Bad Korea Moves

In the mid-1990s, North Korea became the only urban, literate society ever to suffer famine in peacetime: up to a million died. Like all famines in our age, it was politically determined. And there is an awful sense that history may soon repeat itself.

By the end of the cold war, North Korea had virtually eliminated money from its consumer economy; its people depended on food and goods distributed directly by the state. When that system fell apart, famine ensued. North Koreans had to learn to fend for themselves: markets sprang up. DPRK officials loathed them, as a variant of the "ideological and cultural infiltration" that had destroyed Soviet socialism.

Late in 2009, Pyongyang struck against this trend with a "currency reform". New won notes were issued for old on a 1-to-100 basis and less than £25-per-person trade-in was permitted. A week later, all old money was void. A crackdown on unofficial commerce with foreign currency followed--the government trying to rub out its "monetary overhang" and punish domestic marketeers.

Currency reforms can bring growth and price stabilisation. But the DPRK's variant led to the won's total collapse: food prices are even higher than before, and rising fast. The economy risks hyperinflation; the markets that forestalled famine are severely unsettled.

Very bad times seem in store for North Korea. Prospects for the international community are not rosy, either. The regime is gambling on a nuclear blackmail game on "disarmament" talks. We have seen how severe Pyongyang's miscalculations can be.

Nicholas Ebserstadt is the Henry Wendt Scholar in Political Economy at AEI.

Photo credit: yeowatzup/Flickr/Creative Commons

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Nicholas
Eberstadt

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.