NKPW: North Korea cracks down on remittances from refugees to their families

Our latest edition of North Korea Perestroika Watch comes via the Chosun Ilbo, which quotes North Korean insiders as saying that the tolerance of markets is temporary, and that a crackdown will come in due course:

Hyun Dong-il at Yanbian University said, “Major changes are taking place in North Korea, but the ruling elite says it is still intent on adhering to the planned, socialist economic model.”

North Korean academics studying at Yanbian University apparently say that the changes are “temporary” measures aimed at dealing with the problems in the state rationing system and that any signs of a free-market economy will be snuffed out once the system is up and running again.

Not all of the analysts quoted agreed with that assessment, and in any event, it’s speculative. But a crackdown on markets would be consistent with the regime’s recent crackdowns on refugee flows, foreign currency savings, private agriculture, and illegal cellphones. It would also be consistent with an ongoing crackdown on clandestine remittances — one of the most important and overlooked elements of the gray-market capitalism that stands between North Korea’s underprivileged classes and starvation.

One of the main drivers of North Korea’s underground market economy has been remittances from refugees who make it to South Korea, and who send money home to feed their families. It’s an informal, trust-based banking system like the hawala system used in the Middle East. For the last few years, it had drawn food into the markets from abroad, and from sotoji plots inside North Korea. It had also drawn breadwinners out of North Korea, incentivized defections to the South, helped those left behind start businesses, and supported a system of family “chain defections.” It had become a powerful engine of change. It was feeding the hungry. It was precisely the kind of “engagement” that North Korea has needed. And the regime hated it.

That’s why the regime has been targeting remittances since at least May of this year (Item 4). The regime’s usual suspects are ethnic Koreans with Chinese citizenship, known as hwagyo:

Growing economic disparity levels among households and ensuing social unrest from this flow of cash prompted the North Korean authorities to take extreme measures: cutting off its source by increasing surveillance of families with defector members, or in some cases going so far as to expel the accused to remote areas of the nation.

However, expanding the circle of monitoring to the hwagyo is considered unprecedented, and reflects the determination of the authorities to stamp out any efforts by those who it believes to be acting as middlemen in the stream of money flowing north. [….]

Not only that, as the range of families who are able to receive funds from defectors expands further inland, instead of contained only to border areas, the authorities have widened the scope of monitoring to include its own–SSD officials and security forces.

“The intensified crackdown on money sent from the South began last year,” the source explained. “Initially, it was mostly the families of defectors they monitored and penalized, but now they have made it more inclusive, punishing those who aid in transferring the cash.” [Daily NK]

The Obama Administration may not be willing to shut down the regime’s financial system, but the regime shows no hesitation about shutting down the informal financial system that the North Korean people increasingly rely on.

Now would be the time for those who have supported trade and engagement with this regime, and opposed sanctions against it, to stop shilling for state capitalism and support real capitalism.