Great Confiscation Updates: Current Trends Cannot Continue

The wire services continue to report that conditions just keep getting worse for North Koreans, but the latest dispatch from Good Friends adds extensive detail to the hyperinflation story, and how it’s affecting the ability of people to get food:

This is the sort of reporting that Good Friends typically does well. We’re used to seeing North Korea’s corn-eaters going hungry, but I always watch for signs that the elite, the military, and other rice-eaters are sharing in the misery:

Those who are immediately affected by the horrifying increase of rice price are the residents with dearth of food saved at home. Households without food have no other option than starving. Situations worsened for people with food as well. Households that used to eat white steamed rice and meat soup began to save food by eating “˜50:50 meal’ with half corn and half rice. People who used to eat “˜50:50 meal’ changed to steamed corn meal and those who had steamed corn meal changed to porridge. While making efforts to save food, they are anxiously awaiting the prices to be stabilized. Some express complaints about worsened life conditions saying, “What is the use of having money? There is no value of the currency, so it is like worthless paper.

The dispatch also reports that the military was also affected by decrees banning all foreign trade. Many military units in North Korea are in business, and foreign trade in food and consumer goods was big business for some officers. Under the new rules, however, that trade has ended, and only trading companies that bring in hard currency for the state itself are allowed to continue their activities.

Current trends suggest that the value of the new won will soon be worthless for any purpose but purchasing food at set prices from government stores. Even this is questionable, however, if even the official prices continue to float, and when there aren’t nearly enough goods in those stores to satisfy consumer demand.

It’s difficult to predict where this is going, in part because current trends almost never do continue. Famine is certainly a possibility, and I suspect that thousands whose livelihoods were destroyed will perish quietly, out of sight. But this isn’t 1994, and most of the North Koreans who are still alive today are resilient, resourceful survivors. A more likely outcome than large-scale famine is that people will survive the Great Confiscation by bartering at first — cigarettes are used as currency in prisons everywhere, after all — and eventually, by trading in Chinese yuan. At first, the regime will dispense harsh punishments for these “economic crimes;” but a few hundred or thousand deaths later, the diktats that demand tomorrow’s sacrifices will be mostly forgotten because no one will have the luxury of obedience.

Within the next year, the regime will face a stark choice among three options. The first option is to continue its anti-market policies without providing its people with an alternative means of survival, which will mean more popular discontent, the collapse of what control the state still has over the peoples’ economy, and ultimately, allowing another nation’s currency to become the peoples’ de facto medium of exchange. The second option is to find enough cash for commercial food purchases to supply government stores with food. This will be difficult to manage in an environment of international economic sanctions. It will require a substantial infusion of outside economic aid — most likely from China — or a reduction in the purchase of weapons and luxuries for Kim Jong Il and his inner party, which could spur discontent, cut-throat competition, and purges within the privileged classes. The third option is to abandon the Great Confiscation and hope that the people will be resourceful enough to restore the old system and go about their business. Any of those three options leads to the outcome of the state losing a substantial portion of its totalitarian control.

If the regime is still intact a year from now, my best guess is that the final outcome a year from now will look like 20% Option 1 and 80% Option 3. The state will be forced to abandon the Great Confiscation but will still shake down the largest traders for blackmail, the new won will be largely supplanted by the yuan for large transactions, and the people will still be miserable and mostly dependent on black markets. The state will also have to cut back on purchases of arms and luxuries and spend more on feeding and mollifying the elite, but this is more likely to be attributable to international sanctions than a discretionary shift in its priorities.