Currency chaosNorth Korea has pulled another extraordinary stunt, this time with its currency.
In a bombshell move, the country has sharply raised the value of its national currency by knocking off two zeroes from its monetary notes and more or less arrogating hidden individual wealth by limiting the amount each household can exchange for the new money to just two to three months’ worth of living expenses.
The sweeping move will inevitably exact a heavy toll on shopkeepers and small merchants struggling to make a living across the nation. Reports told of growing confusion and resentment over the sudden revaluation move. A majority of North Koreans have been making their living from unauthorized markets for the last decade after food distribution stopped.
The North Korean authorities nevertheless enforced revaluation as a means to uphold the status quo of the regime by reinforcing its hold over its people. Many residents had turned to black market activities and began to accumulate wealth over the years, posing a potential threat to the government’s control over its people.
But it’s unlikely that the government will gain what it seeks from confiscating personal wealth. The country has been mired in economic pitfalls for the last two decades ever since the breakdown of the Socialist bloc.
Productivity remained low as the result of poor central planning, while foreign capital and resources became scarce following the collapse in ties with Socialist economies. North Korea’s only way out of this economic mess has been to break its shell and reach out to the outside world by opening its market, at least to some degree.
Yet North Korean authorities have become more introverted, alienating themselves and weakening ties with the international community through heightened military belligerency led by nuclear weapons development.
They have instead enforced a futile “work harder and faster” campaign on the country’s impoverished working community. The ramifications of those policies have been perennial scarcity in food and daily goods, black market prosperity, skyrocketing inflation and resentment against the ruling class. If the North Koreans believe that currency reform will wipe out these problems, they are more foolish than we thought. The hike in currency value is the composite byproduct of a failed system, not its solution.
North Korea must realize that its only choice is to reform its dysfunctional central planning system and keep abreast with the rest of the world.
It must give up its nuclear program and cease making menacing threats to prevent further isolation and deprivation.