Posted by: Ihlwan Moon on December 7, 2009
Despite reports of an outburst of anger over North Korea’s stunning redenomination of its currency last week, ordinary citizens in the communist country are not so severely affected by the move, according to a prominent defector from Pyongyang. Aimed directly at curbing the unofficial economy, North Korea on Nov. 30 began circulating new notes that lop off two zeros from the nominal value of the North Korean won. Cho Myungchul, a former professor on economics at Pyongyang’s Kim Il Sung University, told a seminar in Seoul today that North Korean leader Kim Jong Il’s regime is likely to win support from the vast majority of North Koreans for its crackdown on corruption and abuses by rich traders who benefitted the most from bustling activity in black markets.
Cho, who defected to South Korea in 1994 and now monitors Pyongyang’s policies in a state-funded think tank in Seoul, says the redenomination was a carefully calculated political move by Kim and his supporters who want to make sure the North Korean leader’s youngest son, Kim Jong Un, is successfully groomed as his successor. “This is a political maneuvering killing far less than 20% of the population to win support from more than 80%” who have not seen any improvement in their life despite burgeoning market activities. “This is a ploy to blame the market for the government’s failure to boost the economy.”
Although North Korea set a ceiling for the amount of old notes its citizens can exchange into new ones, most households don’t have enough cash kept at their homes to be affected. Those who have earned a lot of money and stashed cash under the mattresses or in the closets beyond the reported ceiling of 150,000 won in old notes are members of the new class of rich who have increasingly grown beyond the control of the Stalinist regime. Cho argues that the main purpose of the redenomination is to undermine the rich and redirect funds into state development projects.
Cho notes that in the previous redenomination of its currency in 1992, North Korea set a limit of 399 won for the amount people could exchange. That was less than six times the then-average wage of North Korean workers. “The latest ceiling is some 50 times the average wage of 3,000 won in the North and most households can’t afford to have that much money at home,” Cho added. Sure there might be an increase in the number of defectors fleeing North Korea among the rich, but for the repressive regime that places highest policy priority on its political security, that may be an acceptable loss of face.