It appears that the basic aims of North Korea’s current economic plan are to go back to the near 100% state-controlled system which existed before the March of Tribulation, and the currency redenomination looks like a key plank in the movement. However, as the plan stands, it also looks like a recipe for an inflationary disaster.
This redenomination was designed to stem the flow of money into the fledgling middle class which spontaneously developed as a result of the existence of the jangmadang, and to provide workers and farmers with more cash.
The North’s authorities never revealed internationally the limits on how much could be exchanged into new bills, but according to inside sources it was 100,000 won per household plus 50,000 won per family member. That is, a family of four could exchange 300,000 won, receiving 3,000 won in new denominations in return. People could put more than that into the bank, but North Korean residents understandably regard depositing money in a bank as concomitant with forfeiting it, given what happened back in 1992, and are unlikely to have accepted the offer in any numbers.
Surprisingly, it is claimed that workers are set to receive the same salary as they used to receive, but in the new bills. Chosun Shinbo, the publication of Chongryon (General Association of North Korean Residents in Japan), reported on the 4th, “Salaries for workers in factories and Party sub-organizations will be guaranteed at the same level as previously.”
A Daily NK source also relayed something similar on the 6th, ““Cadres are soothing complaining citizens by saying that they will receive the same wages but in the new denominations.”
If the authorities do indeed go ahead and pay wages that high to workers, inflation will be a racing certainty. Regardless, workers and farmers worldwide tend to welcome such policies. What may not be welcomed is a new crackdown on market activity.
According to North Korea Intellectuals Solidarity (NKIS), a decree has been handed down saying that selling rice in the jangmadang has been banned and that any rice on sale will be confiscated.
The NKIS source explained, “New market management regulations have been received by local people’s committees, and instructions ordering a crackdown on the markets have been forwarded to the National Security Agency.”
Indeed, side effects of the market crackdown have already been reported. Good Friends, a Seoul-based NGO, has released a story claiming that, “In the Kangan-dong jangmadang in Sooncheon in South Pyongan Province, the rice price, which used to be around 16 won per kilogram (in new won), rose to 50 won on the 3rd.”
Furthermore, despite the fact that the authorities have already announced that the rice price would be pegged at the level it was immediately after the July 1st Economic Management Reform Measure in 2002, 45 won, by the 7th it had risen to more than 80 won.
The authorities may not be too concerned about that at the moment though, since there are also signs that, along with the currency redenomination, the authorities are attempting to kick start state distribution once again. A number of moves to this effect have been reported.
During the last weekend when the currency exchange was well underway, the authorities apparently distributed food to agricultural areas. Post-harvest distribution for farmers is somewhat routine in North Korea, but even that has not been guaranteed in recent years. According to NKIS, food distribution to workers also resumed.
