N.Korea's Currency Reform Could End in Chaos

      December 07, 2009 13:22

      The North Korean military is on alert for a possible civil uprising following last week's sudden currency reform, according to a Russian business newspaper citing foreign diplomats in the communist country. The currency reform involved the exchange of only limited amounts of old bills at a rate of 100:1, with the state confiscating the remainder. People who are afraid of exposing the size of their wealth have no choice but to hide their old bills. It is difficult to ascertain the actual circumstances, but it is apparent the North Korean regime is virtually stealing money equivalent to two or three months' wages for the average worker. And public discontent is rising to the degree that the regime had to order the military on standby to quell riots.

      The currency reform may seem illogical, but it appears to follow careful political considerations. Ever since the regime became unable to feed its own people, a primitive form of the market economy in the form of open-air markets emerged everywhere as North Koreans struggled to stay alive. A certain group of North Koreans were able to amass a little wealth that way, and when the gap between rich and poor began to widen in a country where such differences are acutely visible, the regime probably began to view them as a threat to the system.

      In other words, the currency revaluation was probably aimed at destroying the middle class before it swells any further and becomes a real threat. Destitute North Koreans still outnumber the new middle class, which means the outcry from the currency revaluation will not be as widespread, assuring North Korean officials that any demonstration of discontent can be suppressed.

      Dmitry Moshakov, a North Korea expert at the Institute of Oriental Studies of the Russian Academy of Sciences, said, "This currency reform targeted the middle class." Pavel Lesakov at Moscow State University, said, "There won't be many North Koreans who protest against or suffer from the latest steps." Others say that the privileged members of the ruling party and the truly wealthy merchants have already exchanged their money into foreign currency. As a result, the people who have been hit hardest by the latest measures are ordinary traders who were just keeping their heads above the water. They must be feeling tremendous anger at the state.

      "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.

      The North Korean government says it will pay wages to laborers as it has done so far even after implementing the 100:1 currency revaluation. That means monthly wages will increase 100 times, but prices of rice and corn will also rise as long as supply remains the same. That means the currency revaluation will make no difference whatsoever to them. Consumer prices have already skyrocketed. If things go as planned, North Koreans will be able to use the new currency starting tomorrow. But experts say that would be impossible. It is time for the South Korean government to consider precautionary measures, taking a close look at the mounting disappointment, discontent and chaos in North Korea.

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