the meeting at Pyongyang, according to the paper.

Kim said the government “will do its best to stabilize people’s lives,” saying it will ease its curb on markets and re-allow the use of foreign currency, the paper said. [AP, Hyung-Jin Kim]

The AP helpfully notes that the Premier is the third-most powerful man in North Korea, after Kim Jong Il and Kim Yong Nam.

This is simply astonishing … an open admission of failure and defeat? From these people? In such a system, apologies tend to portend dark things. It may well be that the removal of Pak Nam Gi, the Finance Director of the Workers’ Party, and Kim Dong-Un, the head of Bureau 39, will now expand into a broader purge of party officials. Purges are dangerous things for regimes. Even when they don’t fracture the leadership, they weaken it, as The Great Purge of 1937-1939 weakened the Soviet Army. To this day, there is still speculation that Stalin was poisoned by aides who thought they’d be purged next.

Just as significant, the regime is now reversing some of the Great Confiscation diktats, or so says an anonymous source for the Chosun Ilbo:

He indicated that the regime will allow people to use foreign currency, which has been banned since the reform, and permit open-air markets to return to normal after a crackdown that seemed aimed at strangling a nascent market economy. But Kim at the same time stressed the need to stick to state-set prices, adding that the government will strictly crack down on the hoarding of goods.

Some experts say the situation in the North has returned to almost the state before the currency reform. A South Korean official said North Korean authorities loosened their control of the markets since there has been unprecedented resistance from ordinary people. This seems to have forced Kim’s hand.

After Kim’s apology, most money changers and illegal traders who had been arrested were reportedly freed. The number of people leaving for China has grown noticeably as offices of state agencies or state-run corporations involved in earning dollars, which suspended business due to the ban on use of foreign currency, have resumed business. [Chosun Ilbo]

The source claims that the apology has “quenched a lot of the simmering public anger,” though this is a report I find difficult to credit too much:

“Premier Kim Yong-il’s direct apology to village chiefs, who are representatives of the people of each region, is tantamount to an apology to the people themselves. It’s a big event in the history of North Korea,” a former senior North Korean official who defected to the South said. “Authorities have never apologized to the people for wrong policies before.” He believes the apology came “because discontent with the currency reform had spread widely even among core supporters of the regime,” he added.

Residents in Hwanghae Province are in some cases said to have beaten security officers who were cracking down on the use of dollars.

But of course, much of the damage can’t be undone. You can’t unburn a pile of worthless currency; revive people who’ve been starved, executed, or killed themselves; or restore confidence in a currency that’s under the control of unstable and arbitrary people.

Furthermore, in a system where power is a zero-sum commodity, for the first time, people fought the system and lived to fight again. To a lot of people used to being under the heel of absolute power, an apology is going to look like weakness. It will invite more challenges. Indeed, the Chosun Ilbo’s source agrees that this apology may invite North Koreans to become more assertive in the future.

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Great Confiscation Updates and Aftermath; Demonstration Reported in Dancheon

It’s still premature to say that the North Korean regime has retreated in its attack on the system of markets, known as jangmadang, on which the majority of the people had come to depend since the collapse of the state distribution system in the 1990’s. The best available information — and the qualifiers to the aforementioned phrase should be obvious — suggests that the regime has decided against pressing the attack in certain specific places for now. For the time being, food prices and exchange rates have begun to stabilize, at least in the border provinces of Ryanggang, North Hamgyeong, and North Pyongan. Time will tell if the regime allows markets to reopen in the “core” area of Pyongsong, a city near Pyongyang that had become a trading center. The reopening of markets near the capital would likely signal an abandonment of the anti-market campaign.

Adding to the confusion, the state has finally announced the long-delayed “official” prices for foodstuffs, threatening to confiscate goods sold for higher prices, despite the fact that the goods’ market value is substantially higher. The Daily NK thinks the new prices will be difficult to enforce.

The regime’s retreat appears, remarkably, to be the result of civil unrest like the reported riot in Hamhung, what I call the Ajumma Rebellion, and alarming reports of violent attacks against members of the security forces. Via Good Friends, there is a new report of civil unrest, this time in the South Hamgyeong town of Dancheon:

Danchun City, South Hamgyong Province is named to have the highest death due to starvation by the result of the field survey, and war veteran residents from the city held a mass protest in front of their city hall. Mainly war veterans over the ages of 70-80 gathered and they were followed by other elders and residents, so the momentum was great. War veterans sat across from city office and violently complained, “We worked hard for our survival during the Arduous March, but the current movement of opening doors to the Strong and Prosperous Nation would make everyone starved to death with currency exchange. Are you going to starve us to death?” The atmosphere turned ugly for a while when residents charged up with emotions screamed after hearing war veteran’s speech. An elder cried, “What is the use of the City Party or people’s government organization when they cannot feed their people? When we followed the Great Leader during the revolution, we wanted to make sure our descendents were well-off. It doesn’t matter if old people die, but our descendents are all about to die. We don’t need such government. The City Party of Danchun City reported this incident directly to the Central Party. On January 26, the Central Party ordered, “Distribute 1,000 tons of rice that is being saved as Number 2 reserve in Danchun City farms. The City Party rushed distribution at the end of January to residents with the most difficult living situation. An official at Danchun City commented, “Residents of other cities and counties are having difficulties, but our residents seem to suffer the most. More people are dying and many households with 4-5 members are living off of 500g of corn noodle boiled in water. [Good Friends]

Even among those without the extraordinary courage needed to openly resist the state, there is more open discontent than in previous years:

Chang, Keum-Ok (alias), a resident in Danchun city, south Hamgyong province complained about the government’s inaction: “they know of people dying of hunger, but they do nothing to resolve people’s suffering. People cannot find grain even if they want to buy, and the food prices skyrocket everyday. People can do nothing but despair at this moment. Ko, Byong-Gook (alias) complained that “if the government took away all of people’s money, they should provide services and goods to ensure people’s basic living conditions. They just say nicely, but nothing is actually coming out to support people’s basic living conditions. There are some rumors from some part of the City Party that PDS (Public Distribution System) may be reactivated around February 16 holiday, but people are not terribly excited by that. People complain that “even if that is true, people will die of hunger while waiting for that to happen. Will the government let starving people die?” People complain that they are experiencing the worst ordeal right now: “our government does not show any mercy; instead they seem to test how long their people could survive without sufficient food.

Good Friends also reports dire conditions in Chongjin, and reports that the damage to the market system is persistent. Traders who lost everything in the Great Confiscation were hit hardest. The markets were their survival strategy. Now, some of them are literally starving. Most ominously for the state, there are worries about the sufficiency of the army’s food supply. And according to multiple reports, people are speaking much more openly of their discontent than in the past:

The residents in Sunchun, South Pyongan province do not hide their opposition. They complain that “the government’s new economic measures make people die of hunger. Instead of making a Strong and Prosperous Nation for people, the new economic measures open the door of poverty and hunger for people. Heyoung Kim (alias) said “women who feed a family have many opinions on the new economic measures. Compared to the days of old monetary system, our living condition is much worse. Many households cannot even eat corn porridges. Since people’s living condition is at the bottom, they talk badly to the government. Police officials agree with such sentiments. “In these days, people are increasingly angry and harshly blame the government. Their firm belief and commitment about the Strong and Prosperous Nation are already gone. Political speeches and lectures these days are not effective to reorient and realign the people to the nation’s ideology. They seem to think only about the means and ways to make their living. [Good Friends]

For obvious reasons, it’s hard to know how much of this is true, though it’s consistent with other things we’ve heard recently. North Korea never emerged from the Great Famine entirely. The most vulnerable and obedient are already dead, but in a place like North Korea, the arbitrariness of the state produces an unsteady but constant supply of vulnerable people whose deaths pass unnoticed.

I predicted before that eventually, “the diktats that demand tomorrow’s sacrifices will be mostly forgotten because no one will have the luxury of obedience.” Most likely, what we’re seeing is a return to the old pattern of the people ignoring, evading, and bribing their way about the state’s economic regulations, as the security apparatus ceases to enforce those regulations as anything more than good reasons to shake down targets of opportunity.


Ordinarily, the palace economy and the peoples’ economy live their separate lives, but there are exceptions. If the state is willing to risk civil unrest because the state wants the money, I’ll speculate that this means that the palace economy needs the money. The sharp drop in revenue from weapons sales certainly also suggests as much. The most telling evidence, however, is the indication that the regime is purging the people who finance the palace economy: first, Pak Nam Gi, the Finance Director of the Workers’ Party, and now, Kim Dong-Un, the head of the notorious Bureau 39:

South Korea’s Yonhap news agency said Kim Dong-un was dismissed because he had been blacklisted by so many foreign governments, including the EU in December, leaving him unable to travel on behalf of Room 39’s legal companies. He has been replaced by his deputy, Jon Il-chun, Yonhap said, citing an unidentified source.

Housed in an unremarkable government compound in Pyongyang, Room 39 oversees 120 companies and mines, accounting for a quarter of all North Korean trade and employing 50,000 people, according to Lim Soo-ho, a research fellow at the Samsung Economic Research Institute. He said Kim’s dismissal may be part of attempts to get around international sanctions. [….]

Some of the money generated by Room 39 is used to buy the loyalty of senior party officials, a role that may take on greater prominence as Kim Jong-il, who suffered a stroke in 2008, prepares to hand over power to his third son, Kim Jong-un. Analysts have estimated that illegal activities account for up to 40% of all North Korean trade and an even higher share of total cash earnings. [The Guardian; hat tip, Curtis]

It’s possible that Kim Dong-Un was replaced simply because he was a marked man outside North Korea, but his dismissal now seems unlikely to be completely unrelated to the regime’s current instability. There are other indications of infighting within the inner party:

“Right now, North Korean officials are busy blaming each other for the failed currency reform and Pak, who spearheaded the revaluation, is believed to have been sacked,” said a diplomatic source in Beijing. “Markets have come to a grinding halt following the currency revaluation and prices have soared,” the source said. It seems North Korea hoped to stabilize prices through the currency reform and then credit the achievement to Kim Jong-il’s third son and heir apparent Jong-un to consolidate his grip on power, but this flopped, the source added.

Some North Korea watchers in China predict that the regime may perform a U-turn back to timid market reforms now that Pak, who led the crusade against capitalism, has been fired. One North Korea expert in Beijing said, “There is a strong possibility that high-ranking North Korean officials who led the drive to crush market forces since 2004 will be removed from office, while policies will shift toward market reforms starting in the second half of this year.” [Chosun Ilbo]

Although it would be reasonable to infer from this that the sanctions are working, as is often the case in North Korea, not all signs point in the same direction. One would not expect a regime in financial distress to proceed with something as useless as cladding the useless Ryugyong Hotel in glass (see, e.g., this excellent photograph, and yes, Pyongyang looks even colder than D.C.)

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Great Confiscation Updates: Hard Times in North Pyongan

Why did North Korea believe that it could reestablish a socialist economy despite international sanctions? According to Open News, the men in the palace were expecting a substantial infusion of sanctions-busting cash from the Chinese:

North Korea expected to receive a financial aid of more than a hundred million yuans from china once the currency reform was in place, so that it provides better supply of goods. And, this is why North Korea had informed China of how and when the currency reform would be conducted although it is a domestic affair to be independently dealt with. (Note 1) But, as China keeps delaying the grant, the currency seems to be unsuccessful, and Kim Jong-Eun appears to be losing the ground in his leadership even before he got a chance to exercis his leadership.

While I remain skeptical of these insider reports about Kim Jong Il’s deliberative process, the timing certainly makes sense. Recall that China had offered North Korea a multi-billion dollar aid package about six weeks before the Great Confiscation. The Obama Administration reportedly protested, but North Korea seemed to think the money was on the way. I don’t doubt that China will find some way to prop up its puppet in Pyongyang, sanctions or not. Even so, the regime has already suffered grave damage. Every report I’ve read suggests that the Great Confiscation has brought popular discontent out into the open, which means that the time is right for an opposition movement to begin to organize.

Open News also reports that since the Great Confiscation, farmers in North Pyongan Province, in the strategic countryside along North Korea’s western corridor, are barely scraping by.

According to the Shin-ui-ju source passed on the 20th, peasants in the Shin-ui-ju periphery, South Shin-ui-ju, and nearby rural areas are suffering greatly. For every 20 household, about 16 are without heating due to the lack of firewood and half are surviving only one meal a day consisting of a whole corn. This is the same reality for North Pyong province as well as many other rural areas.

Source sees such phenomenon as the aftermath of the currency reform. Initially, the peasants were granted special privilege by receiving many million wons of the new currency. However, upon the government’s false advertisement of lowering about 1% on prices and promising 20won for a kilo rice, the peasants spend their new cash away.

When peasants get a hand on large shares of money, they typically spend it on clothing or purchasing home appliances such as T.V set, refrigerator, washer, and large recorder. Men prefer bicycles or motorcycles, and women tend to spend it on expensive clothing. Since state stores such as the First Department Store in Pyong Yang are not found in the rural regions, peasants buy the same product more expensively through private dealers. [Open News]

Recent reports of anti-government leafleting in that area suggest that things weren’t prosaic there before the Great Confiscation, either.

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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.

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Great Confiscation Updates: Current Trends Cannot Continue

The wire services continue to report that conditions just keep getting worse for North Koreans, but the latest dispatch from Good Friends adds extensive detail to the hyperinflation story, and how it’s affecting the ability of people to get food:


This is the sort of reporting that Good Friends typically does well. We’re used to seeing North Korea’s corn-eaters going hungry, but I always watch for signs that the elite, the military, and other rice-eaters are sharing in the misery:

Those who are immediately affected by the horrifying increase of rice price are the residents with dearth of food saved at home. Households without food have no other option than starving. Situations worsened for people with food as well. Households that used to eat white steamed rice and meat soup began to save food by eating “˜50:50 meal’ with half corn and half rice. People who used to eat “˜50:50 meal’ changed to steamed corn meal and those who had steamed corn meal changed to porridge. While making efforts to save food, they are anxiously awaiting the prices to be stabilized. Some express complaints about worsened life conditions saying, “What is the use of having money? There is no value of the currency, so it is like worthless paper.

The dispatch also reports that the military was also affected by decrees banning all foreign trade. Many military units in North Korea are in business, and foreign trade in food and consumer goods was big business for some officers. Under the new rules, however, that trade has ended, and only trading companies that bring in hard currency for the state itself are allowed to continue their activities.


Current trends suggest that the value of the new won will soon be worthless for any purpose but purchasing food at set prices from government stores. Even this is questionable, however, if even the official prices continue to float, and when there aren’t nearly enough goods in those stores to satisfy consumer demand.

It’s difficult to predict where this is going, in part because current trends almost never do continue. Famine is certainly a possibility, and I suspect that thousands whose livelihoods were destroyed will perish quietly, out of sight. But this isn’t 1994, and most of the North Koreans who are still alive today are resilient, resourceful survivors. A more likely outcome than large-scale famine is that people will survive the Great Confiscation by bartering at first — cigarettes are used as currency in prisons everywhere, after all — and eventually, by trading in Chinese yuan. At first, the regime will dispense harsh punishments for these “economic crimes;” but a few hundred or thousand deaths later, the diktats that demand tomorrow’s sacrifices will be mostly forgotten because no one will have the luxury of obedience.

Within the next year, the regime will face a stark choice among three options. The first option is to continue its anti-market policies without providing its people with an alternative means of survival, which will mean more popular discontent, the collapse of what control the state still has over the peoples’ economy, and ultimately, allowing another nation’s currency to become the peoples’ de facto medium of exchange. The second option is to find enough cash for commercial food purchases to supply government stores with food. This will be difficult to manage in an environment of international economic sanctions. It will require a substantial infusion of outside economic aid — most likely from China — or a reduction in the purchase of weapons and luxuries for Kim Jong Il and his inner party, which could spur discontent, cut-throat competition, and purges within the privileged classes. The third option is to abandon the Great Confiscation and hope that the people will be resourceful enough to restore the old system and go about their business. Any of those three options leads to the outcome of the state losing a substantial portion of its totalitarian control.

If the regime is still intact a year from now, my best guess is that the final outcome a year from now will look like 20% Option 1 and 80% Option 3. The state will be forced to abandon the Great Confiscation but will still shake down the largest traders for blackmail, the new won will be largely supplanted by the yuan for large transactions, and the people will still be miserable and mostly dependent on black markets. The state will also have to cut back on purchases of arms and luxuries and spend more on feeding and mollifying the elite, but this is more likely to be attributable to international sanctions than a discretionary shift in its priorities.

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Great Confiscation Update

From the Daily NK:

A defector, who spoke with his family in North Hamkyung Province on Tuesday, reported the news to the Daily NK, “I called my family to send some money to them as I had heard they were in trouble, and they told me that the current situation is unspeakably terrible. They live only by bartering with others.

He explained further, “For now, state-designated prices are still not public, so people think that selling goods for cash now would mean making a loss. Therefore, bartering has become the main method of trading for the people.

That, and the fact that the value of the currency is plunging so fast that no one wants to hold it.

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Great Confiscation Updates: Marcus Noland and Stephan Haggard on the Risk of Hyperinflation (Updated)

[Update:   Blaine Harden has a must-read story in the Washington Post:  “[T]he government’s action appears to have backfired, with potentially disastrous consequences in a country that is chronically short of food.  The black-market value of “new” won has reportedly plummeted against Chinese currency, spooking private traders who have pulled their goods out of markets. Outside economists say suspicion about the value of the won has made residents wary, increasing economic stagnation and worsening food shortages.”]

In my in-box today is this paper by Noland and Haggard on the effects of the Great Confiscation on the North Korean economy, which cites a number of the same sources I’ve cited here recently. I thought I’d share it with you even before I had time to read the whole paper myself. It’s both relieving and gratifying to see two eminent economists reaching some of the same conclusions that I had early on: that this move will shrink the nascent North Korean “peoples’ economy” and result in more, not less, inflation:

The effects of these confiscatory measures are twofold. First, they will increase the risk premium on engaging in market-based economic activity, both increasing the prices of goods and services as well as decreasing their availability. It has been reported that even some high priority housing construction in the capital has ground to a halt amid the chaos.

Second, the reform provides a disincentive to hold the domestic currency and, in the long run, will encourage further dollarization of the economy. The government preemptively banned the use of foreign currencies on December 28. Successful implementation of this prohibition will require an extraordinary degree of repression. These disincentives to economic activity and to holding the domestic currency (assuming the ban on foreign currencies does not stick) will make it increasingly difficult for the state to finance its activities and thus reinforce, not diminish, inflationary tendencies.

There is also a particularly valuable chronology of the North’s anti-reform measures on page 5.

Three other new articles I was going to discuss anyway dovetail well with what Noland and Haggard write. The first of these, from Open Radio, notes that not everyone is unhappy with the currency redistribution, at least until hyperinflation eats up what amounts to a substantial pay increase:

According to a source on December 27, North Korean citizens have positive feedback on currency reform. Especially at the end of December, elderlies, farmers, and those who receive salary are fond of the reform. With same amount of retirement support for elderlies and salary, the value of payment increased hundred-fold. On the other hand, price of goods did not rise very much. For this reason, purchase power increased fifty-fold. Men who were criticized for not being able to make enough for 1kg of rice are now being accepted, which is enhancing the positive feedback on currency reform.

According to the source, trade is not frequent, but 1kg of rice is selling at 38-45 Won (2000 Won before the currency reform), and home-made soju is selling at 20-25 Won (500-600 Won before the currency reform). Therefore, with salary of 2000-3000 Won could only buy 1-2kg of rice before, whereas now, the same amount of salary can buy 50kg of rice. Pension for the elderly is also kept at 1,500-2,000 Won.

However, the citizens are still anxious that the price level may rise. If the price level is kept at status quo, the currency reform would have done the job of raising citizens’ support for the North Korean government. [Open Radio]

Noland and Haggard also note that “wage policies were introduced that favored certain groups,” particularly those employed in factories and party organizations. For those groups, the new wage structure gave them an effective hundred-fold pay increase, plus substantial bonuses. The apparent idea here is to draw people back from the capitalist economy to state-owned industries, thus increasing the state’s export revenues. But how are those industries supposed to operate if North Korea’s old socialist economy isn’t capable of operating? The bigger question also remains: what good is a wage increase if the wages are paid in currency that’s worth nothing?

But confiscation changes how traders and even households think about their holdings of North Korean won and foreign currency. Residents are now more suspicious of holding won and thus put downward pressure on the exchange rate, adding additional inflationary pressures to the economy. One news report indicated that by the end of December, in the wake of the ban on foreign currencies, the postconversion black market won-yuan rate had reached 1,000 implying a won-dollar rate of more than 600,000 in preconversion terms!

The first time I believe I’ve seen Noland and Haggard use that kind of punctuation.

Reinforcing the evidence of hyperinflation, here’s the latest from the Chosun Ilbo:

One Korean Chinese, who visited Pyongyang recently, said, “Department store shelves are stacked with goods that the state confiscated from market traders in return for nothing on Jan. 1, and they are selling those goods at prices readjusted at the exchange rate of 100 old won for one new won. Huge crowds rushed to buy them, so they ran out of stock immediately.”

But commodity prices skyrocketed. Inflation is soaring as market traders are hoarding goods, anticipating that the real value of the new currency will plummet. According to a North Korean source, 1 kg of rice cost about 30 won right after the currency reform but is now closing in on 1,000 won. The U.S. dollar was exchanged at the rate of 75 won to the greenback right after the currency reform but soared to 400 won in late December. There is speculation that it is now only a matter of time before the rate will reach 3,000 won, the same as the unofficial exchange rate of the old won.

Market traders are angry as they have realized that they were robbed of nearly everything they earned. A former senior North Korean official said, “The latest currency reform is more cruel than the previous reform in 1992. It’s tantamount to the state confiscating 99 percent of people’s money.”

Authorities have been handing out food rations in Pyongyang and other regions since December, but North Koreans already know that the food cannot last them more than a month or two. Urban residents are experiencing particular hardship.

Similarly, Open Radio reports that wealthier buyers have just depleted merchants’ inventories by dumping their foreign currency in anticipating of the ban on its possession and use, which will at least temporarily drive up the price that buyers would have to pay for the same goods in North Korean won.

In the end, Noland and Haggard conclude that the regime will fail to stamp out private markets, that there will be many isolated and uncoordinated expressions of dissent, and that those expressions will not present a serious challenge to the regime because the people have no means to organize to oppose the regime. Sadly, I agree.

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Great Confiscation Updates: Regime Turns Attention to Foreign Currency

The North Korean People’s Safety Agency has declared a “complete prohibition of foreign currency usage. The decree was issued on December 26th and went into effect on Monday 28th. A source inside North Hamkyung Province reported, “A People’s Safety Agency declaration on banning the use of U.S. dollars, Yuan and the Euro was publicized on the 26th. The declaration was posted in public places and in every workplace starting this morning.

The title of the declaration is, “On punishing severely those who use foreign currencies within our Republic. Surprisingly, the targets of the declaration are said to include foreigners visiting North Korea.

A source from Yangkang Province also reported, “From December 28, no foreign currencies can be used. The foreign currencies the declaration meant were dollars, Yuan and the euro. According to the source, this new regulation was a Cabinet decision, and the People’s Safety Agency is responsible for its implementation. The declaration stipulates, “Not for any reason may individuals or organizations possess any foreign currency, with the exception of banks.[Daily NK]

The directive from North Korea’s Ministry of People’s Security seen at one of Pyongyang’s commercial markets said that from January 1, residents will not be allowed to directly pay with dollars, euros or other foreign currencies for food, goods and other retail items, Xinhua news agency reported. “Foreigners with foreign currency will also have to exchange it for North Korea’s own currency to use it,” the report added, citing the announcement. [Reuters, Chris Buckley and Jon Herskovitz]

There will be almost no exceptions to this new rule except North Korean banks holding foreign currency after international transactions. For everyone else, we can assume that examples will be duly set:

“The relevant authorities will adopt measures to establish strict order for the circulation of the national currency,” the directive said, according to Xinhua. [….] It also warned that businesses breaking the new restrictions would be shut down and their property confiscated, and illicit foreign exchange deals would be “harshly dealt with.” [Reuters]

The North Hamkyung Province source also cautioned, “Upon the release of this declaration, there will inevitably be someone sent to a prison camp or sentenced to an extreme penalty as a model case. These days, if you are unlucky, you may become the model case for bringing in Yuan or dollars. [Daily NK]

North Koreans’ holdings in foreign currency are very different from their savings in North Korean currency in two ways: first, the regime can print all the dollars we’re willing to let it get away with printing, but it still lacks the unilateral power to cancel dollars, which will always have intrinsic value on the black market. People — especially people with the means to pay extortion money and buy their way out of a prison camp — are still going to hoard them, especially after the regime has given them so much reason to distrust the North Korean currency. The new currency’s value is already plunging, even as the regime struggles to re-set wages and prices.

The second and more important difference is who holds foreign currency in North Korea — aside from foreigners, of course: the elite. Now, having seen the ferocious anger the Great Confiscation provoked among the proles, the regime is still willing to confiscate the savings of inner and outer party members. That is a real risk, because the military and security forces — the people who carry guns — come from these classes. Apparently, at least one person in the South Korean government agrees with me. Who can imagine any South Korean official saying this while Roh was President?

“It is difficult to estimate the threat to us that will arise in the aftermath of the currency reform and from the regime instabilities as leader Kim Jong-Il goes ahead with a hereditary power handover,” the minister said in a New Year message to the South’s 655,000-member military. [….]

“North Korea is continuing to expand its armaments despite a lack of food and serious economic challenges,” minister Kim said, calling on the military to stay alert to the potential threat. [AFP, Park Chan Kyong]

Make that two people in South Korea. It’s rare that I find myself agreeing at all with anyone from a place with a hippie pinko name like the “Hankyoreh Peace Institute:”

Kim Yeon-Chul, director of the independent Hankyoreh Peace Institute, said the ban on using foreign exchange was aimed at stabilising the value of the new won against overseas currencies. “In the end, all will depend on whether the North will be able to curb inflation, especially whether it can rein in rampant food prices through a stable supply of food rations,” he told AFP.

On that account, it’s already looking bleak. The North Korean regime appears to be buying up every bag of rice it can find across the Chinese border — to the point where it’s getting hard for the Chinese to buy any. If the regime (as opposed to food smugglers) is in fact behind this shopping spree, it’s a welcome development — it’s a rare case of the North Korean regime apparently spending foreign exchange money on food instead of goodies like centrifuges, Italian yachts, and Omega Watches. For the regime to shift its priorities in such an unprecedented way — even as the palace economy’s income from weapons sales is being pinched — suggests just how dangerous the men in the palace think the situation on the streets must be.

(Interestingly, Open Radio is claiming that possible successor Kim Jong Eun is being set up as the fall guy architect of this Great Confiscation.)

Yet unless the regime has enough foreign exchange to meet the caloric needs of the people in-kind, the value of new currency will collapse, the state’s wages will become worthless, and discontent will rise again in the spring. And this time, it won’t just be the proles in the countryside who will be discontented. Yet thus far, the regime’s preferred strategy has been to hand out stacks of the new currency while continuing to crack down on markets. This means more cash that’s less trusted than ever is chasing less food than ever, which fuels hyperinflation and disincentives farmers and food smugglers from selling food to markets where people can buy it.

Yet another source of uncertainty here is the regime’s historic tendency to turn a blind eye, eventually, toward enforcing diktats that the majority of people violate of necessity. It may well be that a year from now, the yuan will be North Korea’s de facto currency for large transactions. The Daily NK seems to agree:

The reason for this measure is that there is no confidence in the North Korean currency, so the public preference is for foreign currency holdings, which the authorities cannot regulate easily. Nevertheless, it is unlikely that people will willingly pay their own foreign currency to the state, irrespective of this requirement, while it is likely to end up stoking inflation. The source explained, “For the time being it will be difficult to use foreign currency, but after a while, it may be possible to use it again. Since faith in our money has already dropped, no matter how hard the authorities regulate it, demand for foreign currency will increase.

For each year since 1994, North Korea’s economy has been slipping progressively out of the regime’s control. So far, the regime has managed to hold onto its control through a combination of arbitrary terror and mutual isolation. Each year, a few more straws are added to the camel’s burden. I believe that popular disgust with the regime is both deep and wide, to a much greater extent than it was in the past, even if that disgust is still unfocused. The big unknown is how many more straws the camel’s back can hold.

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Great Confiscation Updates

The Washington Post’s Blaine Harden writes today that popular discontent over the Great Confiscation isn’t going away:

It was an unexplained decision — the kind of command that for more than six decades has been obeyed without question in North Korea. But this time, in a highly unusual challenge to Kim’s near-absolute authority, the markets and the people who depend on them pushed back.  Grass-roots anger and a reported riot in an eastern coastal city pressured the government to amend its confiscatory policy. Exchange limits have been eased, allowing individuals to possess more cash.

The currency episode reveals new constraints on Kim’s power and may signal a fundamental change in the operation of what is often called the world’s most repressive state. The change is driven by private markets that now feed and employ half the country’s 23.5 million people, and appear to have grown too big and too important to be crushed, even by a leader who loathes them.

The currency episode seems far from over, and there have been indications that Kim still has the stomach for using deadly force. There have been public executions and reinforcements have been dispatched to the Chinese border to stop possible mass defections, according to reports in Seoul-based newspapers and aid groups with informants in the North.

Still, analysts say there has also been evidence of unexpected shifts in the limits of Kim’s authority.  “The private markets have created a new power elite,” said Koh Yu-whan, a professor of North Korean studies at Dongguk University in Seoul. “They pay bribes to bureaucrats in Kim’s government, and they are a threat that is not going away.”

On balance, however, the signs I’ve seen are these:  (a) the regime’s partial reversal of the confiscation has reduced public anger; (b) in the near term, the rage has given way to acceptance, and the odds of a broader wave of public protest are diminished in the short-term; however (c) the Pandora’s box of public dissent has opened, and will prove very difficult to close in the medium to long term.  That’s especially so now that the people have forced the regime to change a major economic policy.  Furthermore, the measures the regime is taking to appease the people in the short-term, such as cash payments to workers and farmers, may not be sustainable in the long term, particularly as a new bout of hyperinflation eats away at the value of the new currency and makes it impossible to save for leaner times.  In North Korea, food supplies typically run shortest in the spring, after winter reserves run out and before the first harvests come in.  Finally, the misery that the Great Confiscation has already caused will linger for years.

One positive aspect of this is that cash the regime spends on buying domestic stability can’t be spent on enriching high-ranking cadres, the military, and WMD development.

I don’t conceal my view that North Korea won’t change barring the overthrow of this regime, which can’t happen peacefully, and that expressions of discontent are signs that the North Korean people are prepared to support a clandestine opposition movement, should one arise.  No such movement has arisen yet; such a movement still lacks a nationwide galvanizing ideology around which a clandestine organization can coalesce and build.  But I suspect that if such an ideology were propagated to North Koreans via Radio Free North Korea or Open Radio, leaders would emerge locally to support it.

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Great Confiscation Updates: North Korea Bans All Foreigners

[Update: The Daily NK thinks the ban is “not news.”]

So how worried is North Korea about the potential for more unrest and rioting? As of yesterday, it will ban all foreigners from entering the country until at least February to make sure there won’t be any foreign witnesses to any demonstrations or massacres.

North Korea reportedly plans to ban foreigners from the country from Sunday until early February, apparently to allow unrest caused by this month’s shock currency reform to die down.

Ju Sang-song, the minister of People’s Security, is in China, according to the North’s Korean Central News Agency, though it gave no reason for his visit. The trip by the North’s top internal security official may aim to seek cooperation from Beijing in preventing a mass exodus of North Korean middle class citizens angry over the devaluation of their savings. [Chosun Ilbo]

Wow. They must be fairly concerned; after all, the North tends not to let in foreigners unless they’re bringing hard currency. Meanwhile, in Chongjin, there’s another report of a public execution:

The Seoul-based aid group Good Friends said in a newsletter Tuesday that authorities publicly executed a citizen in the northeastern city of Chongjin on Dec. 6 after he incinerated a pile of old bills at home over concern he could be investigated over how he amassed the money. [AP]

In times like these, it’s noteworthy that cell phone subscriptions are selling briskly, or at least were, when people had money. What I can’t figure out is why the regime is allowing this, especially now. Maybe someone can explain to me how the North Korean government expects to control these things, but it seems exceptionally dangerous for this regime to allow people to have a way of communicating between different cities and regions if unrest breaks out. Frankly, I see this as a good thing that won’t last.

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Great Confiscation Updates

A DAY AFTER I excoriated the New York Times for its awful North Korea coverage (well, it is …) their Ideas blog links and recommends my New Ledger post about the Ajumma Rebellion. I prefer to think they’re trying to appease me.


NORTH KOREA SANCTIONS ITSELF: So, exactly how much of a North Korean economy is still left if you suddenly and arbitrarily confiscate private savings and eradicate private markets?

South Korea’s Hankyoreh newspaper quoted sources in China’s border city of Dandong as saying private transactions — which supplement the faltering state distribution system — have come to a virtual halt.

“The road linking Pyongyang and Sinuiju has been shut down. It’s been hard to get through to partners in the North by phone,” a Chinese businessman told the independent daily in Dandong, across the border river from Sinuiju. [AFP]

This is typical of the brutal, clumsy incompetence that has made North Korea the wretched failing state it is today. Only the North Koreans would think to weed a garden by drenching it with Agent Orange. I look forward to Christine Ahn’s calls for Kim Jong Il to lift these sanctions, which really are going to hurt the North Korean people, and just as the food situation was already looking bleak.


AMID THE CHAOS the Great Confiscation has wrought, party officials have been called to a flurry of meetings to reset wages and prices.


THERE IS ONE GROUP of people to whom the old North Korean money still has value: Chinese souvenir collectors.


AS I PREDICTED, North Korea is already showing signs of hyperinflation.



It is hard to overstate just how bold a move that is. North Korea’s military “is on alert for a possible civil uprising,” according to a major South Korean newspaper, the Chosun Ilbo. Reports have been filtering out of North Korea that the country’s markets have become arenas of protest, with traders–many of them women in their 40s and 50s–publicly cursing the North Korean authorities. [….]

That is exactly why these signs of unrest are so important. Dissent in North Korea carries individual risks even worse than the horrors that street protesters have been braving in Iran. But the stories are credible, and they suggest that North Korea’s regime is approaching a fragile moment. This comes on top of Kim’s questionable health, following what is believed to have been a stroke in 2008.

President Barack Obama, and other leaders of the democratic world, have a choice. They can dismiss the rising murmurs of North Korea’s stricken people, and stick with the sorry tradition of bailing out and propping up the North Korean regime via yet another round of nuclear talks and payoffs. Or they can leave Kim to struggle with this nightmare of his own making, and maybe even notch up the financial pressure to nudge North Korea’s totalitarian regime toward its rightful place in history’s unmarked graveyard of discarded lies. [Forbes]

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Great Confiscation Updates

The Daily NK reports that the regime is trying to blame the need for the Great Confiscation on foreign enemies and domestic capitalists:

It continued, “Our people have suffered from famine due to natural disaster and imperialist anti-republic maneuvers and irrational residents’ attempted activities to gain not social and national benefit, but private benefit.

“This phenomenon has been generated temporarily during the completion of our socialist country, and the Party and the Fatherland have been getting through these difficulties on the principle of putting the priority on the people’s convenience.

The South Korean government is watching North Korea closely for signs of internal unrest, notes the Donga Ilbo:

The South Korean government believes riots could erupt in North Korea following the communist country’s currency revaluation last week, an official in Seoul said yesterday. The fear is that North Koreans could riot over losing their hard-earned cash or clash with authorities in the process of a government crackdown. The government official said Seoul is paying keen attention to the unstable internal situation in North Korea following its surprise currency reform.

Elsewhere, Yonhap notes that officially, the South Korean government denies knowledge that the North Korean military is on any heightened state of alert.

I find myself in rare agreement with Rudiger Frank, quoted in the Chosun Ilbo:

“Temporary discontent will be quelled and the North Korean regime will emerge victorious over the short term,” said North Korea expert Rudiger Frank, an East German who studied at Kim Il Sung University. “But the experience of former socialist countries is that disappointment and discontent pile up silently and gradually lead to revolutionary circumstances.” Frank said public discontent ends up erupting at times like a leader’s death, famine, external shock or domestic unrest.

More rare agreement, with the U.S. Institute of Peace:

If the DPRK government had improved and restored the inconsistent Public Distribution System and other public services on a national basis (a massive undertaking), a revaluation may have triggered greater state control by minimizing the benefits from the non-formal market system and making the North Korean people dependent on the state again. It does not appear that the DPRK government has improved these national systems. In an apparent effort to restore discipline through this revaluation, the DPRK government may have initiated a period of economic, social, and political destabilization by undermining a widely used coping mechanism for the people, as well as a growing number of officials.

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North Korea Completes Great Confiscation (Upated)

[Updated below.]

By now, it is December 7th in Pyongyang, and the period for exchanging old currency for new has passed. By filling the streets with troops and police, the regime has, for the moment, managed to contain the “fury and frustration” of people who, robbed of their savings and deprived of food rations, no longer know how they’re going to make it through the winter.

For now, only isolated outbreaks of dissent are reported. The people know that this regime will stop at nothing to preserve the state of terror, most recently evidenced by wire service reports that border guards have been given shoot-to-kill orders to prevent an exodus of desperate, hungry people:

North Korea has ordered its border guards to open fire on anyone who crosses its border without permission, in what could be an attempt to thwart defections by people disgruntled over its recent currency reform, a news report said Saturday.

The National Defense Commission — the top government body headed by North Korean leader Kim Jong Il — recently instructed soldiers to kill unauthorized border crossers on the spot, South Korea’s mass-circulation Chosun Ilbo newspaper said, citing unidentified sources inside the North.

It said the order could be an attempt by the communist government to stop members of North Korea’s middle class who are angry over suddenly being deprived of their money from leaving the country. [AP, Kwang-Tae Kim]

The latest reports speak of a mood that could have been written into Madame Defarge’s knitting.

Angry citizens burned piles of old bills at two separate locations in the eastern coastal city of Hamhung on Monday, the Daily NK, a Seoul-based online news outlet that focuses on North Korean affairs, reported late Thursday, citing an unidentified North Korean resident. It quoted the resident as saying he saw graffiti and leaflets criticizing North Korean leader Kim Jong Il in and around a college in Hamhung — a rare move in a country where the totalitarian government keeps tight control over its 24 million people. [AP, Kwang-Tae Kim]

“People are mad at Kim Jong-il,” says Ha Tae Keung, head of Open Radio for North Korea, which broadcasts two hours a day of news from Seoul into North Korea. “Suddenly your wealth is gone, and you have nothing. It is very difficult.” The question, he asks, is “whether the protest is organized or random.” [Christian Science Monitor, Don Kirk]

Some say that such measures, combined with the currency grab, fuel resentment. “There is huge demand for a more open economy and society,” says Kim Sang-hun, a North Korean human-rights activist. In Myanmar, the closest parallel to North Korea in the vicious incompetence of its thugocracy, the cancellation of high-value banknotes in 1988 contributed to a nationwide uprising. North Korea may be some way from such an explosion. But you might expect confidence in the regime to be at a low ebb. [The Economist]

And we can safely dispense, once and for all, with the myth of a North Korea that only wants our help to reform gradually, a myth generally fueled by the regime’s periodic showcase efforts to sustain itself with hard currency. (These efforts tend to generate a great deal of shallow press coverage but seldom last very long, and they never penetrate far into North Korea itself.)

In a sign that the regime may want to screw the rich as well as the poor, the regime announced all transactions in foreign currency would be banned without exception, and that even foreigners would not be permitted to spend hard currency there. In Pyongyang, people were “stocking up like mad on necessities” before the end of the exchange period, suggesting that the currency revaluation will only make the inflation problem worse. Before the exchange, the price of a kilo of rice surged from 1,700 won to 15,000.

The first quasi-official acknowledgement of the Great Confiscation comes via the pro-Kim Jong Il, Japan-based Chosun Sinbo, which “normally reflects official thinking” except when it’s endorsing American politicians while they are adored by the American media (though the North Koreans may be having second thoughts by now). The Chosun Sinbo has run a rather remarkable interview with Jo Song-Hyon, an official with the North Korean Central Bank, who asserts in fluent doublespeak that the Great Confiscation is widely popular even as he implicitly acknowledges the “disorder” it has triggered:

The newspaper said the reform had widespread support because it favoured those who have worked “faithfully for their nation and society.” It quoted Jo as saying North Korea would take more steps to stop disorder while all shops and restaurants will be banned from trading in foreign currency. [….]

North Korea will further strengthen “socialist principles and order in economic management,” Jo was quoted as saying. The currency measure “will weaken the role of markets and expedite the distribution of goods through a state-controlled commercial network,” he said. [AFP]

Yonhap’s translation of the interview is a bit different from AFP’s:

“An absolute majority of workers from laborers, farmers and office workers are giving their support to this government measure,” Jo said. [….]

“The imperialists’ vicious isolation and suffocation maneuvers against us, subsequent natural disasters and the fall of the socialist market have posed great impediments to the normal economic development of our country,” Jo said. He even mentioned the so-called “arduous march” of the late 1990s, during which about 3 million North Koreans died from hunger, according to foreign estimates. The official said productivity fell and the government was forced to spend lavishly to maintain the nation. “As a result, the currency became inflated, and an abnormal imbalance in the people’s economic development has ensued,” he asserted.

The reform is aimed at curbing burgeoning free market trade, a necessary step to build a strong socialist nation in three years, he said. North Korea, which depends on international food aid to help feed its 24 million people, has set the target year for economic revival at 2012, the birth centennial of Kim Il-sung, the country’s founder and father of the current leader Kim Jong-il. “We are not headed toward a free market economy, but will further consolidate the principles and order of the socialist economy” with the revaluation, the official said. [Yonhap, emphasis mine]

You’re going to love the reason this regime found it necessary to shock its entire population with a surprise announcement. Yes, North Korea is now a fastidious foe of money laundering!

He also said the reform took effect so suddenly so as to give no time for money laundering. “If this measure is made public beforehand, there would arise time for illegal money to become legal by subterfuge,” he said. “In the future, a large share of economic activities will be subject not to the market, but the planned supply and distribution system” of the government, he said.

The measure is expected to reduce cash circulating in the market. Jo said people can make exchanges for new banknotes for seven days ending Sunday, and “bills that were not exchanged during the period — and our currency that has been illegally taken outside the country — will become entirely invalid.” [Yonhap]

Of course, for unadulterated blackwhite, nothing beats the original source:

The Korean people are now striving hard to build a great, prosperous and powerful socialist nation, giving a full display to the spirit of self-reliance and hard working. This spirit is the powerful ideological and moral weapon of the Korean people, who have covered the road of victory and glory under the leadership of the Workers’ Party of Korea. Since the torch of a new great revolutionary upsurge of the Songun era was kindled the Korean people have fully demonstrated what miracles and feats the owners of this spirit can perform on all fronts of the building of such a country. [….]

The Korean people have still suffered from different shortages in their efforts for finally building a thriving nation. However, there is nothing impossible for the Korean people, who, closely united around the WPK, have an indomitable spirit, a superior socialist system and a solid foundation of self-reliant economy consolidated in trying ordeals.

It is thanks to the spirit of self-reliance and hard working that they have established the Korean-style production system based on domestic raw materials and resources, introduced the Juche-oriented up-to-date technologies and built monumental edifices with an indefatigable will and strenuous efforts. The Korean people are convinced that only in the spirit of self-reliance and hard working, can they emerge victorious and usher in the future of a powerful nation. [KCNA]

If North Korea had an organized opposition, and if that opposition was prepared to continue the currency exchange program without limits and with counterfeit versions of the new North Korean currency, that opposition would make itself very popular over the course of this coming winter. I’m just saying ….

Update 1: This Chosun Ilbo report appears to the be basis for the “shoot-on-sight” reports. It, in turn, cites the Russian business daily Kommersant and “sources” inside North Korea:

The North Korean Army is on standby and ready to quell any protests against last week’s drastic currency reform, Russian business daily Kommersant last Friday quoted diplomatic sources in North Korea as saying. The sources said authorities had ordered the Army to stand by as outrage grew in cities across the North, with critics describing the reform as daylight robbery.

North Koreans are panicking as all shops were ordered closed during the currency reform period and they can no longer use any money they have saved up. Foreign diplomats are meeting with North Korean authorities in efforts to persuade them to reverse the reform, the sources added. [Chosun Ilbo]

I don’t know if the dissent is spreading or if more reports are simply leaking out.

According to sources in the North, the National Defense Committee has ordered guards on the border with China to shoot at will at anyone who crosses without permission. This is seen as an attempt to thwart defections by people disgruntled by the currency reform.

The sources said there could be a mass defection of middle-class North Koreans who have suddenly been deprived of their money. One South Korean intelligence officer said, “We don’t have any information that there’ll be a riot or a mass defection, but since North Koreans have never so far taken collective action, they are more likely to choose defection if the situation gets worse.”

The Ministry of Public Security has been on emergency alert after old 5,000-won bills carrying the image of Kim Il-sung were found torn or damaged on piles of garbage in Chongjin, North Hamgyong Province, Hamhung, South Hamgyong Province, and Pyongsong, South Pyongan Province. Graffiti and leaflets criticizing North Korean leader Kim Jong-il have also started to appear, the sources added. North Koreans are reportedly reluctant to replace old bills with new ones as a gesture of protest against the currency reform.

I don’t claim to know what’s going to happen next. But to the North Korean people, this is a very big deal, and I’ve based on everything I’ve read, they’ve never been angrier.

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