Thursday, December 3, 2009

A Crackdown on Individual Business to Save Kim’s Regime

To regain the social stability and stop losing support from most of his roots, Kim Jong-il launched a monetary reform on Dec. 1, 2009 aiming at curbing inflation and smothering growing free markets. This campaign marks North Korean attempt on the marketing economy since mid of 2002 has gone to the dead end.

According to news from South Korea, North Korea has sharply revalued its currency by replacing the old banknotes with new ones beginning from Dec. 1, 2009. The exchange period will be 6 days from Dec. 1 to 6. The exchange rate for the new currency is 100 to 1, for example, with old-denomination 1,000 won notes being replaced by new 10 won notes. The authorities initially limited the total sum that an individual can exchange to 100,000 won. Under widespread protests, the limit was raised later to 150,000 Won in cash and 300,000 that in bank savings.

Since July 2002, North Korea issued a series of opening and reform measures that allow individuals of Pyongyang to freely sell goods in free markets. After seven years, the free market policy caused high inflation and serious disparity between the rich and the poor. The individuals selling in the free markets had accumulated money for themselves, but the personnel of state-owned enterprises and government had confronted extreme difficulties in their lives due to the high inflation caused by the free markets and relatively low and fixed salaries.

In Pyongyang, a worker can only earn about 3000 to 4000 won per month. 3000 won could only purchase two kilograms of rice there. Due to low salaries, many government workers had to take briberies from businesspersons in free markets for a better life. These years, most of people’s living standards were declining sharply except for these newly rich individual businesspersons and bribery-taken bureaucrats. People’s anger and un-satisfaction to Kim’s regime have been accumulated to a historic level high.

With under-table money, many individual businesses even controlled corrupted government workers who managed the markets. To get more benefits from individual businesses, many officials tricked or ignored Kim’s orders from central government. In January of 2009, Kim Jong-il posted notices throughout, announcing the goods to be traded in free markets had to be limited to individual produced agricultural products, meat (except beef), and clothes. The other goods were only allowed to sell in state-owned stores; however, the measure resulted in failure, due to lacking of powerful monitoring from the lower-level government.

Under this situation, Kim felt that he was losing the support from most of his people including his roots, the ruling party members, except these newly rich individuals in free markets, who only account for a very small part of the population in his country.

To ease the social crisis and regain the support from most of his people, he launched this sudden attack, a revolution to capitalism, on the newly rich traders and corrupted officials. By putting the exchange limit under 300,000 won per person, he thoroughly nullified these people’s treasures, which they had accumulated in the past seven years legally or illegally.

This event tells us an autocratic regime is not compatible with free markets and free competitions, which are the stimulations of the social development. Kim’s regime has been stuck into an unprecedented social crisis.

According to recalls from some people who have been to Pyongyang these years, the examples of individual free trades there were like follows,

Every weekend, in a market place called ‘unification market’, there were more than 1000 individual traders surrounded by thousands of customers there. Individual business stalls inside the market were packed with commodities such as snack food, electronics, imported wine, local apples, peaches, imported pineapples, cloth, clothes from China, Singapore beer, and Thai detergents, as well as China-made watches, electric shavers, television sets, and dishwashers, etc. Business there always was very booming.

Self-employed individuals also appeared on the streets. For example, people could see aged vendors selling farm produces packed at the back of bicycles, aged cobblers squatting on the roadside repairing people’s shoes. Some makeshift stalls were set up on roadside pavements to sell beverage drinks, cigarettes, and sweets for vendors.

All these individual businesses and vendors could decide the prices of their own goods. But they needed to pay rents to market management offices for renting stalls in the market places and that on the roadside pavements. People believe, after the storm of monetary reform on Dec. 1, 2009, this kind of free trades may not be seen any more in Pyongyang.