Posted December. 04, 2009 09:02,
North Koreas surprise currency revaluation is intended to short circuit the development of an entrepreneurial class independent of the state, a leading North Korea analyst said yesterday.
Marcus Noland (photo), deputy director of the Peterson Institute for International Economics in Washington, contributed a piece to the Wall Street Journal titled Kim Jong Ils Fake Currency Reform.
Unlike a Turkish or Ghanaian-style reform, in which all citizens are encouraged to convert all their holdings of the old currency, the North Korean regime limits the amount of currency that can be converted. This renders excess holdings worthless, and has set off the frenzy this week to get out of old won and into anything elsedollars, Chinese yuan, physical goodsthat will maintain value, he said.
In short, he implied that North Koreas currency revaluation was a bad move.
Noland said the North Korean government seeks to suppress the rise of market activity and opportunities to accumulate wealth beyond state control. Participants in North Koreas bootstrap capitalism include everyone from laid-off factory workers to government officials who exploit their inside knowledge to deal privately in everything from grain to imported Chinese consumer goods, he said.
The currency reform is part of Pyongyangs broader effort to curtail the rise of market activities and the development of pathways to wealthand potentially power beyond state control.
North Korea has initiated currency reform or introduced similar measures to confiscate the savings and working capital of private entrepreneurs roughly every decade since the nations founding in 1948.
In North Korea, a private-sector market would be one of the few ways for citizens to interact with each other away from the states watchful eyes. So, it stands to reason the regime would be worried about the market quite apart from any subversion of the states own economic machinery, Noland said.
He cited changes to North Koreas criminal code approved in 2004 and 2007 as examples. The revisions included expanded definitions of economic crimes and prohibited a wide range of standard commercial activities.
People convicted of engaging in illegal commercial activities and gaining large profits or illegally giving money or goods in exchange for labor could face up to two years of hard labor. Those involved in extreme cases of state property theft could even receive the death penalty.
Despite both the currency reform and the legal crackdown on the private economy, the regime is not succeeding in stamping out the market entirely, Noland said.
In South Korea, Todays News about North Korea, a magazine published by the human rights organization Good Friends, said yesterday, North Koreas Cabinet made its 423rd decision on currency exchange to improve life for its people and correct the system and order of economic management.
The magazine said the North Korean Workers Party led the currency revaluation and ordered officials to severely punish violations of currency exchange laws.
North Korean authorities are also known to have announced a ban on the use of foreign currencies by North Koreans taking effect Wednesday. Accordingly, electronic appliances sold by stores paid in foreign currencies have been sold out as North Koreas wealthy people have rushed to buy the items before the deadline.