Money in Socialist Economies: The Case of North Korea

March 1, 2010 4:44 PM

Money in Socialist Economies: The Case of North Korea by Dr. Rüdiger Frank

Dated January 29, 2010, the Foreign Trade Bank of the DPRK (North Korea) issued document No. DC033 10-004 to diplomatic missions and international organizations present in North Korea. They were informed that the use of foreign currency was to be stopped, payments were to be made in the form of non-cash cheques, and that the official exchange rate of the Euro to the North Korean Won was changed from 188.2 KPW to 140 KPW, effective January 2, 2010.

posted by Tlery (27 comments total)

From the Nation of Racist Dwarfs. OK, I'm off to RTFA now.
posted by gwint at 5:06 PM on March 1, 2010 [2 favorites]

As an archaeology major, the section regarding North Korea's currency struck an immediate chord with me. It reminded me of nothing so much as Egyptologists poring over stelae and tomb reliefs from the time of Amunhotep III and Akhenaten, trying to determine from the position of certain royal figures whether Amunhotep or Queen Tiye or Nefertiti was really the driving force behind the new regime.

Can it be that we know so little about North Korea that we are reduced to doing this with bills printed in or around 2008? Or is it just this guy?
posted by Countess Elena at 5:12 PM on March 1, 2010

from gwint's link:

Americans are caricatured as hook-nosed monsters

Awesome.

The United States and its partners make up in aid for the huge shortfall in North Korea's food production, but there is not a hint of acknowledgement of this by the authorities, who tell their captive subjects that the bags of grain stenciled with the Stars and Stripes are tribute paid by a frightened America to the Dear Leader.

Not so awesome.
posted by zinfandel at 5:16 PM on March 1, 2010

North Korea is socialist?
posted by DU at 5:19 PM on March 1, 2010

In the same sense that the US is democratic.
posted by jtron at 5:35 PM on March 1, 2010 [3 favorites]

OH BUUUUUUUUUUURN
posted by jtron at 5:35 PM on March 1, 2010 [3 favorites]

North Korea is socialist?

How they use the term? Yes. But no one else on earth uses that term to mean that.

On the other side of things, they do have socialist traits in their economy, so I suppose it's semi-legit.
posted by Lord Chancellor at 5:49 PM on March 1, 2010

jtron, dude, you're doin' it wrong.
posted by KGMoney at 6:20 PM on March 1, 2010

To understand the possible motives and effects of the above-said measures, it is helpful to briefly remember what money is actually good for. People living in market economies, no matter how regulated or liberal these are, usually take it for granted that money serves as a means to store value, as a medium of payment and exchange, or as an accounting unit.

And here I thought money was a mechanism to make bankers rich at the expense of the working man. Silly me. A means to store value. Like Enron stock certificates.
posted by three blind mice at 6:33 PM on March 1, 2010

To paraphrase Terry Pratchett, a dollar is a promise by the government to grant you one dollar's worth of gold, so long as you promise not to actually turn up and ask for it.
posted by Countess Elena at 6:44 PM on March 1, 2010 [1 favorite]

Bankers basically profit by skimming small percentages of money as it changes hands, but they only reason they're allowed to do that — the only reason "banker" exists as a profession at all, heck the only reason banks exist at all — is because money is useful to non-bankers.

If you don't believe this, reflect on trying to make the global economy work on a purely barter mechanism. And then imagine how long it would take for money to be reinvented, in the form of something like goldsmiths notes or grain certificates, and then realize that in the process you just reinvented an antediluvian species of banker as well.

If paper money wasn't a generally useful thing to have around (if, say, we all had Bags of Holding into which we could put sacks of flour and bushels of wheat and barrels of oil and carry them easily around) then there would be no need for transactional credit and much of the reason for banks wouldn't exist. (You might still have investment brokerages which allow people with a surplus of wealth, in excess of what they know how or want to spend at the moment, to loan it to someone who has an idea that requires more resources than they have at their personal command. Such services could still exist in a Bag-of-Holding-based economy, I suppose.)
posted by Kadin2048 at 7:03 PM on March 1, 2010 [2 favorites]

The United States and its partners make up in aid for the huge shortfall in North Korea's food production, but there is not a hint of acknowledgement of this by the authorities, who tell their captive subjects that the bags of grain stenciled with the Stars and Stripes are tribute paid by a frightened America to the Dear Leader.

More specifically, they like to claim that the US provides them with massive amounts of rice in exchange for access to their nuclear sites.

It seems like there's been a spat of DPRK posts on the blue lately, and for anyone who's more than a little interested, I can't recommend Nothing to Envy enough. It's an outstanding portrait of what a mindfuck of a country the place really is. The Cleanest Race (you may remember this post) is pretty interesting as well, but suffers from a fairly bad case of academia-itis, and is extremely narrowly focused on propaganda, to the exclusion of first-person narratives. It does have a lot of really interesting information, though, and is worth reading if you can get your hands on it.
posted by god hates math at 7:04 PM on March 1, 2010 [3 favorites]

A few days ago I posted about North Korea (part of it was a double so it got tanked) but someone posted an excellent link in the comments.

"A Year in Pyongyang" is a full-length novel/travelogue/commentary on North Korean society. I'm on chapter 6 and it's extremely interesting so far.
posted by Taft at 7:24 PM on March 1, 2010 [4 favorites]

Bankers basically profit by skimming small percentages of money as it changes hands, but they only reason they're allowed to do that — the only reason "banker" exists as a profession at all, heck the only reason banks exist at all — is because money is useful to non-bankers.

Yes, but when skimming becomes dipping becomes gouging becomes a trillion dollar ransom note handed to the taxpayer, it becomes difficult to see banks and bankers as noble actors.

It seems like there's been a spat of DPRK posts on the blue lately,

Indeed. I thought it was irony. Those Olympics seemed like they went on forever.
posted by three blind mice at 7:42 PM on March 1, 2010 [1 favorite]

From the article: Communist theory posits that the storage of value, the exchange of goods and services, and accounting will no longer be necessary. Superabundance of everything makes the issue of dealing with scarcity – which is what economics is all about – obsolete. Hence, under communism, there is no need for money or other forms of private property.

No it doesn't. The point about abundance in earlier communist theoretical writings, particularly those of Marx, was the recognition that the new industrial technologies and techniques created the possibility of abundance, which only further highlighted the iniquities of societies were so many were in want when it was now possible to end that want - the notion that scarcity was no longer because of absolute natural limits ("the struggle for existence") but because of the particular way wealth and the outputs of social production were distributed. It was also part of a polemic with Malthus and his followers. As usual with Marx, he was engaging in a critique of the prevailing political economy, not offering a detailed plan for a post-capitalist society. For example:

At a certain stage, therefore, human production reaches a level where not only essential necessities but also luxuries are produced, even if, for the time being, they are only produced for a minority. Hence the struggle for existence – if we allow this category as valid here for a moment – transforms itself into a struggle for enjoyments, a struggle no longer for the mere means of existence but for the means of development, socially produced means of development, and at this stage the categories of the animal kingdom are no longer applicable. But if, as has now come about, production in its capitalist form produces a far greater abundance of the means of existence and development than capitalist society can consume, because capitalist society keeps the great mass of the real producers artificially removed from the means of existence and development; if this society is forced, by the law of its own existence, continually to increase production already too great for it, and, therefore, periodically every ten years, reaches a point where it itself destroys a mass not only of products but of productive forces, what sense is there still left in the talk about the “struggle for existence?” The struggle for existence can then only consist in the producing class taking away the control of production and distribution from the class hitherto entrusted with it but now no longer capable of it; that, however, is the Socialist revolution.

There are all sorts of criticisms to be made of Marx's theory, but they shouldn't be so crude as to imagine that he based his belief in the possibility of communism on some Big Rock Candy Mountain vision of everything on tap.
posted by Abiezer at 9:32 PM on March 1, 2010 [6 favorites]

Theoretical quibbles aside it's a very interesting article though! Thanks for the link - I find Japan Focus to be a consistently good read ever time I see a link to it but for some reason I hadn't got round to bookmarking it (until now).
posted by Abiezer at 9:36 PM on March 1, 2010

The United States and its partners make up in aid for the huge shortfall in North Korea's food production, but there is not a hint of acknowledgement of this by the authorities, who tell their captive subjects that the bags of grain stenciled with the Stars and Stripes are tribute paid by a frightened America to the Dear Leader.

This is actually true.
posted by mobunited at 1:09 AM on March 2, 2010

A recent visitor to Pyongyang confirmed in a talk with the author that individuals are subject to a cumbersome process if they wish to purchase anything. Rather than using a standard hard currency or exchanging it into the new Won, they now have to obtain a receipt stating the price of the good they want to buy, then present this at a desk where they exchange their money into exactly the needed amount of North Korean money, and finally return to the shop assistant, hand over the exact amount, and receive the product.

Bit like the process you had to go through in Foyles bookshop in London until about five years ago then...
posted by kerplunk at 4:57 AM on March 2, 2010 [1 favorite]

So wait, they just told every other country that the Euro was suddenly worth 25.6% less?
You can do that?
posted by Theta States at 7:06 AM on March 2, 2010

Rather than using a standard hard currency or exchanging it into the new Won, they now have to obtain a receipt stating the price of the good they want to buy, then present this at a desk where they exchange their money into exactly the needed amount of North Korean money, and finally return to the shop assistant, hand over the exact amount, and receive the product.

They used to have a process rather similar to this for purchasing things in the former East Germany. I can't remember the exact details any more but I know it involved standing in several lines in a similar way, getting various receipts and carrying them here or there. Purchasing a small item could be a fairly lengthy process.
posted by flug at 8:02 AM on March 2, 2010

So wait, they just told every other country that the Euro was suddenly worth 25.6% less? You can do that?

They enforce fixed exchange rates in their favour when you go there. There is a black market rate that is closer to the true valuation, but is it worth the risk if you're already in a totalitarian country?

Recently they revalued their currency (well issued new currency at a fixed exchange to the old and limited the amount that could be exchanged) in order to wipe out savings when markets were forming as people formed capital.
posted by hylaride at 8:25 AM on March 2, 2010

Recently they revalued their currency (well issued new currency at a fixed exchange to the old and limited the amount that could be exchanged) in order to wipe out savings when markets were forming as people formed capital.

Oh that's such a dick move!
posted by Theta States at 11:35 AM on March 2, 2010

Yes, but when skimming becomes dipping becomes gouging becomes a trillion dollar ransom note handed to the taxpayer, it becomes difficult to see banks and bankers as noble actors.

Noble != useful and necessary. I know banks have been harshing everybody's buzz lately but this sort of 'BANKING SUCKS' critique is an emotion-driven end run around logic, despite the fact that someone dredges it up in every single thread that's even tangentially about banking and gets favorited for doing so.
posted by zvs at 12:22 PM on March 2, 2010

"A Year in Pyongyang" is a full-length novel/travelogue/commentary on North Korean society. I'm on chapter 6 and it's extremely interesting so far.

Thanks for that link. It is interesting and well-written, but the author's reasoning powers, well... I get the impression he could tour the antebellum South and come out 50/50 on slavery because gosh the slaves he saw seem to smile and sing a lot.
posted by fleacircus at 7:41 PM on March 2, 2010

Oh that's such a dick move!

Yes. Far preferable that capitalists lose trillion$ on bad speculative bets, then charge the taxpayer for their losses. Much more democratic.
posted by telstar at 10:19 PM on March 2, 2010

Yes. Far preferable that capitalists lose trillion$ on bad speculative bets, then charge the taxpayer for their losses. Much more democratic.

The problem is that we gave them the money, not capitalism itself. Capitalism is supposed to function as a profit and loss system. If you remove either, it either stops anything from happening or becomes crony capitalism. When bad companies put themselves at risk, they're supposed to die so that better run companies can take their place. This is why bailouts are bad.
posted by hylaride at 11:12 AM on March 3, 2010

So many dick moves...
posted by Theta States at 11:40 AM on March 3, 2010