Tuesday, December 13, 2011

The Slow Road to Yuanization

How can it be that the state is not giving the North Korean people distribution, rice costs 5,000 North Korean won per kilo, the Chinese Yuan is trading for up to 1,000 North Korean won in some markets, and yet nobody appears to be starving?

This, in essence, is the conundrum troubling North Korea watchers today.

Some are really concerned. Here's Joo Seong Ha of North Korea Real Talk (from Ask a Korean!);
The price of rice in North Korea is not cheap even compared to South Korea's rice price. Unless it comes from an expensive brand, the price of rice in South Korea is under $2 per kilo. In other words, North Korean rice price is around half of South Korean rice price. Considering the huge disparity between the incomes of North and South Korea, the fact that North Koreans buy rice at this price is astonishing.
Joo believes that there is at least the risk that these rapidly rising prices portend impending famine. But, whether or not he is correct, it is certainly noticeable that his concerns are rooted more in the fact that he cannot assimilate the situation in any other way given the evidence available to him than because he has actual evidence of encroaching devastation. He continues;
In the spring of 1995, in Pyongyang, I saw the rice price going from 50 won per kilo to 200 won per kilo in just two or three months. And then two or three months later, mass starvation deaths began to occur everywhere in North Korea, and the regime declared the March of Struggle. But it is the fall right now, when rice just finished getting harvested -- and the price is already rising. I would rest a little easier if someone could explain to me that this is not a repeat of 1995.
Admittedly, his worries seem on the prima facie evidence available to be valid. 5,000 North Korean won per kilo is not a sustainable price for people earning around 5,000 North Korean won per month, after all. 

So what's the deal? 

Obviously nobody is saying there is no hunger. There presumably is. Similarly, it is not that Mr. Joo is wrong. No; instead, I wonder whether he and many others are looking at the wrong signal. In other words, I wonder whether the Yuan has become so overwhelmingly ubiquitous that North Korea has become the first ever 'Yuanized' state, and that, as a result, the price of rice denominated in North Korean won is becoming irrelevant because the buyers buy and the sellers sell in Chinese Yuan, and almost nobody is prepared to keep their savings in domestic currency. 

Were that to be the case, while it may suit the media to devote column inches to the skyrocketing price of rice, if few people are actually paying in that currency, then it is irrelevant, isn't it?

However, that is not precisely cause for celebration either, for if the government keeps forcing those parts of the economy it still controls to operate on North Korean won then there may well be a great deal of hunger and possible starvation, just as Mr. Joo predicted. This fits well with the narrative of a degraded and hungry military that has been a feature of analysis for some time. Equally, it will come as no comfort whatsoever to the "vulnerable people who have no access to the market" or those charged with providing aid to those people, and equally the statement, "helping the completely helpless in a state with no social safety net nor obvious desire to help its own people is something that only aid can realistically do at this point," also appears doomed to remain true for the foreseeable future.

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