Abstract
North Korea has been, and arguable still is, an extreme case of a state socialist system. Due to ideological and economic reasons, by the late 1980s, the country had been largely de-monetised in the sense that money existed but was unable to fulfil its basic functions. A massive economic shock resulting from the collapse of the global socialist system after 1990 contributed to a re-monetisation including a reform of the domestic currency from the mid-1990s. Individuals have reacted in a predictable way, thus weakening the power of the state. Currently, North Korea is, in some aspects, more monetised than, for example, East Germany was in 1989, thanks to the de facto existence of parallel currencies. This chapter analyses the process of re-monetisation, its impact on society, and the state’s efforts to curb these effects, which we are only beginning to comprehend fully.
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Notes
- 1.
The Japanese authorities initially discouraged investment in particular areas such as industry, and promoted investment in agriculture. After a brief period of moderate liberalism, the beginning of the World War 2 in East Asia marked a transition to a military economy with strategic investments in heavy and chemical industry. The participation of Koreans was possible, but limited to collaborators. See D. McNamara (1990).
- 2.
For a glimpse on the life of North Koreans in the early years after 1945, see S. Kim (2013).
- 3.
An excellent study of the mechanisms of business-to-business relations in North Korea, based upon a thorough analysis of North Korean publications such as Kŭlloja or Kyŏngje Yŏn’gu can be found in P.H. Park (2016, p. 115).
- 4.
Marx argued that economic development takes place in stages and according to objective laws. There is no room for shortcuts in this way of thinking. A society first had to go through a full capitalist stage before it could move on. This simple rule has been ignored or bent massively by the leaders of states that had hardly moved beyond feudalism, not to speak of capitalism, but nevertheless wanted to use the brand image of “Marxism” for ideological and legitimacy purposes.
- 5.
The official term was “woehwawa pakkun ton” (foreign exchange money).
- 6.
It should be noted that other socialist countries including Cuba and East Germany had used foreign exchange certificates. In China , these certificates were abolished only in 1994.
- 7.
For more detail on the Zainichi, see C. S. Lee and G. De Vos (1981). The pro-North Korean part of this group is organised in the Chōsen Sōren (ch’ongryŏn).
- 8.
Despite German unification that had taken place a year before, the GDR (East German) passport was still valid for another five years. This was a technical regulation to avoid the need to convert over ten million East German passports into new documents immediately.
- 9.
In a long conversation with a North Korean (anonymity of this source is kept for safety reasons) in 1992, I was, for example, told about some young women using their physical attractiveness to obtain Party membership. Men often “volunteered” to serve in the military for up to one decade in order to get Party membership after deobilisation. Smaller favours could be bought with a bottle of liquor.
- 10.
The Council for Mutual Economic Assistance (COMECON) was a formal organisation to co-ordinate the economic activities of the Soviet Union’s socialist satellite states. The basic idea was the same as for every domestic socialist economy: the conviction that competition through parallel production facilities was a waste of resources, and that economic efficiency could be maximised through a centrally organised division of labour. See Springer Gabler Verlag (2016).
- 11.
The role of Japanese currency can be explained by the close economic relationship between North Korea and the pro-North Korean group of Zainichi Koreans in Japan who regularly sent money to relatives. In fact, trade relations were brisk; at the time of my studies in North Korea, most products in the hard currency stores were obviously imported from Japan including Coca Cola, shoes, stationery, etc.
- 12.
They function as a pre-paid card. They can be charged with cash and then used with a password at designated shops, even taxis. The most popular cash card in North Korea is the red-blue “Narae Card”, issued by the Foreign Trade Bank.
- 13.
In fact, I had initially used “socialist neoconservatism”, but this led to confusion among American colleagues who had a very specific understanding of the term “neocon”. See Frank (2010a).
- 14.
I once asked a North Korean friend what she does with her monthly salary. She replied that she takes it home, in cash, and keeps it there. When I explained that, in my country, wages would typically be transferred to a bank, she gazed at me in bewilderment, and, over the next days, kept asking about the reasons why we considered the use of a bank to be a good idea.
- 15.
During a closed door meeting with North Korea’s Vice Minister of Foreign Affairs in Brussels, the participants including myself were informed as early as 14 October 2002, that North Korea would stop using the US Dollar and introduce the Euro as its official currency for hard currency operations. This measure was officially implemented on January 2003. In reality, however, the US Dollar did not disappear from North Korea, and the Chinese Yuan became stronger.
- 16.
Foreign Trade Bank of the DPRK (2010) Document No. DC03310-004. 29 January 2010.
- 17.
This is a view that I emphatically do not share. The Party and the military are both instruments of power, and are closely interconnected; each high-ranking officer is also a Party member. Dividing lines in North Korea’s élite certainly exist. However, they run between families and regions, not between (but inside of) institutions.
- 18.
We are indeed talking about millions. If each of the 50,000 Kaesong workers received only two Choco Pies per day, this would amount to about 35 million such snacks annually.
- 19.
Among those that I have personally seen are the Golden Triangle Bank in Rasŏn and the Kwangbok Area Supermarket in Pyongyang.
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Frank, R. (2017). De-monetisation, Re-monetisation, and Parallel Currencies in North Korea. In: Rövekamp, F., Bälz, M., Hilpert, H. (eds) Cash in East Asia. Financial and Monetary Policy Studies, vol 44. Springer, Cham. https://doi.org/10.1007/978-3-319-59846-8_4
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