[Op-Ed] Currency Capers of 2 Rouge States

Venezuela announced Jan. 8 the devaluation of its currency bolivar. The bolivar was devalued 17 percent from 2.15 per U.S. dollar to 2.60 for imports of necessities. For non-necessities, the value fell 50 percent to 4.30 per greenback. When the Venezuelan people were told that the policy would take effect Jan. 11, they rushed to stores. Soldiers armed with guns warned store owners of confiscation of goods if they raised prices. Nevertheless, prices have reportedly doubled less than a month after the announcement. Venezuelan President Hugo Chavez, however, congratulated himself Tuesday on the 11th anniversary of his tenure, saying, “I can do another 11 years.”

The devaluation is seen as his attempt to make up for losses stemming from his lax administration of state affairs. An increase in foreign currency earnings for oil exports is expected from the devaluation. Chavez has enjoyed high popularity over the past several years on the back of high oil prices. The global economic crisis, however, has changed the situation. In pursuit of what he calls “21st-century socialism, he has continued to bash the market economy and business and ignore investment in the oil industry. Though Venezuela is awash in oil, gas stations are shutting down due to lack of water and electricity. Its people’s purchasing power is also lower than 11 years ago.

Yet no Venezuelan has starved to death. North Korea also revalued its currency in November last year at an exchange rate between its old and new notes of 100 to 1. Because of this, the communist country is suffering from hyperinflation, with the price of rice rising tenfold. Good Friends, a Seoul-based civic group fighting for human rights in North Korea, said, “North Hamkyong Province (in North Korea) saw the largest number of people dying of hunger.” A brawl erupted between police cracking down on market activities and residents, resulting in a shooting rampage by a person who took a gun from police, according to the civic group. It seems that the North’s attempt to smooth the way for heir apparent Kim Jong Un, the youngest son of leader Kim Jong Il, has failed.

Coincidentally, the two rogue countries conducted their currency revaluations at similar times to overcome a regime crisis. More than anything, they needed to curb spiraling inflation. Under the name of protecting workers, Venezuela raised its minimum wage 25 percent and North Korea 100-fold. The two authoritarian governments continue to say they are pursuing an economy that benefits workers. In reality, however, poor workers have been the hardest hit by runaway inflation stemming from the currency revaluations.

Editorial Writer Kim Sun-deok (yuri@donga.com)