The Sino-North Korean border economy: money and power relations in North Korea.
Yet only one subsequent report suggested that any such deaths did occur, in spite of the fact that rice denominated in KPW appeared to be out of reach of ordinary citizens. Moreover, upon expert consideration, these deaths in Hwanghae province, unverified but plausible, were attributed to abnormally high levels of state appropriation of food stocks for transfer to Pyongyang (so-called gunnyang mi, or military rice) from regions surrounding the metropolitan area (Kim 2012). At the time, thousands of soldiers of the Korean People's Army (KPA) were living in khaki military tents on the banks of the Taedong River and elsewhere in the capital city, a fact verified with my own eyes in April 2012. These conscripted men, all of whom had to be fed if they were to make an active economic contribution, were working on construction projects whose completion was scheduled to coincide with the 100th anniversary of the birth of Kim Il-sung on April 15 that year. In other words, the deaths in nearby Hwanghae province began to look like a localized anomaly.
This overall absence of preventable deaths at a time of relative economic hardship indicates the scale of change in contemporary North Korean economic life over the past three decades. In the current era, food security is predicated not on state distribution of foodstuffs and daily necessities but on market exchanges (Smith 2015; Tudor and Pearson 2015). Within this context, one of the major contributors to rising food security--in particular since late 2009--has been the growth in foreign currency possession and use by ordinary citizens. While not the sole guarantor of food security for ordinary citizens, foreign currency holdings offer a hedge against exogenous shocks and thus play a vital role in the contemporary market economic system.
I look in detail at this phenomenon in the DPRK, beginning in the 1980s, and mainly examine the implications for general economic stability. I focus not on the US dollar (USD) much beloved of elites in Pyongyang but on the steady uptake of Chinese renminbi (RMB), particularly along the river border that the DPRK shares with China--the geographical basis of this special issue. I ask three questions: What initiated the growth in hard-currency possession and use in the cross-border economy between the DPRK and China? Does this trend stem from general conditions or from specific events in the DPRK's economic history? What can the border economy, specifically in the Tumen River basin, teach us about the contemporary resilience of the DPRK economy and state-society relations?
Armed with testimony from structured interviews conducted in 2014 with a group of former DPRK citizens now based in the Republic of Korea (South Korea), I seek to position the growth in foreign currency usage within the history of recent DPRK marketization, linking it to economic shocks in 1992, 2002, and 2009. I also consider the threats and opportunities presented by the rising tide of foreign currency possession and use.
The Price of Rice--and Corn
Generally speaking, the price of rice can be used as a proxy for overall price inflation in the DPRK; rice prices are also tracked (at a discount of approximately 50 percent) by the price of corn. Inflation in the price of both grains--which together constitute the staple diet of the North Korean population--is governed by four interdependent and mutually constitutive factors. One is the scale and success of domestic grain harvests. Another is the volume and reliability of public distribution of rations by the state. Third is what I term "border regime dynamics," a category that includes both crackdowns on specific criminal activities along the border and regular and irregular border closures, which take place in preparation for and during political events. For example, the death of Kim Jong-il in 2011 resulted in 100 days of mourning and concomitant restrictive conditions on legal border crossing, impeding trade flows.
The fourth category is exchange rates. Exchange rates, specifically both RMB and USD exchange rates to the KPW, directly impact the capacity of agricultural producers to import farming inputs. Among these inputs is nitrogen fertilizer, a productive capacity that the DPRK chronically lacks. Also affected are trading companies linked (formally and informally) to state entities that import foodstuffs during lean periods and/or after poor harvest yields.
Naturally, holding assets in goods or hard currency reduces the risk posed by KPW-denominated rice price inflation and shifting exchange rates. This is increasingly common in the DPRK, in particular in the Tumen River borderland economy, where there is a body of evidence of widespread and growing foreign currency usage and possession by individuals in most areas of economic life. (1) For instance, in early 2013 the Seoul-based news website Daily NK released a video that highlighted this trend. Taken in February that year, the footage shows both official markets and unofficial alley markets in and around the border city of Hyesan in Ryanggang province. The film showed that a majority of the products on sale in these markets were priced not in KPW but in RMB, and that most customers were paying directly in RMB (Daily NK 2013; Green 2012; Ruwitch and Park 2013).
The 2013 film and similar productions, including a special edition of the program Panorama shown by South Korean state broadcaster KBS on Valentine's Day 2014, illustrate the scale of the phenomenon in the China-DPRK borderland (KBS 2014). Indeed, in a private interview with the former citizen of the DPRK who made the Daily NK film, he estimated that 90 percent of people in the city were using foreign currency, overwhelmingly RMB, for their transactions at the time of his visit. As there are practical limitations on the use of foreign currency in market exchanges, the accuracy of this claim may be doubted. There are too few low-denomination foreign currency banknotes and limited supplies of coins in North Korea; and in any case, use of hard currency is illegal, a prohibition that is periodically enforced. Nevertheless, these doubts do not detract from the trend toward hard currency usage that such videos highlight. Even where trade is conducted in local currency, this is accomplished by exchanging hard currency holdings for KPW prior to use via a network of commercial moneychangers who operate in or near marketplaces. Simultaneously, value is stored for periods longer than twenty-four hours in hard currency, and larger transactions are also conducted in RMB or other foreign currencies (KBS 2014; Lee and Green 2014).
There is nothing unique about the DPRK in this respect. Use of foreign currencies for asset storage and exchange in border regions is widespread. Travel to Namphalong, a market town in Myanmar just across the country's border with India, where Indian rupees are as welcome as the local Burmese currency (Mallet 2015). Ethiopian traders store their assets in stock or currency too, apparently to mitigate the threat posed by inflation in an era of rapid economic expansion under authoritarian rule (Manson 2015).
The point of interest and contention here, therefore, is not whether people in the DPRK, originally in the border economy but with increasing frequency elsewhere, are using foreign currency in the course of their market exchanges and as an asset storage mechanism. Clearly they are, and given evidence of similar trends elsewhere, this can be regarded as quite predictable. Our interest is in causation.
Market History Reevaluated
Once upon a time in the DPRK, access to and possession of foreign currency of any type was a privilege and status symbol afforded only to the top echelon of the population. Generally based in Pyongyang, this meant persons who were connected to the state via robust political networks in a country whose socialist economy functioned on what Karl Polyani would doubtless have described as "other principles of economic behavior" (Polyani 1944, 58). Foreign currency was a tool by which men, for it was almost always men, conspicuously demonstrated their wealth and thus status in society. The US dollar was--and indeed remains--the currency of choice for such capital-city highflyers.
National economic circumstances changed in the 1980s and 1990s, and with gathering speed in the 2000s. To summarize what has been written extensively elsewhere (most recently in English in Smith 2015 and Tudor and Pearson 2015), piecemeal economic liberalization in the 1980s led to modest economic growth, marginal incentive improvements within enterprises, rising production outside the state plan, and thus growth in private holdings of cash. Exogenous shocks in the late 1980s and early 1990s then caused continuous negative economic growth over almost a decade (reaching its nadir in 1992 at an estimated -7.6 percent), inciting the rise of famine coping mechanisms rooted in barter trade, with Chinese traders and in domestic settings, that developed into market exchanges (Kim and Kim 2013; Rhee, Jung, and Rha 2008). In the process, foreign currency began to transform into a tool of the general population (Choi and Koo 2003; Park 2009). Much of the externally recorded foreign currency use and possession in the DPRK takes place in the borderland between the DPRK and China, where many of the deaths in the famine era (1995-1998) also occurred. Some observers have branded this development yuanization (Green 2012; Ruwitch and Park 2013).
Yuanization, defined as the use of non-KPW currency for trade and asset storage within the sovereign borders of the DPRK, unlike the elites' ostentatious USD displays, is an integral element of the market development process that has been under way in the DPRK for more than two decades. It is an outcome of a protracted conflict between the center, comprising Pyongyang and the elite ruling class, with its autarkical desire for sovereign control of North Korean political and economic terrain, and the borderland, the political center of the Kim family dynasty. But the borderland, when viewed from the center, is a region on the country's economic margins.
North Korea's Decline
The Soviet Collapse and Other Explanations
How North Korea's prolonged economic decline came about cannot be reduced to a monocausal explanation. Variously it has been put down to one or a combination of reasons, starting with the demise of the Soviet Union, whose diverse aid and assistance had allowed the DPRK to maintain the illusion of juche autarky for so long (Park 2011). Other factors sometimes adduced are the nationwide panic incited by the death of Kim Il-sung on July 8, 1994 (Jeong 2011), and the ruinously expensive World Festival of Youth and Students held in Pyongyang in the summer of 1989 (ASIA-PRESS International 2010). Whatever the cause, the decline was felt most starkly in the rapid deterioration of the Public Distribution System, or PDS, the DPRK's state system of rationing (Haggard and Noland 2011).
Sources from the first generation of the DPRK ruling elite allege that Kim Jong-il knew that the country's command economic model was in decline as early as the mid-1970s. In his memoir, former Korean Workers' Party (KWP) international secretary Hwang Jang-yop (1998, 276) recalls that at that time, "I didn't have all that much interest in statistics, but it was impossible not to notice that the North Korean economy was constantly recording minus figures." Hwang further notes that after 1986 the situation began to take a desperate turn. Kae Myung-bin, a North Korean economic official--not a defector--supports Hwang's view. Japanese journalist Ishimaru Jiro interviewed Kae in May 2006. Kae stated that the "'March of Tribulation' had its origin in many local areas from 1987." (2)
It was not, however, the general drift into decline witnessed by Hwang in the 1970s and Kae in the 1980s that pushed DPRK citizens to begin holding their assets in hard currency, any more than it was solely the demise of the PDS, the disintegration of the Soviet Union, or any other causes usually mentioned.
Explanations from Interviews
I undertook a set of structured interviews in order to disaggregate and pinpoint the forces that were dominant in prompting the spread of foreign currency usage and possession among ordinary citizens in the DPRK during and after the 1980s. The group of interviewees consisted of ten individuals representing different age cohorts and dates of departure from North Korea. Six came from border cities along the Tumen River, two from Pyongyang (later exiled to the same borderland economic region), and two from inland provincial cities whose testimony is included with reference to the border economy. Three people were in their twenties, five in their thirties, and two in their fifties at the time of the interviews.
Each respondent is indicated hereafter by a combination of a single letter and a number: respondents A1-A3 left the DPRK between 1998 and 2003, B1-B4 departed between 2004 and 2009, and C1-C4 between 2010 and 2012. This periodization was chosen to distinguish between phases in DPRK famine and postfamine defection history: the first, A, marks the period of desperation incited by famine; the second, B, refers to a period of defection by individuals for whom life in the DPRK may have been difficult but not impossible; the third, C, marks the period after the November 2009 currency reform measure that is discussed later in this article. All the individuals interviewed crossed the country's northern border to make their escape from the DPRK. The structured interview questions avoided overtly political topics, such as the country's leadership or opinion of specific government policies.
The responses of the interviewees reveal two features. First, they reveal that periodization is an important matter in discussion of the yuanization process. The types of activity that yield foreign currency, and the status that possession of such resources confers, change over time and by location, while the prevalence of foreign currency in society also shifts. Second, the responses give weight to the hypothesis that it was primarily the economic shocks of 1992, 2002, and 2009 that prompted citizens to seek to acquire foreign currency rather than other economic factors. The (entirely understandable) desire of individual citizens to avoid the impact of inflation was not a factor, although such avoidance can become the rationale for continuing to seek out hard currency over the medium and long term.
The relative impact of each shock depended on economic development and class distinctions at the time. Different people, and more importantly different numbers of people, were affected in each instance. It also depended on location: people residing in the border region with China were able to respond more actively than those in areas farther inland, although there were distinctions between regions there as well. All other factors being static, the response of those directly and consciously affected remained the same over time, including the possession and use of foreign currency.
Responding to Shocks
"The people around me who used hard currency [in the late 1980s and early 1990s] were traders, KWP cadres, and military officials," B1, the child of a military official who left her borderland hometown of Chongjin in 2006, explained. "People then thought that using foreign currency was a symbol of wealth." The KPA divisional commander and divisional political commissar's wife, the same respondent recalls, even entered into a secret competition to see who could amass the most foreign currency.
Respondent A1 revealed that foreign currency first entered her family home in Hyesan during the late 1980s too. "Once it was possible for me to go shopping alone, it became possible for me to use foreign currency," she recalled. The 1980s was not a time of universal foreign currency use, even in Pyongyang, but as a resident of a city on the border with China it was nevertheless observable conduct for smugglers and traders to employ RMB as a medium of exchange and asset storage. In the words of B3, "It was in the late '80s that foreign capital started to be noticeable for me." B3, who was responsible for the issuance of the travel permits that are obligatory for ordinary residents wishing to travel between counties and cities inside the DPRK, and who used to live in Hyesan, recalled how "every time I issued a permit I got foreign currency." However, she went on to say that the only individuals known to have significant hard currency reserves were senior officials at the municipal level: the KWP organizing secretary, the municipal Ministry of State Security chief, and the chief of police (Ministry of People's Security).
Such was the situation in the early days of foreign currency accumulation. Conversely, discussion of later periods in contemporary DPRK economic history gives a sense of the shifting value, beyond the purely monetary exchange value, of foreign currency in North Korean society. There are few hints of the former social status attributed to those who possessed and used foreign currency. Indeed, B2, who left the town of Musan in late 2007, branded the use of RMB in market exchanges and asset storage as entirely "natural." B2 said, "All the North Korean people who store money at home do so in foreign currency," and, "in the case of Chinese traders, if the trading is not in foreign currency, there is a limit on the trading they will do."
According to the respondents, three main triggers drove this shift to foreign currency: a currency revaluation implemented in July 1992, the July 1 Economic Management Improvement Measure of 2002, and a flash currency reform measure in November 2009. The interview responses suggest that, because these three incidents dispossessed holders of KPW and/or reduced the value of existing KPW holdings, they highlighted the idea that foreign currency storage would best protect assets from the state.
A Close-Up of the Three Shocks
Let's look at the three incidents in turn. The first, the currency revaluation of 1992, took place as North Korea's economy was contracting sharply as a result of international conditions outlined earlier, but also in the aftermath of rapid growth in the volume of money circulating in society. Accordingly, one South Korean state research body believes that the intention of the revaluation was to claw back into state coffers monies that were circulating in the private sphere (KINU 2009). This analysis is in keeping with analogous events in the history of socialist states. According to Peebles (1991, 473), monetary reform measures in socialist states during the mid- to late twentieth century "aimed at confiscating what were thought of as the illegitimately earned gains of wartime speculators and traders." The DPRK currency measure of 1992--and 2009, described below--evinces a similar ambition: to take back into public hands what is officially regarded as the morally unjustifiable gains of traders (Sim 2015). (3)
A1, the relatively affluent respondent from Hyesan for whom foreign currency was the sine qua non of her juvenile shopping experiences, believes it was the currency revaluation of 1992 that made her parents focus their attention on acquiring foreign currency in order to protect their assets. "I know that in my house, the currency revaluation of the '90s caused my parents to concern themselves with possession of Chinese and American money," she said.
The second exogenous shock, the July 1 Economic Management Improvement Measure of 2002 (hereafter the "7.1 Measure"), had a similar effect on public perceptions of currency risk. It is widely agreed that the 7.1 Measure was an attempt to rationalize and streamline the structure of public finances (KINU 2009). However, an internal government document that emerged in 2002 and is cited in Hassig and Oh (2009) shows that the state was, at a minimum, aware of the potential for returning monies hidden in society to the public purse, a process reminiscent of a currency redenomination or reform. "At present, commercial transactions are rampant because state prices are lower than those of farmers' markets.... To be frank, the state does not have money at present, but individuals have money exceeding two years of the state's budget" (Hassig and Oh 2009, 44). By raising prices and wages dramatically, the 7.1 Measure eroded the value of local currency capital stocks held by traders and other private individuals. Respondent C2, a young woman from Wonsan (not part of the Tumen River border economy), said that based upon her own experiences as a member of the North Korean military at the turn of the century, "People learned in 2002 that you needed to have foreign currency to be safe." (4)
The third and final shock is the one that incited foreign currency uptake for the greatest number of DPRK citizens, a fact reflected in the interviews. The flash currency reform of November 30, 2009, was a key moment in driving ordinary people toward foreign currency holdings. That day, North Koreans woke to hear that the existing KPW was being withdrawn and a new one issued. These exchanges were to be done at a rate of 100:1. Each citizen faced a strict limit on how much of the old currency could be exchanged: initially 100,000 won, later raised to 150,000 won, and then back down to 100,000 won but with an additional 50,000 won per family member in a family of four. An additional sum could be deposited in banks, but this amount fluctuated over time too.
In his analysis of the policy, Yang (2010, 84) described the process as "hasty." Like the currency redenomination of 1992, the 2009 reform also appears to have aimed at reducing the stock of currency in society outside the state-led command economy. A US government briefing from February the following year asserts that the policy "aimed at filling the DPRK's public finance coffers" (Wikileaks 2010d).
The 2009 currency reform was not the progenitor of the shift to foreign currency; that occurred years before. However, the fallout in 2009 was more serious than it had been in 1992 or 2002 because more people were affected by it. It prompted a hyperinflationary episode that began in December 2009 and continued into 2010. Hyperinflation is defined as a monthly inflation rate of more than 50 percent. According to research carried out by Steve Hanke of the Cato Institute based on exchange rate data provided by Daily NK, hyperinflation in the DPRK peaked in March 2010 when daily inflation reached 6.13 percent, implying that prices doubled every 11.8 days. Although technical hyperinflation ceased shortly thereafter, extremely high rates of inflation persisted unabated. Hanke calculated an annual inflation rate of 116 percent for 2012, declining to a "mere" 30 percent in 2013. (5) It also resulted in the death by firing squad of at least one economic official (Yonhap News 2010).
According to respondent C3, who lived in Hyesan until mid-2012, "Following the currency reform, anxiety about domestic currency made the use of foreign currency routine." C3 went on, "People with domestic currency took a really big hit in the currency reform, but foreign currency wasn't affected at all," adding, "the people who had foreign currency got really rich."
Why were the currency incidents of 1992, 2002, and 2009 critical moments in North Korean economic history? As one US diplomatic cable of early 2010 put it dryly, "At issue is who is suffering the ill effects" (Wikileaks 2010c). Public tolerance for government policy that has a negative impact is often surprisingly high. Prior scholarship shows that even surpassing the (rather indistinct) threshold for public displays of discontent will not necessarily result in collective action. As Lin (2005, 2) reminds us, "there is no direct correlation between the degree of exploitation or impoverishment and the frequency and likelihood of collective action." The ever-present, highly credible threat of coercion to ensure compliance is another relevant factor in the case of the DPRK, one that cannot be overlooked.
However, even though discontent is rarely publicly expressed, an exogenous shock can trigger the adoption of new coping mechanisms. The years 1992, 2002, and 2009 were transformative for this reason. Similar incidents earlier in the history of the DPRK--the three currency reforms and revaluations of 1947, 1959, and 1979--had less impact upon the livelihoods or actions of ordinary citizens. Most of the population was still living in postwar conditions of poverty and/or, as the national reconstruction process bore fRuit, had grown reliant on the state-run PDS. (6) By the time of the country's fourth currency revaluation of 1992, the July 1 Economic Management Improvement Measure of 2002, and the second currency reform of November 2009, the circumstances in the DPRK had changed substantially. Starting in the 1980s, driven initially by a reformist government policy, a rising number of people began to generate surpluses through business activities beyond the state plan and exploitation of trends in corruption. Currency reforms and revaluations were a means of extracting monies "hidden" from the public finances in society and bringing those monies back into state coffers.
Predictably, people faced with confiscatory events that threaten to undermine the process of accumulation and holding assets worth protecting from expropriation will seek alternative forms of storage. Minor economic disadvantage may not be sufficient to render the risks present in holding foreign currency worth taking--risks present due to government policy and a repressive security apparatus. But a more dramatic currency event is capable of changing that cost-benefit calculus and bringing individuals to reassess the merits of defying official policy.
The testimony from my interviews affirms that the process of foreign currency acquisition has been an ongoing reality for ordinary citizens of the DPRK, particularly in the border region, since the late 1980s. Specifically, I assign a high degree of causality to the hypothesis that the move to foreign currency followed exogenous shocks in 1992, 2002, and 2009. The imperative to earn profit that defines the marketization era has made foreign currency acquisition not merely possible but arguably necessary.
One should be careful about describing the rising popularity of foreign currency purely in terms of benefit to ordinary North Korean people. It is by no means certain that increased access to hard currency produces optimal outcomes for the majority of citizens. Indeed, quite the opposite could in principle be true. Questions remain over whether the inequalities and economic class divisions brought about by marketization may in fact supplement or replace existing political schisms, fostering new types of discontent (Kahneman et al. 2006).
New forms of exchange inevitably foster new social cleavages. Money is not, as Zelizer (1989, 359) writes, "a unitary, fungible, absolutely impersonal instrument." The dominant understanding of money is an inaccurate and misleading by-product of Bernard Berber's "absolutization of the market," which produces the "illusory yet pervasive" assumption that market exchange is not culturally or socially constrained and conditioned (Zelizer 1989, 343).
In daily life, people actually differentiate money in many ways, not merely in terms of quantity (how much money do I have?), but also in terms of its special qualities (what type of money do I have?). In 1990s Russia, the ruble and USD constituted "strikingly different practical and moral forces and move[d] differently through society" (Lemon 1998, 22). Lemon records how Soviet citizens construed the relations between currencies in terms of complex meta concepts such as social authenticity, civilization, and humankind.
Historical documents and testimony show that in premarketization DPRK, social cleavages divided those with political power from those without, and foreign currency acted as a carrier signal for the presence or absence of political power. In the current era, partly as an outcome of sheer ubiquity, the role of foreign currency tends toward practical matters rather than the reification of social status. Nevertheless, those with access to hard currency exist in a situation of relative fiscal, food security, and psychological superiority compared to the by no means trivial number of those who do not. The words of respondent A1, "once it was possible for me to go shopping alone, it became possible for me to use foreign currency," or B4, "I bought a four-room apartment in Rangnan District for $3,000 back in 1996," are not everyone's story, and never will be.
The robustness of the financial networks that have emerged from the shift to market exchanges and foreign currency use is responsible for the absence of preventable deaths in North Korea since the turn of the century. But that very robustness is also exclusionary. It exacerbates the preexisting marginalization of the lowest income groups in society, those without either financial or political capital to prop themselves up in rapidly shifting socioeconomic sands.
Absent greater economic opening of the DPRK, the ubiquity or otherwise of RMB and USD in the country will remain a focus of contestation for the foreseeable future. However, inside footage, historical documentation, and scholarly analysis offer compelling evidence that ordinary people, in particular those in the border economy of the Tumen River basin, understand the need to securely store their assets, often in foreign currency. Many, if not most, appear willing to act upon that understanding in defiance of the state. (7) This is an outcome of general trends in the North Korean economy over thirty years. Over time, barter trade has been replaced by market exchange as the economic system has outgrown the vacuum left behind by the collapse of the PDS, dissolution of the Soviet Union, and death of Kim Il-sung, the leader of the country's highly centralized political structure.
The result is a challenge. In the DPRK, the two dominant metanarratives of contemporary social change everywhere--capitalism and the making of the modern state--are in a symbiotic but also conflicted relationship. Social control is in contradiction with the undiscriminating nature of capital. This is a major challenge to the government in Pyongyang, which has yet to present a compelling vision of a state capable of weathering the storms of the post-Cold War age.
Christopher Green is a PhD candidate at Leiden University in the Netherlands, where he researches the political economy of the DPRK. His recent publications include coauthored articles in the Review of Korean Studies and Japan Focus that are soon to appear in an edited volume on contemporary South Korean culture. He is also manager of international affairs for the online periodical Daily NK. He can be reached at firstname.lastname@example.org. This research was supported by an Academy of Korean Studies Grant (AKS-2013-R-11).
(1.) Evidence shows that this trend is nationwide, and has been for some years. However, the Tumen River borderland economy was the first area of the DPRK to yuanize, and it is here that our evidence is particularly verifiable. This borderland economy is the basis for the conclusions I present here.
(2.) Hwang Jang-yop (1998). As Choi (2015) notes, memoirs must be treated with extraordinary care as primary sources, but Hwang's explanation makes logical sense and places future events in context.
(3.) For more on the rapid growth of the DPRK economy during this period, see the relevant memos and government documents available in the Woodrow Wilson International Center for Scholars archive. At the same time, readers will note that the currency reform of 1959 is not mentioned in any of the memos by external observers of the situation in the DPRK, highlighting the relatively minor role played by currency itself in the domestic economy of the day.
(4.) This young woman, now in her late twenties, left her home in North Korea in 2010 and graduated from an elite university in Seoul in 2015. She is not involved in North Korean human rights activism. I do not attempt to explain or dispute the intention behind the policy of 2002; I only focus on the outcome for ordinary citizens. For more on the policy and its aims, see Haggard and Noland (2011) and Park (2009).
(5.) Steve Hanke is head of the Cato Institute's Troubled Currencies Project (www.cato.org/research/troubled-currencies-project). The hyperinflationary episode that took place in the DPRK in 2010 is not included in the statistics analyzed in Hanke and Krus (2012) because of doubts over the reliability of the data but is explained in a detailed footnote.
(6.) A currency reform occurs when a government replaces one currency with another and the exchange rate between the old and new currencies provides for the elimination of a portion of the total monetary stock. A currency revaluation is when "all nominal values such as wages and prices are changed without an attempt to withdraw part of the monetary stock" (Peebles 1991, 473-481). Currency revaluations and reforms are not particularly rare. The Republic of Korea has implemented three in its seventy-year history: in 1950, 1953, and 1962 (Donga Ilbo 1993). In the case of the DPRK, measures were introduced in 1947, 1959, 1979, 1992, and finally in 2009. Two of these events were currency reforms; the other three, including that of 1947, which marked the creation of a currency for what would become the sovereign DPRK, were currency revaluations.
(7.) In a private interview with a former department head of the National Intelligence Service, the South Korean state intelligence agency, I was informed that the percentage of trade occurring in hard currency in 2013 was thought within the agency to be around 40 percent, but was much higher nearer the border with China.
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