Sino-NK

Encroaching Devastation: On Rice, Markets, and the Yuanization of North Korea

by Christopher Green

Christopher Green is Manager of International Affairs for Daily NK and writer of Destination Pyongyang, based in Seoul.

Propaganda is only useful to a certain extent. For one thing –as the people of North Korea have long been aware and as their brethren in the Ukraine and China also became aware long before them — it is not possible to eat propaganda.

Therefore, while Rodong Shinmun remains full of stories about things like: (a) how people braving the sub-zero conditions in Pyongyang to attend the memorial service for Kim Jong Il on December 28^th laid their outerwear on the tarmac in order to ensure that snow would not be allowed to gather in the path of the hearse; (b) how the “South Chosun” (e.g., South Korean) government will never again be dealt with owing to its anti-nationalist response to the DPRK’s call for the unfettered right of South Koreans to mourn at the wake of Kim Jong Il in Pyongyang; and (c) how imperative it is to study with diligence the contents of the Joint New Year’s Editorial[1] (and it really is full to the proverbial brim with exactly these things, though the whys of all three fall outside today’s remit), it is, nevertheless, the illogically high price of rice and other daily necessities that will be consuming the available thinking time of the average provincial North Korean going into 2012.

Given that this simple fact – the price of rice — has by far the greatest potential to cause unrest in modern North Korea, it is advisable for outsiders to prioritize the same. By all means, read Rodong Shinmun if able, but after that, time might be better spent thinking about this: how can it be that, in spite of all the verbiage, the state continues to deny the North Korean people rations, rice remains prohibitively expensive at cost 4,000-5,000 North Korean won per kilo, and the Chinese Yuan is trading for up to 1,000 North Korean won in some areas?

Can it really be the case that, in such an environment, nobody appears to be starving?

Data and Image courtesy Marcus Noland

Some analysts, fortunately, are already thinking about it. Here’s Joo Seong Ha of North Korea Real Talk;

The price of rice in North Korea is not cheap even compared to South Korea’s rice price. Unless it comes from an expensive brand, the price of rice in South Korea is under $2 per kilo. In other words, North Korean rice price is around half of South Korean rice price. Considering the huge disparity between the incomes of North and South Korea, the fact that North Koreans buy rice at this price is astonishing.

Joo believes that the risk exists that these prices portend famine. But whether or not he is correct, his concerns remain rooted more in the fact that he cannot assimilate the situation in any other way, given the evidence available, than in proof of encroaching devastation.

He continues:

 In the spring of 1995, in Pyongyang, I saw the rice price going from 50 won per kilo to 200 won per kilo in just two or three months. And then two or three months later, mass starvation deaths began to occur everywhere in North Korea, and the regime declared the March of Struggle. But it is the fall right now, when rice just finished getting harvested — and the price is already rising. I would rest a little easier if someone could explain to me that this is not a repeat of 1995.

Despite the lack of absolute proof, Mr. Joo’s worries seem on the prima facie evidence available to be valid: 4,000-5,000 North Korean won per kilo is not a sustainable price for people earning around 5,000 North Korean won per month, after all, and history does provide a fearful precedent indeed.

But, we would be wise to ask: is there an alternative explanation?

First and most obviously, a proportion of those people with access to the market do clearly earn well above the average national income. Even with rice and other necessities at more sensible (i.e. lower) prices, market traders with their wits about them can make money. As such, given that most enterprises and families do operate in the market to some degree, state wage levels are something of a red herring to begin with.

However, I actually wonder whether Mr. Joo and others are concerned about famine not because they are wrong about income levels, but because they are looking at the wrong signals. In other words, I wonder whether the Yuan has become so overwhelmingly ubiquitous that we can legitimately claim that North Korea has become the first ever ‘Yuanized’ state. Such a development would account for the fact that the price of rice denominated in North Korean Won is becoming entirely irrelevant on-the-ground because the buyers buy and the sellers sell in Chinese Yuan and, therefore, almost nobody is prepared to keep their savings in domestic currency.

Even if I were over-stating the Yuanization case here, it would still be true that while it may suit news outlets in South Korea and beyond to devote column inches to the skyrocketing price of rice in North Korea, if in fact relatively few people were actually operating in the local currency, then it would be irrelevant to the wider debate.

However, that would not be all that much cause for celebration, either, for the following reason: If the DPRK government keeps forcing people in those parts of the economy it still does control to operate on North Korean Won-denominated wages, with limited recourse to the market (meaning the military-industrial complex and parts of the military itself, primarily), then there may well be a great deal of hunger, and plausibly starvation, going forward. Similarly, problems could arise if there were severe regional differentials between currencies. That is to say, certain internal areas could be stuck using the North Korean Won while others held Yuan. While this concern is, by definition, difficult to verify it would come as no comfort whatsoever to the “vulnerable people who have no access to the market” in areas Yuanized or not, or those charged with providing aid to those and other destitute people.

For these reasons, even if we embrace the above hypothesis, we still have an obligation to keep a watchful eye on the rising cost of daily necessities and falling value of the North Korean Won.