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North Korea: Witness to Transformation

Slave to the Blog: the Burden of Cool Edition

by | June 11th, 2013 | 07:00 am

You know how it is when you are the first to recognize a cool band and then everyone else jumps on the bandwagon? Pretty soon they’re dating models and going into rehab and appearing on cheesy TV shows and they aren’t cool anymore.  Here we review some recent stories–all dealing with finance–where we we were in on the ground floor.

Foreign Currency Offerings: Steph Haggard passed along this piece from New Focus International suggesting that one effect of sanctions has been to intensify the practice of selling positions in the Korean Workers Party–and possibly the state apparatus–for donations. We flagged a DailyNK article on this practice a couple of years ago, but the New Focus International piece suggests that this practice has become more systematic: “Based on the guidelines issued by the NDC, those who make offerings of US$1000 or more will be rewarded with a Rank 3 national decoration. Offerings of US$10,000 or more will guarantee the donor direct entry into the Workers’ Party, bypassing the customary probation period, as well as a ‘Letter of Appreciation’ from Kim Jong Un. Those who offer up more than US$100,000 will receive a Medal for Efforts. They will also receive either an extension to their right to work abroad, or a guaranteed re-issue of their right to leave North Korea for business purposes.” Here in America we call this “bundling.” Ambassadorship, anyone?

Economic Crimes: Human Rights Watch sent me an email with the subject line “HRW: North Korea: Pyongyang Cracks Down on Economic ‘Crimes’.” Welcome aboard! Not sure there is actually anything new in the HRW report, but it serves a useful purpose if it directs attention to the issue.  Our earlier and more substantive work was published in Political Science Quarterly and can also be obtained in working paper form. We argue that the expansion in the number of economic crimes aids the security apparatus in extracting bribes. If everything is illegal, shakedowns are easier.

Choco Pies: Steph also passed along another piece from New Focus International which claims that everyone has misunderstood the Choco Pie phenomenon. If anyone regards Choco Pies as emblematic of South Korean goods flooding into North Korean markets, as the straw-man set up in the piece does, they are indeed misguided. South Korean goods are not flooding the market; cheaper Chinese goods are.  But the significance of Choco Pies is not as a consumer good flooding the market, but rather as an alternative currency that developed at the Kaesong Industrial Complex. North Korean rules and South Korean collusion prevents labor markets from functioning and workers being paid a market-clearing wage. The result: workers get paid bonuses in Choco Pies, which then circulate. Forget the dietary implications; the Choco Pie-won exchange rate would be a great leading indicator.

True Story: One night with some friends in a bar in Baltimore, I started checking out this skinny dirty blonde in black jeans standing a few feet away drinking a bottle of beer and eating Chinese carry-out.  Before I could ditch my roommate and say anything she killed the beer…and climbed up on stage.