Tuesday, December 8, 2009

Is North Korea Facing Revolution?

A few months ago it would have been unheard of. There have actually been open protests in North Korea as the hermit nation switches to a new currency, exchanging 100 old Won for one new Won. What has people upset are the strict limits on how much can be exchanged. The maximum is 150,000 old Won per family, which is about $50.00 on the private market. Banks will allow balances of up to 300,000 Won to roll over to the new currency. What has people up in arms is the fact that any money over the limit becomes worthless.

Who does this hurt? This hurts private traders, who have been grudgingly tolerated in the last few years as a necessary supplement to the imploding state controlled economy. When communism fails, it turns to small scale capitalist activity to get through the crunch. Lenin did it back in 1924 to help the Soviet Union recover from civil war and the resulting famine. Since then, Poland, Hungary, Romania and other communist countries have sacrificed ideological purity for pragmatic means.

Unfortunately, currency switches are a way of pulling the rug out from under small scale entrepreneurs. The people affected are those who have accumulated savings that would be legal and legitimate in a non communist country. It also disrupts trade that cushions the harsh effect of communist inefficiency. The introduction of small scale free trade in North Korea has made the traders, who are predominantly middle age and older women major wage earners in their family and an economic bloc in society. It should be borne in mind that an official factory or teacher's salary might be a few thousand Won a month, while the daily earnings of a private trader might be many even more than that.

To get an idea of how brave even mild protests are in North Korea, it should be remembered that even a mild offense, like failing to bow to a statue of Kim Il Sung can get a whole family deported to a prison zone. People have been killed for owning bibles. It is this harsh record that makes reports like the following from the Wall Street Journal all the more amazing.

"In new reporting on Tuesday, Open Radio for North Korea, a Seoul-based shortwave radio station that broadcasts news to the North, said that police killed the two men in Pyongsong, a market center outside of Pyongyang, on Friday after they divided their savings among a large group of people and urged them to exchange the money for them, attempting to get around the government's limit.

Chosun Ilbo, a South Korean newspaper, cited informants in the North in reporting that the women working in the marketplaces of some towns "openly curse government authorities despite the risk of being arrested."

Two million people are estimated to have died since the mid 1990s in North Korea. Why did protests not erupt then? Perhaps the reason might be that people were two busy fighting starvation to fight the government. Free enterprise was actually putting food on people's tables, as well as giving them hope that things could change gradually for the better. The currency switch probably represents the death of many people's hopes that the government might be working with them to solve North Korea's formidable economics problems. Hardship is a lot harder to tolerate when it extinguishes hope.

It is hard to understand why the North Korean government is following its current course. Investment from abroad and taking steps within the country to creatively interpret socialism could raise the standard of living and relieve pressure on the regime. Both Koreas have expressed a desire for reunification. The vast economic disparity between the two Koreas is far more profound than that which existed between East and West Germany 20 years ago. Investment in and developing North Korea could be a prelude to reunification or solidifying its position as an independent country. Resolving North Korea's position in the family of nuclear nations will also pave the way for the country's development and prosperity. In any case, a dramatic reunification with its vast cost overruns like that in Germany seems highly unlikely in Korea.

North Korea is facing a serious crisis that could result in another famine, serious unrest or a turning point that could lead to a better future. In 1989, Romania and East Germany each had moments where they could have maintained order with a massacre. Both countries decided not to take such a course. This choice led both countries to revolutions that were largely bloodless. North Korea is likely to be facing such a decision soon. For the sake of its long suffering people, I hope its leaders hold fire. Sphere: Related Content

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