[VIEWPOINT]Money as Measure of National Strength

Several years ago, I went to the Louvre Museum and saw the Code of Hammurabi, the set of laws enacted by the sixth king of the Amorite Dynasty of Old Babylon at around 2123-2108 B.C. The code carved into an eight-foot-high black stone monument offers a picture of the daily lives of ancient Babylonians.

At the time, both crops and silver were used as media of exchanges and value indicators, which meant they had to be measured and weighed. Shekel, a weight unit, came to be used also as a currency unit. The simultaneous use of crops and metals necessitated a strict exchange ratio between the two, which the Code of Hammurabi specified in detail.

Borrowing and lending appear to have been prevalent at the time and resulted in frequent quarrels. While debtors were allowed to repay their debts either with silver or barley, the law stipulated the use of specific forms of currency for certain transactions. For instance, loans of cows or farming slaves had to be repaid with crops, and the services of doctors, technicians and bricklayers paid with silver. Anyone violating the law and demanding other forms of payment was harshly punished.

The Code of Hammurabi also dictated that a tavern-keeper who did not accept corn according to the gross weight in payment of drink, but demanded silver, should be convicted and thrown into water.

Silver must have been regarded as a superior form of currency. We can deduce that the Babylonians hoarded silver and used crops instead, which means that Gresham's law - the good coins hoarded and bad coins circulated when both are exchangeable - had been already operating in ancient Babylon.

A similar phenomenon is happening in North Korea today; the "good" U.S. dollar is turning the North Korean currency into "bad" currency. Several months ago, North Korea called off its workers from the Korean Peninsula Energy Development Organization's light-water reactor construction site, demanding that the workers' monthly wages be raised from $110 to $600.

The official exchange rate is about 2.16 North Korean won against a U.S. dollar, but dollars are traded up to 100 times the official rate in black markets. If we assume the average monthly wage of North Koreans to be 100 won, it doesn't even come to a dollar. Out of the dollar revenues North Korean authorities received from KEDO, they paid only a dollar to each worker, and pocketed the rest. KEDO refused to accept the demand for a six-fold raise, and recently hired cheap labor from Uzbekistan instead.

Hyundai's finances are fast dwindling after paying $12 million each month to North Korea in fees for the Mount Kumgang tourism project. It is negotiating to halve the commission, but even that will be too high. Hyundai should bear this in mind when it negotiates the tourism business to Kaesong in the future.

In the past, money meant any forms of currency convertible to other kinds of assets, such as gold and silver. Since President Nixon closed the so-called "gold window" to stop the convertibility of dollars for gold in 1971, however, currencies throughout the world came to resemble a ship floundering without an anchor.

The degree of confidence local citizens and foreigners have in the national economy and in the central bank's currency management policies determine the value of money today. The uncertain outlook for the global economy is causing money around the world to surge toward the United States and raising the value of the greenback. Currency is a measure of national strength. The currency of a rich and powerful country is treated as good money even by its "sworn enemy," and that of a poor country mistreated even by its own people. It is time that we reviewed how our currency is treated both within the country and outside, and what kind of efforts the economic principals of our society are making to raise its value.

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The writer is a professor of economics at Sogang University.

by Kim Pyung-joo