19 March 2010

Shooting the finance guys

Last November, North Korea revalued its currency, the won, apparently to reduce the financial influence of the country's growing merchant class and reassert state control over the economy. North Koreans were obliged to exchange old notes for new ones at a rate of 100 to one. Confusion about the policy led to hoarding, in turn driving prices up and the new currency plummeted in value. People found it increasingly difficult to buy food and fears arose that the famines of the 1990s were about to return. A cap on the amount that could be changed reduced some people's savings to piles of worthless notes. Social unrest grew, highly unusual in that rigid dictatorship. In short, the reform was a disaster.

Remarkably, the prime minister apologized for "causing pain among the people" and promised to improve the food supply. But this wasn't enough. The reform had not only caused economic chaos, it had undermined Dear Leader Kim Jong-il's plans to transfer power to his son, Kim Jong-un. A scapegoat had to be found, and the obvious choice was the regime's financial chief, Pak Nam-gi. Last week they shot the poor bastard.

Putting a finance minister in front of a firing squad seems a rather over the top response to failed economic policy. Although when one looks at the results of American administrations deregulating their banks, one's trigger finger does itch a bit. And if we could line the bankers up along the wall with them .... well.

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